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)
5.50% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES DUE JUNE 30, 2005
---------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
N/A
----------------------------------------------------
(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$42,750,000 (1) US$3,458.48 (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 US$45,000,000 aggregate
principal amount of 5.50% Convertible Unsecured Subordinated Debentures of
The Descartes Systems Group Inc. at the maximum aggregate cash offer price
of US$950 for each US$1,000 principal amount of such Debentures.
[_] 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 Debentureholders
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.
DOCUMENT 1
----------
THE DESCARTES SYSTEMS GROUP INC.
CORPORATE HEADQUARTERS
[LOGO] 120 RANDALL DRIVE, WATERLOO, ONTARIO, CANADA N2V 1C6
TELEPHONE (519) 746-8110 O FAX (519) 746-1984
WWW.DESCARTES.COM
June 2, 2003
Dear Debentureholder:
We are pleased to inform you that 3078393 Nova Scotia Company (the
"Offeror"), a wholly-owned subsidiary of The Descartes Systems Group Inc.
("Descartes"), is offering to purchase (the "Debenture Offer") up to an
aggregate principal amount of U.S.$45,000,000 of the 5.50% Convertible Unsecured
Subordinated Debentures due June 30, 2005 of Descartes (the "Debentures"),
representing a maximum of approximately 62.5% of the outstanding principal
amount of Debentures, at a single price of U.S.$950, plus the amount of unpaid
interest (subject to applicable withholding tax) accrued up to and as at the
date immediately prior to the date on which the Offeror takes up and pays for
Debentures under the Offer per U.S.$1,000 principal amount of Debentures (the
"Purchase Price"). The Debenture Offer expires on July 11, 2003, at 5:00 p.m.,
Toronto time (the "Expiration Date"), unless extended or withdrawn by the
Offeror. The Offeror has received from a significant Debentureholder a
commitment to deposit under the Debenture Offer U.S.$30,856,500 aggregate
principal amount of Debentures at the Purchase Price. A copy of the offer to
purchase (the "Offer to Purchase") setting out the details of the Debenture
Offer is enclosed and we urge you to read it carefully and to obtain
professional advice before deciding whether or not to tender your Debentures.
Each Debentureholder must decide whether or not it wishes to participate in
the Debenture 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.
Those Debentureholders who do not participate in the offer may experience a
reduction in the liquidity of the market for their Debentures, which reduction
in liquidity could be significant.
Those Debentureholders who participate in the offer will receive the
Purchase Price for their Debentures, subject to proration if more than the
aggregate principal amount of Debentures sought under the offer are deposited.
Descartes is also 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 also expire on
the Expiration Date, unless extended or withdrawn by Descartes. A copy of the
offer to purchase setting out the details of the Share Offer is also enclosed.
You are receiving the enclosed materials relating to the Share Offer
because you are a holder of Debentures which are convertible for Shares in
accordance with the terms and conditions applicable to the Debentures. Canadian
securities legislation requires that the Share Offer be extended not only to all
holders of the Shares, but also to holders of any security that is convertible
into Shares prior to the Expiration Date. This Share Offer only applies to you
insofar as you may, prior to the Expiration Date, convert your Debentures for
Shares and, to do so, you must follow all terms and conditions that apply to the
Debentures, including notice of conversion provisions. THERE MAY BE TAX AND
OTHER CONSEQUENCES RESULTING FROM A CONVERSION OF YOUR DEBENTURES FOR SHARES AND
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR OR OTHER PROFESSIONAL BEFORE DECIDING TO
CONVERT YOUR DEBENTURES FOR SHARES.
If you decide to convert your Debentures for Shares in order to avail
yourself of the Share Offer, you must deposit all or some of the Shares you
receive upon such conversion with the designated depositary prior to the
Expiration Date.
For additional information with respect to the Debenture Offer, you may
contact Credit Suisse First Boston LLC (in the United States) or Griffiths
McBurney & Partners (in Canada) 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 Debentures in your name, if applicable, or your financial adviser.
Sincerely,
/s/ MANUEL PIETRA
---------------------------------
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
3078393 NOVA SCOTIA COMPANY, A WHOLLY-OWNED SUBSIDIARY OF
THE DESCARTES SYSTEMS GROUP INC.,
TO PURCHASE FOR CASH THE AGGREGATE PRINCIPAL AMOUNT OF UP TO U.S.$45,000,000
OF 5.50% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES DUE JUNE 30, 2005 OF
DESCARTES AT A PURCHASE PRICE OF U.S.$950
PLUS ANY ACCRUED AND UNPAID INTEREST FOR EACH U.S.$1,000 PRINCIPAL
AMOUNT OF DEBENTURES
3078393 Nova Scotia Company (the "Offeror"), a wholly-owned subsidiary of The
Descartes Systems Group Inc. ("Descartes" or the "Company"), invites holders
("Debentureholders") of the 5.50% Convertible Unsecured Subordinated Debentures
due June 30, 2005 of Descartes (the "Debentures") to deposit Debentures up to a
maximum of U.S.$45,000,000 aggregate principal amount of Debentures for purchase
by the Offeror at a price of U.S.$950 plus the amount of unpaid interest accrued
up to and as at the date immediately prior to the date on which the Offeror
takes up and pays for Debentures under the Offer for each U.S.$1,000 principal
amount of Debentures (the "Purchase Price") 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. On May 12, 2003, the last full day of trading prior
to the announcement of Descartes' intention to make the Offer, the closing price
of the Debentures on the Toronto Stock Exchange was U.S.$85 for each U.S.$100
principal amount of Debentures.
Each Debentureholder who has properly deposited Debentures pursuant to the Offer
and who has not withdrawn such Debentures will receive the Purchase Price
(subject to any applicable withholding tax) payable in cash, for all Debentures
purchased upon the terms and subject to the conditions of the Offer including
the provisions relating to proration described herein. If an aggregate principal
amount of Debentures greater than U.S.$45,000,000 is deposited pursuant to the
Offer and not withdrawn, the deposited Debentures will be purchased on a pro
rata basis according to the aggregate principal amount of Debentures deposited
by the depositing Debentureholders.
The Offeror reserves the right to withdraw the Offer and not take up and pay for
any Debentures deposited under the Offer unless certain conditions are
satisfied. See Section 5, "Certain Conditions of the Offer". NONE OF THE
OFFEROR, DESCARTES, THEIR RESPECTIVE BOARD OF DIRECTORS OR ANY REPRESENTATIVE
THEREOF MAKES ANY RECOMMENDATION TO ANY DEBENTUREHOLDER AS TO WHETHER TO DEPOSIT
OR REFRAIN FROM DEPOSITING DEBENTURES. EACH DEBENTUREHOLDER MUST MAKE THE
DECISION WHETHER TO DEPOSIT DEBENTURES UNDER THE OFFER BASED ON THEIR PARTICULAR
CIRCUMSTANCES. DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX
CONSEQUENCES OF ACCEPTING THE OFFER. SEE SECTION 14, "INCOME TAX
CONSIDERATIONS".
Any Debentureholder desiring to deposit all or any portion of his or her
Debentures 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 Debentures to the Depositary according to the
procedure set forth in the Offer to Purchase under "Procedure for Depositing
Debentures" or request his, her or its broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for him, her or it. ANY
DEBENTUREHOLDER HAVING DEBENTURES REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE SHOULD CONTACT SUCH PERSON OR
INSTITUTION IF THE DEBENTUREHOLDER DESIRES TO DEPOSIT SUCH DEBENTURES.
(continued on following page)
The Dealer Managers for the Offer are:
In the United States: In Canada:
CREDIT SUISSE FIRST BOSTON LLC GRIFFITHS MCBURNEY & PARTNERS
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,
DEBENTUREHOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE
OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER,
THE OFFEROR MAY, IN ITS SOLE JUDGMENT, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY
TO EXTEND THE OFFER TO DEBENTUREHOLDERS IN SUCH JURISDICTION.
(continued from cover)
INFORMATION FOR UNITED STATES DEBENTUREHOLDERS ONLY
THIS OFFER IS MADE BY THE OFFEROR, A FOREIGN COMPANY INCORPORATED UNDER THE LAWS
OF THE PROVINCE OF NOVA SCOTIA, CANADA, FOR SECURITIES OF DESCARTES, A FOREIGN
ISSUER AMALGAMATED UNDER THE LAWS OF THE PROVINCE OF ONTARIO, CANADA, AND WHILE
THE OFFER IS SUBJECT TO THE DISCLOSURE REQUIREMENTS OF THE PROVINCE OF ONTARIO
AND THE OTHER PROVINCES OF CANADA, DEBENTUREHOLDERS SHOULD BE AWARE THAT IN SOME
RESPECTS THESE DISCLOSURE REQUIREMENTS ARE DIFFERENT FROM THOSE OF THE UNITED
STATES.
THE ENFORCEMENT BY DEBENTUREHOLDERS OF CIVIL REMEDIES UNDER U.S. SECURITIES LAWS
MAY BE ADVERSELY AFFECTED BY THE FACT THAT DESCARTES IS AMALGAMATED UNDER THE
LAWS OF ONTARIO, AND THE OFFEROR IS INCORPORATED UNDER THE LAWS OF NOVA SCOTIA,
AND THAT SOME OF THEIR RESPECTIVE 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.
DEBENTUREHOLDERS 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 TO PURCHASE.
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
OFFER TO PURCHASE..............................................................6
1. Principal Amount of Debentures; Proration............................7
2. Procedure for Depositing Debentures..................................7
3. Withdrawal Rights....................................................9
4. Acceptance for Payment and Payment for Debentures...................10
5. Certain Conditions of the Offer.....................................12
6. Extension and Variation of the Offer................................13
7. Payment in the Event of Mail Service Interruption...................14
8. Liens; Proxies......................................................14
9. Certain Information Concerning the Offeror and Descartes............15
10. Purpose and Effects of the Offer....................................16
11. Valuation Exemption.................................................18
12. Price Range of Debentures and Common Shares; Purchases
and Distributions..................................................19
13. Interest of Directors and Senior Officers; Transactions and
Arrangements Concerning the Offer..................................21
14. Income Tax Considerations...........................................22
15. Certain Legal Matters; Regulatory Approvals.........................28
16. Prior Valuations....................................................28
17. Source and Amount of Funds..........................................28
18. Depositary..........................................................28
19. Financial Advisers..................................................28
20. Fees and Expenses...................................................29
21. Statutory Rights....................................................30
22. Notice..............................................................30
23. Other Terms.........................................................30
24. Additional Information..............................................30
25. Recent Developments.................................................31
26. Summary Historical Consolidated Financial Information and
Unaudited Pro Forma Consolidated Financial Statements..............31
APPROVAL BY DESCARTES........................................................C-1
APPROVAL BY THE OFFEROR......................................................C-1
CONSENT OF GRIFFITHS MCBURNEY & PARTNERS.....................................C-2
CONSENT OF BLAKE, CASSELS & GRAYDON LLP......................................C-2
CONSENT OF TESTA, HURWITZ & THIBEAULT, LLP...................................C-2
CONSENT OF DELOITTE & TOUCHE LLP.............................................C-3
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 debentures. In this summary term sheet, the terms "we",
"us" and "our" refer to the Offeror, and the terms "you" and "your" refer to
Debentureholders. 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 THE OFFEROR OFFERING TO PURCHASE?
We are a wholly-owned subsidiary of Descartes. We are offering to purchase
up to an aggregate principal amount of U.S.$45,000,000 of Descartes' 5.50%
Convertible Unsecured Subordinated Debentures due June 30, 2005. Whether or not
we purchase the full amount will depend on the aggregate principal amount of
debentures tendered in the offer. See "Principal Amount of Debentures;
Proration" on page 7.
o WHAT WILL THE OFFEROR PAY ME IN EXCHANGE FOR MY DEBENTURES?
All debentures that we purchase in the offer will be purchased in cash,
denominated in U.S. dollars, at a purchase price of U.S.$950 plus the amount of
unpaid interest that has accrued up to and as at the date immediately prior to
the date on which we take up and pay for debentures under the offer for each
U.S.$1,000 principal amount of debentures, subject to any applicable withholding
tax. See "Principal Amount of Debentures; Proration" on page 7. See also
"Acceptance for Payment and Payment for Debentures" on page 10.
o ARE THERE ANY SIGNIFICANT ARRANGEMENTS WITH DEBENTUREHOLDERS OR OTHER
OFFERS TO PURCHASE SECURITIES?
As of the date of the offer, there were outstanding debentures in the
aggregate principal amount of U.S.$71,995,000. A significant holder of
debentures has agreed with Descartes to tender under the offer U.S.$30,856,500
aggregate principal amount of debentures, representing approximately 43% of the
outstanding debentures, at a purchase price of U.S.$950 plus the amount of
unpaid interest that has accrued up to and as at the date immediately prior to
the date on which we take up and pay for debentures under the offer for each
U.S.$1,000 principal amount of debentures, subject to any applicable withholding
tax. See also "Interest of Directors and Officers; Transactions and Arrangements
Concerning the Offer" on page 21.
Descartes has made an offer to purchase up to 11,578,000 of its outstanding
common shares for a cash price of not more than Cdn$3.85 and not less than
Cdn$3.00 per common share (subject to any applicable withholding tax). See also
"Recent Developments" on page 31.
o CAN I TENDER SOME BUT NOT ALL OF MY DEBENTURES? WHAT HAPPENS TO DEBENTURES
THAT I DO NOT TENDER?
You can tender all, some or none of your debentures. Any debentures that
you do not tender will continue in effect in accordance with their current terms
and conditions. See "Procedure for Depositing Debentures" on page 7.
o HOW DO I TENDER MY DEBENTURES FOR PURCHASE?
If you wish to tender -- or "deposit" -- your debentures, 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 the debentures are
currently registered in the name of The Canadian Depository for Securities
Limited ("CDS") as custodian for its participants, CDS will be issuing
instructions to its participants as to the method of depositing the debentures
under the terms of the offer. If you wish to deposit debentures under the offer,
you should immediately contact the investment dealer, stock broker, bank, trust
company or other nominee through which your debentures are held in order that
they may take the necessary steps on your behalf to be able to deposit such
debentures under the offer. See "Procedure for Depositing Debentures" on page 7.
1
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 debentures that we take up in the offer. If we extend the offer, we may
delay the acceptance of any debentures that have been deposited. We cannot
assure you that we will extend the offer or, if we do extend it, for how long.
See "Extension and Variation of the Offer" on page 13.
o WHEN WILL I RECEIVE PAYMENT?
We will take up and pay for debentures 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 Debentures" on page 10.
o IF MY DEBENTURES 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 22. 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
debentures. Persons who are considering tendering debentures 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 debentureholder, you will not have to pay any
brokerage fee or commission in connection with tendering under the offer if you
deposit your debentures directly with CIBC Mellon Trust Company as depositary
pursuant to the offer. If you hold your debentures 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 debentures under the offer. See "Acceptance
for Payment and Payment for Debentures" on page 10.
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.
o CAN I WITHDRAW PREVIOUSLY TENDERED DEBENTURES?
You may withdraw some or all of your tendered debentures 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
debentures at any time until the extended expiration date. You may also withdraw
some or all of your tendered debentures if we have not paid for them within
three business days of being taken up. See "Withdrawal Rights" on page 9.
o WHAT DOES THE OFFEROR'S BOARD OF DIRECTORS AND DESCARTES' BOARD OF
DIRECTORS THINK OF THE OFFER?
Although our Board of Directors and the Descartes' Board of Directors have
each approved the offer, none of the Offeror, Descartes or their respective
board of directors or any representative thereof makes any recommendation as to
whether you should deposit or refrain from depositing your debentures in the
offer. You must decide for yourself whether to deposit debentures under the
offer, and if so, what principal amount of debentures to deposit. See "Purpose
and Effects of the Offer" on page 16.
2
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
debentures are held. You may also contact either of the dealer managers, Credit
Suisse First Boston LLC (in the United States) or Griffiths McBurney & Partners
(in Canada), 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 THIS OFFER TO PURCHASE.
AGGREGATE PRINCIPAL The aggregate principal amount of U.S.$45,000,000
AMOUNT OF DEBENTURES of Debentures will be purchased, subject to
TO BE PURCHASED proration as described herein and to sufficient
Debentures being deposited pursuant to the Offer
and not withdrawn.
PURCHASE PRICE 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 Offeror takes up and pays
for Debentures under the Offer per U.S.$1,000
principal amount of Debentures.
ARRANGEMENTS WITH As of the date hereof, there were outstanding
DEBENTUREHOLDERS Debentures in the aggregate principal amount of
U.S.$71,995,000. A significant holder of
Debentures has agreed with Descartes to tender
U.S.$30,856,500 aggregate principal amount of
Debentures owned by it under the Offer,
representing approximately 43% of the outstanding
Debentures.
SHARE OFFER On the date hereof, Descartes has made an offer to
purchase up to 11,578,000 of its outstanding
common shares for a cash price of not more than
Cdn$3.85 and not less than Cdn$3.00 per common
share (subject to any applicable withholding tax)
(the "Share Offer").
BROKERAGE COMMISSIONS No fee or commission will be payable by any
registered Debentureholder that deposits
Debentures directly with the Depositary pursuant
to the Offer. Any Debentureholder who holds
Debentures 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 Debentures under the
Offer.
CONDITIONS OF THE OFFER The Offeror reserves the right to withdraw the
Offer and not take up and pay for Debentures
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 the Offeror (the "Expiration Date").
PAYMENT DATE The Offeror will take up and pay for Debentures as
soon as practicable after the Expiration Date, and
in any event not later than 10 days after the
Expiration Date.
CURRENCY OF PAYMENT The Purchase Price will be denominated in United
States dollars.
POSITION OF THE OFFEROR, None of the Offeror, Descartes, their respective
DESCARTES AND THEIR board of directors or any representative thereof
RESPECTIVE DIRECTORS makes any recommendation to any Debentureholder as
to whether to deposit or refrain from depositing
Debentures. See Section 10, "Purpose and Effects
of the Offer".
WITHDRAWAL RIGHTS Deposited Debentures may be withdrawn at any time
until 5:00 p.m., Toronto time, on July 11, 2003,
and may also be withdrawn if the Debentures have
not been paid for by the Offeror within three
business days of being taken up. See Section 3,
"Withdrawal Rights".
4
TAX DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE
INCOME TAX CONSEQUENCES OF ACCEPTING THE OFFER.
SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
FURTHER INFORMATION Contact the Depositary, either of the Dealer
REGARDING THE OFFER Managers or consult your investment dealer, stock
broker, bank, trust company or other nominee
through which your Debentures are held. The
respective addresses, telephone and facsimile
numbers of the Depositary and the Dealer Managers
are set forth on the back cover of this Offer to
Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
OFFEROR OR DESCARTES AS TO WHETHER DEBENTUREHOLDERS SHOULD DEPOSIT OR REFRAIN
FROM DEPOSITING DEBENTURES 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 THE OFFEROR OR DESCARTES.
5
OFFER TO PURCHASE
TO THE HOLDERS OF 5.50% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES
DUE JUNE 30, 2005 OF THE DESCARTES SYSTEMS GROUP INC.
The Offeror hereby invites the holders (the "Debentureholders") of the
5.50% Convertible Unsecured Subordinated Debentures due June 30, 2005 of
Descartes (the "Debentures") to deposit up to a maximum of U.S.$45,000,000
aggregate principal amount of Debentures for purchase by the Offeror at a price
of U.S.$950 plus the amount of unpaid interest accrued up to and as at the date
immediately prior to the date on which the Offeror takes up and pays for
Debentures under the Offer per U.S.$1,000 principal amount of Debentures (the
"Purchase Price") (subject to any applicable withholding tax) 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"). Of the total Purchase Price for a Debenture,
U.S.$950 is in respect of the U.S.$1,000 principal amount and the remainder is
in respect of the amount of such unpaid and accrued interest. The Purchase Price
will be denominated in United States dollars.
THE OFFER IS NOT CONDITIONAL UPON ANY MINIMUM AGGREGATE PRINCIPAL AMOUNT OF
DEBENTURES BEING DEPOSITED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 5, "CERTAIN CONDITIONS OF THE OFFER".
All Debentureholders who have properly deposited and not withdrawn their
Debentures pursuant to the Offer will receive the Purchase Price (subject to any
applicable withholding tax), payable in cash, for all Debentures purchased upon
the terms and subject to the conditions of the Offer, including the provisions
relating to proration described herein. If, prior to the Expiration Date (as
defined in Section 1, "Principal Amount of Debentures; Proration"), more than
the aggregate principal amount of U.S.$45,000,000 of Debentures is properly
deposited pursuant to the Offer and not withdrawn, the Offeror will accept for
purchase at the Purchase Price (subject to any applicable withholding tax), on a
pro rata basis (calculated to the nearest whole U.S.$1,000 principal amount of
Debentures, so as to avoid the creation of fractional Debentures), the aggregate
principal amount of U.S.$45,000,000 of Debentures from Debentureholders. The
Offeror will return all Debentures not purchased under the Offer, including
Debentures not purchased because of proration. Registered Debentureholders will
not be obligated to pay brokerage fees or commissions on the purchase of their
deposited Debentures by the Offeror pursuant to the Offer. Debentureholders who
hold their Debentures 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
Debentures under the Offer.
None of the Offeror, Descartes, their respective board of directors or any
representative thereof makes any recommendation to any Debentureholder as to
whether to deposit or refrain from depositing Debentures. Each Debentureholder
must make his or her own decision whether to deposit Debentures and, if so, what
principal amount of Debentures to deposit.
DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
ACCEPTING THE OFFER. SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
As of May 30, 2003, there were outstanding Debentures in the aggregate
principal amount of U.S.$71,995,000. The Debentures in the aggregate principal
amount of U.S.$45,000,000 that the Offeror is offering to purchase represent
62.5% of the Debentures outstanding at May 30, 2003. On May 12, 2003, the last
full day of trading prior to the announcement of Descartes' intention to make
the Offer, the closing price per U.S.$100 principal amount of Debentures as
reported on the Toronto Stock Exchange was U.S.$85. Debentureholders are urged
to obtain current market quotations for the Debentures. See Section 12, "Price
Range of Debentures and Common Shares; 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.
6
1. PRINCIPAL AMOUNT OF DEBENTURES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Offeror will
accept for payment and purchase Debentures in the aggregate principal amount of
U.S.$45,000,000 or such lesser aggregate principal amount of Debentures as are
properly deposited at or prior to the Expiration Date (and not withdrawn in
accordance with Section 3, "Withdrawal Rights"), pursuant to the Offer. The term
"Expiration Date" means 5:00 p.m., Toronto time, on July 11, 2003, unless the
Offeror, in its sole discretion, shall have extended the period during which
Debentures may be deposited under the Offer, in which event the term "Expiration
Date" shall refer to the latest time and date at which the Offer, as so extended
by the Offeror, shall expire. For a description of the Offeror's right to extend
the period of time during which Debentures 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 the aggregate principal amount of U.S.$45,000,000 of
Debentures is deposited pursuant to the Offer and not withdrawn, the Debentures
to be taken up and paid for will be subject to proration.
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, the Offeror will, in its sole discretion, determine the aggregate
principal amount of Debentures deposited pursuant to the Offer and not
withdrawn. As promptly as practicable thereafter, the Offeror will publicly
announce the aggregate principal amount of Debentures deposited pursuant to the
Offer and not withdrawn, and upon the terms and subject to the conditions of the
Offer (including the proration provisions described herein), all
Debentureholders who have properly deposited and not withdrawn Debentures
pursuant to the Offer will receive the Purchase Price (subject to any applicable
withholding tax), payable in cash, for each U.S.$1,000 principal amount of
Debentures purchased. The Offeror will take up and pay for such Debentures not
later than 10 days after the Expiration Date. The Offeror will pay for such
Debentures as soon as possible, and in any event not more than three business
days after taking up the Debentures. All Debentures not purchased pursuant to
the Offer, including Debentures not purchased because of proration, will be
returned to the depositing Debentureholders at the Offeror's expense as promptly
as practicable following the Expiration Date.
If the aggregate principal amount of Debentures properly deposited and not
withdrawn by the Expiration Date pursuant to the Offer is less than or equal to
U.S.$45,000,000, the Offeror will, upon the terms and subject to the conditions
of the Offer, purchase at the Purchase Price (subject to any applicable
withholding tax) all Debentures deposited and not withdrawn.
If the aggregate principal amount of Debentures properly deposited and not
withdrawn by the Expiration Date pursuant to the Offer is greater than
U.S.$45,000,000, the Offeror will, upon the terms and subject to the conditions
of the Offer, purchase at the Purchase Price (subject to any applicable
withholding tax) Debentures so deposited having an aggregate principal amount of
U.S.$45,000,000 on a pro rata basis (calculated to the nearest whole U.S.$1,000
principal amount of Debentures, so as to avoid the creation of fractional
Debentures). The Offeror's determination as to proration shall be final and
binding on all parties.
2. PROCEDURE FOR DEPOSITING DEBENTURES
PROPER DEPOSIT OF DEBENTURES. To deposit Debentures 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. The Debentures
are currently registered in the name of and held by or on behalf of The Canadian
Depository for Securities Limited ("CDS") as custodian for its participants.
Beneficial interests in the Debentures, constituting ownership of the
Debentures, are represented through book-entry accounts of institutions acting
on behalf of beneficial owners as direct and indirect participants of CDS,
rather than by definitive certificates. PARTICIPANTS OF CDS SHOULD CONTACT SUCH
DEPOSITARY WITH RESPECT TO THE DEPOSIT OF DEBENTURES UNDER THE OFFER. CDS WILL
BE ISSUING INSTRUCTIONS TO ITS PARTICIPANTS AS TO THE METHOD OF DEPOSITING SUCH
DEBENTURES UNDER THE TERMS OF THE OFFER. DEBENTUREHOLDERS WHO WISH TO DEPOSIT
DEBENTURES UNDER THE OFFER SHOULD CONTACT THE INVESTMENT DEALER, STOCK BROKER,
BANK, TRUST COMPANY OR OTHER NOMINEE THROUGH WHICH THE DEBENTURES ARE HELD IN
ORDER TO TAKE THE NECESSARY STEPS TO BE ABLE TO DEPOSIT SUCH DEBENTURES UNDER
THE OFFER.
7
PARTIAL TENDERS. A Debentureholder desiring to deposit only a portion of
the aggregate principal amount of a Debenture may do so, subject to the
restriction set out below, by depositing a Debenture in the manner described
above and indicating in the accompanying Letter of Transmittal the portion of
the principal amount thereof that the Debentureholder wishes to deposit to the
Offer. The Offeror shall, as soon as practicable following the completion of the
Offer, issue a new Debenture to such Debentureholder to evidence the remaining
principal amount of the deposited Debenture retained by the Debentureholder. In
order to comply with the terms of the trust indenture creating the Debentures
dated as of June 30, 2000 between Descartes and Montreal Trust Company of Canada
(now Computershare Trust Company of Canada) (the "Trust Indenture"), a
Debentureholder who wishes to accept the Offer in respect of a portion, but not
all, of the aggregate principal amount of a Debenture may do so, provided that
the principal amount of Debentures which is deposited to the Offer is in a
denomination of U.S.$1,000 or an integral multiple thereof.
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 Debentures 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) Debentures are deposited for the account of 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 a recognized stock exchange 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 such
entity, 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
Debentures 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
Debentures 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 DEBENTURES AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE DEPOSITING DEBENTUREHOLDER.
FOR THE DEBENTUREHOLDER'S PROTECTION, THE OFFEROR 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 DEBENTURES BY THE
DEPOSITARY.
GUARANTEED DELIVERY. If a Debentureholder wishes to deposit Debentures
pursuant to the Offer and cannot deliver certificates for such Debentures or
time will not permit all required documents to reach the Depositary by the
Expiration Date, such Debentures 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 the Offeror is received by the
Toronto office of the Depositary specified below by the Expiration
Date; and
(c) the certificates for all deposited Debentures 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 Debentures, 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. A "Trading
Day" means any day on which trading occurs on the Toronto Stock
Exchange.
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.
8
Notwithstanding any other provision hereof, payment for Debentures
deposited and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Debentures, a properly
completed and duly executed Letter of Transmittal (or a manually executed
photocopy thereof) relating to such Debentures, with signatures guaranteed if so
required and any other documents required by the Letter of Transmittal. If a
Debenture 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 principal amount of
Debentures 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 Debentures will be determined by the Offeror, in its
sole discretion, which determination shall be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all deposits of
Debentures determined by it not to be in proper form or the acceptance for
payment of or payment for which may, in the opinion of the Offeror's counsel, be
unlawful. The Offeror also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in any deposit of
Debentures. No deposit of Debentures will be deemed to be properly made until
all defects and irregularities have been cured or waived. None of the Offeror,
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. The Offeror's 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 Debentures pursuant to any
one of the procedures described above will constitute a binding agreement
between the depositing Debentureholder and the Offeror, 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
Debentures 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 Debentures deposited or (y) other
securities immediately convertible into, exercisable, or exchangeable for the
amount of the Debentures deposited and upon acceptance of such person's deposit,
will acquire such Debentures for deposit by conversion, exercise or exchange of
such other securities and (ii) will deliver or cause such Debentures 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 Debentures to the Offeror
pursuant to any procedures described herein will constitute a representation by
such Debentureholder that (i) such Debentureholder has a net long position in
the Debentures being deposited within the meaning of Rule 14e-4 and (ii) the
deposit of such Debentures complies with Rule 14e-4.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section, deposits of Debentures
pursuant to the Offer will be irrevocable. Unless otherwise required or
permitted by applicable law, any Debentures 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 Debentures have not been taken up by the Offeror
prior to the receipt by the Depositary of an effective notice of
withdrawal in respect of such Debentures; or
(c) if the Debentures have not been paid for by the Offeror 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
Debentureholder to accept or reject the Offer (other than a
change that is not within the control of the Offeror or of an
affiliate of the Offeror), in the event that such change occurs
9
before the end of the period during which Debentures 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
(ii) a notice of extension or variation extending the period of time
during which Debentures 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 Debentures if the period during
which Debentures 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 Debentures 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 Debentures have not been taken
up by the Offeror 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 Debentures before such Debentures are taken
up by the Offeror. 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 Debentures that are to be withdrawn
and must specify the name of the person who deposited the Debentures to be
withdrawn, the name of the registered holder, if different from that of the
person who deposited such Debentures, and the principal amount of Debentures 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
Debentureholder must submit the serial numbers shown on the particular
certificates evidencing the Debentures 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 Debentures deposited by an Eligible
Institution. A WITHDRAWAL OF DEBENTURES 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 SHOULD CONTACT SUCH DEPOSITARY WITH RESPECT TO THE
WITHDRAWAL OF DEBENTURES UNDER THE OFFER. DEBENTUREHOLDERS WHO WISH TO WITHDRAW
DEBENTURES UNDER THE OFFER SHOULD IMMEDIATELY CONTACT THE INVESTMENT DEALER,
STOCK BROKER, BANK, TRUST COMPANY OR OTHER NOMINEE THROUGH WHICH DEBENTURES ARE
HELD IN ORDER TO TAKE THE NECESSARY STEPS TO BE ABLE TO WITHDRAW SUCH DEBENTURES
UNDER THE OFFER.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
NOTICES OF WITHDRAWAL WILL BE DETERMINED BY THE OFFEROR, IN ITS SOLE DISCRETION,
WHICH DETERMINATION SHALL BE FINAL AND BINDING. NONE OF THE OFFEROR, 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 Debentures properly withdrawn will thereafter be deemed not deposited
for purposes of the Offer. However, withdrawn Debentures may be redeposited
prior to the Expiration Date by again following any of the procedures described
in Section 2, "Procedure for Depositing Debentures".
If the Offeror is delayed in its purchase of Debentures or is unable to
purchase Debentures pursuant to the Offer for any reason, then, without
prejudice to the Offeror's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Offeror all deposited Debentures, and
such Debentures may not be withdrawn except to the extent depositing
Debentureholders 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 DEBENTURES
Upon the terms and subject to the conditions of the Offer (including
proration), the Offeror will determine the aggregate principal amount of
Debentures deposited and not withdrawn pursuant to the Offer.
10
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, subject to proration, Debentures deposited and not withdrawn pursuant
to the Offer if, as and when the Offeror gives oral (to be confirmed in writing)
or written notice to the Depositary of its acceptance of such Debentures for
payment pursuant to the Offer. The Offeror will take up and pay for such
Debentures not later than 10 days after the Expiration Date. The Offeror will
pay for such Debentures validly deposited pursuant to the Offer as soon as
possible and in any event not more than three business days after taking up the
Debentures.
Payment for Debentures accepted for payment pursuant to the Offer will be
made by depositing the aggregate Purchase Price for such Debentures with the
Depositary, which will withhold any applicable withholding tax and which will
act as agent for the depositing Debentureholders for the purpose of receiving
payment from the Offeror and transmitting such payment to the depositing
Debentureholders. Receipt of such payment by the Depositary will be deemed to
constitute receipt of payment by persons depositing Debentures. Under no
circumstances will interest be paid by the Offeror or the Depositary to persons
depositing Debentures by reason of any delay in paying for any Debentures.
In the event of proration of Debentures deposited pursuant to the Offer,
the Offeror will determine the proration factor and pay for those deposited
Debentures accepted for payment as soon as practicable after the Expiration
Date. However, the Offeror 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 Debentures not purchased, including Debentures 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
Debentureholder.
The Purchase Price for Debentures 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 Debentures 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
Debentures.
The Depositary will forward cheques and certificates representing all
Debentures 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 Debentureholders depositing Debentures will not be obligated to
pay brokerage fees or commissions in connection with depositing Debentures under
the Offer. Debentureholders who hold their Debentures 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 Debentures under the Offer.
11
5. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Offeror shall not be
required to accept for purchase, purchase or pay for any Debentures deposited
and may terminate or cancel the Offer or, subject to applicable law, may
postpone the payment for Debentures deposited if, at any time on or after June
2, 2003 and at or before the payment for any such Debentures, any of the
following events shall have occurred (or shall have been determined by the
Offeror to have occurred) and, in any such case and regardless of the
circumstances, the Offeror 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
Debentures by the Offeror or otherwise directly or indirectly relating
in any manner to or affecting the Offer, or (ii) that otherwise, in
the sole judgement of the Offeror, acting reasonably, has or may have
a material adverse effect on the Debentures 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 the Offeror 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 the Offeror, 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 the
Offeror, acting reasonably, might affect the extension of credit by
banks or other lending institutions, (v) any significant decrease in
the market price of the Debentures 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 Debentures, 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 the
Offeror, 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
12
similar transaction with or involving Descartes or any of its
affiliates, other than the Offer and the Share Offer, shall have been
proposed, announced or made by any individual or entity;
(f) the Offeror shall have concluded that exemptions from the valuation
requirements under applicable securities legislation in Canada are not
available to the Offeror for the Offer and, if required under any such
legislation, the Offeror shall not have received exemptions or waivers
of the appropriate Canadian securities regulatory authorities from
such requirements in respect of the Offer; and
(g) any change shall have occurred or been proposed to the Income Tax Act
(Canada) or to the administrative policies or assessing practices of
the Canada Customs and Revenue Agency that, in the sole judgment of
the Offeror, acting reasonably, is detrimental to the Offeror,
Descartes or a Debentureholder.
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. The Offeror, 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 or cause to be
provided notice of such waiver or withdrawal to the Toronto Stock Exchange and
applicable Canadian and U.S. securities regulatory authorities. If the Offer is
withdrawn, the Offeror shall not be obligated to take up, accept for purchase or
pay for any Debentures deposited under the Offer, and the Depositary will return
all certificates for deposited Debentures 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 the Offeror and may be
asserted by the Offeror in its sole discretion, acting reasonably, regardless of
the circumstances (including any action or inaction by the Offeror) giving rise
to any such conditions, or may be waived by the Offeror, in its sole discretion,
in whole or in part at any time. The failure by the Offeror 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 the Offeror concerning the events described in this Section
shall be final and binding on all parties.
6. EXTENSION AND VARIATION OF THE OFFER
The Offeror 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 Debentures 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 Debentureholders. Promptly after giving
notice of an extension or variation to the Depositary, the Offeror 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 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 Debentures may be deposited pursuant to the Offer shall not
expire before 10 days after the notice of extension or variation has been given
to Debentureholders respectively unless otherwise permitted by applicable law.
If, in the unlikely event prior to the Expiration Date the Offeror in its
sole discretion increases the consideration offered to Debentureholders by a
variation in the terms of the Offer, such increase shall be applicable to all
Debentureholders whose Debentures are taken up pursuant to the Offer.
The Offer may not be extended by the Offeror if all the terms and
conditions of the Offer, except those waived by the Offeror, have been complied
with, unless the Offeror first takes up and pays for all Debentures properly
deposited under the Offer and not withdrawn. Notwithstanding the foregoing, if
the Offeror waives any terms or
13
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 the Offeror first
taking up the Debentures 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 Debentureholder to accept or
reject the Offer (other than a change that is not within the control of the
Offeror or Descartes or of an affiliate thereof), the Offeror 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
Debentureholders 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, the Offeror 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 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 Debentures previously deposited and not taken up or
withdrawn will remain subject to the Offer and may be accepted for purchase by
the Offeror in accordance with the terms of the Offer, subject to Section 3,
"Withdrawal Rights" of the Offer. An extension of the Expiration Date or a
variation of the Offer does not constitute a waiver by the Offeror of its rights
under Section 5, "Certain Conditions of the Offer" of this Offer to Purchase.
Without limiting the manner in which the Offeror may choose to make any
public announcement referred to above, except as provided by applicable law, the
Offeror 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
Debentures purchased under the Offer and certificates for any Debentures to be
returned will not be mailed if the Offeror 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 Debentures were delivered until the Offeror has
determined that delivery by mail will no longer be delayed. The Offeror 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; PROXIES
Under the Letter of Transmittal, the depositing Debentureholder will be
bound by a representation and warranty that such Debentureholder has full power
and authority to deposit, sell, assign and transfer the deposited Debentures and
that if the deposited Debentures are accepted for payment by the Offeror, the
Offeror 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.
Under the Letter of Transmittal, the depositing Debentureholder will
revoke, effective from the time of take up and payment for its Debentures 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
Debentureholder at any time with respect to the deposited Debentures to the
extent that such Debentures 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 Debentures, and the Debentureholder
shall not take any steps to vote the Debentures, on or after the time of take up
and payment for such Debentures under the Offer.
14
9. CERTAIN INFORMATION CONCERNING THE OFFEROR AND DESCARTES
The Offeror was incorporated under the laws of the province of Nova Scotia
on May 27, 2003. Its registered office is 1601 Lower Water Street, Halifax, Nova
Scotia B3J 2V1. The Offeror was incorporated for purposes of making the Offer
and of holding the Debentures, if any, acquired pursuant to the Offer. All of
the issued and outstanding shares of the Offeror are owned by 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.
The authorized share capital of Descartes consists of an unlimited number
of common shares (the "Common Shares"). As of May 30, 2003, there were
52,231,711 Common Shares issued and outstanding and an aggregate principal
amount of U.S.$71,995,000 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 U.S. Securities and Exchange
Commission (the "SEC") on Form 40-F, are specifically incorporated by reference
into, and form an integral part of, this Offer to Purchase.
The Offeror also hereby incorporates by reference any filings Descartes
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.
15
The Company will provide to each Debentureholder 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
The aggregate Purchase Price paid by the Offeror will be funded by
Descartes by means of one or more loans to and/or subscriptions for shares of
the Offeror. Descartes believes that the purchase of Debentures 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 Debentures purchased
pursuant to the Offer will be held by the Offeror. Neither the Offeror nor
Descartes currently intends for the Offeror to transfer the Debentures to
Descartes for cancellation or to any other person. There can be no assurance
that these intentions will not change.
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
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
of the Company respecting the possible purchase of the 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 the Debentures and Common Shares for consideration by the
Board of Directors.
At its meeting on April 25, 2003, the Board of Directors of the Company
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 analyses and develop a
recommendation respecting the terms on which the Company would undertake issuer
bids to purchase certain of either or both of the Debentures and Common Shares.
On May 5, 2003, the Board of Directors of the Company met to discuss all
aspects of the purchase of certain of the 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 Share 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 Share 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;
16
(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 Share 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 Share Offer.
Following discussions with management of Descartes, the Board of Directors
of the Company approved proceeding with the Offer and the Share Offer including
the maximum price to be paid under each of the Offer and the Share Offer; the
maximum principal amount of Debentures to be subject to the Offer and the
maximum number of Common Shares to be subject to the Share 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 Share Offer, the
announcement of such offers.
On May 12, 2003, Descartes finalized the pricing and size of each of the
Offer and the Share 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 Share Offer.
On May 28, 2003, the Board of Directors of the Company met and approved (i)
the documentation prepared in connection with the Offer and the Share Offer,
including this Offer to Purchase, the Letter of Transmittal, and the offer to
purchase in respect of the Share Offer and related letter of transmittal, and
(ii) the commencement of the Offer and the Share Offer.
Subject to certain exceptions, Canadian provincial securities legislation
prohibits the Offeror, Descartes and their affiliates from acquiring any
Debentures, other than pursuant to the Offer, until at least 20 business days
after the Expiration Date or termination of the Offer. The Offeror or Descartes
may in the future purchase additional Debentures on the open market, in private
transactions, through issuer bids or otherwise, subject to applicable law and
the terms of the Debentures. Any such purchases may be on the same terms or on
terms which are more or less favourable to Debentureholders than the terms of
the Offer. Any possible future purchases by the Offeror or Descartes will depend
on many factors, including the market price of the Debentures, Descartes'
business and financial position, the results of the Offer and general economic
and market conditions.
Descartes currently has no intention to cause the Debentures to be delisted
from the Toronto Stock Exchange where they are currently listed, or to acquire
by compulsory means Debentures from Debentureholders who do not accept the
Offer. Descartes and the Offeror currently intend that, following completion of
the Offer, the Offeror will continue to hold the Debentures and do not intend
for the Offeror to transfer the Debentures to Descartes for cancellation or to
any other person. There can be no assurance that these intentions will not
change. To the extent that Debentures are acquired by the Offeror, there may be
a reduction in the liquidity of the market for the Debentures, which reduction
in liquidity could be significant. Subject to Descartes meeting the continued
listing requirements of the Toronto Stock Exchange and to any possible future
purchases of the Debentures by Descartes or an affiliate of Descartes, the
Debentures will continue to be listed on the Toronto Stock Exchange provided
that a minimum aggregate principal amount of U.S.$2,000,000 of Debentures
remains outstanding.
Except as disclosed in this Offer to Purchase, 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 Share
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
17
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; (ix) 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, the Offeror and Descartes believe that a number of
factors, including the following, should be considered by Debentureholders:
(a) the Offer provides Debentureholders who are considering the sale of
all or a portion of their Debentures the opportunity to deposit their
Debentures for sale at the Purchase Price (subject to any applicable
withholding tax) and, if any such Debentures are purchased pursuant to
the Offer, to sell such Debentures for cash at a premium to trading
prices for the Debentures prior to May 12, 2003, being the date on
which the Offer and the Share Offer were announced (see Section 12,
"Price Range of Debentures and Common Shares; Purchases and
Distributions");
(b) the Significant Debentureholder has agreed to deposit under the Offer
U.S.$30,856,500 aggregate principal amount of Debentures at the
Purchase Price (see Section 13, "Interest of Directors and Officers;
Transactions and Arrangements Concerning the Offer; Commitment
Agreement");
(c) Debentureholders who tender Debentures to the Offer will avoid the
payment of the usual brokerage commissions associated with market
sales; and
(d) the Offer is not conditional upon any minimum number of Debentures
being deposited.
NONE OF THE OFFEROR, DESCARTES, THEIR RESPECTIVE BOARD OF DIRECTORS OR ANY
REPRESENTATIVE THEREOF MAKES ANY RECOMMENDATION TO ANY DEBENTUREHOLDER AS TO
WHETHER TO DEPOSIT OR REFRAIN FROM DEPOSITING ANY OR ALL OF SUCH
DEBENTUREHOLDER'S DEBENTURES. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. DEBENTUREHOLDERS 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
DEBENTURES AND, IF SO, THE AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES TO DEPOSIT.
DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
ACCEPTING THE OFFER. SEE SECTION 14, "INCOME TAX CONSIDERATIONS".
11. VALUATION EXEMPTION
Descartes has applied for relief from the applicable Canadian securities
regulatory authorities exempting the Offeror and Descartes from the requirement
to obtain and disclose in this Offer to Purchase an independent opinion as to a
value or range of values for the Debentures. A valuation would not be required
if the Debentures were not convertible into Common Shares. Descartes' exemption
application was based upon submission that: (i) the convertibility feature of
the Debentures is of no material value; (ii) the Debentures trade on the Toronto
Stock Exchange as non-convertible, unsecured, subordinated debt based upon the
underlying creditworthiness of Descartes as well as on the implied interest
yield of the Debentures that investors can readily compare to other available
income-producing securities; (iii) the Debentureholders know or are in a
position to know and understand the terms attaching to the Debentures and the
basis upon which the Debentures trade, including the prices and volumes at which
the Debentures trade, which knowledge, together with the disclosure in this
Offer to Purchase, will be sufficient for the Debentureholders to decide whether
or not to tender to the Offer; and (iv) the Offer would provide immediate
liquidity to Debentureholders, which would not otherwise necessarily be
available through the Toronto Stock Exchange during the period in which the
Offer would be outstanding. Accordingly, it was submitted that the possible
benefit to Debentureholders of being provided with a formal valuation does not
justify the expense to Descartes in obtaining one.
In support of its application dated May 26, 2003, among other things,
Descartes represented to the applicable Canadian provincial securities
regulators that: (i) on May 13, 2003, the closing price of the Common Shares on
18
the Toronto Stock Exchange was Cdn$3.12 which was approximately 6.4% of the
conversion price of the Debentures at such time, based on the foreign exchange
rates then in effect, and over the 12 complete months preceding the filing of
the application, the Common Shares traded on the Toronto Stock Exchange in a
range between Cdn$2.88 and Cdn$6.06 per Common Share; (ii) in the opinion dated
June 2, 2003 of one of Descartes' financial advisers, Griffiths McBurney &
Partners, a registered investment dealer, a copy of which opinion is attached
hereto as Schedule "A", the convertibility feature of the Debentures is of no
material value and the Debentures trade on the Toronto Stock Exchange as if they
were non-convertible, unsecured, subordinated debt based on the underlying
creditworthiness of the Company; (iii) over the 12 complete months preceding the
filing of the application, the Debentures traded on the Toronto Stock Exchange
on 158 out of 272 trading days, with an average daily trading value of
U.S.$48,596 principal amount of Debentures on the days traded and the price
range over that period was U.S.$680 to U.S.$930 per U.S.$1,000 principal amount
of Debentures.
12. PRICE RANGE OF DEBENTURES AND COMMON SHARES; PURCHASES AND DISTRIBUTIONS
TRADING OF DEBENTURES. The Debentures are listed on the Toronto Stock
Exchange. The following table sets forth, for the periods indicated, the high
and low prices per U.S.$100 principal amount of Debentures and volumes of
Debentures in units of U.S.$100 principal amount traded on such exchange as
compiled by the Toronto Stock Exchange:
TSX
---------------------------------------------
MONTH ENDING HIGH (U.S.$) LOW (U.S.$) VOLUME
------------ ------------ ----------- ------
2003
May ........................ 93.00 84.00 299,687
April ...................... 87.00 86.50 4,320
March ...................... 87.96 85.50 4,610
February ................... 87.00 85.10 4,200
January .................... 87.00 84.00 4,210
2002
December ................... 86.00 81.00 2,760
November ................... 82.00 75.00 14,710
October .................... 76.00 73.00 10,100
September................... 75.00 72.00 4,800
August ..................... 77.00 72.00 11,690
July ....................... 72.00 68.00 5,050
June ....................... 70.75 68.50 13,490
May ........................ 71.00 68.00 12,920
April ...................... 71.50 69.00 8,820
QUARTER ENDING
--------------
2003
March....................... 87.96 84.00 13,020
2002
December ................... 86.00 73.00 27,570
September................... 77.00 68.00 21,540
June........................ 71.50 68.00 35,230
March....................... 76.00 70.00 8,390
2001
December ................... 75.00 58.00 17,060
September................... 80.00 62.00 15,240
June........................ 92.01 75.00 5,650
March....................... 105.00 77.00 3,350
On May 12, 2003, the last full trading day prior to the announcement of
Descartes' intention to make the Offer, the closing price per U.S.$100 principal
amount of Debentures on the Toronto Stock Exchange was U.S.$85.
19
DEBENTUREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
DEBENTURES.
TRADING OF COMMON SHARES. The Common Shares are listed and posted for
trading on the Toronto Stock Exchange and the Nasdaq National Market under the
symbols "DSG" and "DSGX", respectively. The following table sets forth, for the
periods indicated, the high and low closing prices per share and the volumes
traded on the Toronto Stock Exchange and the Nasdaq National Market, as compiled
by the Toronto Stock Exchange and a published financial source, respectively.
TSX NASDAQ
--------------------------------------------- --------------------------------------------
MONTH ENDING HIGH (CDN$) LOW (CDN$) VOLUME HIGH (U.S.$) LOW VOLUME
------------ ----------- ---------- ------ ------------ --- ------
(U.S.$)
2003
May ................ 3.72 2.94 11,255,800 2.65 2.13 594,849
April .............. 4.02 3.23 4,442,542 2.76 2.22 352,500
March .............. 4.75 3.20 3,089,596 3.18 2.15 321,560
February ........... 4.93 4.02 2,427,809 3.17 3.04 12,600
January ............ 5.42 4.50 1,935,947 3.55 2.92 193,720
2002
December ........... 5.95 4.52 3,962,203 3.85 2.85 352,900
November ........... 5.59 4.06 4,856,516 3.53 2.59 493,180
October ............ 4.85 3.21 5,159,217 3.10 2.04 256,850
September .......... 4.47 3.53 2,883,008 2.90 2.22 236,600
August ............. 5.35 3.76 3,775,597 3.50 2.40 221,530
July ............... 5.55 4.32 3,304,976 3.60 2.80 444,600
June................ 6.06 4.10 3,029,806 3.96 2.68 704,400
May................. 5.58 4.48 9,679,842 3.59 2.87 916,400
April .............. 7.54 5.09 5,205,708 4.69 3.32 988,500
TSX NASDAQ
--------------------------------------------- --------------------------------------------
QUARTER ENDING HIGH (CDN$) LOW (CDN$) VOLUME HIGH (U.S.$) LOW VOLUME
-------------- ----------- ---------- ------ ------------ --- ------
(U.S.$)
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
DISTRIBUTION OF DEBENTURES. The aggregate principal amount of
U.S.$75,000,000 of Debentures was distributed in Canada pursuant to a short form
prospectus dated June 26, 2000 and in the U.S. pursuant to an exemption from
registration under the U.S. Securities Act of 1933, as amended, in each case at
a price of U.S.$1,000 per U.S.$1,000 principal amount of Debentures for
aggregate net proceeds to Descartes of U.S.$71,812,500 after deduction of
underwriting fees and before deduction of other offering expenses.
PREVIOUS PURCHASES AND SALES OF SECURITIES BY DESCARTES. On August 1, 2002,
Descartes announced its intention to repurchase for cancellation by way of a
substantial issuer bid offer expiring on September 6, 2002 up to an aggregate of
U.S.$51,428,571 principal amount of its outstanding Debentures at a single price
of U.S.$700 for each U.S.$1,000 principal amount of Debentures. Descartes
purchased for cancellation an aggregate principal amount of U.S.$5,000 of
Debentures pursuant to such offer. No sales and no other purchases of any
securities of Descartes, including Debentures, have been made by Descartes
during the twelve months preceding the Offer,
20
excluding Common Shares issued pursuant to the exercise of options granted
pursuant to Descartes' employee stock option plan.
DIVIDEND POLICY. Descartes has not paid any cash dividends on its Common
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.
13. INTEREST OF DIRECTORS AND SENIOR OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE OFFER
OWNERSHIP OF COMMON 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 Common 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 Common 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%
Manuel Pietra (6)............... Chief Executive Officer and President 83,330 .16%
Colley Clarke (7)............... Executive Vice-President, Finance & Chief Financial 239,511 .46%
Officer
Art Mesher (8).................. Executive Vice-President, Corporate Strategy and Business 497,520 .95%
Development
Bruce Gordon (9)................ Senior-Vice-President, Products and Technology 70,900 .14%
Brandon Nussey (10)............. Senior-Vice-President, Operations Development 5,060 .01%
Alec Moore (11)................. Senior Vice-President, Corporate Finance 12,500 .03%
Massood Oroomchi (12)........... Senior Vice-President, Finance & Administration 14,500 .03%
Evros Psiloyenis................ Senior-Vice-President, Infrastructure and Support 0 0%
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 1,921,901 3.68%
persons)........................
PRIMECAP Management Company..... 5,698,600 10.91%
------------------------------------
(1) Includes options to acquire 182,834 Common Shares which are or will be exercisable over the next 60 days.
(2) Includes options to acquire 17,248 Common Shares which are or will be exercisable over the next 60 days.
(3) Includes options to acquire 17,248 Common Shares which are or will be exercisable over the next 60 days.
(4) Includes options to acquire 17,248 Common Shares which are or will be exercisable over the next 60 days.
21
(5) Includes options to acquire 13,079 Common Shares which are or will be exercisable over the next 60 days.
(6) Includes options to acquire 83,330 Common Shares which are or will be exercisable over the next 60 days.
(7) Includes options to acquire 237,496 Common Shares which are or will be exercisable over the next 60 days.
(8) Includes options to acquire 494,020 Common Shares which are or will be exercisable over the next 60 days.
(9) Includes options to acquire 70,900 Common Shares which are or will be exercisable over the next 60 days.
(10) Includes options to acquire 5,000 Common Shares which are or will be exercisable over the next 60 days.
(11) Includes options to acquire 12,000 Common Shares which are or will be exercisable over the next 60 days.
(12) Includes options to acquire 12,000 Common Shares which are or will be exercisable over the next 60 days.
(13) Includes options to acquire 22,550 Common Shares which are or will be exercisable over the next 60 days.
(14) Includes options to acquire 5,000 Common Shares which are or will be exercisable over the next 60 days.
(15) Based on 52,231,711 Common 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 Common Shares under the
Share Offer.
COMMITMENTS TO ACQUIRE SECURITIES. Other than pursuant to the Share Offer,
Descartes has no commitments to purchase Common Shares or, other than pursuant
to the Offer, Debentures. As described in Section 25, "Recent Developments", and
elsewhere in this Offer to Purchase, pursuant to the Share Offer, Descartes has,
on the date hereof, made an offer to acquire 11,578,000 of its outstanding
Common Shares for a cash price of not more than Cdn$3.85 and not less than
Cdn$3.00 per Common Share (subject to any applicable withholding tax). 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 Common Shares or Debentures. Employees and directors of Descartes
may, if eligible, participate in and acquire Common Shares pursuant to the
employee stock option plan and employee share purchase plan of Descartes.
CONTRACTS, ARRANGEMENTS AND UNDERSTANDINGS. 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 Offer, within five
days of the date of the 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 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 Offer, and on or before the expiry of ten days after
the expiry of the Offer; (ii) the 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
Offer. The Commitment Agreement shall terminate if the Debentures deposited
under the 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 Offer or any person with respect to
any security of Descartes in relation to the Offer.
14. INCOME TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The Offeror and the Company have been advised by Blake, Cassels & Graydon
LLP that the following summary accurately describes the principal Canadian
federal income tax considerations under the Income Tax Act (Canada) (the "Tax
Act") generally applicable to Debentureholders who dispose of such securities
pursuant to the Offer and who, for purposes of the Tax Act and at all relevant
times hold their Debentures as capital property, deal at arm's length with
Descartes and the Offeror and are not affiliated with Descartes or the Offeror.
Debentures held by certain financial institutions, registered securities dealers
and corporations controlled by one or more of the foregoing, are generally not
held as capital property and are subject to special "mark-to-market" rules which
are not discussed herein.
22
The summary takes into account the current provisions of the Tax Act, the
regulations thereunder, the current administrative policies and assessing
practices of the Canada Customs and Revenue Agency ("CCRA") and all specific
proposals to amend the Tax Act and regulations publicly announced by the
Minister of Finance (Canada) prior to the date hereof. This summary does not
take into account or anticipate any other changes in law, or in administrative
policies or assessing practices, whether by judicial, governmental or
legislative action or decision, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations.
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
DEBENTUREHOLDER. DEBENTUREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO
THE TAX CONSEQUENCES IN THEIR PARTICULAR CIRCUMSTANCES.
FOREIGN CURRENCY
----------------
For purposes of the Tax Act, all amounts relevant in computing a
Debentureholder's liability under the Tax Act must be computed in Canadian
currency. Any amount denominated in U.S. dollars (including adjusted cost base,
proceeds of disposition and payments of interest) must be converted into
Canadian dollars based on the Canada/U.S. currency exchange rate prevailing at
the time the particular amount arises.
RESIDENTS OF CANADA
-------------------
The following portion of the summary applies only to Debentureholders who,
at all relevant times, are resident or deemed to be resident in Canada for
purposes of the Tax Act.
A Debentureholder who sells Debentures to the Offeror pursuant to the Offer
will be considered to have disposed of such Debentures for proceeds of
disposition equal to the Purchase Price (less the portion thereof that relates
to accrued interest). The Debentureholder will realize a capital gain (capital
loss) on the disposition of the Debentures sold equal to the amount by which the
Debentureholder's proceeds of disposition, net of any reasonable costs of
disposition, are greater than (or less than) the adjusted cost base of such
Debentures to the Debentureholder immediately before the disposition. The
portion of the Purchase Price that relates to accrued interest is required to be
included in computing the income of the Debentureholder for the taxation year in
which the Debentures are disposed of, except to the extent such interest was
otherwise included in the income of the Debentureholder for that year or a
previous year.
Under the Tax Act, one-half of any capital gain (capital loss) realized by
a Debentureholder is a taxable capital gain (an allowable capital loss). Taxable
capital gains must be included in computing the income of a Debentureholder for
the year in which the disposition occurs. Allowable capital losses may be
deducted only against taxable capital gains subject to and in accordance with
the provisions of the Tax Act. In certain circumstances, such as where a
Debentureholder (or person affiliated with the Debentureholder for purposes of
the Tax Act) acquires other Debentures during the period that begins 30 days
before and ends 30 days after the disposition and at the end of that period owns
such Debentures, the Debentureholder's loss from the disposition is deemed to be
nil.
NON-RESIDENTS OF CANADA
-----------------------
The following portion of the summary applies only to Debentureholders who,
at all relevant times, for purposes of the Tax Act, are not resident or deemed
to be resident in Canada, and do not use or hold and are not deemed to use or
hold Debentures in carrying on business in Canada. Special rules not discussed
below may apply to a Debentureholder that is a non-resident insurer which
carries on business in Canada and elsewhere.
A non-resident Debentureholder will not be subject to tax under the Tax Act in
respect of any capital gain (and will not be entitled to deduct any amount in
respect of a capital loss) realized on the disposition of Debentures to the
Offeror pursuant to the Offer unless the Debentures constitute "taxable Canadian
property" of the Debentureholder and the Debentureholder is not entitled to
relief under an applicable tax treaty or convention. As long as the Common
Shares are listed on a prescribed stock exchange (which currently includes the
Toronto Stock Exchange and Nasdaq National Market), the Debentures will not
constitute taxable Canadian property of a Debentureholder unless at any time
during the 60 month period immediately preceding the disposition, the
Debentureholder, persons with whom the Debentureholder does not deal at arm's
length, or the Debentureholder together with such persons,
23
owns not less than 25% of the issued shares of any class or series of Descartes.
A Debentureholder who would exceed this 25% threshold based solely on the number
of Common Shares that would be owned by such Debentureholder (either alone or
together with such persons) upon conversion of Debentures should contact its own
tax adviser for advice as to whether such Debentures constitute taxable Canadian
property.
The Offeror will withhold tax in accordance with Part XIII of the Tax Act
on the portion of the Purchase Price that relates to accrued interest on the
basis that such amount may be deemed to be interest in accordance with Part XIII
of the Tax Act. In addition, to the extent (if any) that the Purchase Price of a
Debenture (excluding the portion thereof that relates to accrued interest)
exceeds the price for which the Debenture was issued (each calculated in
Canadian dollars using the prevailing exchange rate at the relevant time), the
Offeror will withhold tax on such excess on the basis that such excess may be
deemed to be interest in accordance with Part XIII of the Tax Act. The rate of
such withholding tax is generally 25% of the interest payment, subject to
reduction under an applicable tax treaty between Canada and the
Debentureholder's jurisdiction of residence. The rate applicable under the
Canada-United States Income Tax Convention (1980) (the "Convention") is
generally 10% where the non-resident Debentureholder is the beneficial owner of
the interest and is a resident of the United States for purposes of the
Convention.
If the Minister of National Revenue (the "Minister") issues a "certificate
of exemption" under the Tax Act to a non-resident Debentureholder, and such
certificate of exemption is in force at the time interest is deemed to be paid
or credited to the Debentureholder, the Offeror would not be required to
withhold tax on deemed interest provided the Debentureholder deals at arm's
length with the Offeror at the time such interest is deemed to be paid or
credited. In general, a certificate of exemption may be issued by the Minister
to a non-resident Debentureholder that is resident in a country which imposes an
income tax, is exempt from income tax under the laws of that country and either
would be exempt from tax if the Debentureholder were resident in Canada or is a
trust or corporation operated exclusively to administer or provide pension or
employee benefits or is a charitable organization.
Under the Convention, interest paid to certain religious, scientific,
literary, educational or charitable organizations and certain pension
organizations that are resident in, and generally exempt from tax in the United
States is generally exempt from Canadian non-resident withholding tax. Provided
certain administrative procedures are observed by such an organization, the
Offeror would not be required to withhold tax from interest deemed to be paid or
credited to such an organization.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Offeror and the Company have 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 Debentures to the Offeror 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).
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 Debentureholders 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, Debentureholders that
hold their Debentures as part of a hedge, straddle or conversion transaction,
insurance companies, tax-exempt entities, Debentureholders 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 Debentureholder sells the Debentures pursuant to the Offer, and
Debentureholders that do not hold the Debentures as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code).
Debentureholders 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 advisors.
24
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
Debentureholder, or any U.S. federal tax considerations other than U.S. federal
income tax considerations.
This summary assumes that (i) the Debentures constitute debt rather than
equity for U.S. federal income tax purposes and (ii) upon the original issuance
of the Debentures, there was no intention to call the Debentures before
maturity.
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 ADVISORS 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 Debentureholder
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 Debentures and
persons holding beneficial interests in Debentures through a partnership are
urged to consult their own tax advisors.
GAIN OR LOSS. The receipt of cash for Debentures pursuant to the Offer will
generally be a taxable transaction for U.S. federal income tax purposes. The tax
consequences of such receipt may vary depending upon, among other things, the
particular circumstances of the holder. In general, a U.S. Holder who receives
cash for Debentures pursuant to the Offer will recognize gain or loss, if any,
for U.S. federal income tax purposes equal to the difference between (a) the
amount realized in exchange for the Debentures tendered less any amounts
attributable to accrued interest that have not been reflected in the U.S.
Holder's adjusted tax basis in the Debentures (see "Interest income" below), and
(b) such holder's adjusted tax basis in such Debentures. A U.S. Holder's
adjusted tax basis for a Debenture is generally the price such holder paid for
the Debenture, increased by any market discount previously included in such
holder's income and reduced (but not below zero) by any amortized premium.
Except as noted below (including in the discussion of "Passive Foreign
Investment Companies"), any gain or loss recognized by a Debentureholder on the
sale of Debentures pursuant to the Offer will generally give rise to capital
gain or loss if the Debenture is held as a capital asset, and will generally be
long-term capital gain or loss if the U.S. Holder's holding period in the
Debenture for U.S. federal income tax purposes is more than one year. A U.S.
Holder who has acquired a Debenture with market discount will generally be
required to treat all or a portion of the gain, if any, on the disposition of
Debentures pursuant to the Offer as ordinary income to the extent of the market
discount accrued to the date of the disposition, less any accrued market
discount income previously reported as ordinary income. Capital losses are
subject to limitations on deductibility for U.S. federal income tax purposes.
INTEREST INCOME. Amounts received by a U.S. Holder in respect of interest
on the Debentures, including any amounts attributable to accrued interest that
have not been reflected in the U.S. Holder's adjusted tax basis in the
Debentures, will generally be taxable as ordinary income.
PASSIVE FOREIGN INVESTMENT COMPANIES - CONSIDERATIONS APPLICABLE TO U.S.
------------------------------------------------------------------------
DEBENTUREHOLDERS
----------------
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, including
25
Debentureholders by reason of their ownership of convertible debt obligations of
the Company. Some, but not all, of the potential adverse consequences under the
PFIC rules are summarized in general terms below, and Debentureholders should
consult their tax advisors 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. Because the Debentures are convertible into stock of the
Company, the Debentures are treated as options, and thus as PFIC equity
interests, for certain purposes under these PFIC rules. FOR THIS REASON, IT IS
POSSIBLE THAT U.S. PERSONS WHO ARE DEBENTUREHOLDERS, AS WELL AS U.S. PERSONS WHO
ACTUALLY OWN STOCK OR OTHER EQUITY INTERESTS 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 Debentures 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 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.
APPLYING PFIC RULES TO A DISPOSITION OF DEBENTURES. The Company's financial
adviser, Griffiths McBurney & Partners, has opined that the convertibility
feature of the Debentures is of no material value and that the Debentures trade
on the Toronto Stock Exchange as if they were non-convertible, unsecured,
subordinated debt. Where the conversion privilege of the Debentures is of no
material value, it is possible that the proceeds of a disposition of Debentures
(pursuant to the Offer or otherwise) could be viewed as having been received for
the Debenture without regard to the conversion feature, and not in exchange for
an option to acquire stock in the Company. If, however, all
26
or a portion of the Debentures are treated as options, and thus as PFIC equity
interests, for purposes of the PFIC rules and the Company is a PFIC, then
depending on a Debentureholder's circumstances, gain on the disposition of
Debentures could be subject to tax as ordinary income and to the interest
charge, as described above. The application of the PFIC rules to the disposition
of convertible debt securities such as the Debentures is unclear, and the IRS
has not provided specific guidance on the matter. In addition, the treatment of
interest on the Debentures is not clear under the PFIC rules, and it is possible
that those rules, as described above, may apply to some or all of the interest
on the Debentures. In any event, as described above under "Interest income,"
interest on the Debentures will be taxable as ordinary income.
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 advisors 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 asset and the amount and type of its 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 DEBENTURES, U.S. HOLDERS SHOULD
CONSULT WITH AND RELY SOLELY UPON THEIR OWN TAX ADVISORS REGARDING THE
APPLICATION OF THE PFIC RULES TO THE DISPOSITION OF DEBENTURES (INCLUDING THE
TREATMENT OF GAIN RECOGNIZED ON DISPOSITION AND THE TREATMENT OF ACCRUED
INTEREST). 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 ADVISORS REGARDING THE APPLICATION OF THE PFIC AND OTHER U.S. TAX
RULES APPLICABLE WITH RESPECT TO STOCK OR OTHER EQUITY INTERESTS IN THE COMPANY.
FOREIGN TAX CREDIT
------------------
Any withholding tax imposed by Canada on interest may be eligible for
treatment as a foreign income tax for which a U.S. Holder may claim a 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 advisors 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.
27
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 ADVISORS
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
Descartes is not aware of any license or regulatory permit that is material
to Descartes' business that might be adversely affected by the Offeror's
acquisition of Debentures 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 Debentures by the Offeror 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 valuation
requirements under provincial securities legislation with respect to the Offer.
The Offeror and Descartes anticipate receiving an order granting the necessary
relief prior to the Expiration Date. Should any such approval or other action be
required, the Offeror and Descartes currently contemplate that such approval or
other action will be sought. The Offeror cannot predict whether it may determine
that it must delay the acceptance for payment of Debentures 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. The Offeror's obligations under the Offer to accept for payment and
pay for Debentures 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 U.S.$42,750,000,
not including interest and disregarding any effects of rounding to the nearest
whole U.S.$1,000 principal amount of Debentures in the event that deposits of
Debentures under the Offer are prorated. See Section 1, "Principal Debentures;
Proration". This cash consideration, together with any related fees and
expenses, will be financed by cash invested by Descartes in the Offeror through
the application of cash, cash equivalents and/or marketable securities currently
held by Descartes.
18. DEPOSITARY
The Offeror has appointed CIBC Mellon Trust Company to act as a Depositary
for: (i) the receipt of certificates representing Debentures and related Letters
of Transmittal deposited under the Offer; (ii) the receipt of certificates
representing Debentures delivered pursuant to the procedures for guaranteed
delivery set forth in Section 2 of the Offer, "Procedure for Depositing
Debentures"; (iii) the receipt from the Offeror of cash to be paid in
consideration of the Debentures acquired by the Offeror under the Offer, as
agent for the depositing Debentureholders; and (iv) the transmittal of such cash
to the depositing Debentureholders as agent for the depositing Debentureholders.
The Depositary may contact Debentureholders by mail, telephone or facsimile and
may request brokers, dealers and other nominee Debentureholders 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
28
terms of the 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 Offer
and GMP will act as Canadian Dealer Manager for the Offer. GMP has provided an
opinion, a copy of which is attached hereto as Schedule "A", on the value of the
convertibility feature of the Debentures and the basis upon which the Debentures
trade (the "Debenture 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 Share Offer, including the structure and
terms of the Share 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 Share Offer. GMP will be a member of the Canadian
soliciting dealer group for the Share Offer. GMP has also provided a liquidity
opinion in connection with the Share Offer (the "Liquidity 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
Common Shares for gross proceeds of Cdn$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 Share 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 Share Offer. Success fees are also payable to
CSFB in respect of the Offer and the Share Offer. A success fee of up to
U.S.$106,250 is payable in such proportion as the aggregate principal amount of
Debentures acquired under the Offer bears to the U.S.$45,000,000 aggregate
principal amount of Debentures which the Offeror has offered to acquire under
the Offer. A success fee of up to U.S.$56,250 is payable in such proportion as
the aggregate number of Common Shares acquired by Descartes under the Share
Offer bears to the 11,578,000 Common Shares which Descartes has offered to
acquire under the Share Offer. The success fees payable under the Offer and the
Share Offer are payable to CSFB upon completion or termination of the Offer and
the Share 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 Share 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.$106,250 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.$56,250 is payable by Descartes to GMP in connection with the Share
Offer on the same terms.
Descartes has also agreed to reimburse CSFB and GMP for certain reasonable
out-of-pocket expenses incurred in connection with the Offer and the Share 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.
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 Debentures
pursuant to the Offer or deposits of Common Shares under the Share 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.
29
Descartes and the Offeror expect to incur aggregate 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. Debentureholders 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 the Offeror 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 Debentures at their respective
addresses as shown on the debenture registers maintained in respect of the
Debentures 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 Debentureholders and (ii) an
interruption of mail service in Canada following mailing. In the event of an
interruption of mail service following mailing, the Offeror 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 the Offeror 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 Debentureholders if it is issued by way of a public
announcement and if it is published 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 the Offeror or 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 Debentures be accepted
from or on behalf of Debentureholders 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. The Offeror 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 Debentureholders 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.
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.
30
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 Descartes 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, Descartes has made the Share Offer, pursuant to which
it has offered to purchase up to 11,578,000 of its outstanding Common Shares for
a cash price of not more than Cdn$3.85 and not less than Cdn$3.00 per Common
Share (subject to any applicable withholding tax). Debentureholders should
review the Share Offer for the full terms and conditions thereof.
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 of the Debentures
under the Offer, assuming the Offeror purchases the maximum aggregate principal
amount of U.S.$45,000,000 on the dates indicated. Additional pro forma
adjustments are also provided to illustrate the impact of the purchase for cash
of 11,578,000 Common Shares at the maximum price of Cdn$3.85 (U.S.$2.52) per
share pursuant to the Share Offer.
31
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
---------------------------------------------------------------------------------------------------------
32
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
===================================================================================================================================
33
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 Debenture Pro Forma Common Share 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 (710) III A 1. 20,485 (500) 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 (710) 48,881 (500) 48,381
MARKETABLE SECURITIES 144,386 (42,750) III A 4. 101,636 (29,152) III B 2. 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 (1,024) III A 2. 614 614
------------------------------------------------------------------------------------------------------------------------------------
242,275 (44,484) 197,791 (29,652) 168,139
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 3,964 3,964 3,964
Accrued liabilities 8,673 (210) III A 1. 8,463 8,463
Deferred revenue 2,923 2,923 2,923
------------------------------------------------------------------------------------------------------------------------------------
15,560 (210) 15,350 - 15,350
CONVERTIBLE DEBENTURES 71,995 (45,000) III A 3. 26,995 26,995
------------------------------------------------------------------------------------------------------------------------------------
87,555 (45,210) 42,345 - 42,345
------------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common shares
Authorized - Unlimited
Issued - 52,224,511 468,618 468,618 (29,652) III B 3. 438,966
Pro Forma Issued - 40,646,511
Additional paid-in capital 5,201 5,201 5,201
Unearned deferred compensation (690) (690) (690)
Accumulated other comprehensive loss (1,506) (1,506) (1,506)
Accumulated deficit (316,903) 726 III A 4. (316,177) (316,177)
------------------------------------------------------------------------------------------------------------------------------------
154,720 726 155,446 (29,652) 125,794
------------------------------------------------------------------------------------------------------------------------------------
242,275 (44,484) 197,791 (29,652) 168,139
====================================================================================================================================
SHAREHOLDERS' EQUITY PER SHARE 2.96 2.98 3.09
====================================================================================================================================
34
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 Debenture Year Ended Common Share 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) 2,899 IV A 1. (1,720) (1,720)
Investment income 6,493 (1,190) IV A 2. 5,303 (830) IV B 1. 4,473
Gain on purchase of debentures (Note I) (89) 303 IV A 3. 214 214
------------------------------------------------------------------------------------------------------------------------------------
1,785 2,012 3,797 (830) 2,967
------------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (139,005) 2,012 (136,993) (830) (137,823)
INCOME TAX RECOVERY (EXPENSE) - CURRENT 362 362 362
------------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST (138,643) 2,012 (136,631) (830) (137,461)
MINORITY INTEREST 448 448 448
------------------------------------------------------------------------------------------------------------------------------------
LOSS (138,195) 2,012 (136,183) (830) (137,013)
------------------------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE
Basic and diluted (2.65) 0.04 (2.61) (0.02) (3.37)
------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted (thousands) 52,234 52,234 52,234 40,656 40,656
------------------------------------------------------------------------------------------------------------------------------------
35
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 by the Offeror of up to an aggregate principal amount of
approximately U.S.$45,000,000 of Debentures, on the basis of assumptions
described below. Additional pro forma adjustments are also provided to
illustrate the effect of the purchase for cash of 11,578,000 Common Shares at
the maximum price of Cdn$3.85 (U.S.$2.52 as converted at the rate of exchange as
at January 31, 2003) per share pursuant to the Share 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 Share Offer took place on January 31, 2003. The unaudited pro forma
consolidated statement of operations assumes that both the Offer and the Share
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 the Share 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 the Offeror will 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 purchase per U.S.$1,000
principal amount of Debentures for a total price of U.S.$42,750,000 plus such
interest.
Under the Share Offer, Descartes has offered to purchase for cancellation, for
cash, up to 11,578,000 Common Shares at a purchase price of not more than
Cdn$3.85 and not less than Cdn$3.00 per Common Share. The pro forma financial
statements give effect to the Share Offer assuming purchase for cancellation,
for cash, of 11,578,000 Common Shares for the maximum purchase price of Cdn$3.85
(U.S.$2.52) per share.
36
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 DEBENTURES
1. To reduce cash for accrued interest to be paid (U.S.$0.2 million) and
estimated expenses directly related to the purchase of Debentures (U.S.$0.5
million).
2. To eliminate deferred issue costs of Debentures purchased (U.S.$1.0
million).
3. To reduce the convertible Debenture liability for the face amount purchased
(U.S.$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
----------
B. PURCHASE OF COMMON SHARES
1. To reduce cash for estimated expenses directly related to the purchase of
Common Shares (U.S.$0.5 million)
2. To reduce long-term marketable securities for the amount required to
purchase the Common Shares (U.S.$29,152,000).
3. To reduce issued share capital with the cash required to purchase the
Common Shares including purchase costs.
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 DEBENTURES
1. To reduce interest expense by the amount attributable to Debentures
purchased (U.S.$2.5 million) and the elimination of the amortization of the
related deferred issue costs (U.S.$0.4 million).
2. To record loss of interest income due to the use of cash for the purchase
of Debentures (U.S.$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
----------
B. PURCHASE OF COMMON SHARES
1. To record loss of interest income due to the use of cash for the purchase
of Common Shares (U.S.$0.8 million).
37
APPROVAL BY DESCARTES
The contents of the Offer, as well as the sending, communication or
delivery thereof to the Debentureholders, 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
Debentures 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 Chairman of the Board Director
APPROVAL BY THE OFFEROR
The contents of the Offer, as well as the sending, communication or
delivery thereof to the Debentureholders, has been approved by the Board of
Directors of 3078393 Nova Scotia Company. 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
Debentures within the meaning of the Securities Act (Quebec).
DATED: June 2, 2003
(Signed) COLLEY CLARKE (Signed) SCOTT PAGAN
President, as Chief Executive Officer Treasurer, as Chief Financial Officer
On behalf of the Board of Directors
(Signed) COLLEY CLARKE (Signed) SCOTT PAGAN
Director Director
C-1
CONSENT OF GRIFFITHS MCBURNEY & PARTNERS
To: The Directors of The Descartes Systems Group Inc.
And to: The Directors of 3078393 Nova Scotia Company
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 3078393 Nova Scotia Company, a wholly-owned subsidiary of The Descartes
Systems Group Inc., to the holders of Debentures of Descartes, 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.
And to: The Directors of 3078393 Nova Scotia Company
We consent to the inclusion of our name and the reference to our
discussion of certain Canadian federal income tax matters in the section titled
"Income Tax Considerations -- Canadian Federal Income Tax Considerations" in the
Offer to Purchase dated June 2, 2003 made by 3078393 Nova Scotia Company, a
wholly-owned subsidiary of The Descartes Systems Group Inc., to holders of
Debentures of Descartes.
June 2, 2003 (Signed) BLAKE, CASSELS & GRAYDON LLP
CONSENT OF TESTA, HURWITZ & THIBEAULT, LLP
To: The Directors of The Descartes Systems Group Inc.
And to: The Directors of 3078393 Nova Scotia Company
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 3078393 Nova
Scotia Company, a wholly-owned subsidiary of The Descartes Systems Group Inc.,
to the holders of Debentures of Descartes.
June 2, 2003 (Signed) TESTA, HURWITZ & THIBEAULT, LLP
C-2
CONSENT OF DELOITTE & TOUCHE LLP
To: The Directors of The Descartes Systems Group Inc.
And to: The Directors of 3078393 Nova Scotia Company
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 5.50% Convertible Unsecured Subordinated
Debentures due June 30, 2005 of Descartes by 3078393 Nova Scotia Company, a
wholly-owned subsidiary of Descartes, dated June 2, 2003.
June 2, 2003 (Signed) DELOITTE & TOUCHE LLP
Kitchener, Ontario
Canada
C-3
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:
We understand that a wholly-owned subsidiary of The Descartes Systems Group Inc.
("Descartes") intends to make an offer (the "Offer") to purchase by way of a
substantial issuer bid up to U.S. $45,000,000 aggregate principal amount of
5.50% Convertible Unsecured Subordinated Debentures maturing June 30, 2005 of
Descartes (the "Debentures") that trade on the Toronto Stock Exchange (the
"TSX"). We further understand that the Debentures are convertible into Descartes
common shares (the "Common Shares") at a conversion price of U.S. $35.00 per
Common Share, being a rate of approximately 28.57 Common Shares per U.S. $1,000
principal amount of Debentures. The Debentures are convertible at the
Debentureholder's option into Common Shares at any time prior to the earlier of
June 30, 2005 and the last business day immediately preceding the date specified
for redemption by Descartes.
GRIFFITHS MCBURNEY & PARTNERS ENGAGEMENT
Descartes engaged Griffiths McBurney & Partners ("GMP") to provide financial
advice to Descartes and its board of directors (the "Board") in connection with
the Offer. Pursuant to that engagement, Descartes requested that GMP prepare and
deliver a written opinion to the Board as to as to whether the convertibility
feature of the Debentures is of any material value, and whether the Debentures
trade on the TSX like non-convertible, unsecured, subordinated debt based on the
underlying creditworthiness of Descartes (the "Opinion").
GMP will receive a fee from Descartes for providing advisory services and for
providing the Opinion. In addition, Descartes has agreed to indemnify GMP for
certain liabilities arising out of GMP's engagement and to reimburse GMP for
certain expenses incurred in connection with the Offer.
CREDENTIALS OF GRIFFITHS MCBURNEY & PARTNERS
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.
SCOPE OF REVIEW
In preparing our Opinion, we have relied upon publicly available information and
information provided to us by management of Descartes, and have utilized such
information without independent confirmation or verification.
In considering the value of the conversion feature of the Debentures, GMP
considered a number of factors including the following:
(a) the value of the equity component of the Debentures, as calculated by GMP
utilizing the Black Scholes Option Pricing Model, is U.S. $0.00 per
U.S.$1,000 of principal amount of Debentures;
A-1
(b) the value of the debt component of the Debentures, as calculated by GMP, is
approximately U.S. $1,000 per U.S.$1,000 of principal amount of Debentures;
(c) during the last twelve months, the Debentures have traded on the TSX in a
range between U.S. $680 per $1000 of principal amount of Debentures and
U.S. $930 per U.S.$1,000 of principal amount of Debentures with an average
volume of U.S. $226,735 on the days traded;
(d) during the last twelve months, the Common Shares have traded on the TSX in
a range between Cdn. $6.06 and Cdn. $2.88 with an average daily volume of
200,465.
(e) based upon foreign exchange rates as of May 30, 2003, the Debentures are
convertible at the equivalent of Cdn. $47.86 per Common Share;
(f) The trading price of the Common Shares, as of the close of trading on the
TSX on May 30, 2003, was Cdn. $3.17 per share;
(g) The trading prices on the TSX for non-convertible, unsecured, subordinated
debt of various Canadian issuers; and
(h) the trading prices on the TSX for convertible, unsecured, subordinated debt
of various Canadian issuers in respect of which the convertibility feature
has a material value.
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
GMP has not prepared a formal valuation of Descartes or any of its securities or
assets for the purposes of this Opinion and the Opinion should not be construed
as expressing any opinion as to the value of the Debentures.
The Opinion has been provided to the Board for its use only in determining the
availability of an exemption from the formal valuation and related disclosure
requirements of Ontario Securities Commission Rule 61-501 and the equivalent
provisions of securities legislation of certain of the other provinces and in
support of Descartes' application for exemption from such requirements, 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, GMP learns of any material change in any fact or matter
affecting the Opinion, GMP reserves the right to change, modify or withdraw the
Opinion.
The Opinion is not to be construed as a recommendation to any holder of
Debentures as to whether or not to tender its Debentures under the Offer.
Based upon and subject to the foregoing, we are of the opinion that:
(i) the convertibility feature of the Debentures is of no material value;
and
(ii) the Debentures trade on the TSX like non-convertible, unsecured,
subordinated debt based on the underlying creditworthiness of
Descartes.
Yours truly,
"Griffiths McBurney & Partners"
Griffiths McBurney & Partners
A-2
Manually executed photocopies of the Letter of Transmittal will be accepted. The
Letters of Transmittal, certificates for Debentures and any other required
documents should be sent or delivered by each depositing Debentureholder 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
Depositary at the address and telephone and facsimile numbers set forth herein.
Debentureholders may also contact their investment dealer, stock broker, bank,
trust company or other nominee through which they hold Debentures for assistance
concerning the Offer.
The Dealer Managers for the Offer are:
In the United States: In Canada:
Credit Suisse First Boston LLC Griffiths McBurney & Partners
11 Madison Avenue 145 King Street West
New York, NY Suite 1100
10010-3629 Toronto, Ontario
M5H 1J8
For further information contact:
For further information contact:
Telephone: (800) 881-8320 Jo-Anne Stansfield
Telephone: (416) 943-6129
(800) 735-1463
Facsimile: (416) 367-6168
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 5.50% CONVERTIBLE UNSECURED SUBORDINATED
DEBENTURES DUE JUNE 30, 2005
OF
THE DESCARTES SYSTEMS GROUP INC.
PURSUANT TO THE OFFER TO PURCHASE BY 3078393 NOVA SCOTIA COMPANY,
A WHOLLY-OWNED SUBSIDIARY OF THE DESCARTES SYSTEMS GROUP INC.,
DATED JUNE 2, 2003
--------------------------------------------------------------------------------
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
The 5.50% Convertible Unsecured Subordinated Debentures due June 30, 2005 (the
"Debentures") of The Descartes Systems Group Inc. ("Descartes") are currently
registered in the name of and held by or on behalf of The Canadian Depository
for Securities Limited ("CDS") as custodian for its participants. Beneficial
interests in the Debentures, constituting ownership of the Debentures, are
represented through book-entry accounts of institutions acting on behalf of
beneficial owners, as direct and indirect participants of CDS rather than by
definitive certificates. PARTICIPANTS OF CDS SHOULD CONTACT SUCH DEPOSITARY WITH
RESPECT TO THE DEPOSIT OF DEBENTURES UNDER THE OFFER (AS DEFINED BELOW). CDS
WILL BE ISSUING INSTRUCTIONS TO ITS PARTICIPANTS AS TO THE METHOD OF DEPOSITING
SUCH DEBENTURES UNDER THE TERMS OF THE OFFER.
THE DEBENTURES ARE CURRENTLY REGISTERED IN THE NAME OF CDS. A DEPOSIT OF SUCH
DEBENTURES CAN BE MADE ONLY BY CDS AS THE HOLDER OF RECORD. THE LETTER OF
TRANSMITTAL CANNOT BE USED BY HOLDERS OF DEBENTURES ("DEBENTUREHOLDERS") WHOSE
DEBENTURES ARE HELD BY CDS TO DEPOSIT SUCH DEBENTURES. A DEBENTUREHOLDER WHO
WISHES TO DEPOSIT DEBENTURES UNDER THE OFFER 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 DEBENTURES UNDER THE OFFER.
This Letter of Transmittal is to be used only if certificates for Debentures are
to be forwarded with it pursuant to Section 2 of the Offer to Purchase (as
defined below). Where multiple Letters of Transmittal are prepared in connection
with one global certificate for Debentures, only one such Letter of Transmittal
should have attached to it a global certificate, and an appropriate
cross-reference to such Letter of Transmittal provided herein.
This Letter of Transmittal, properly completed and duly executed, together with
all other required documents, must accompany the certificates for the Debentures
deposited pursuant to the Offer. Debentureholders whose certificates are not
immediately available or who cannot deliver their certificates for Debentures
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 Debentures according to the guaranteed delivery procedure set
forth in Section 2 of the Offer to Purchase. See Instruction 2.
DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
DEPOSITING DEBENTURES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX
CONSIDERATIONS" IN THE OFFER TO PURCHASE THAT ACCOMPANIES THIS LETTER OF
TRANSMITTAL.
The undersigned delivers to 3078393 Nova Scotia Company, a wholly-owned
subsidiary of Descartes, the enclosed certificate(s) for Debentures and, subject
only to the provisions of the Offer regarding withdrawal, irrevocably accepts
the Offer for such Debentures upon the terms and conditions contained in the
Offer to Purchase. The following are the details of the enclosed certificate(s):
-------------------------------------------------------------------------------------------------------------
DESCRIPTION OF DEBENTURES DEPOSITED
(SEE INSTRUCTIONS 3 AND 4)
-------------------------------------------------------------------------------------------------------------
Name and Address of Debenture Certificate Principal Amount of Debentures Principal Amount of Debentures
Registered Holder(s) Number(s) Represented (U.S.$) Deposited* (in multiples of
U.S.$1,000)
--------------------- ----------------------- -------------------------------- ------------------------------
--------------------- ----------------------- -------------------------------- ------------------------------
--------------------- ----------------------- -------------------------------- ------------------------------
------------------------------------------------------------------------------ ------------------------------
TOTAL PRINCIPAL AMOUNT OF DEBENTURES DEPOSITED $
------------------------------------------------------------------------------ ------------------------------
* If you desire to deposit less than the entire principal amount of Debentures
evidenced by the certificate listed above, indicate in this column the
principal amount of Debentures you wish to Deposit hereunder. Otherwise the
entire principal amount of Debentures evidenced by such Debenture
certificate will be considered to have been deposited.
--------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN PROVIDED HEREIN DOES NOT
CONSTITUTE A VALID DELIVERY.
TO: 3078393 NOVA SCOTIA COMPANY (THE "OFFEROR"), A WHOLLY-OWNED SUBSIDIARY
OF DESCARTES
AND TO: CIBC MELLON TRUST COMPANY (THE "DEPOSITARY"), AS DEPOSITARY AT ITS
OFFICES SET OUT HEREIN.
The undersigned hereby deposits to the Offeror the above-described Debentures,
pursuant to the Offeror's Offer to Purchase up to a maximum of U.S.$45,000,000
aggregate principal amount of Debentures at a price of U.S.$950 plus the amount
of any unpaid interest (subject to any applicable withholding tax) accrued up to
and as at the date immediately prior to the date on which the Offeror takes up
and pays for Debentures under the Offer for each U.S.$1,000 principal amount of
Debentures (the "Purchase Price"), payable in cash, for all Debentures purchased
upon the terms and subject to the conditions set forth in the Offeror's 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 to Purchase 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 that accompanies this Letter of Transmittal.
Subject to and effective upon acceptance for purchase of the Debentures
deposited hereby in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to or upon the order of the Offeror all
rights, title and interest in and to all Debentures deposited hereby and in and
to any and all rights, benefits and claims in
2
respect thereof or arising, or having arisen as a result of the undersigned's
status as a Debentureholder of Descartes and in and to any and all
distributions, payments, principal, interest, 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 Debentures or any of them on or after the date upon which the
Debentures are taken up and paid for under the Offer.
All questions as to the validity (including, without limitation, timely receipt)
and form of notices of withdrawal shall be determined by Descartes in its sole
discretion acting reasonably, and such determination shall be final and binding.
The undersigned hereby irrevocably constitutes and appoints the Depositary and
any officer of Descartes or the Offeror as attorney-in-fact of the undersigned
with respect to such Debentures effective from the time the Offeror takes up and
pays for the Debentures (the "Effective Time"), with full power of substitution
(such power of attorney being an irrevocable power coupled with an interest),
to:
(a) deliver certificates for such Debentures, together with all accompanying
evidences of transfer and authenticity, to or upon the order of, the
Offeror upon receipt by the Depositary, as the undersigned's agent, of the
Purchase Price;
(b) present certificates for such Debentures for cancellation and transfer on
the books of the trustee for the Debentures;
(c) register or record, transfer and enter the transfer of such Debentures in
the appropriate register of holders of such Debentures; and
(d) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Debentures, 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 the Offeror accepts the Debentures for payment, the
Offeror 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;
(b) on request, the undersigned will execute and deliver any additional
documents that the Depositary, the Offeror or Descartes deems necessary or
desirable to complete the assignment, transfer, and purchase of the
Debentures 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
Debentures to the extent Debentures 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 Debentures, and the undersigned shall not take steps to vote the
Debentures on or after the Effective Time unless the Debentures 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
Debentures deposited hereby. The certificates and the principal amount of
Debentures that the undersigned wishes to deposit should be indicated in the
appropriate boxes.
3
The undersigned understands that if the aggregate principal amount of Debentures
properly deposited by the Expiration Date and not withdrawn is greater than
U.S.$45,000,000, the Offeror will, upon the terms and subject to the conditions
of the Offer, purchase at the Purchase Price, Debentures so deposited having an
aggregate principal amount of U.S.$45,000,000 on a PRO RATA basis (calculated to
the nearest whole U.S.$1,000 principal amount of Debentures, so as to avoid the
creation of fractional Debentures). The Offeror's 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, the Offeror may terminate or amend the Offer or may not be
required to purchase any of the Debentures deposited hereby or may accept for
payment, in accordance with the applicable proration provisions relating to
Debentures deposited, fewer than all of the Debentures deposited hereby. The
undersigned understands that certificate(s) for any Debentures deposited but not
purchased will be returned to the undersigned at the address indicated above,
unless otherwise indicated in Box A "Special Payment Instructions" or Box B
"Special Delivery Instructions". The undersigned recognizes that Descartes has
no obligation, pursuant to the Special Payment Instructions, to transfer any
certificates for Debentures from the name of their registered owner.
The undersigned understands that acceptance of Debentures by the Offeror for
payment will constitute a binding agreement between the undersigned and the
Offeror, effective as of the Expiration Time, upon the terms and subject to the
conditions of the Offer.
The undersigned understands that payment for Debentures accepted for payment
pursuant to the Offer will be made by depositing the aggregate Purchase Price
for such Debentures, with the Depositary. The Depositary will act as agent for
the depositing Debentureholders for the purpose of receiving payment from the
Offeror and transmitting such payment to the depositing Debentureholders.
Receipt of payment by the Depositary will be deemed to constitute receipt of
payment thereof by persons depositing Debentures. Under no circumstances will
interest be paid by the Offeror or the Depositary by reason of any delay in
paying for any Debentures or otherwise, other than interest specifically
provided for in the Offer.
The undersigned instructs the Offeror and the Depositary to issue the cheque for
the Purchase Price for such of the deposited Debentures 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 A "Special Payment Instructions", Box B
"Special Delivery Instructions" or Box C "Hold for Pick-Up".
THE UNDERSIGNED UNDERSTANDS THAT IF A DEBENTURE 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 BOX B
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5 AND 6) (SEE INSTRUCTIONS 1, 4, 5 AND 6)
----------------------------------------------------------- ---------------------------------------------------------
To be completed ONLY if certificates for Debentures To be completed ONLY if certificates for Debentures
deposited but not purchased and/or the cheque for the deposited but not purchased and/or the cheque for the
purchase price of Debentures purchased are to be issued purchase price of Debentures purchased are to be sent
in the name of someone other than the undersigned. to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
-----------------------------------------------------------
Issue: [ ] cheque and/or [ ] certificate(s)to: Issue: [ ] cheque and/or [ ] certificate(s) to:
Name Name
------------------------------------------------------- -----------------------------------------------------
(Please Print) (Please Print)
Address Address
---------------------------------------------------- --------------------------------------------------
----------------------------------------------------------- ---------------------------------------------------------
----------------------------------------------------------- ---------------------------------------------------------
(Include Postal Code) (Include Postal Code)
-----------------------------------------------------------
(SOCIAL INSURANCE NO. OR CCRA BUSINESS NO.)
----------------------------------------------------------- ---------------------------------------------------------
---------------------------------------------------------
BOX C HOLD FOR PICK-UP
[ ] Hold certificates and/or cheques representing
Debentures not tendered, not deemed to have been
tendered or not purchased for pick-up.
---------------------------------------------------------
5
--------------------------------------------------------------------------------
BOX D
[ ] CHECK HERE IF CERTIFICATES FOR DEPOSITED DEBENTURES 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 E BOX F
DEBENTUREHOLDER(S) SIGN HERE GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5) (SEE INSTRUCTIONS 1 AND 5)
Must be signed by registered owner(s) exactly as name(s) Authorized Signature:___________________________________
appear(s) on certificate(s) or on a security position
listing or by person(s) authorized to become registered
owner(s) by certificate(s) and documents transmitted with
this Letter of Transmittal. If signature is by Name(s):________________________________________________
attorney-in-fact, executor, administrator, trustee, (Please Print)
guardian, officer of a corporation or another acting in a
fiduciary or representative capacity, please set forth the Title:__________________________________________________
full title. See Instruction 5.
Authorized Signature :_________________________________
Signature(s) of Owner(s) Name of Firm :__________________________________________
Address :_______________________________________________
_______________________________________________________
________________________________________________________
Name(s):_______________________________________________
(Please Print) ________________________________________________________
(Include Postal Code)
Capacity:______________________________________________
Address:_______________________________________________ Area Code and Telephone Number:_________________________
_______________________________________________________ ________________________________________________________
Dated_____________________________________________, 2002
Area Code and Telephone Number:________________________
_______________________________________________________
DEBENTUREHOLDERS MUST PROVIDE THEIR SOCIAL INSURANCE NO.
OR CCRA BUSINESS NO.
DATED____________________________________________, 2002
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
Debentures 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 A "Special Payment Instructions" or Box B
"Special Delivery Instructions" above; or
(b) such Debentures 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 F "Guarantee of
Signature(s)". See Instruction 5.
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 Debentures 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.
Debentureholders whose certificates are not immediately available or who
cannot deliver certificates for Debentures and all other required documents
to the Depositary by the Expiration Date, may deposit their Debentures by
or through any Eligible Institution by properly completing 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 Debentures, 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 within three days on
which trading occurs on the Toronto Stock Exchange (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 Debentures 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
Debentures, is at the election and risk of the depositing Debentureholder.
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 Debentures (i.e. Debentures in
amounts other than U.S.$1,000 or an integral multiple thereof), nor will it
accept any alternative, conditional or contingent deposits except as
specifically permitted by the Offer to Purchase. All depositing
Debentureholders, 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.
7
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Debentures Deposited" is inadequate, the certificate numbers and/or the
principal amount of Debentures should be listed on a separate signed
schedule and attached to this Letter of Transmittal.
4. PARTIAL DEPOSITS AND UNPURCHASED DEBENTURES. If less than all of the
principal amount of Debentures evidenced by any certificate are to be
deposited, fill in the principal amount of Debentures which are to be
deposited in the column entitled "Principal Amount of Debentures
Deposited". In such case, if any deposited Debentures are purchased, a new
certificate for the remainder of the principal amount of Debentures
evidenced by the old certificate(s) will be issued and sent to the
registered holder, unless otherwise specified in Box A "Special Payment
Instructions" or Box B "Special Delivery Instructions" on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All
Debentures represented by the certificate(s) listed and delivered to the
Depositary are deemed to have been deposited unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Debentures 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 Debentures are registered in the names of two or more joint
owners, each such owner must sign this Letter of Transmittal.
(c) If any deposited Debentures 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 Debentures deposited and transmitted hereby, no endorsements of
certificate(s) representing such Debentures or separate powers of
attorney are required unless payment is to be made, or the
certificates for Debentures 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 powers of attorney 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 powers of attorney, 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 power(s) of
attorney must be guaranteed by an Eligible Institution. See
Instruction 1.
(e) If this Letter of Transmittal or any certificates or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorney-in-fact, officers or 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.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for Debentures
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
A "Special Payment Instructions" and/or Box B "Special Delivery
Instructions" on this Letter of Transmittal must be completed. If a cheque
evidencing payment for Debentures deposited is to be held by the Depositary
for pick-up by the undersigned or any person designated by the undersigned
in writing, Box C "Hold for Pick-Up" on this Letter of Transmittal must be
completed.
7. IRREGULARITIES. The Offeror 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 Debentures
and its determination shall be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all deposits of
Debentures determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror's counsel, be
unlawful. The Offeror 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 Debentures and the Offeror's interpretation of the terms of the
Offer (including these instructions) will be final and binding on all
parties. No deposit of Debentures 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
8
cured within such time as the Offeror shall determine. None of the Offeror,
the Dealer Manager, 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.
8. 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 at its 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.
9. SUBSTITUTE FORM W-9. Each tendering U.S. Debentureholder 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 Debentureholder to a 30% U.S. federal backup
withholding tax on payments to be received by such Debentureholder. If
backup withholding applies, 30% of the amounts otherwise payable to the
Debentureholder 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.
10. 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 DEBENTURES 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:
----------------- -----------------------------------
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 ")
SUBSTITUTE
--------------------------------------------------------------
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, 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
trust under State law Agriculture 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.
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 of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage or student loan interest paid to you.
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 DEPOSIT OF 5.50% CONVERTIBLE UNSECURED SUBORDINATED
DEBENTURES DUE JUNE 30, 2005
OF
THE DESCARTES SYSTEMS GROUP INC.
PURSUANT TO THE OFFER TO PURCHASE BY 3078393 NOVA SCOTIA COMPANY,
A WHOLLY-OWNED SUBSIDIARY OF THE DESCARTES SYSTEMS GROUP INC.,
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 5.50% Convertible
Subordinated Unsecured Debentures due June 30, 2005 (the "Debentures") of The
Descartes Systems Group Inc. ("Descartes") pursuant to the Offer (as defined
below) if certificates for Debentures 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 3078393 Nova Scotia Company (the "Offeror"),
a wholly-owned subsidiary of Descartes, in the manner and at a price of U.S.$950
plus the amount of any unpaid interest (subject to any applicable withholding
tax) accrued up to and as at the date immediately prior to the date on which the
Offeror takes up and pays for Debentures under the Offer for each U.S.$1,000
principal amount of Debentures (the "Offer to Purchase"), upon the terms and
subject to the conditions set forth in the 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"), receipt of which is hereby
acknowledged, the aggregate principal amount of Debentures indicated below
pursuant to the guaranteed delivery procedure set forth in Section 2 of the
Offer to Purchase.
DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
DEPOSITING DEBENTURES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX
CONSIDERATIONS" IN THE OFFER TO PURCHASE THAT ACCOMPANIES THIS NOTICE OF
GUARANTEED DELIVERY.
Aggregate Principal Amount of Debentures: $ Name(s) of Registered Holder(s):
(in multiples of U.S.$1,000) -------------
----------------------------------------
Certificate Nos. (if available): (Please type or print)
------------------------
Address:
-------------------------------------------------------- --------------------------------
----------------------------------------
Signature(s)
-------------------------------------------- ----------------------------------------
Postal Code
--------------------------------------------------------
(Sign Here)
Dated: , 2003 Area Code and Daytime Telephone No:
--------------------------------------------
----------------------------------------
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 DEBENTURE 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
DEBENTURES 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 Debentures 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.
Name of Firm: Authorized Signature:
---------------------- -------------------
Address of Firm: Name:
------------------- -----------------------------------
Title:
----------------------------------- ----------------------------------
Telephone Number: Dated:
------------------ ----------------------------------
2
DOCUMENT 5
----------
BROKER LETTER TO CLIENTS
OFFER BY
3078393 NOVA SCOTIA COMPANY, A WHOLLY-OWNED SUBSIDIARY
OF THE DESCARTES SYSTEMS GROUP INC.,
TO PURCHASE FOR CASH THE AGGREGATE PRINCIPAL AMOUNT
OF UP TO U.S.$45,000,000 OF THE
5.50% CONVERTIBLE UNSECURED SUBORDINATED 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 DEBENTURES
THE OFFER WILL EXPIRE AT 5:00 P.M., TORONTO TIME, ON JULY 11, 2003
UNLESS WITHDRAWN OR EXTENDED
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 3078393 Nova Scotia Company (the "Offeror"), a
wholly-owned subsidiary of The Descartes Systems Group Inc. ("Descartes"), to
purchase 5.50% Convertible Unsecured Subordinated Debentures due June 30, 2005
of Descartes (the "Debentures"), at a price of U.S.$950 plus the amount of
unpaid interest accrued up to and as at the date immediately prior to the date
on which the Offeror takes up and pays for Debentures under the Offer for each
U.S.$1,000 principal amount of Debentures (the "Purchase Price") (subject to any
applicable withholding tax), payable 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 Debentureholders from Mr. Manuel
Pietra, Chief Executive Officer and President of Descartes.
WE ARE A PARTICIPANT IN THE BOOK-ENTRY SYSTEM OF THE CANADIAN DEPOSITORY
FOR SECURITIES LIMITED ("CDS") WHICH ACTS AS A CUSTODIAN OF THE DEBENTURES BEING
HELD FOR YOUR ACCOUNT. AS SUCH, A DEPOSIT OF SUCH DEBENTURES CAN BE MADE ONLY BY
CDS AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS GIVEN THROUGH US,
AS A NOMINEE OF CDS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO DEPOSIT DEBENTURES HELD BY CDS FOR
YOUR ACCOUNT WHICH WE MAINTAIN.
We request instructions as to whether you wish us to deposit any or all of
the Debentures 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 Debentures, pursuant to the Offer which is for up to a
maximum of U.S.$45,000,000 aggregate principal amount of Debentures for
purchase by the Offeror at the Purchase Price (subject to any applicable
withholding tax), payable in cash, for all Debentures purchased upon the
terms and subject to the conditions set forth in the Offer, including the
provisions relating to proration described therein.
2. The Offer is not conditional upon a minimum aggregate principal amount of
Debentures being deposited, however it is subject to certain other
conditions. See Section 5 of the Offer.
3. 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.
4. As described in the Offer, if the aggregate principal amount of Debentures
properly deposited and not withdrawn by the Expiration Date pursuant to the
Offer is greater than U.S.$45,000,000, the Offeror will, upon the terms and
subject to the conditions of the Offer, purchase at the Purchase Price,
Debentures so deposited having an aggregate principal amount of
U.S.$45,000,000 on a PRO RATA basis (calculated to the nearest whole
U.S.$1,000 principal amount of Debentures, so as to avoid the creation of
fractional Debentures). The Offeror's determination as to proration shall
be final and binding on all parties
5. Each tendering U.S. Debentureholder 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
Debentureholder to a 30% U.S. federal backup withholding tax on payments to
be received by such Debentureholder. If backup withholding applies, 30% of
the amounts otherwise payable to the Debentureholder 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.
DEBENTUREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO DEPOSIT
DEBENTURES AND, IF SO, THE AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES TO DEPOSIT.
NONE OF THE OFFEROR, ITS BOARD OF DIRECTORS, DESCARTES, ITS BOARD OF DIRECTORS
OR ANY REPRESENTATIVE THEREOF MAKES ANY RECOMMENDATION TO ANY DEBENTUREHOLDER AS
TO WHETHER TO DEPOSIT OR REFRAIN FROM DEPOSITING DEBENTURES.
If you wish to have us deposit any or all of your Debentures 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 Debentures, all such Debentures will
be deposited unless otherwise specified on the Instruction Form.
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.
The Offer is being made to all holders of Debentures. The Offeror is not
aware of any jurisdiction where the making of the Offer is not in compliance
with applicable law. If the Offeror becomes aware of any jurisdiction where the
making of the Offer is not in compliance with any valid applicable law, the
Offeror will make a good faith effort to comply with such law. If, after such
good faith effort, the Offeror 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
Debentures 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 the Offeror's behalf by the Dealer
Managers or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
DEBENTUREHOLDERS SHOULD CAREFULLY CONSIDER THE INCOME TAX CONSEQUENCES OF
DEPOSITING DEBENTURES UNDER THE OFFER. SEE SECTION 14 "INCOME TAX
CONSIDERATIONS" IN THE OFFER TO PURCHASE THAT ACCOMPANIES THIS LETTER.
2
INSTRUCTION FORM
WITH RESPECT TO OFFER TO PURCHASE BY 3078393 NOVA SCOTIA COMPANY,
A WHOLLY-OWNED SUBSIDIARY OF THE DESCARTES SYSTEMS GROUP INC.,
FOR CASH THE AGGREGATE PRINCIPAL AMOUNT OF UP TO U.S.$45,000,000 OF
5.50% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES
DUE JUNE 30, 2005 OF THE DESCARTES SYSTEMS GROUP INC.
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 DEBENTURES
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 3078393 Nova Scotia Company (the
"Offeror"), a wholly-owned subsidiary of The Descartes Systems Group Inc.
("Descartes"), to purchase 5.50% Convertible Unsecured Subordinated Debentures
due June 30, 2005 of Descartes (the "Debentures") at a price of U.S.$950 plus
the amount of any unpaid interest accrued up to and as at the date immediately
prior to the date on which the Offeror takes up and pays for Debentures under
the Offer for each U.S.$1,000 principal amount of Debentures (the "Purchase
Price") (subject to any applicable withholding tax), payable in cash, for all
Debentures purchased, in either case upon the terms and subject to the
conditions set forth in the Offer, including the provisions relating to
proration described therein.
This will instruct you to deposit to the Offeror the aggregate principal
amount of Debentures indicated below (or, if no aggregate principal amount is
indicated below, all Debentures) that are held by you for the account of the
undersigned, upon the terms and subject to the conditions of the Offer.
================================================================================
MUST BE COMPLETED ONLY IF PARTIAL DEBENTURES ARE BEING DEPOSITED*
PRINCIPAL AMOUNT OF DEBENTURES DEPOSITED U.S.$_____________________________
================================================================================
* IF FEWER THAN ALL THE DEBENTURES BENEFICIALLY OWNED ARE TO BE DEPOSITED, FILL
IN THE AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES THAT ARE TO BE DEPOSITED. UNLESS
OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL DEBENTURES BENEFICIALLY OWNED
BY THE DEPOSITING DEBENTUREHOLDER ARE BEING DEPOSITED.
================================================================================
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE
DEPOSITING DEBENTUREHOLDER. 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)
3
================================================================================
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 Social Security Number
and certify by signing or Employer Identification
and dating below. Number (if awaiting TIN
write "Applied For ")
----------------------------------------------------------------
SUBSTITUTE PART II - For Payees exempt from backup withholding, see the
attached Guidelines for Certification of Taxpayer
FORM W-9 Identification Number on Substitute Form W-9 and
complete as instructed therein.
----------------------------------------------------------------
DEPARTMENT Certification - Under penalties of perjury, I certify that:
OF THE
TREASURY (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
INTERNAL IDENTIFICATION NUMBER (OR I AM WAITING FOR A TAXPAYER
REVENUE IDENTIFICATION NUMBER TO BE ISSUED TO ME);
SERVICE ----------------------------------------------------------------
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE: (A)
I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT BEEN
PAYOR'S NOTIFIED BY THE INTERNAL REVENUE SERVICE (IRS) THAT I AM
REQUEST FOR SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO
TAXPAYER REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS
IDENTIFICATION NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
NUMBER 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.)
----------------------------------------------------------------
4
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.
5
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 The corporation
the account or, if LLC (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 The adult or, if the 12. Partnership account or The partnership
(joint 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 incompetent person(3) other tax-exempt
a designated ward, minor, organization
or 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
trust under State law Agriculture 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.
6
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 interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to non-resident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage or student loan interest paid to you.
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.
7