Sudbury Capital Corporation
TSX VENTURE : SUD.P

October 17, 2006 09:01 ET

Sudbury Capital Corporation Announces Proposed Qualifying Transaction

TORONTO, ONTARIO--(CCNMatthews - Oct. 17, 2006) -

NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA

Sudbury Capital Corporation ("Sudbury") (TSX VENTURE:SUD.P), a capital pool company, is pleased to announce that it has entered into an arm's length letter of intent dated October 16, 2006 (the "Letter of Intent") to complete a business combination (the "Qualifying Transaction") with Sea Dragon Energy Inc. ("Sea Dragon"). If completed, the business combination will constitute Sudbury's qualifying transaction pursuant to the policies of the TSX Venture Exchange (the "Exchange").

Information Concerning Sudbury

Sudbury is a company existing under the laws of Ontario and is a reporting issuer in Alberta and Ontario. Sudbury currently has 4,000,000 common shares (the "Sudbury Shares") outstanding, of which 2,000,000 are currently held in escrow pursuant to the policies of the Exchange.

Sudbury has granted stock options to acquire up to an aggregate of 400,000 additional common shares in the capital of Sudbury at a price of $0.10 per share (the "Sudbury Options") to directors and officers of Sudbury. Sudbury has also issued options to acquire up to an aggregate of 200,000 additional common shares in the capital of Sudbury at a price of $0.10 per share (the "Sudbury Agent's Options") as part of the compensation payable to the agent in connection with Sudbury's initial public offering. Other than the Sudbury Options and Sudbury Agent's Options, no other securities of Sudbury, convertible or exchangeable into shares of Sudbury, are outstanding.

Further information concerning Sudbury can be found in the prospectus of Sudbury dated May 31, 2006.

Information Concerning Sea Dragon

Sea Dragon is a private company existing under the federal laws of Canada. Sea Dragon currently has 34,632,500 common shares (the "Sea Dragon Shares") outstanding. Sea Dragon has also issued warrants to acquire an aggregate of 2,316,250 common shares in the capital of Sea Dragon at a price of $0.30 per share (the "Sea Dragon Warrants").

Sea Dragon has granted compensation options to acquire an aggregate of 255,000 common shares in the capital of Sea Dragon at a price of $0.20 per share (the "Sea Dragon Finder's Options") as part of a finder's fee in connection with a non-brokered private placement completed by Sea Dragon. Sea Dragon intends to grant stock options to acquire up to an aggregate of 2,800,000 common shares in the capital of Sea Dragon at price to be determined by the board of directors of Sea Dragon (the "Sea Dragon Options"). Other than the Sea Dragon Options, the Sea Dragon Finder's Options and the Sea Dragon Warrants, no other securities of Sea Dragon, convertible or exchangeable into shares of Sea Dragon, are outstanding.

Sea Dragon is and has been engaged in the oil and gas business since March 28, 2006. Pursuant to an assignment agreement with, amongst others, Mogul Energy Ltd. a company incorporated pursuant to the laws of British Columbia, Woodgreen International Holdings Ltd., a company incorporated pursuant to the laws of the British Virgin Islands and Yellowfern Continental S.A., a company incorporated pursuant to the laws of the British Virgin Islands (collectively, the "Assigning Parties"), Sea Dragon acquired a 40% working interest in the concession known as the East Wadi Araba (the "EWA Concession") located in the Gulf of Suez, Egypt. In connection with entering into the assignment agreement, the Assigning Parties acquired 20,000,000 Sea Dragon Shares, representing 57.7% of the outstanding Sea Dragon Shares. Sea Dragon's principal interest is in the exploration, development and production of oil from the EWA Concession.

An evaluation of the reserve potential of the EWA Concession was performed by Chapman Petroleum Engineering Ltd. of Calgary, Alberta in a report dated April 5, 2006 (the "Chapman Report"). The Chapman Report will be reviewed by the Exchange and a comprehensive news release will be issued in due course.

Information Concerning the Proposed Qualifying Transaction

Sudbury and Sea Dragon have entered into the Letter of Intent setting out certain terms and conditions pursuant to which the proposed Qualifying Transaction will be completed. The Qualifying Transaction is subject to the parties successfully negotiating and entering into a definitive amalgamation agreement, share purchase agreement or other similar agreement such that the Qualifying Transaction may be completed on a tax preferred basis to the parties thereto.

The completion of the Qualifying Transaction is also subject to an arm's length brokered financing of a minimum of $500,000 (the "Financing").

Pursuant to the Letter of Intent, Sudbury and Sea Dragon have agreed to issue common shares in the capital of Sudbury to the current shareholders of Sea Dragon at a deemed value of $0.20 per share or one (1) Sudbury Common Share for each Sea Dragon share currently outstanding. The parties have further agreed that the value of Sea Dragon Shares shall not exceed $6,926,500 (on a pre-money basis prior to the completion of the Financing).

The value of Sea Dragon remains subject to final determination, which determination, in part, will be based in the context of the market through the Financing. Assuming the completion of the minimum Financing and the Qualifying Transaction, current Sudbury shareholders, current Sea Dragon shareholders and purchasers pursuant to the Financing would hold approximately 8.5%, 84.19% and 6.0% of the then outstanding shares of Sudbury (being shares of the resulting issuer), respectively. To the extent that the value of Sea Dragon is ultimately determined to be less than or greater than $6,926,500, these percentages will be adjusted accordingly. Subject to regulatory approval including approval of the Exchange, Wildeboer Dellelce LLP or its nominee will receive a finder's fee in the amount of 500,000 common shares of Sudbury in connection with the Qualifying Transaction. Mr. Perry N. Dellelce, a founder and the managing partner of Wildeboer Dellelce LLP, is a director of Sudbury and will be a director of the resulting issuer.

The proceeds of the Financing will be used to explore and develop prospective lands in the EWA Concession and for working capital purposes.

The completion of the Qualifying Transaction is subject to the approval of the Exchange and all other necessary regulatory approvals. It is also subject to additional conditions precedent, including shareholder approvals of Sudbury and Sea Dragon as required under applicable corporate or securities laws, satisfactory completion of due diligence reviews by both parties, approvals of the board of directors of Sudbury and Sea Dragon and certain other conditions customary for transactions of this nature. As the Qualifying Transaction is an arm's length transaction, it is not contemplated that shareholder approval of Sudbury will be required by the Exchange (except as may be otherwise required by law) provided that Sudbury files a filing statement with the Exchange. The target closing date for the Qualifying Transaction is January 10, 2007 or such other date as the parties may mutually agree on.

Sudbury will make an application to the Exchange for an exemption from the sponsorship requirement of the Exchange policies. There is no certainty that such exemption will be granted.

The final negotiated value of Sea Dragon and the terms of the Financing will be disclosed in a subsequent press release of Sudbury and in the filing statement to be prepared by Sudbury in respect of the Qualifying Transaction. Trading in the Sudbury Shares will remain halted until at least the time of such press release upon receipt of the sponsorship exemption or the appointment of a sponsor and pending the completion of certain due diligence investigations by the Exchange including Exchange review of the Chapman Report and other background searches conducted against the directors and officers of the resulting issuer. There can be no assurance that trading in the Sudbury Shares will resume prior to the completion of the Qualifying Transaction.

Management and Board of Directors of Resulting Issuer

Upon completion of the Qualifying Transaction, it is anticipated that management of the resulting issuer will include the persons identified below. Additional proposed directors and officers of the resulting issuer will be identified at a later date.

David M. Thompson - President and Director

David Thompson has over 25 years of financial experience in the oil and gas industry. He joined the Larmag Group of Companies in 1988 and established the oil trading company Larmag Energy Trading Limited based in Bermuda with offices in the US and Europe. Mr. Thompson was appointed senior vice president when he became the finance director for Larmag Energy operating in Turkmenistan in 1992.

Mr. Thompson has helped to raise over US$100 million in funds for the Larmag Group of Companies and has negotiated a number of farm-outs to reduce Larmag Group of Companies' interest to Odyssey Petroleum Corporation and later Dragon Oil Plc.

Mr. Thompson became the Chief Financial Officer of Aurado Energy, Inc. (TSX: AEO) in 2002 and became the Chief Financial Officer of Forum Energy Corporation (OTCBB: TCXXF) from 2003 to 2005. In 2005, he helped to take the assets of Forum Energy Corporation into a new UK Company -Forum Energy Plc and successfully admitted this company to the Alternative Investment Market ("AIM") in London by raising over Pounds Sterling 15 million through an initial public offering.

Mr Thompson is a Certified Management Accountant (1988) and is on the board of a number of mutual fund companies as well as charities.

Sohail ("S.K.") Kiani - Executive Vice President and Director

For the last five years, S.K. Kiani has been an independent financial services consultant specializing in the energy sector. Prior to becoming an independent consultant, Mr. Kiani served as Vice President, Investments for Merrill Lynch Investment Bank Canada/Singapore and Assistant Vice President of Royal Trust Bank of Canada. Mr. Kiani has also served as Assistant to the Chairman of Far East Energy (OTCBB: FEEC) and was for a brief time the Chief Executive Officer of Dusty Mac International a subsidiary of Transglobe Energy Corp. (TSX: TGL, AMEX: TGB, OTCBB: TGLEF). Mr. Kiani was also a director of Oracle Energy Corp. (TSX: OCL, FWB:O2E) until October, 2005.

Barry G.M. Wood - Director

Barry Wood has over thirty-three years experience in the oil and gas industry which includes 16 years with Marathon Oil in various positions such as Exploration Manager, Egypt. Currently, he is the founder and director of PetroQuest International Ltd., a UK based company specializing in identifying and developing exploration fairways, prospect mapping and assisting in development work. Dr. Wood also acts as an international consultant advising on exploration strategies, risks and development plans in North and East Africa, the Middle East and South East Asia. He has also conducted a three-year research project on Basin Evolution of North Africa and the northern Middle East to understand reservoir and trap development in that region. Dr. Wood has a Doctorate of Philosophy from Oxford University (2001), a B.Sc. Honours from Queen's University (1972) and a B.A. from Queen's University (1969).

Ahmed Farid Ahmed Moaaz-Director

Ahmed Moaaz has over 30 years experience in the oil and gas industry. Mr. Moaaz is the Vice President, Operations of Trident Petroleum International, an international oil company which is currently operating in Egypt and has a joint venture with The Egyptian Petroleum Corporation operating a field in the Red Sea coast. Mr. Moaaz was the Chairman and Managing Director of the Egyptian Natural Gas Holding Company (E-Gas), El Wastani Petroleum Company, a joint venture between The Egyptian Natural Gas Holding Company and Centurion International between 2003 and 2005. Mr. Moaaz was also a former Deputy Chairman for Production of Egyptian General Petroleum Corporation where he was responsible for supervising and directing drilling production and petroleum engineering of all joint venture companies operating in Egypt. Mr. Moaaz has also supervised the operations and was a director of Suez Esso Petroleum Company. Mr. Moaaz has a B.Sc. in Petroleum Engineering from Cairo University (1971).

Parvez Tyab - Director

Parvez Tyab has an extensive background in venture capital financing over the past 20 years. As an independent consultant and venture capitalist he has assisted a number of companies in relation to their financing and development. Currently Mr. Tyab is the President of a private Canadian based company developing oil and gas assets in southeast Saskatchewan, Canada.

Perry N. Dellelce - Director

Perry Dellelce is a founder and partner at Wildeboer Dellelce LLP, a boutique business law firm whose practice is restricted to that of securities, corporate finance and tax matters. Mr. Dellelce has a B.A. from the University of Western Ontario (1985), an M.B.A. from the University of Notre Dame (1987) and an LL.B. from the University of Ottawa (1990).

Mr. Dellelce currently serves as a director on the boards of directors of the following corporations:

- Claymore Capital Management Inc., a private equity fund focused on work-out or turn-around situations;

- Bradmer Pharmaceuticals Inc., a publicly traded company which develops drugs for cancer therapy;

- FRI Corporation, a privately held software company serving the financial services industry; and

- redCity Search Company Inc., a publicly traded local internet search company.

Mr. Dellelce's community involvement includes:

- President's Council of the University of Western Ontario;

- Board of Directors of the Alumni Association of the University of Western Ontario;

- Business Advisory Council of the Mendoza College of Business at the University of Notre Dame;

- Executive Education Advisory Council of the Mendoza College of Business at the University of Notre Dame;

- Campaign Cabinet of the University of Ottawa Faculty of Law;

- Entrepreneurship Advisory Board of the Rotman School of Management of the University of Toronto;

- Development Steering Committee of the Board of Trustees of the Art Gallery of Ontario; and

- Board of Directors of The Power Plant Contemporary Art Gallery, Toronto, Ontario.

As noted above, completion of the Qualifying Transaction is subject to a number of conditions, including, but not limited to, acceptance by the Exchange and if applicable pursuant to Exchange requirements, majority of the minority shareholder approval. Where applicable, the Qualifying Transaction cannot close until the required approvals have been obtained. There can be no assurance that the Qualifying 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 proposed Qualifying Transaction, any information released or received with respect to the proposed Qualifying 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 to be highly speculative.

This press release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of Sudbury. These risks and uncertainties could cause actual results and Sudbury's plans and objectives to differ materially from those expressed in the forward-looking information. Actual results and future events could differ materially from those anticipated in such information. These and all subsequent written and oral forward-looking information are based on estimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. Sudbury assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change.

The Exchange has in no way passed upon the merits of the proposed Qualifying Transaction and has neither approved nor disapproved the contents of this release.

Contact Information

  • Sudbury Capital Corporation
    Charles J. Lilly
    Director
    (705) 522-2400
    or
    Sea Dragon Energy Inc.
    David Thompson
    President
    (604) 608-8704