Sun Red Capital Corporation
TSX VENTURE : SSQ.H

March 29, 2010 16:28 ET

Sun Red Capital Corporation: Update on Proposed Transaction With Compass Petroleum Ltd.

CALGARY, ALBERTA--(Marketwire - March 29, 2010) - Sun Red Capital Corporation (TSX VENTURE:SSQ.H) -

Not for dissemination in the United States or through U.S. newswires. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Sun Red Capital Corporation (the "Company" or "Sun Red"), a capital pool company listed on the NEX (the "NEX") (TSX VENTURE:SSQ.H), is pleased to provide the following update with respect to the proposed business combination transaction involving Compass Petroleum Ltd. ("Compass") and Compass Acquisition Corp. ("AcquisitionCo"), which was announced in news releases disseminated by the Company on February 17, 2010 and March 1, 2010.

The Amended and Restated Amalgamation Agreement

On March 26, 2010, Sun Red, Compass and AcquisitionCo executed and delivered an amended and restated amalgamation agreement (the "Restated Agreement"), which reflects a number of amendments to the amalgamation agreement originally signed by the parties on February 26, 2010 (the "Original Agreement") and provides for the amalgamation (the "Amalgamation") of Sun Red and AcquisitionCo, a wholly-owned subsidiary of Compass. A copy of the Restated Agreement has been filed as a material document on Sun Red's SEDAR profile and can be accessed at www.sedar.com. The Original Agreement was amended in light of certain delays encountered by the parties in obtaining reports required to be included in the information circular to be distributed to shareholders of Sun Red in connection with the special meeting at which Sun Red shareholders will be asked to consider the Amalgamation (the "Special Meeting") and to accommodate an offering of subscription receipts proposed to be undertaken by AcquisitionCo (as described below). Sun Red anticipates that the Special Meeting, originally scheduled for May 7, 2010, will be held on May 21, 2010.

The Board of Directors of Sun Red reiterates that it has unanimously determined that the Amalgamation is fair to the Sun Red shareholders and is in the best interests of Sun Red and its shareholders and recommends that Sun Red shareholders vote in favour of the Amalgamation.

The Compass/AcquisitionCo Offering

Compass and AcquisitionCo have engaged Raymond James Ltd. (the "Agent") to act as agent in connection with a proposed private placement for minimum gross proceeds of $10 million and maximum gross proceeds of $15 million (the "Offering"). The Offering is to be undertaken on a reasonable commercial efforts basis and is expected to involve the distribution of subscription receipts (the "Subscription Receipts") of AcquisitionCo. The engagement agreement between Compass, AcquisitionCo and the Agent (the "Engagement Agreement") provides that the Subscription Receipts will be priced at $1.50 per receipt (or such other price, determined in the context of the market, as may be acceptable to Compass). 

The Engagement Agreement also provides that each Subscription Receipt will be exchanged into one voting Class B common share (a "Class B Share") of AcquisitionCo, without further payment or action on the part of the holder, immediately prior to the Amalgamation becoming effective. Under the Restated Agreement, each Class B Share will be exchanged for one common share of Compass upon the Amalgamation becoming effective.

The gross proceeds of the Offering will be released to AcquisitionCo immediately prior to the completion of the Amalgamation, upon the satisfaction of certain conditions, including the satisfaction or waiver of all conditions precedent to completion of the Amalgamation set out in the Restated Agreement. In the Engagement Agreement, Compass has agreed that the net proceeds from the Offering will be used to fund Compass' exploration and development of its west Saskatchewan Viking resource area, future property acquisitions and for general corporate purposes. 

The trading of the Sun Red shares has been halted by the NEX. Trading will recommence on a date determined by the NEX.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and, if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

ON BEHALF OF THE BOARD OF DIRECTORS OF
SUN RED CAPITAL CORPORATION

"Greg Hansen"
Greg Hansen
Chief Financial Officer

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Sun Red Capital Corporation
    Greg Hansen
    Chief Financial Officer
    (403) 397-0186
    (403) 245-2723 (FAX)
    Greg@sunredcapital.com