Stornoway Diamond Corporation Contact
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This document is important and requires your immediate attention. If you have any questions as to how to deal with it, you should consult your investment dealer, stock broker, bank manager, trust company manager, accountant, lawyer or other professional advisor. No securities regulatory authority in Canada has approved or disapproved, expressed an opinion about, or passed upon the fairness or merits of, the Offer contained in this document, the securities offered pursuant to such Offer or the adequacy of the information contained in this document and it is an offence to claim otherwise. THE SECURITIES OFFERED PURSUANT TO THIS OFFER AND CIRCULAR HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY UNITED STATES STATE SECURITIES COMMISSION NOR HAS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY UNITED STATES STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFER AND CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE. THE SECURITIES WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION. August 10, 2006 STORNOWAY DIAMOND CORPORATION OFFER TO PURCHASE all of the outstanding common shares of CONTACT DIAMOND CORPORATION on the basis of 0.36 of a common share of Stornoway Diamond Corporation for each common share of Contact Diamond Corporation Stornoway Diamond Corporation (‘‘Stornoway’’ or the ‘‘Offeror’’) hereby offers (the ‘‘Offer’’) to purchase, on and subject to the terms and conditions of the Offer, all of the outstanding common shares (the ‘‘Contact Shares’’) of Contact Diamond Corporation (‘‘Contact’’), other than any Contact Shares owned, directly or indirectly, by the Offeror and its affiliates on any Take-Up Date (as defined in the Glossary below), and including any Contact Shares that may become issued and outstanding after the date of this Offer but prior to the Expiry Time (as defined below) upon the conversion, exchange or exercise of any securities of Contact that are convertible into or exchangeable or exercisable for Contact Shares. The Offeror does not currently own, directly or indirectly, any Contact Shares. Under the Offer, each holder of Contact Shares (each a ‘‘Shareholder’’ and collectively, the ‘‘Shareholders’’) is entitled to receive, in respect of each Contact Share, 0.36 of a common share of Stornoway (‘‘Stornoway Shares’’). See Section 1 of the Offer, ‘‘The Offer’’. The Offer is open for acceptance until 8:00 p.m. (Toronto time) on September 18, 2006 unless, extended or withdrawn (the ‘‘Expiry Time’’). For a discussion of risk factors you should consider in evaluating the Offer, see Section 7 of the Circular, ‘‘Risk Factors’’. The Offer is subject to certain conditions, including, without limitation, that not less than 13,814,077 Contact Shares will have been validly deposited under the Offer by Agnico-Eagle Mines Limited (‘‘Agnico-Eagle’’) pursuant to a lock-up agreement described below. See Section 2 of the Offer, ‘‘Conditions of the Offer’’, for a complete description of the conditions of the Offer. Subject to applicable law, the Offeror reserves the right to withdraw the Offer and not take-up and pay for Contact Shares deposited under the Offer unless each of the conditions of the Offer is satisfied or waived by the Offeror at or before the Expiry Time. See Section 1 of the Offer, ‘‘The Offer’’. The Board of Directors of Contact has unanimously determined that the Offer is fair to the Shareholders and that the Offer is in the best interests of Contact and has resolved unanimously to RECOMMEND to the Shareholders that they ACCEPT the Offer and DEPOSIT their Contact Shares under the Offer. The Special Committee of the Board of Directors of Contact has received a valuation and fairness opinion from Orion Securities Inc. Pursuant to a support agreement made July 21, 2006 between Stornoway and Contact (the ‘‘Support Agreement’’), Contact has agreed to, among other things, support the Offer. See Section 14 of the Circular, ‘‘Support Agreement’’. Agnico-Eagle, which holds approximately 31% of the outstanding Contact Shares, and all of the directors and officers of Contact, who collectively hold approximately 2% of the outstanding Contact Shares, have each entered into Lock-Up Agreements pursuant to which each has agreed to tender its Contact Shares in valid acceptance of the Offer and not to withdraw them unless the lock-up agreement has been terminated in accordance with its terms. See Section 12 of the Circular, ‘‘Commitments to Acquire Securities of Contact; Lock-Up Agreements’’. 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 or directed to, nor will deposits of Contact Shares be accepted from or on behalf of, Shareholders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. However, the Offeror may, in its sole discretion, take such action as it may deem necessary to extend the Offer to Shareholders in any such jurisdiction. The Dealer Managers for the Offer are: BMO Nesbitt Burns Inc. Canaccord Capital Corporation The Offeror’s intention to make the Offer was announced on July 24, 2006 before the opening of trading on the TSX. The Stornoway Shares are listed on the TSX under the trading symbol ‘‘SWY’’. The Contact Shares are listed on the TSX under the trading symbol ‘‘CO’’. The volume-weighted average trading price of the Stornoway Shares on the TSX for the 20 trading days ending July 21, 2006, the last trading day prior to the announcement of the Offeror’s intention to make the Offer, was $1.2472. The volume-weighted average trading price of the Contact Shares on the TSX for the 20 trading days ended July 21, 2006 was $0.3887. The Offer represents a 16% premium to the volume-weighted average trading price of the Contact Shares on the TSX for the 20 trading days ended July 21, 2006 (based on the volume-weighted average trading price of the Stornoway Shares on the TSX for the 20 trading days ended July 21, 2006). As a result of restrictions under United States securities laws, U.S. Shareholders (as defined below) shall not be entitled to receive Stornoway Shares in connection with the Offer. Instead, any such Stornoway Shares will be issued and delivered to the Depositary on behalf of the U.S. Shareholders and sold on their behalf by a registered broker or investment dealer retained by the Depositary on the TSX through an orderly sale and the net cash proceeds (after paying brokerage commissions and other expenses) will be remitted to such U.S. Shareholders in Canadian dollars. Each U.S. Shareholder accepting the Offer will be deemed by such acceptance to have agreed that it will not receive any Stornoway Shares and instead will receive the net cash proceeds from the sale on its behalf of such Stornoway Shares (as described above) as consideration of its acceptance of the Offer. Shareholders who wish to accept the Offer must properly complete and execute the accompanying Letter of Transmittal (printed on green paper) or a manually signed facsimile thereof and deposit it, together with the certificates representing their Contact Shares and all other required documents, at the office of CIBC Mellon Trust Company (the ‘‘Depositary’’) in Toronto, Ontario in accordance with the instructions in the Letter of Transmittal. Alternatively, Shareholders may (1) accept the Offer by following the procedures for book-entry transfer of Contact Shares described in Section 5 of the Offer, ‘‘Manner of Acceptance — Acceptance by Book-Entry Transfer’’; or (2) accept the Offer where the certificates representing the Contact Shares are not immediately available, or if the certificates and all of the required documents cannot be provided to the Depositary before the Expiry Time, by following the procedures for guaranteed delivery described in Section 5 of the Offer, ‘‘Manner of Acceptance — Procedure for Guaranteed Delivery’’ using the accompanying Notice of Guaranteed Delivery (printed on yellow paper) or a manually signed facsimile thereof. Shareholders whose Contact Shares are registered in the name of a nominee should consult their broker, investment dealer, bank, trust company or other nominee for assistance in depositing their Contact Shares. Shareholders will not be required to pay any fee or commission if they accept the Offer by depositing their Contact Shares directly with the Depositary or if they make use of the services of a Soliciting Dealer to accept the Offer, provided that, if a Shareholder is a U.S. Shareholder, the proceeds resulting from any sale of Stornoway Shares by a registered broker or investment dealer retained by the Depositary on its behalf will be subject to deductions in respect of brokerage commissions and other expenses. See Section 1 of the Offer, ‘‘The Offer — US Shareholders’’. Questions and requests for assistance may be directed to Georgeson Shareholder Communications Canada Inc. (the ‘‘Information Agent’’). Contact details for such persons may be found on the back page of this document. Additional copies of this document and related materials may be obtained without charge on request from the Information Agent at its office specified on the back page of this document. Additionally, copies of this document and related materials may be found at www.sedar.com. i NOTICE TO SHAREHOLDERS IN THE UNITED STATES As a result of restrictions under United States securities laws, U.S. Shareholders shall not be entitled to receive Stornoway Shares in connection with the Offer. Instead, any such Stornoway Shares will be issued and delivered to the Depositary on behalf of the U.S.