Exhibit 99.2
BAY RESOURCES LTD.
(a Delaware Corporation)
Xxxxx 0
000 Xx Xxxxx Xxxx
Xxxxxxxxx Xxxxxxxx 0000
Xxxxxxxxx
________________________________________________________________________________
SUBSCRIPTION AGREEMENT
________________________________________________________________________________
Instructions
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PLEASE COMPLETE AND SIGN TWO COPIES OF THE SUBSCRIPTION AGREEMENT
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SUBSCRIPTION AGREEMENT
FOR
BAY RESOURCES LTD.
(a Delaware Corporation)
1. Stock Subscription: The undersigned, RAB SPECIAL SITUATIONS LP ("Subscriber")
hereby subscribes for 1,670,000 shares of Common Stock, $0.001 par value, of Bay
Resources, Inc., a Delaware Corporation ("Bay Resources" or the "Company") at an
offering price of $ 1.00 per share of Common Stock ("Common Stock"), together
with warrants in the form attached hereto as Schedule "A" for the purchase of
1,670,000 shares of Common Stock, $0.001 par value (the "Warrant Shares"), at an
exercise price of $ 1.30 to be exercisable for a period of twenty-four months
(24) following the Closing Date (the "Warrants") (collectively the Common Stock,
the Warrants and the Warrant Shares are known as the "Securities") for and in
consideration of $1,670,000 to be paid in cash at closing. All figures are in
United States Dollars unless otherwise specified. There is no minimum
subscription. Such Subscription is subject to the following terms and
conditions:
a. Tender of Purchase Price: Subscriber tenders to Bay Resources the
purchase price either by a check payable to the order of "Bay Resources
Ltd." or a wire transfer to Bay Resources, pursuant to written instructions
provided to Subscriber by Bay Resources (the "Purchase Price").
b. Closing: Upon receipt by Bay Resources of the consideration agreed to
herein, prior to 12:00 p.m. on March 31, 2004, or such other time as may be
agreed to by the Bay Resources and the Subscriber (the "Closing Date"). All
funds will be delivered to Bay Resources. The Securities subscribed for
herein will not be deemed issued to, or owned by, the Subscriber until the
Subscription Agreement has been executed by Subscriber and countersigned by
Bay Resources, all payments required to be made herein. The Closing is
subject to the fulfillment of the following conditions (the "Conditions")
which Conditions Bay Resources and the Subscriber covenant to exercise its
reasonable best efforts to have fulfilled on or prior to the Closing Date:
(i) for the benefit of Bay Resources, the Subscriber shall have
tendered the Purchase Price to Bay Resources;
(ii) for the benefit of the Subscriber, all relevant documentation and
approvals as may be required, by applicable securities statutes,
regulations, policy statements and interpretation notes, by
applicable securities regulatory authorities and by applicable
rules shall have been obtained and, where applicable, executed by
or on behalf of the Subscriber;
(iii) for the benefit of the Subscriber, Bay Resources' board of
directors shall have authorized and approved the execution and
delivery of this Agreement, the issuance and delivery of the
Securities, the allotment and issuance of such Securities;
(iv) Bay Resources (for the benefit of the Subscriber) and the
Subscriber (for the benefit of Bay Resources) shall have complied
with its covenants contained in this Agreement to be complied
with prior to Closing, and Bay Resources for the benefit of the
Subscriber shall have delivered a Certificate of a senior officer
of the Company (acting without personal liability) to that effect
to the Subscriber;
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(v) the representations and warranties of Bay Resources (for the
benefit of the Subscriber) and the Subscriber (for the benefit of
Bay Resources) set forth in this Agreement shall be true and
correct as of the Closing Date; and
(vi) Bay Resources (for the benefit of the Subscriber) will deliver at
the Closing, a favourable legal opinion from Bay Resources'
counsel with respect to such matters set forth in Section 3(dd)
of this Agreement.
Either party may waive in writing in whole or in part by the party
benefiting such party before Closing upon such terms as it may consider
appropriate in its sole discretion.
c. Issuance of Securities: After the Closing Date, Bay Resources
will deliver the certificates within five (5) days representing the
Securities, including the Common Stock, the Warrants and Common Stock
issuable upon exercise of the Warrant, to the Subscriber (unless Subscriber
otherwise instructs Bay Resources in writing). The Certificates
representing the Securities, delivered pursuant to this Subscription bear a
legend in the following form, unless such Securities have been registered
under the Securities Act of 1933, as amended ("1933 Act") or where
exempted:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES AND MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT OR (I) TO THE COMPANY, (II) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
1933 ACT, (III) IN COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION
UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR
(IV) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION, IN EACH
CASE AFTER PROVIDING AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT
REGISTRATION UNDER THE 1933 ACT."
d. If the Certificates representing the Securities have been held for
a period of at least one (1) year and if Rule 144 the 1933 Act, is
applicable (there being no representations by Bay Resources that Rule 144
is applicable), then the undersigned may make sales of the Securities only
under the terms and conditions prescribed by Rule 144 of the 1933 Act or
Exemptions therefrom. Bay Resources shall use commercially reasonable
efforts to cause its legal counsel to deliver an opinion or such other
documentation as may reasonably be required to effect sales of the
Securities under Rule 144.
2. Representations and Warranties: Subscriber hereby represents and warrants
to Bay Resources:
a. SUBSCRIBER UNDERSTANDS THAT THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES AGENCY.
b. Subscriber is not an underwriter and acquired the Securities, solely
for investment for its own account and not with a view to, or for,
resale in connection with any distribution of securities within the
meaning of the 1933 Act; and is not being purchased with a view to or
for the resale,
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distribution, subdivision or fractionalization thereof; and the
undersigned has no contract, undertaking, understanding, agreement, or
arrangement, formal or informal, with any person to sell, transfer, or
pledge to any person the securities for which it hereby subscribes, or
any part thereof; and it understands that the legal consequences of
the foregoing representations and warranties to mean that it must bear
the economic risk of the investment for an indefinite period of time
because the Securities have not been registered under the 1933 Act,
and, therefore, may be resold only if registered under the 1933 Act or
an exemption from such registration is available.
c. Subscriber understands the speculative nature and risks of investments
associated with Bay Resources, and confirms that the Securities would
be suitable and consistent with its investment program and that its
financial position enables Subscriber to bear the risks of this
investment; and that there may not be any public market for the
securities for herein.
d. The Securities subscribed for herein may not be transferred,
encumbered, sold, hypothecated, or otherwise disposed of to any
person, except in compliance with the 1933 Act and applicable state
securities or "blue sky" laws. Without limiting the generality or
application of any other covenants, representations, warranties or
acknowledgements of the Subscriber respecting resale of the
Securities, if the Subscriber decides to offer, sell or otherwise
transfer any of the Securities, it will not offer, sell or otherwise
transfer any of such Securities directly or indirectly, unless:
(i) the sale is to the Company;
(ii) the sale is made outside the United States in a transaction
satisfying the requirements of Regulation S under the 1933
Act and in compliance with applicable local laws and
regulations;
(iii)the sale is made pursuant to the exemption from the
registration requirements under the 1933 Act provided by
Rule 144 thereunder and in accordance with any applicable
state securities or "blue sky" laws;
(iv) the Securities are sold in a transaction that does not
require registration under the 1933 Act or any applicable
state laws and regulations governing the offer and sale of
Securities, and it has prior to such sale furnished to the
Company an opinion of counsel to that effect, which opinion
and counsel shall be reasonably satisfactory to the Company;
or
(v) the Securities are registered under the 1933 Act and any
applicable state laws and regulations governing the offer
and sale of such Securities,
and the Subscriber understands that the Company may
instruct its registrar and transfer agent not to record
any transfer of the Securities without first being
notified by the Company that it is satisfied that such
transfer is exempt from or not subject to the
registration requirements of the 1933 Act and
applicable state securities laws.
e. Bay Resources is under no obligation, except as stated in Section 4
below, to register or seek an exemption the 1933 Act or any or any
applicable state laws for the Securities, or to cause or permit the
Securities to be transferred in the absence of any such registration
or exemption and that Subscriber herein must hold such Securities
indefinitely unless the Securities are subsequently registered under
1933 Act and applicable state securities laws or an exemption from
registration is available.
f. At the time of subscription, Subscriber reviewed the economic
consequences of the purchase of
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the Securities with its attorney and/or other financial advisor, was
afforded access to the books and records of the Company, conducted an
independent investigation of the business of the Company, and was
fully familiar with the financial affairs of the Company. Subscriber
consulted with its counsel with respect to the 1933 Act and applicable
federal and state securities laws. Company has not provided Subscriber
with any representations, statements, or warranties as to the
Securities. Subscriber has reviewed the term sheet delivered in
connection with this Offering and attached hereto as Schedule "B" (the
"Term Sheet"), the Company's Form 10-K for the year ended June 30,
2003 and Form 10-QSB for the quarter ended December 31, 2003, all of
which are filed electronically on XXXXX.
g. Subscriber had the opportunity to ask questions of the Company and
receive additional information from the Company to the extent that the
Company possessed such information, or could acquire it without
unreasonable effort or expense, necessary to evaluate the merits and
risks of an investment in Bay Resources.
h. Subscriber confirms that it is able (i) to bear the economic risk of
the investment, (ii) to hold the Securities for an indefinite period
of time, and (iii) to afford a complete loss of its investment; and
represents that it has adequate means of providing for its current
needs and possible personal contingencies, and that it has no need for
liquidity in this investment; (iv) this investment is suitable for
Subscriber based upon his investment holdings and financial situation
and needs, and this investment does not exceed ten percent of
Subscriber 's net worth; (v) Subscriber has by reason of its business
or financial experience could be reasonably assumed to have the
capacity to protect its own interests in connection with this
transaction.
i. The Subscriber has not purchased the Securities as a result of any
form of general solicitation or general advertising, including
advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio, or
television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.
j. Subscriber confirms that this transaction is intended to be exempt
from registration under the 1933 Act by virtue of section 4(2) of the
1933 Act and the provisions of Rule 506 of Regulation D promulgated
thereunder, and confirms that it is an "accredited investor" (as that
term is defined under Rule 501(a) as promulgated under Regulation D of
the 1933 Act). The Subscriber hereby certifies that the Subscriber
satisfies one or more of the categories of "accredited investors" as
are indicated by the Subscriber's initials next to the appropriate
category: (please place an "X" next to the appropriate category)
_________ Category 1. A bank, as defined in Section 3(a)(2) of the
1933 Act, whether acting in its individual or fiduciary
capacity; or
_________ Category 2. A savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the 1933
Act, whether acting in its individual or fiduciary capacity;
or
_________ Category 3. A broker or dealer registered pursuant to
Section 15 of the United States Securities Exchange Act of
1934; or
_________ Category 4. An insurance company as defined in Section
2(13) of the 1933 Act; or
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_________ Category 5. An investment company registered under the
United States Investment Company Act of 1940; or
_________ Category 6. A business development company as defined in
Section 2(a)(48) of the United States Investment
Company Act of 1940; or
_________ Category 7. A small business investment company licensed by
the U.S. Small Business Administration under Section 301
(c) or (d) of the United States Small Business Investment
Act of 1958; or
_________ Category 8. A plan established and maintained by a state,
its political subdivisions or any agency or instrumentality
of a state or its political subdivisions, for the benefit of
its employees, with total assets in excess of U.S.
$5,000,000; or
_________ Category 9. An employee benefit plan within the meaning of
the United States Employee Retirement Income Security Act of
1974 in which the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance
company or registered investment adviser, or an employee
benefit plan with total assets in excess of U.S. $5,000,000
or, if a self-directed plan, with investment decisions made
solely by persons who are accredited investors; or
_________ Category 10. A private business development company as
defined in Section 202(a)(22) of the United States
Investment Advisers Act of 1940; or
_X_______ Category 11. An organization described in Section 501(c)(3)
of the United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust, or a partnership,
not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of U.S.
$5,000,000; or
_________ Category 12. Any director, executive officer, or general
partner of the Company of the securities being offered or
sold, or any director, executive officer, or general partner
of a general partner of that Company; or
_________ Category 13. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the date
hereof exceeds U.S.$1,000,000; or
_________ Category 14. A natural person who had an individual income
in excess of U.S.$200,000 in each of the two most recent
years or joint income with that person's spouse in excess of
U.S.$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year; or
_________ Category 15. A trust, with total assets in excess of
U.S.$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii)
under the 1933 Act; or
_________ Category 16. Any entity in which all of the equity owners
meet the requirements of at least one of the above
categories.
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All information which the Subscriber has provided concerning the Subscriber is
correct as of the date set forth below and if there should be any change in such
information prior to the acceptance of this Agreement by the Company, the
Subscriber will immediately provide such information to the Company.
3. Company Representations, Warranties and Covenants. Bay Resources
represents, warrants and covenants that, at the Closing Date (an acknowledges
that the Subscriber is reylying on such representations, warranties and
covenants):
a. each of Bay Resources and each of its subsidaries is a valid and
subsisting corporation duly incorporated and in good standing under
the laws and jurisdiction of incorporation, and Bay Resources has no
subsidiaries other than as set forth in the Company's annual report on
Form 10-K for the year ended June 30, 2003;
b. each of Bay Resources and each of its subsidaries is duly registered
and licensed to carry on business in the jurisdiction in which it
carries on business or owns property where so required by the laws of
that jurisdiction;
c. Bay Resources and its subsidiaries own, possess or has obtained, and
is operating in compliance with, all governmental, administrative and
third party licenses, permits, certificates, registrations, approvals,
consents and other authorizations (collectively, "Permits") necessary
to own or lease (as the case may be) and operate its properties, and
to conduct its businesses or operations as currently conducted, except
such Permits the feailure of which to obtain would not have a material
adverse effect on the business, properties, operations, financial
condition or results of operations of Bay Resources, and neither Bay
Resources nor any of its subsidiaries has received any notice of
proceedings would have a material adverse effect on Bay Resources, or
any circumstance which would lead it to believe that such proceedings
are reasonably likely;
d. the business and operations of Bay Resources and its subsidiaries have
been conducted in accordance with all applicable laws, rules and
regulations of all governmental authorities, except for such
violations which would not, individually or in the aggregate, have a
material adverse effect on the financial condition or business of Bay
Resources and its subsidiaries;
e. the authorized capital of Bay Resources consists of 25,000,000 shares
of common stock, of which there were (i) 13,290,146 shares issued and
outstanding as of March 30, 2004 as fully paid and non-assessable
shares and (ii) no options and/or warrants to purchase shares of
common stock were outstanding;
f. Bay Resources will reserve or set aside sufficient shares of common
sotck in its treasury to issue the Securities, and all such Securities
will upon payment of the recited consideration and issuance be duly
and validly issued as fully paid and non-assessable;
g. the issuance of the Securities will not be subject to any pre-emptive
right or other contractual right to purchase securities granted by Bay
Resources or to which Bay Resources is bound;
h. the issue and sale of the Securities by Bay Resources does not and
will not conflict with, and does not and will not result in a breach
of, any of the terms of its incorporating documents or any agreement
or instrument to which Bay Resources is a party;
i. the Corporation has complied and will comply fully with the
requirements of all applicable corporate and securities laws in all
matters relating to the Offering.
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j. there are no legal or governmental actions, suits, proceedings or
investigations pending or, to Bay Resources' knowledge, threatened, to
which Bay Resources or any of its subsidiaries is or may be a party or
of which property owned or leased by Bay Resources or any of its
subsidiaries is or may be the subject, or related to environmental,
title, discrimination or other matters, which actions, suits,
proceedings or investigations, individually or in the aggregate, could
have a material adverse effect on Bay Resources;
k. there are no judgments against Bay Resources or any of its
subsidiaries, if any, which are unsatisfied, nor is Bay Resources or
any of its subsidiaries, if any, subject to any injunction, judgment,
decree or order of any court, regulatory body, administrative agency
or other governmental body;
l. this Agreement has been or will be by the Closing Date, duly
authorized by all necessary corporate action on the part of Bay
Resources, and Bay Resources has full corporate power and authority to
undertake the Private Placement;
m. this Agreement has been duly authorized, executed and delivered by the
Corporation and constitutes a valid and legally binding obligation of
the Company enforceable against it in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting the rights of creditors generally and except as limited by
the application of equitable principles when equitable remedies are
sought, and by the fact that rights to indemnity, contribution and
waiver, and the ability to sever unenforceable terms, may be limited
by applicable law;
n. neither Bay Resources nor any of its subsidiaries is in violation of
its organizational or incorporating documents nor in violation of, or
in default under, any lien, mortgage, lease, agreement or instrument,
except for such defaults which would not, individually or in the
aggregate, have a material adverse effect on the financial condition,
properties or business of Bay Resources or it subsidiaries;
o. subject to the accuracy of the representations and warranties of the
Subscriber contained in this Agreement, the offer, sale and issuance
of the Securities as contemplated by this Agreement are exempt from
the registration requirements of the 1933 Act, from the registration
or qualifications requirements of the state securities or "blue sky"
laws and regulations of any applicable state or other applicable
jurisdiction;
p. Bay Resources' shares of common stock are quoted for trading on the
National Association of Securities Dealers over-the-counter electronic
bulletin board (the "OTCBB"),
q. no order ceasing, halting or suspending trading in securities of Bay
Resources nor prohibiting the sale of such securities has been issued
to and is outstanding against Bay Resources or its directors, officers
or promoters, and, to the best of Bay Resources knowledge, no
investigations or proceedings for such purposes are pending or
threatened;
r. neither Bay Resources nor any subsidiary thereof will have taken any
action which would be reasonably expected to result in the delisting
or suspension of quotation of Bay Resources' shares of common stock on
or from the OTCBB and Bay Resources will have complied, in all
material respects, with the rules and regulations of eligibility on
the OTCBB;
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s. no person, firm or corporation acting or purporting to act at the
request of Bay Resources is entitled to any brokerage, agency or
finder's fee in connection with the purchase and sale of the
Securities described herein;
t. Bay Resources is a "reporting issuer" under section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and is
not in default of any of the requirements of the 1934 Act;
u. as of their respective filing dates, each report, schedule,
registration statement and proxy filed by Bay Resources with the
United States Securities and Exchange Commission ("SEC")(each, an "SEC
Report" and collectively, the "SEC Reports") (and if any SEC Report
filed prior to the date of this Agreement was amended or superseded by
a filing prior to the date of this Agreement, then also on the date of
filing of such amendment or superseding filing), (i) where required,
were prepared in all material respects in accordance with the
requirements of the 1933 Act, or the 1934 Act, as the case may be, and
the rules and regulations promulgated under such Acts applicable to
such SEC Reports, (ii) did not contain any untrue statements of a
material fact and did not omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading and (iii) are all the forms, reports
and documents required to be filed by Bay Resources with the SEC since
that time. Bay Resources' subsidiaries are not required to file any
reports or other documents with the SEC. Each set of audited
consolidated financial statements and unaudited interim financial
statements of Bay Resources (including any notes thereto) included in
the SEC Reports (i) complies as to form in all material respects with
the published rules and regulations of the SEC with respect thereto,
and (ii) have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly
present, in all material respects, the financial position of Bay
Resources as of the dates thereof and the results of its operations
and cash flows for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments
which were not or are not expected to be material in amount. To Bay
Resources' knowledge, no events or other factual matters exist which
would require Bay Resources to file any amendments or modifications to
any SEC Reports which have not yet been filed with the SEC but which
are required to be filed with the SEC pursuant to the 1933 Act or the
1934 Act;
v. Each SEC Report containing financial statements that has been filed
with or submitted to the SEC since July 31, 2002, was accompanied by
the certifications required to be filed or submitted by Bay Resources'
chief executive officer and chief financial officer pursuant to the
Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx Act"); at the time of
filing or submission of each such certification, such certification
was true and accurate and complied with the Xxxxxxxx-Xxxxx Act and the
rules and regulations promulgated thereunder; such certifications
contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither Bay
Resources nor any of its officers has received notice from any
governmental entity questioning or challenging the accuracy,
completeness, form or manner of filing or submission of such
certification;
w. there is no fact known to Bay Resources which Bay Resources has not
publicly disclosed which materially adversely affects, or so far as
Bay Resources can reasonably foresee, will materially adversely
affect, the assets, liabilities (contingent or otherwise), capital,
affairs, business, prospects, operations or condition (financial or
otherwise) of Bay Resources or the ability of Bay Resources to perform
its obligations under this Agreement;
x. Except as disclosed in the SEC Reports, Bay Resources and its
subsidiaries, if any, have filed all federal, state, local and foreign
tax returns which are required to be filed, or have requested
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extensions thereof, and have paid all taxes required to be paid by
them and any other assessment, fine or penalty levied against them, to
the extent that any of the foregoing is due and payable, except for
such assessments, fines and penalties which are currently being
contested in good faith;
y. Bay Resources has established on its books and records reserves which
are adequate for the payment of all taxes not yet due and payable and
there are no liens for taxes on the assets of Bay Resources or its
subsidiaries, if any, except for taxes not yet due, and there are no
audits of any of the tax returns of Bay Resources which are known by
Bay Resources' management to be pending, and there are no claims which
have been or may be asserted relating to any such tax returns which,
if determined adversely, would result in the assertion by any
governmental agency of any deficiency which would have a material
adverse effect on the properties, business or assets of Bay Resources;
z. is not an "investment company" within the meaning of the Investment
Company Act of 1940;
aa. neither Bay Resources nor any of its affiliates, nor any person acting
on its or their behalf (i) has made or will make any "directed selling
efforts" (as such term is defined in Regulation S of the 1933 Act) in
the United States, or (ii) has engaged in or will engage in any form
of "general solicitation" or "general advertising" (as such terms are
defined in Rule 502 (c) under Regulation D of the 1933 Act) in the
United States with respect to offers or sales of the Securities;
bb. the Corporation has not, for a period of six months prior to the date
hereof, sold, offered for sale or solicited, and will not for a period
of six months after the Closing Date, offer, sell or solicit, any
offer to buy any of its securities in a manner that would be
integrated with the offer and sale of the Units and would cause the
exemption from registration set forth in Rule 506 of Regulation D or
Rule 903 of Regulation S of the 1933 Act to become unavailable with
respect to the offer and sale of the Securities;
cc. the warranties and representations in this section are true and
correct and will remain so as of the Closing Date;
dd. Bay Resources will cause a favourable legal opinion to be delivered at
Closing by its counsel addressed to the Subscriber with respect to
such matters as the Subscriber may reasonably request relating to this
transaction, acceptable in all reasonable respects to the Subscribers'
counsel, acting reasonably, including to the effect that:
(i) Bay Resources is existing and in good standing under the
laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to carry on its
business as presently carried on and to own and lease its
assets where such assets are owned or leased;
(ii) Bay Resources has all necessary corporate capacity and
authority to enter into and perform its obligations under
this Agreement and to issue and sell the Securities;
(iii)this Agreement and the obligations under the Warrant have
been duly authorized by Bay Resources and constitute legally
binding obligations upon Bay Resources and is enforceable in
accordance with their respective terms (subject to the usual
qualifications);
(iv) registration under the 1933 Act of the Securities is not
required for the offer and sale thereof to the Subscriber in
accordance with the provisions of this Agreement; and
(v) such other matters as counsel to the Subscriber may
reasonably require in connection with this Agreement.
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ee. the warranties and representations in this section are true and
correct and will remain so as of the Closing Date; and
ff. Bay Resources shall indemnify, defend and hold the Subscriber (which
term shall, for the purposes of this Section, include the Subscriber
or its shareholders, managers, partners, directors, officers, members,
employees, direct or indirect investors, agents and affiliates and
assignees and the stockholders, partners, directors, members,
managers, officers, employees direct or indirect investors and agents
of such affiliates and assignees) harmless against any and all
liabilities, loss, cost or damage, together with all reasonable costs
and expenses related thereto (including reasonable legal and
accounting fees and expenses), arising from, relating to, or connected
with an untrue, inaccurate or breached statement, representation,
warranty or covenant of Bay Resources contained herein. Bay Resources
undertakes to notify the Subscriber immediately of any change in any
representation, warranty or other material information relating to Bay
Resources set forth in this Agreement which takes place prior to the
Closing Date.
4. Registration Rights
a. Bay Resources shall prepare and file with the SEC (the "SEC") within
one hundred twenty (120) calendar days after the Closing Date a
registration statement (on Form X-0, XX-0, XX-0, X-0, or other
appropriate registration statement form reasonably acceptable to the
Subscriber) under the 1933 Act (the "Registration Statement"), at the
sole expense of Bay Resources (except as specifically provided in
Section c hereof), in respect of the Subscriber, so as to permit a
public offering and resale of the Common Stock and Common Stock
acquirable upon exercise of the Warrants (collectively, the
"Registrable Securities") in the United States under the 1933 Act by
the Subscriber as selling stockholder and not as underwriter. Bay
Resources shall use its best efforts to cause such Registration
Statement to become effective as soon as possible thereafter, and
within five (5) calendar days of the SEC clearance to request
acceleration of effectiveness. Bay Resources will notify the
Subscriber of the effectiveness of the Registration Statement (the
"Effective Date") within three (3) Trading Days (days in which the
OTCBB is open for quotation) (each, a "Trading Day").
b. Bay Resources will maintain the Registration Statement or
post-effective amendment filed under this Section 4 effective under
the 1933 Act until the earlier of the date (i) all of the Registrable
Securities have been sold pursuant to such Registration Statement,
(ii) the Subscriber receives an opinion of counsel to Bay Resources,
which opinion and counsel shall be reasonably acceptable to the
Subscriber, that the Registrable Securities may be sold under the
provisions of Rule 144 without limitation as to volume, (iii) all
Registrable Securities, (or all Common Stock and Warrants, in the case
of Warrants not then exercised) have been otherwise transferred to
persons who may trade the Registrable Securities without restriction
under the 1933 Act, and Bay Resources has delivered a new certificate
or other evidence of ownership for such Registrable Securities not
bearing a restrictive legend, (iv) all Registrable Securities may be
sold without any time, volume or manner limitations pursuant to Rule
144(k) or any similar provision then in effect under the 1933 Act in
the opinion of counsel to Bay Resources, which counsel shall be
reasonably acceptable to the Subscriber, (v) Bay Resources obtains the
written consent of the Subscriber, or (vi) two (2) years from the
Effective Date (the "Effectiveness Period").
c. All fees, disbursements and out-of-pocket expenses and costs incurred
by Bay Resources in connection with the preparation and filing of the
Registration Statement and in complying with applicable securities and
"blue sky" laws (including, without limitation, all attorneys' fees of
Bay Resources, registration, qualification, notification and filing
fees, printing expenses, escrow fees, blue sky fees and expenses and
the expense of any special audits incident to or required by any such
registration) shall be borne by Bay Resources. The Subscriber shall
bear the cost of underwriting and/or brokerage discounts, fees and
commissions, if any, applicable to the Registrable Securities being
registered and the fees and expenses
S/A-11 of 19
of its counsel. The Subscriber and its counsel shall have a reasonable
period, not to exceed five (5) Trading Days, to review the proposed
Registration Statement or any amendment thereto, prior to filing with
the SEC. Bay Resources shall qualify any of the Registrable Securities
for sale in such states as the Subscriber reasonably designates.
However, Bay Resources shall not be required to qualify in any state
which will require an escrow or other restriction relating to Bay
Resources and/or the sellers, or which will require Bay Resources to
qualify to do business in such state or require Bay Resources to file
therein any general consent to service of process. Bay Resources at
its expense will supply the Subscriber with copies of the applicable
Registration Statement and the prospectus included therein and other
related documents in such quantities as may be reasonably requested by
the Subscriber.
d. Prior to the effectiveness of the Registration Statement filed
pursuant to Section 4(a), the rights to cause Bay Resources to
register Registrable Securities granted to the Subscriber by Bay
Resources under this Section 4 may be assigned in full by a Subscriber
in connection with a transfer by such Subscriber of not less than
500,000 Common Shares or not less than 125,000 Warrants, in either
case in a single transaction to a single transferee purchasing as
principal, provided, however, that (i) such transfer is otherwise
effected in accordance with applicable securities laws; (ii) such
Subscriber gives prior written notice to Bay Resources; and (iii) such
transferee agrees to comply with the terms and provisions of this
Agreement, and such transfer is otherwise in compliance with this
Agreement.
e. If at any time or from time to time after the Effective Date, Bay
Resources notifies the Subscriber in writing of the existence of a
Potential Material Event (as defined in Section (f) below), the
Subscriber shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable
Securities, from the time of the giving of notice with respect to a
Potential Material Event until the Subscriber receives written notice
from Bay Resources that such Potential Material Event either has been
disclosed to the public or no longer constitutes a Potential Material
Event. If a Potential Material Event shall occur prior to the date a
Registration Statement is required to be filed, then Bay Resources's
obligation to file such Registration Statement shall be delayed
without penalty for not more than thirty (30) calendar days. Bay
Resources must, if lawful, give the Subscriber notice in writing at
least two (2) Trading Days prior to the first day of the blackout
period.
f. "Potential Material Event" means any of the following: (i) the
possession by Bay Resources of material information not ripe for
disclosure in a registration statement, as determined in good faith by
the Chief Executive Officer or the Board of Directors of Bay Resources
that disclosure of such information in a Registration Statement would
be detrimental to the business and affairs of Bay Resources; or (ii)
any material engagement or activity by Bay Resources which would, in
the good faith determination of the Chief Executive Officer or the
Board of Directors of Bay Resources, be adversely affected by
disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by
the Chief Executive Officer or the Board of Directors of Bay Resources
that the applicable Registration Statement would be materially
misleading absent the inclusion of such information; provided that,
(i) Bay Resources shall not use such right with respect to the
Registration Statement for more than an aggregate of 90 days in any
12-month period; and (ii) the number of days Bay Resources is required
to keep the Registration Statement effective shall be extended by the
number of days for which the Corporation shall have used such right..
g. The Subscriber will cooperate with Bay Resources in all respects in
connection with this Agreement, including timely supplying all
information reasonably requested by Bay Resources (which shall include
all information regarding the Subscriber and proposed manner of sale
of the Registrable Securities required to be disclosed in any
Registration Statement) and executing and returning all documents
reasonably requested in connection with the registration and sale of
the Registrable Securities and entering into and performing its
obligations under any underwriting agreement, if the offering is an
underwritten offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten
S/A-12 of 19
offering. Any delay or delays caused by the Subscriber, or by any
other purchaser of securities of Bay Resources having registration
rights similar to those contained herein, by failure to cooperate as
required hereunder shall not constitute a breach or default of Bay
Resources under this Agreement.
h. Whenever Bay Resources is required by any of the provisions of this
Agreement to effect the registration of any of the Registrable
Securities under the 1933 Act, Bay Resources shall (except as
otherwise provided in this Agreement), as expeditiously as possible,
subject to the assistance and cooperation as reasonably required of
the Subscriber with respect to each Registration Statement:
(i) (A) prior to the filing with the SEC of any Registration
Statement (including any amendments thereto) and the
distribution or delivery of any prospectus (including any
supplements thereto), provide draft copies thereof to the
Subscriber and reflect in such documents all such comments
as the Subscriber (and its counsel), reasonably may propose
respecting the Selling Shareholders and Plan of Distribution
sections (or equivalents) and (B) furnish to the Subscriber
such numbers of copies of a prospectus including a
preliminary prospectus or any amendment or supplement to any
prospectus, as applicable, in conformity with the
requirements of the 1933 Act, and such other documents, as
the Subscriber may reasonably request in order to facilitate
the public sale or other disposition of the Registrable
Securities owned by the Subscriber;
(ii) register and qualify the Registrable Securities covered by
the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Subscriber shall
reasonably request (subject to the limitations set forth in
Section (b) above), and do any and all other acts and things
which may be necessary or advisable to enable the Subscriber
to consummate the public sale or other disposition in such
jurisdiction of the securities owned by the Subscriber;
(iii)cause the Registrable Securities to be quoted or listed on
each service on which the Common Stock of Bay Resources is
then quoted or listed;
(iv) notify the Subscriber, at any time when a prospectus
relating thereto covered by the Registration Statement is
required to be delivered under the 1933 Act, of the
happening of any event of which it has knowledge as a result
of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing, and Bay Resources shall prepare
and file a curative amendment as promptly as commercially
reasonable;
(v) as promptly as practicable after becoming aware of such
event, notify the Subscriber, (or, in the event of an
underwritten offering, the managing underwriters) of the
issuance by the SEC of any stop order or other suspension of
the effectiveness of the Registration Statement at the
earliest possible time and take all lawful action to effect
the withdrawal, recession or removal of such stop order or
other suspension; and
(vi) provide a transfer agent and registrar for all securities
registered pursuant to the Registration Statement and a
CUSIP number for all such securities.
j. With respect to any sale of Registrable Securities pursuant to a
Registration Statement filed pursuant to this Section 4, the
Subscriber hereby covenants with Bay Resources (i) not to make any
sale of the Registrable Securities without effectively causing the
prospectus delivery requirements
S/A-13 of 19
underthe Securities Act to be satisfied and (ii) to notify Bay
Resources promptly upon disposition of all of the Registrable
Securities.
k. In addition to the registration rights set forth in Section 4(a), if
the Registration Statement filed pursuant to Section 4(a) is not filed
within 120 calendar days from the Closing Date, or otherwise declared
effective by the SEC, then the Subscribers shall also have certain
"piggy-back" registration rights as follows:
(i) If at any time after the issuance of the Registrable
Securities, Bay Resources shall file with the SEC a
registration statement under the 1933 Act registering any
shares of equity securities, Bay Resources shall give
written notice to each Subscriber prior to such filing.
(ii) Within twenty (20) calendar days after such notice from Bay
Resources, each Subscriber shall give written notice to Bay
Resources whether or not such Subscriber desires to have all
of such Subscriber's Registrable Securities included in the
registration statement. If any Subscriber fails to give such
notice within such period, such Subscriber shall not have
the right to have Subscriber's Registrable Securities
registered pursuant to such registration statement. If any
Subscriber gives such notice, then Bay Resources shall
include such Subscriber's Registrable Securities in the
registration statement, at Company's sole cost and expense,
subject to the remaining terms of this Section 4(k).
(iii)If the registration statement relates to an underwritten
offering, and the underwriter shall determine in writing
that the total number of shares of equity securities to be
included in the offering, including the Registrable
Securities, shall exceed the amount which the underwriter
deems to be appropriate for the offering, the number of
shares of the Registrable Securities shall be reduced in the
same proportion as the remainder of the shares in the
offering and such participating Subscriber's Registrable
Securities included in such registration statement will be
reduced proportionately. For this purpose, if other
securities in the registration statement are derivative
securities, their underlying shares shall be included in the
computation. Each participating Subscriber shall enter into
such agreements as may be reasonably required by the
underwriters and each Subscriber shall pay the underwriters
commissions relating to the sale of their respective
Registrable Securities.
(iv) The Subscribers shall have an unlimited number of
opportunities to have the Registrable Securities registered
under this Section 4(k) provided that Bay Resources shall
not be required to register any Registrable Security or keep
any Registration Statement effective beyond such period
required under Section 4(b) of this Agreement.
(v) The Subscriber shall furnish in writing to Bay Resources
such information as Bay Resources shall reasonably require
in connection with a registration statement.
l. Bay Resources acknowledges that there is no adequate remedy at law for
failure by it to comply with the provisions of Section 4 of this
Agreement and that such failure would not be adequately compensable in
damages, and therefore agrees that its agreements contained in such
Section 4 may be specifically enforced. If Bay Resources shall fail to
file such registration statement when required pursuant to Section a
or to keep any registration statement effective as provided in Section
4 or otherwise fails to comply with its obligations and agreements in
this Section 4, then, in addition to any other rights or remedies the
Subscriber may have at law or in equity, including without limitation,
the right of rescission, Bay Resources shall indemnify and hold
harmless the Subscriber from and against any and all manner or loss
which it may incur as a result of such
S/A-14 of 19
failure. In addition, Bay Resources shall also reimburse the
Subscriber for any and all reasonable legal fees and expenses incurred
by it in enforcing their rights pursuant to Section 4, regardless of
whether any litigation was commenced.
5. Indemnity and Contribution
a. Bay Resources agrees to indemnify and hold harmless each Subscriber,
their respective officers, directors, employees, partners, legal
counsel and accountants, and each person controlling such Subscriber
within the meaning of Section 15 of the 1933 Act, and each person who
controls any underwriter within the meaning of Section 15 of the 1933
Act, from and against any losses, claims, damages, expenses or
liabilities (or actions or proceedings in respect thereof) to which
such Subscriber or such other indemnified person may become subject
(including in settlement of litigation, whether commenced or
threatened) insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state
a material fact in the Registration Statement, including all documents
filed as a part thereof and information deemed to be a part thereof,
on the effective date thereof, or any amendment or supplements
thereto, or arise out of any failure by Bay Resources to fulfill any
undertaking or covenant included in the Registration Statement or to
perform its obligations hereunder or under applicable law and Bay
Resources will, as incurred, reimburse such Subscriber, each of its
respective officers, directors, employees, partners, legal counsel and
accountants, and each person controlling such Subscriber, and each
person who controls any such underwriter, for any legal or other
expenses reasonably incurred in investigating, defending or preparing
to defend, settling, compromising or paying such action, proceeding or
claim; provided, however, that Bay Resources shall not be liable in
any such case to the extent that such loss, claim, damage, expense or
liability (or action or proceeding in respect thereof) arises out of,
or is based upon, (i) the failure of any Subscriber, or any of their
agents, affiliates or persons acting on their behalf, to comply with
the covenants and agreements contained in this Agreement with respect
to the sale of Registrable Securities, (ii) an untrue statement or
omission in such Registration Statement in reliance upon and in
conformity with written information furnished to Bay Resources by an
instrument duly executed by or on behalf of the Subscriber, or any of
its agents, affiliates or persons acting on its behalf, and stated to
be specifically for use in preparation of the Registration Statement
and not corrected in a timely manner by the Subscriber in writing or
(iii) an untrue statement or omission in any prospectus that is
corrected in any subsequent prospectus, or supplement or amendment
thereto, that was delivered to the Subscriber prior to the pertinent
sale or sales by such Subscriber and not delivered by the Subscriber
to the individual or entity to which it made such sale(s) prior to
such sale(s).
b. The Subscriber agrees to indemnify and hold harmless Bay Resources
from and against any losses, claims, damages, expenses or liabilities
(or actions or proceedings in respect thereof) to which Bay Resources
may become subject (under the 1933 Act or otherwise) insofar as such
losses, claims, damages, expenses or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i)
the failure of the Subscriber or any of its agents, affiliates or
persons acting on its behalf, to comply with the covenants and
agreements contained in this Agreement with respect to the sale of
Registrable Securities; or (ii) an untrue statement or alleged untrue
statement of a material fact or omission to state a material fact in
the Registration Statement in reliance upon and in conformity with
written information furnished to Bay Resources by an instrument duly
executed by or on behalf of such Subscriber and stated to be
specifically for use in preparation of the Registration Statement;
provided, however, that the Subscriber shall not be liable in any such
case for (i) any untrue statement or alleged untrue statement or
omission in any prospectus or Registration Statement which statement
has been corrected, in writing, by such Subscriber and delivered to
Bay Resources before the sale from which such loss occurred; or (ii)
an untrue statement or omission in any prospectus that is corrected in
any subsequent prospectus, or supplement or amendment thereto, that
was delivered to the Subscriber prior
S/A-15 of 19
to the pertinent sale or sales by the Subscriber and delivered by the
Subscriber to the individual or entity to which it made such sale(s)
prior to such sale(s), and the Subscriber, severally and not jointly,
will, as incurred, reimburse Bay Resources for any legal or other
expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim. Notwithstanding the
foregoing, the Subscriber shall not be liable or required to indemnify
Bay Resources in the aggregate for any amount in excess of the net
amount received by the Subscriber from the sale of the Registrable
Securities, to which such loss, claim, damage, expense or liability
(or action proceeding in respect thereof) relates.
c. Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is
to be sought against an indemnifying person pursuant to this Section
5, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action and,
subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent
that it shall wish, to assume the defense thereof. After notice from
the indemnifying person to such indemnified person of the indemnifying
person's election to assume the defense thereof, the indemnifying
person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there
exists or shall exist a conflict of interest that would, in the
opinion of counsel to the indemnified party, make it inappropriate
under applicable laws or codes of professional responsibility for the
same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the
expense of such indemnifying person; provided, further, that the
indemnifying person shall not be obligated to assume the expenses of
more than one counsel to represent all indemnified persons. In the
event of such separate counsel, such counsel shall agree to reasonably
cooperate.
d. If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsection
(a) or (b) above in respect of any losses, claims, damages, expenses
or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate
to reflect the relative fault of Bay Resources on the one hand and the
Subscriber, or its agents, affiliates or persons acting on its behalf,
on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities (or
actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
Bay Resources on the one hand or the Subscriber, or its agents,
affiliates or persons acting on its behalf, on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Bay
Resources and the Subscriber agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were
determined by any other method of allocation which does not take into
account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, expenses or liabilities (or
actions or proceedings in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 0000 Xxx) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. In any event, the
Subscriber shall not be liable or required to contribute to Bay
Resources in the aggregate for any amount in excess of the net amount
received by the Subscriber from the sale of its Registrable
Securities.
S/A-16 of 19
6. Governing Law: This Subscription Agreement shall be binding upon
the parties hereto, their heirs, executors, successors, and legal
representatives. The laws of the State of Delaware shall govern the
rights of the parties as to this Agreement.
7. Indemnification: Subscriber acknowledges that it understands the
meaning and legal consequences of the representations and warranties
contained herein, and it hereby agrees to indemnify and hold harmless
Bay Resources and any other person or entity relying upon such
information thereof from and against any and all loss, damage or
liability due to or arising out of a breach of any representation,
warranty, or acknowledgement of Subscriber contained in this
Agreement.
8. Nonassignability: Except as otherwise expressly provided herein,
this Agreement may not be assigned by Subscriber.
9. Entire Agreement: This instrument contains the entire agreement
among the parties with respect to the acquisition of the shares and
the other transactions contemplated hereby, and there are no
representations, covenants or other agreements except as stated or
referred to herein.
10. Amendment: This Agreement may be amended or modified only by a
writing signed by the party or parties to be charged with such
amendment or modification.
11. Binding On Successors: All of the terms, provisions and
conditions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors,
and legal representatives.
12. Titles: The titles of the sections of this Agreement are for
convenience of reference only and are not to be considered in
construing this Agreement.
13. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which shall be deemed an original and all of which taken together
shall constitute one and the same document, notwithstanding that all
parties are not signatories to the same counterpart.
14. Severability: The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of
the balance of this Agreement.
15. Disclosure Required Under State Law: The offering and sale of the
Securities is intended to be exempt from registration under the
securities laws of certain states. Subscribers who reside or purchase
the Securities may be required to make additional disclosures by the
securities laws of various states and agrees to provide such
additional disclosures as requested by Bay Resources upon written
request.
16. Notices: All notes or other communications hereunder (except
payment) shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by registered or certified mail
postage prepaid, or by Express Mail Service or similar courier,
addressed as follows:
If to Subscriber: At the address designated on the signature
page of this Agreement.
If to the Company: BAY RESOURCES LTD.
Xxxxx 0
000 Xx Xxxxx Xxxx
Xxxxxxxxx Xxxxxxxx 0000
Xxxxxxxxx
S/A-17 of 19
17. Time of the Essence: Time shall be of the essence of this
Agreement in all respects.
18. Facsimile and Counterpart Subscriptions: Bay Resources shall be
entitled to rely on delivery of a facsimile copy of this Agreement
executed by the subscriber, and acceptance by Bay Resources of such
executed Agreement shall be legally effective to create a valid and
binding agreement between the Subscriber and Bay Resources in
accordance with the terms hereof. In addition, this Agreement may be
executed in counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same document.
19. Future Assurances: Each of the parties hereto will from time to
time execute and deliver all such further documents and instruments
and do all acts and things as the other party may, either before or
after the Closing, reasonably require to effectively carry out or
better evidence or perfect the full intent and meaning of this
Agreement.
S/A-18 of 19
SUBSCRIBER HEREBY DECLARES AND AFFIRMS THAT IT HAS READ THE WITHIN AND FOREGOING
SUBSCRIPTION AGREEMENT, IS FAMILIAR WITH THE CONTENTS THEREOF AND AGREES TO
ABIDE BY THE TERMS AND CONDITIONS THEREIN SET FORTH, AND KNOWS THE STATEMENTS
THEREIN TO BE TRUE AND CORRECT.
***
IN WITNESS THEREOF, Subscriber executed this Agreement this 31st Day of
March, 2004
SUBSCRIBER:
RAB SPECIAL SITUATIONS
By:* WPS Xxxxxxxx
---------------
Title: Director of G.P.
----------------
By:*
---------------
Title:
------------------
-----------------------------
(Employer Identification Number)
--------------------------------
(Address)
----------------------------------
* By the foregoing signature, I hereby certify to BAY RESOURCES LTD. that I am
duly empowered and authorized to provide the foregoing informaton.
This Subscription Agreement is hereby accepted by the Company this 31st day of
March, 2004.
BAY RESOURCES LTD.
By: /s/ Xxxxx Xxx
-------------
Xxxxx Xxx
Title: Director and Secretary
-----------------------
S/A-19 of 19
Schedule "A"
Warrant Certificate
BAY RESOURCES LTD.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF BAY RESOURCES LTD.
Warrant to Purchase
1,670,000 Shares of Common Stock
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES AND MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (I) TO THE
COMPANY, (II) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE 1933 ACT, (III) IN COMPLIANCE WITH THE EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE,
OR (IV) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION, IN THE CASE OF
(III) OR (IV) ABOVE, AFTER PROVIDING AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE 1933 ACT.
FOR VALUE RECEIVED, Bay Resources Ltd., a Delaware corporation (the
"Company"), hereby certifies that RAB Special Situation LP, its successor or
permitted assigns (the "Holder"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, 1,670,000
fully paid and non-assessable shares of Common Stock of the Company, par value
$.0001 per share (the "Common Stock"), at a purchase price per share equal to
the Exercise Price (as hereinafter defined).
Notwithstanding anything contained herein to the contrary, the Warrant
represented by this certificate shall not be exercisable by the Holder, in whole
or in part, and the Company shall not give effect to any such exercise of the
Warrant, if, after giving effect to such exercise, the Holder, together with any
Affiliate of the Holder (including any person or company acting jointly or in
concert with the Holder) (the "Joint Actors") would in the aggregate
beneficially own, or exercise control or direction over that number of voting
securities of the Company which is 9.99% or greater of the total issued and
outstanding voting securities of the Company, immediately after giving effect to
such exercise. For the purposes of this paragraph, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.
1. Definitions. (a) The following terms, as used herein, ha ve the
following meanings:
"Affiliate " shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
1
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of Melbourne, Victoria Australia are
authorized by law to close.
"Common Stock" means the Common Stock, par value $.0001 per share, of the
Company.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons in
whose name a stock certificate is registered or accompanied by a duly executed
stock assignment separate from the certificate with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Exercise Date" means the date a Warrant Exercise
Notice is delivered to the Company in the manner provided in Section 8 below.
"Exercise Price" means $1.30.
"Expiration Date " means 5:00 p.m. (Melbourne, Victoria Australia) on March
___, 2006; provided that if such date shall in the City of Melbourne, Victoria
Australia be a holiday or a day on which banks are authorized to close, then
5:00 p.m. on the next following day which in the city of Melbourne, Victoria
Australia is not a holiday or a day on which banks are authorized to close.
"Fair Market Value " means as to any security, the average closing prices
of such security's sales on the Principal Market for the day as of which "Fair
Market Value" is being determined, or, if there have been no sales on any such
exchanges on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day. If the Common Stock is not listed or
admitted to unlisted trade privileges and bid and asked prices are not so
reported, the Fair Market Value shall be determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
"Initial Warrant Exercise Date" means the date hereof.
"Person" means an individual, partnership, corporation, trust, joint stock
company, association, joint venture, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Principal Market" means the National Association of Securities Dealers
electronic over-the-counter bulletin board ("OTCBB"), or if not quoted on the
OTCBB, the primary securities exchanges or market on which such security may at
the time be listed or quoted for trading.
"Warrant Shares" means the shares of Common Stock deliverable upon exercise
of this Warrant, as adjusted from time to time.
2
2. Exercise of Warrant.
(a) The Holder is entitled to exercise this Warrant in whole or in part at
any time on or after the Initial Warrant Exercise Date until the Expiration
Date. To exercise this Warrant, the Holder shall execute and deliver to the
Company a Warrant Exercise Notice substantially in the form annexed hereto. No
earlier than five (5) days after delivery of the Warrant Exercise Notice, the
Holder shall deliver to the Company this Warrant Certificate, including the
Warrant Exercise Subscription Form forming a part hereof duly executed by the
Holder, together with payment of the applicable Exercise Price. Upon such
delivery and payment, the Holder shall be deemed to be the holder of record of
the Warrant Shares subject to such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be actually delivered to the
Holder.
(b) The Exercise Price may be paid to the Company either:
(i) in cash or by certified or official bank check or bank cashier's
check payable to the order of the Company, or by wire transfer or
by any combination of cash, check or wire transfer.
(ii) by providing the Company a written notice that the Holder is
exercising the Warrant (or a portion thereof) on a "cashless"
basis in exchange for that number of shares of Warrant Stock
equal to the product of (x) the number of shares as to which such
Warrant, or portion thereof, is being exercised multiplied by (y)
a fraction, the numerator of which is the Fair Market Value (as
hereinafter defined) of the Warrant Stock less the Exercise Price
and the denominator of which is such Fair Market Value. Solely
for the purposes of this Section 2(b)(ii), Fair Market Value
shall be calculated either (i) on the Exercise Date or (ii) as
the average of the Fair Market Values for each of the five
trading days preceding the Exercise Date, whichever results in a
higher Fair Market Value.
By way of illustration for the purposes of this Section 2(b)(ii), the
Holder may elect to receive shares equal to the value of this Warrant
(or the portion thereof being canceled) by surrender of this Warrant,
computed using the following formula:
X = Y(A-B)
------
A
Where: X = The number of shares of Common Stock to be issued
to the Holder
3
Y = The number of Shares purchasable under this Warrant
(at the date of such calculation) with respect to which
this Warrant is exercised
A = The Fair Market Value of one share of Common
Stock
B = The Exercise Price (as adjusted to the date of such
calculation)
(c) If the Holder exercises this Warrant in part, this Warrant
Certificate shall be surrendered by the Holder to the Company and a new Warrant
Certificate of the same tenor and for the unexercised number of Warrant Shares
shall be executed by the Company. The Company shall register the new Warrant
Certificate in the name of the Holder or in such name or names of its transferee
pursuant to paragraph 5 hereof as may be directed in writing by the Holder and
deliver the new Warrant Certificate to the Person or Persons entitled to receive
the same.
(d) Upon surrender of this Warrant Certificate in conformity with the
foregoing provisions, the Company shall transfer to the Holder of this Warrant
Certificate appropriate evidence of ownership of the shares of Preferred Stock
or other securities or property to which the Holder is entitled, registered or
otherwise placed in, or payable to the order of, the name or names of the Holder
or such transferee as may be directed in writing by the Holder, and shall
deliver such evidence of ownership and any other securities or property to the
Person or Persons entitled to receive the same.
3. Restrictive Legend. Certificates representing shares of Common Stock
issued pursuant to this Warrant shall bear a legend substantially in the form of
the legend set forth on the first page of this Warrant Certificate to the extent
that and for so long as such legend is required pursuant to applicable law.
4. Covenants of the Company.
(a) The Company hereby agrees that at all times there shall be
reserved for issuance and delivery upon exercise of this Warrant
such number of its authorized but unissued shares of Common Stock
or other securities of the Company from time to time issuable
upon exercise of this Warrant as will be sufficient to permit the
exercise in full of this Warrant. All such shares shall be duly
authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights.
(b) The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through
any reorganization, transfer of assets,
4
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against
impairment. Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above
the amount payable therefor upon such exercise immediately prior
to such increase in par value, (ii) take all such action as may
be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (iii) use its best
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as
may be necessary to enable the Company to perform its obligations
under this Warrant.
(d) Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of
the shares of Common Stock issuable upon exercise of the
Warrants, the Company shall take any corporate action which may
be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of such Common Stock
at such adjusted Exercise Price.
(e) Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
(f) The Company covenants that during the period the Warrant is
outstanding, it will use its best efforts to comply with any and
all reporting obligations under the Securities Exchange Act of
1934, as amended.
(g) The Company will take all such reasonable action as may be
necessary (i) to maintain a Principal Market for its Common
Shares in the United States and (ii) to assure that such Warrant
Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the
Principal Market upon which the Common Stock may be listed.
(h) The Company shall preserve and maintain its corporate existence
and all licenses and permits that are material to the proper
conduct of its business and it shall refrain from changing its
name.
5
(i) The Company will not close its shareholder books or records in any ma
nner which prevents the timely exercise of this Warrant.
5. Exchange, Transfer or Assignment of Warrant; Registration
(a) Each taker and holder of this Warrant Certificate by taking or
holding the same, consents and agrees that the registered holder
hereof may be treated by the Company and all other persons
dealing with this Warrant Certificate as the absolute owner
hereof for any purpose and as the person entitled to exercise the
rights represented hereby.
(b) The Holder agrees that it will not transfer, hypothecate, sell,
assign, pledge or encumber any Warrants or Warrant Shares unless
such securities are registered under the Securities Act of 1933,
as amended (the "1933 Act") and registered or qualified under any
applicable state securities laws or such transfer is effected
pursuant to an available exemption from registration.
(c) The Holder of this Warrant has been granted certain registration
rights by the Company. The registration rights are set forth in
that certain Subscription Agreement between the Company and the
Holder dated March 31, 2004. The terms of the Subscription
Agreement are incorporated herein by this reference.
6. Anti-Dilution Provisions.
The Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Warrant shall be subject to adjustment from
time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares
of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii)
combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares, the number of Warrant Shares shall be
proportionately adjusted to reflect such dividend, distribution,
subdivision, reclassification or combination. For example, if the
Company declares a 2 for 1 stock split and the number of Warrant
Shares immediately prior to such event was 200,000, the number of
Warrant Shares immediately after such event would be 400,000.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever the number of Warrant Shares is adjusted pursuant to
Subsection (a) above, the Exercise Price shall simultaneously be
adjusted by multiplying the Exercise Price immediately prior to
such event by the number of Warrant Shares immediately prior to
such event and dividing the product so obtained by the number of
Warrant Shares, as adjusted. If an Exercise Price has not yet
been established, an adjustment thereof shall be deferred until
one is established pursuant to the terms of this Warrant.
6
(c) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five
percent (5%) in such price; provided, however, that any
adjustments which by reason of this Subsection (c) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 6 shall be made to
the nearest cent or to the nearest one- hundredth of a share, as
the case may be.
(d) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon
exercise of each Warrant to be mailed to the Holder. The Company
may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation
required by this Section 6, and a certificate signed by such firm
shall be conclusive evidence of the correctness of such
adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (a), above.
(f) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are
stated in this Warrant.
(g) In case at any time or from time to time conditions arise by
reasons of action taken by the Company, which in the reasonable
opinion of its Board of Directors, are not adequately covered by
the provisions of Section 6 hereof, and which might materially
and adversely affect the exercise rights of the Holder hereof,
the Board of Directors shall appoint a firm of independent
certified public accountants, which may be the firm regularly
retained by the Company, which will give their opinion upon the
adjustment, if any, on a basis consistent with the standards
established in the other provisions of Section 6 necessary with
respect to the Exercise Price then in effect and the number of
shares of Common Stock for which the Warrant is exercisable, so
as to preserve, without dilution, the exercise rights of the
Holder. Upon receipt of such opinion, the Board of Directors
shall forthwith make the adjustments described therein.
7. Loss or Destruction of Warrant. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if
7
mutilated, the Company shall execute and deliver a new Warrant Certificate of
like tenor and date.
8. Notices. Any notice, demand or delivery authorized by this
Warrant Certificate shall be in writing and shall be given to the Holder or the
Company, as the case may be, at its address (or telecopier number) set forth
below, or such other address (or telecopier number) as shall have been furnished
to the party giving or making such notice, demand or delivery:
If to the Company: Bay Resources Ltd.
Xxxxx 0, 000 Xx. Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx Xxxxxxxxx 0000
Fax: (000) 0000-0000
Attention: Xxxxx Xxx
with a copy to:
Xxxxxxxx Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to the Holder: RAB Special Situations LP
RAB Special Situations LP
c/o RAB Capital Limited
No. 0 Xxxx Xxxxxx
Xxxxxx X0XX 0XX
Xxxxxx Xxxxxxx
with a copy to:
XXXXXX & XXXXXXX LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxx
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
8
9. Rights of the Holder. Prior to the exercise of any Warrant, the Holder
shall not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
or other distributions, to exercise any preemptive right or any notice of any
proceedings of the Company except as may be specifically provided for herein.
10. GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF DELAWARE, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.
11. Amendments; Waivers. Any provision of this Warrant Certificate may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Holder and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
12. Company Reorganization. In the event of any sale of substantially
all the assets of the Company or any reorganization, reclassification, merger or
consolidation of the Company where the Company is not the surviving entity, then
as a condition to the Company entering into such transaction, the entity
acquiring such assets or the surviving entity, as the case may be, shall agree
to assume the Company's obligations hereunder.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by its duly authorized officer and to be dated as of March ____, 2004.
BAY RESOURCES LTD.
By:___________________________________
Name:
Title:
Acknowledged and Agreed:
RAB SPECIAL SITUATIONS LP
By:________________________
Name:
Title:
1
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant
by execution of the Warrant Exercise Subscription Form)
To: Bay Resources Ltd.
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Common Stock, par value $.0001 per share, of Bay
Resources Ltd. The undersigned intends to exercise the Warrant to purchase
___________ shares (the "Shares") at $_____ per Share (the Exercise Price
currently in effect pursuant to the Warrant).
(check one)
? The undersigned elects to pay the aggregate Exercise Price for the Shares
in cash, certified or official bank or bank cashier's check (or a combination of
cash and check) as indicated below.
? The undersigned elects to exercise its the "cashless" exercise right in
accordance with the terms hereof and Section 2(b)(ii) of the Warrant Certificate
with respect to ________ Common Shares. The undersigned will receive that number
of Shares equal to the product of (x) the number of shares as to which is being
exercised multiplied by (y) a fraction, the numerator of which is the Fair
Market Value (as hereinafter defined) of the Shares less the Exercise Price and
the denominator of which is such Fair Market Value.
Date:_________________________
_____________________________________
(Signature of Owner)
_____________________________________
(Xxxxxx Xxxxxxx)
_____________________________________
(City) (State) (Zip Code)
Payment:$_______________________ cash $________________________ check
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant
after deliver of Warrant Exercise Notice)
To: Bay Resources Ltd.
The undersigned irrevocably exercises the Warrant for the purchase of
___________ shares (the "Shares") of Common Stock, par value $.0001 per share,
of Bay Resources Ltd. (the "Company") at $_____ per Share (the Exercise Price
currently in effect pursuant to the Warrant).
? The undersigned herewith makes payment of $___________ (such payment
being made in cash or by certified or official bank or bank cashier's check
payable to the order of the Company or by any permitted combination of such cash
or check), all on the terms and conditions specified in the within Warrant
Certificate, surrenders this Warrant Certificate and all right, title and
interest therein to the Company and directs that the Shares deliverable upon the
exercise of this Warrant be registered or placed in the name and at the address
specified below and delivered thereto.
? The undersigned elects to exercise its the "cashless" exercise right in
accordance with the terms hereof and Section 2(b)(ii) of the Warrant Certificate
with respect to ________ Common Shares. The undersigned will receive that number
of Shares equal to the product of (x) the number of shares as to which is being
exercised multiplied by (y) a fraction, the numerator of which is the Fair
Market Value (as hereinafter defined) of the Shares less the Exercise Price and
the denominator of which is such Fair Market Value.
Date:______________________________
_____________________________________
(Signature of Owner)
_____________________________________
(Xxxxxx Xxxxxxx)
_____________________________________
(City) (State) (Zip Code)
Securities and/or check to be issued to: _______________________________________
Please insert social security or identifying number:___________________________
Name:___________________________________________________________________________
Street Address:_________________________________________________________________
City, State and Zip Code:______________________________________________________
Any unexercised portion of the Warrant evidenced by the within Warrant
Certificate to be issued to:____________________________________________________
Please insert social security or identifying number:______________________
Name:___________________________________________________________________________
Street Address: City, State and Zip Code:______________________________________
WARRANT ASSIGNMENT FORM
Dated___________ ___, _____
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto_____________________________(the "Assignee"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to shares of Common Stock represented by this Warrant
and does hereby irrevocably constitute and appoint _______________________
Attorney, to transfer the same on the books of the Company, with full power of
substitution in the premises.
Signature:______________________________________
Schedule "B"
Term Sheet
BAY RESOURCES LTD
SUMMARY
TERM SHEET
The following sets forth a summary of terms of the private placement (the
"Offering"). No representation or warranty is made as to the accuracy of such
summary, and it is qualified in its entirety by, and should be read in
conjunction with, the attached subscription agreement ("Subscription Agreement")
and the more detailed information prepared by Bay Resources Ltd (the "Company")
which is included as Exhibits to the Term Sheet. No person has been authorized
to give any information or to make any representation concerning the Company or
the Shares other than information given by duly authorized officers of the
Company in connection with investors' examination of the Company and the terms
of the Offering and, if given or made, any such other information or,
representation should not be relied upon as having been authorized by the
Company.
Prospective purchasers must carefully review all of the information and
transaction documents contained in these materials, and to the extent such
purchasers desire more information, should request such from the Company and its
representatives. The Offering is being made pursuant to Rule 506 of Regulation D
under the Securities Act of 1933, as amended (the "1933 Act"). The Offering is
being made solely to "accredited investors," as that term is defined in Rule 501
of Regulation D.
THE OFFERING
Issuer Bay Resources Ltd, a Delaware corporation
Security Offered The Company's common stock ("Shares") and warrants
over unissued Shares expiring two (2) years from the
date of issue with an exercise price of US$1.30 per
warrant.
Price Per Share US$1.00
Amount of Shares 1,670,000 shares for an aggregate amount
Offered by the in cash of US$1,670,000. For each share subscribed
Company for by Subscriber, Subscriber will receive one (1)
warrant to purchase one share of Common Stock
expiring two (2) years from the date of issue
with an exercise price of US$1.30 per warrant.
Use of Proceeds The Company will utilize the proceeds of the
Offering to conduct exploration activities for
gold on the mining and exploration properties of
Xxxxxx Corporation and on new tenements in the
Committee Bay Greenstone Belt, and for general
corporate and administrative purposes.
Business Description The Company was incorporated in Delaware in 1973 as
Bayou Oil & Gas Inc. The Company was involved in
a number of activities between 1973 and 1998. Since
that time, it has investigated a number of different
business proposals and in September 2000 announced that
it intended to focus on opportunities in the mining
& exploration area specifically in North America and
Latin America. The Company has identified two business
opportunities that it wishes to proceed with which are
in the gold industry.
Canada - Gold
The Company has an agreement with Xxxxxx to explore for gold
on Tahera's extensive properties on the Slave Craton in
northern Canada. Xxxxxx is a diamond exploration company
listed on the Toronto Stock Exchange and is engaged in the
diamond exploration in the northern Slave Craton. Xxxxxx has
developed an extensive database to explore for diamonds and
under the terms of the agreement, Bay Resources will use the
database and geochemical samples to explore for gold.
Xxxxxx retains a two percent net smelter return royalty on
any production from deposits discovered as a result of the
Company using the Xxxxxx samples and database.
Tahera's diamond exploration data that Bay Resources will
have access to includes electromagnetic geophysical surveys,
overburden and bedrock mapping, overburden sampling and
drilling data. The Xxxxxx overburden samples cover some
60,000 square kilometers of the northern Slave Craton with
some 17,000 samples being potentially available for gold and
base metal analysis. The overburden samples have been taken
on a reconnaissance scale with line intervals at 2.5 - 5.0
kilometers with some detailed surveys at 50- 100 meter
sample spacings. The Xxxxxx samples cover areas of known
gold mineralisation including in the vicinity of the Lupin
and Ulu gold deposits.
Tahera's Jericho and Contwoyto properties lie in close
proximity to the Lupin gold mine, which is a large, high
grade, gold deposit (some three million ounce gold endowment
produced to date), currently operated by Kinross Gold
Corporation. Bay Resources considers there to be significant
potential for gold mineralization, similar to that found at
Lupin, on Tahera's Jericho and Contwoyto properties.
Utilizing the Xxxxxx database in conjunction with existing
public data, Bay Resource's objective is to delineate new
areas of gold mineralization on the northern Slave Craton
that could lead to a multi-million ounce gold discovery.
In June 2002, the Company commenced acquiring a strategic
land position in the highly prospective Committee Bay
Greenstone Belt. In March 2003, it announced that it would
focus its gold exploration efforts on the Committee Bay
Greenstone Belt, west of Melville Peninsula, Nunavut,
Canada.
The Committee Bay Greenstone Belt, located approximately 240
kilometers northeast of Xxxxx Lake in Nunavut, is believed
to represent one of the largest unexplored greenstone belts
in North America, with potential to host world-class gold
deposits.
Bay Resources currently holds 29 claims totaling 71,694
acres in the Committee Bay Greenstone Belt. These claims
were recorded on October 16, 2002. To keep the claims in
good standing, a total of C$286,304 of assessment work is
required to be completed by the anniversary date of October
16, 2004. C$143,388 ($2 per acre) is required in each
subsequent year up to 2012 (at which point a decision to
bring the claims to lease must be made).
The Archean Committee Bay Greenstone belt was the subject of
a 3 year (2000-2003) Canadian government Targeted Geoscience
Initiative (TGI). Total funding for all 29 TGIs was
approximately $40 million. The stated objective of TGI was
to increase the level and cost-effectiveness of private
sector exploration for mineral resources. Government work in
the Committee Bay Belt included 1:100,000 scale geologic
mapping, prospecting, surficial mapping, drift prospecting,
and airborne geophysics (400 m flight line spacing). All of
these products will include digital releases and be
incorporated into
a high quality GIS database. A summary of the government TGI
work can be found at:
xxxx://xxxxxx.xxxxx.xx.xx/xxxxxxxxx_xxx/Xxxxxxxxx.xxxx
The stratigraphy of the Committee Bay Greenstone Belt
includes banded iron formation up to 50 metres thick,
komatiite flows, basalts, intermediate to felsic tuffs, and
quartz-cobble conglomerates. Deformation is recorded by
major shear zones, second order faults, complex folding, and
felsic intrabelt intrusions (including a pluton with the
same 2.718 Ma age as the Dome Stock in Red Lake). Numerous
gold showings are spread out over a 150 km x 40 km area
including the Inuk zone (12.8 gpt Au / 5metres) in northeast
Committee Bay.
The area is best known for the Meliadine Gold Project, which
is currently in the pre-feasibility stage and has a major
interest held by WMC International, as well as the
Meadowbank Project of Cumberland Resources, which is in post
feasibility stage. These two projects host 7.5 million
ounces of gold resources. The Committee Bay Greenstone Belt
is also situated in the same general region as the
developing diamond play currently being explored by De
Beers, BHP-Billiton, Northern Empire Minerals Ltd. and
Stornoway Ventures Ltd. Bay Resources has accumulated a
large landholding in the belt.
In February 2003, Committee Bay Resources Ltd., a company
with large landholding in the Committee Bay area, signed a
letter of intent with Gold Fields Explorations Ltd., to form
a joint venture, whereby Goldfields will take an equity
position in CBR and will spend US$10 million on exploration
to earn a 65% interest in that project. Previous work in the
Committee Bay area returned samples grading up to 245 grams
per tonne gold, 0.5% nickel and 0.8% copper.
The geology is highly prospective for BIF hosted gold (as in
the 3.0 M oz Au Meadowbank and 4.6 M oz Au Meliadine
deposits further to the south). In addition to the BIF
hosted gold targets, this belt has potential for
shear-hosted lode gold, Witswaterstrand style gold,
komatiite hosted stratiform Ni-Cu (Kambalda analogy), and
PGEs in layered igneous complexes (Xxxxxxxxx Lake
Anorthosite Suite). Samples from previous workers in the
Committee Bay area returned samples up to 245 gpt Au, 0.5%
Ni, and 0.8% Cu. Committee
The developing Eastern Arctic diamond plays currently being
explored by De Beers, BHP-Billiton, Northern Empire Minerals
Ltd., and Stornoway Ventures Ltd. are to the northeast and
southeast of the Committee Bay Belt. Impressive diamond
results were returned from caustic fusion of the Melville
Island kimberlites and the landholdings have now increased
to 7 million acres. The 1.5 million acre Xxxxxxxxx diamond
play north of Xxxxxx Inlet has intersected 18 kimberlites in
since June 2003.
In summary, the Committee Bay Greenstone Belt is highly
prospective and underexplored for multiple commodities
(gold, nickel, copper, PGEs, diamonds). Bay Resources has
significant land holdings in the belt and these cover
several gold showings (up to 9.7 gpt).. Risk Factors The
Subscriber acknowledges and agrees that he or she has been
advised by the Company that an investment in the Company
involves a high degree of risk, including the risk that the
Subscriber may lose his or her entire investment in the
Company. Without limiting the generality of the foregoing,
the undersigned acknowledges that he or she has been
apprised of the following risks factors:
(a) Forward Looking Statements. Certain of the statements
contained in the Summary Term Sheet, including, without
limitation, statements regarding Tahera's business,
strategy, plans and objectives of management for future
operations are forward-looking within the meaning of the
federal securities laws. These statements use
forward-looking words, such as "anticipate," "continue,"
"expect," "may," "will," "estimate," "believe" or other
similar words. These statements discuss further expectations
or contain projections. Although the Company believes that
the expectations reflected in the forward-looking statements
are reasonable, actual results will likely differ from those
suggested by the forward-looking statements for various
reasons. When considering forward-looking statements, one
should keep in mind the risk factors referred to in this
Subscription Agreement. The risk factors could cause actual
results to differ materially from those contained in any
forward-looking statements.
(b) Control by Insiders. Following the completion of the
transactions described in the Term Sheet, the Company's
principal stockholder, Edensor Nominees Pty Ltd., will
continue to own more than 65.6% of the outstanding Common
Stock and will be able to elect the entire Board of
Directors.
(c) Dependence on Key Personnel; Need to Hire Additional
Employees. The development and implementation of the Summary
Term Sheet is entirely dependent on the Company's existing
officers and key employees. To implement its business plan,
the Company may need to acquire additional technical and
marketing employees in an environment in which such
personnel are in great demand and not always readily
available. If for any reason the Company would be unable to
retain its existing personnel and significantly expand its
staff, its business may be materially and adversely
effected. The
Company does not maintain key person life insurance for any
of its employees.
(d) Speculative Nature of Mineral Exploration and
Development. Mineral exploration particularly for gold is
speculative in nature, involves many risks and frequently is
nonproductive. There can be no assurance that the Company's
investment in gold exploration or mining companies or gold
exploration efforts will be successful. Once gold in
commercially recoverable grades and quantities are
discovered it may take a number of years from the initial
exploration stages until production is possible during which
time the economic feasibility of production may change. (e)
Need for Additional Funds. The Company will require
substantial additional funds to finance the exploration and
development of the gold interests as well as for working
capital purposes. The ability of the Company to provide such
funds will be dependent on its cash resources, ability to
raise further finance (either debt or equity) and its risk
profile of any further investment.
(f) Mining Risks and Insurance. The business of gold
exploration and mining is generally subject to a number of
risks and hazards including environmental hazards,
industrial accidents, labor disputes, encountering unusual
or unexpected geologic formations, cave-ins, flooding and
periodic interruptions due to inclement or hazardous weather
conditions. Such risks could result in damage to or
destruction of mineral properties or producing facilities,
personal injury, environmental damage, delays in mining,
monetary losses and possible legal liability.
(g) Canadian Listing The Company has advised the Subscriber
of its plans to seek dual listing of the Company's
Securities on the Toronto Venture Exchange and/or seek to
spin its Canadian exploration assets out into a separate
corporate vehicle (such as a Capital Pool Company or similar
start up type company) and to seek listing of the separate
corporate vehicle on Toronto Venture Exchange and that in
the case of the use of the separate corporate vehicle, the
Company will consider the distribution of the shares in the
separate corporate vehicle received by the Company to its
shareholders. There can be no guarantee that a listing on
Toronto Venture Exchange will be approved or successful.
Financial Condition
At March 4, 2004, the Company had total assets of
approximately A$8,000 and total liabilities of approximately
A$2,212,000. A majority of the debt is owed to a company of
which Xx Xxxxxxx is a Director and it has provided loan
funds to the Company to allow the Company to continue to
operate; and the balance are trade creditors. The Company
has no operating revenue. It has been agreed between the
potential Subscriber, Xx X X Xxxxxxx and the Company that
the amount owed to the company associated with Xx X X
Xxxxxxx will be converted into shares and warrants at the
same unit subscription price and on the same terms and
conditions as the potential Subscriber will subscribe for
shares and warrants in the Company.
Board of Directors
The Directors of the Company are Xxxxxx Xxxxxxx, Xxxxx
Tyrwhitt, Xxxxx Xxx and Xxxx Xxxxxxx.
Transfer The Shares have not been registered under the 1933 Act and
Restrictions are subject to certain restrictions on transfer as described
in the Subscription Agreement.
Capitalization Assuming the sale of the following:
1. 1,753,984 Shares at a price of US$1.00 to convert
US$1,753,984 of debt into equity; and
2. 1,670,000 Shares to potential Subscriber,
immediately following the Offering there would be 16,714,130
Shares issued and outstanding and 3,423,984 warrants issued
and outstanding. On a fully diluted basis, assuming the
exercise of all issued and outstanding warrants, there will
be 20,138,114 Shares issued and outstanding. The Company is
authorized to issue 25 million Shares of US$.0001 par value.