Sudbury Capital Corporation
TSX VENTURE : SUD.P

December 21, 2006 15:01 ET

Sudbury Capital Corporation Update on Proposed Qualifying Transaction

TORONTO, ONTARIO--(CCNMatthews - Dec. 21, 2006) -

(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)

On October 17, 2006, Sudbury Capital Corporation ("Sudbury") (TSX VENTURE:SUD.P), a capital pool company, issued a press release announcing a proposed business combination (the "Qualifying Transaction") with Sea Dragon Energy Inc. ("Sea Dragon"). The proposed Qualifying Transaction will constitute Sudbury's qualifying transaction pursuant to the policies of the TSX Venture Exchange (the "Exchange").

Pursuant to Exchange Policy 2.4 - Capital Pool Companies ("Policy 2.4"), Sudbury is required to file with the Exchange, within 75 days after the press release announcing the Qualifying Transaction, the initial documents (the "Initial Documents") required by Policy 2.4. The Initial Documents include a CPC filing statement prepared in accordance with the Exchange form of filing statement which provides full, true and plain disclosure of all material facts relating to Sudbury and Sea Dragon.

The Initial Documents, including the filing statement, will not be filed with the Exchange within 75 days after the press release announcing the Qualifying Transaction as a result of delays in preparation of the Initial Documents caused by the matters described below relating to Sea Dragon.

On October 20, 2006, Sea Dragon, Mogul Energy International Inc. and Mogul Energy Ltd. (collectively, the "Defendants") were served with a statement of claim in the Supreme Court of British Columbia by Transpacific Petroleum Corp. and Ghareeb Awad (collectively, the "Plaintiffs"). The claims made against Sea Dragon by the Plaintiffs were with respect to the East Wadi Araba concession in the Gulf of Suez, Egypt (the "East Wadi Concession") and included, amongst other things, (i) an interlocutory and permanent injunction to prevent the alleged unlawful submission of a deed of assignment to the Egyptian General Petroleum Corporation that does not include TransPacific Petroleum Corp. or appoints Dover Investments Limited as operator; (ii) the payment of US$60,000 in consulting fees owed to Ghareeb Awad with respect to the East Wadi Concession; (iii) the nullification of the East Wadi Concession agreement with the Egyptian General Petroleum Corporation and the Arab Republic of Egypt; (iv) the assignment of the Defendants' 60% interest in the East Wadi Concession to the Plaintiffs in the event the two commitment wells are not drilled by July 17, 2007; and (iv) punitive damages.

The Defendants made an application to stay the action on the grounds that the issues which were in dispute arise from a series of contracts under which the parties to the action agreed to submit to arbitration. On November 8, 2006, the action by the Plaintiffs was stayed by the Honourable Madam Justice Garson in the Supreme Court of British Columbia on the basis that the allegations in the statement of claim fell within the scope of the arbitration clauses in the relevant contracts.

The Defendants agreed to extend the time for the Plaintiffs to appeal the stay of the action to January 15, 2007. Currently, an appeal has not been served upon the Defendants nor has the matter been submitted to arbitration by the Plaintiffs. Accordingly, the Defendants are under no obligation to defend or respond to an appeal or participate in arbitration at this time. However, the Defendants have informed Sudbury that the claims contained in the statement of claim are without merit and they intend to vigorously defend the claims set forth in the statement of claim should the Plaintiffs appeal or should the matter be submitted to arbitration by the Plaintiffs. The Defendants are also in negotiation with the Plaintiffs to settle this matter and anticipate having a written settlement agreement in place by December 31, 2006.

As a result of the aforementioned delay, Sudbury has obtained from the Exchange a 30 day extension to January 30, 2007 for the filing of the Initial Documents relating to the Qualifying Transaction.

As noted above and in Sudbury's press release dated October 17, 2006, 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