SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
BAY RESOURCES LTD
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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|_| Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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[LOGO OMITTED] [LETTERHEAD OMITTED]
TO OUR STOCKHOLDERS:
You are cordially invited to attend our 2004 Annual Stockholders' Meeting to be
held at Level 8, 580 St Kilda Road Melbourne Victoria 3004 Australia on January
27, 2005, at 3.00pm.
We have attached a Notice of Annual Meeting of Stockholders and Proxy Statement
that discuss the matters to be presented at the meeting.
At this year's meeting, we will be asking our stockholders to elect Joseph Isaac
Gutnick, David Stuart Tyrwhitt, Peter James Lee and Paul Lawrence Ehrlich as
directors, to approve an increase in our authorized shares of common stock, and
to approve the adoption of our 2004 Share Option Plan.
We hope that you will come to the Annual Meeting in person. Even if you plan to
come, we strongly encourage you to vote now. Instructions on voting by facsimile
or mail are shown on your proxy and in the Proxy Statement. If for any reason
you desire to revoke your proxy, you can do so at any time before it is voted.
Your vote is important and will be greatly appreciated.
If you have any questions about the matters to be voted on at the Annual Meeting
or you need help voting your shares, please either Mr. Pini Althaus at (718) 953
6340 (email pini@bayresourcesltd.com) or me at (613) 8532 2860 or
peter@bayresourcesltd.com
/s/ Peter Lee
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Peter Lee
Secretary
BAY RESOURCES LTD
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
TIME
3.00pm. on January 27, 2005.
PLACE
Level 8, 580 St Kilda Road Melbourne Victoria 3004 Australia
PURPOSES
To elect four members of the Board of Directors to serve a one year term.
To approve an amendment to our Certificate of Incorporation to increase the
authorized number of shares of common stock from 25,000,000 to 50,000,000
shares.
To approve the 2004 Share Option Plan.
To transact any other business that properly comes before the Meeting or any
adjournment of the Meeting.
RECORD DATE
You can vote if you were a stockholder of record at the close of business on
December 15, 2004.
By order of the Board of Directors
/s/ Peter Lee
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Peter Lee
Secretary
November 11, 2004
Melbourne, Victoria, Australia
HOW TO VOTE
Your vote is important. You may vote by using a traditional proxy card and
returning it to us by facsimile on (613) 8532 2805 or by mail to PO Box 6315 St
Kilda Road Central, Melbourne, Victoria, 8008 Australia
BAY RESOURCES LTD
PROXY STATEMENT
TABLE OF CONTENTS PAGE
General Information about the Solicitation 1
Election of Directors 3
Executive Compensation 9
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 12
Approval to Increase the Authorised Shares of Common Stock 16
Approval of the 2004 Share Option Plan 18
Requirements, Including Deadlines, for Submission of
Stockholder Proposals and Nominations of Directors 21
Other Matters 22
Audit Committee Charter Annex A
2004 Share Option Plan Annex B
PROXY STATEMENT
GENERAL INFORMATION ABOUT THE SOLICITATION
We are sending you these proxy materials in connection with the solicitation by
the Board of Directors of Bay Resources Ltd (OTCBB: BYRE) of proxies to be used
at Bay Resources Annual Meeting of Stockholders to be held on ThursdayJanuary
27, 2005, and at any adjournment or postponement of the Meeting. "We", "our",
"us" and the "Company" all refer to Bay Resources. The proxy materials are first
being mailed on or about December 22, 2004.
WHO MAY VOTE
You will only be entitled to vote at the Annual Meeting if our records show that
you held your shares on December 10, 2004. At the close of business on November
16, 2004, a total of 16,714,130 shares of our common stock were outstanding and
entitled to vote. Each share of common stock has one vote.
HOW TO VOTE
If your shares are held by a broker, bank or other nominee, it will send you
instructions that you must follow to have your shares voted at the Annual
Meeting. If you hold your shares in your own name as a record holder, you may
instruct the proxy agents how to vote your shares as described below.
VOTE BY MAIL
If you choose to vote by facsimile or mail, simply mark your proxy, date and
sign it, and return it to us in the envelope provided. If the envelope is
missing, please mail your completed proxy card to Bay Resources, PO Box 6315 St
Kilda Road Central Melbourne Victoria 8008 Australia.
VOTING AT THE ANNUAL MEETING
The method by which you vote will not limit your right to vote at the Annual
Meeting if you decide to attend in person. If your shares are held in the name
of a bank, broker or other holder of record, you must obtain a proxy, executed
in your favor, from the holder of record to be able to vote at the Meeting.
All shares that have been properly voted and not revoked will be voted at the
Annual Meeting. If you sign and return your proxy card but do not give voting
instructions, the shares represented by that proxy will be voted as recommended
by the Board of Directors.
HOW TO REVOKE YOUR PROXY
You may revoke your proxy at any time before it is voted. If you are a record
stockholder, you may revoke your proxy in any of the following ways:
o by giving notice of revocation at the Annual Meeting.
o by timely delivery of written instruction revoking your proxy to the
Secretary of Bay Resources , PO Box 6315 St Kilda Road Central Melbourne
Victoria 8008 Australia.
o by voting in person at the Annual Meeting.
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HOW VOTES WILL BE COUNTED
The Annual Meeting will be held if a quorum, consisting of a majority of the
outstanding shares of common stock entitled to vote, is represented at the
Meeting. If you have returned a valid proxy or are a record holder and attend
the Meeting in person, your shares will be counted for the purpose of
determining whether there is a quorum, even if you wish to abstain from voting
on some or all matters introduced. Abstentions and broker "non-votes" are also
counted in determining whether a quorum is present. A "broker non vote" occurs
when a broker, bank or nominee that holds shares for a beneficial owner does not
vote on a particular proposal because it does not have discretionary voting
power for that proposal and has not received voting instructions from the
beneficial owner.
If a quorum is not present at the Annual Meeting, a majority of the shares
present, in person or by proxy, has the power to adjourn the Meeting from time
to time until a quorum is present. Other than announcing at the Annual Meeting
the time and place of the adjourned Meeting, no notice of the adjournment will
be given to stockholders unless required because of the length of the
adjournment.
Directors will be elected by a plurality of the votes cast.
The affirmative vote of a majority of the outstanding shares of our common stock
is required to approve the proposed amendment of our certificate of
incorporation.
The votes cast "for" must exceed the cast "against" to approve each other matter
voted on at the Meeting.
Abstentions and broker "non-votes" are not counted in the election of directors
or the approval of any other matter.
Votes that are withheld or shares that are not voted will have the same legal
effect as a vote against the proposed amendment of our certificate of
incorporation but will have no effect on the outcome of any other matter voted
on.
LIST OF STOCKHOLDERS
The names of stockholders of record entitled to vote at the Annual Meeting will
be available at the Annual Meeting and for ten days prior to the Meeting for any
purpose germane to the Meeting, between the hours of 9.00 a.m. and 5.00 p.m., at
our principal executive offices at Level 8, 580 St Kilda Road Melbourne Victoria
3004 Australia.
COST OF THIS PROXY SOLICITATION
We will pay the cost of preparing, assembling and mailing the notice of meeting,
proxy statement and enclosed proxy card. In addition to the use of mail, our
employees may solicit proxies personally and by telephone. Our employees will
receive no compensation for soliciting proxies other than their regular
salaries. We may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy materials to their principals and to
request authority for the execution of proxies. We may reimburse such persons
for their expenses incurred in connection with these activities.
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PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
Our By-laws provide that the number of Directors of the Company initially shall
be six and that the number of directors which shall thereafter constitute the
whole Board shall be determined by the Board of Directors. The Board has
determined that the number of Directors constituting the whole Board shall be
four.
Directors need not be stockholders of the Company or residents of the State of
Delaware. Directors are elected for an annual term and generally hold office
until the next Directors have been duly elected and qualified. Directors may
receive compensation for their services as determined by the Board of Directors.
A vacancy on the Board may be filled by the remaining Directors even though less
than a quorum remains. A Director appointed to fill a vacancy remains a Director
until his successor is elected by the Stockholders at the next annual meeting of
Shareholder or until a special meeting is called to elect Directors.
Our Board of Directors currently has four members who hold office for a period
of one year.
Your proxy will be voted FOR the election of the four nominees named below,
unless you withhold authority to vote for any or all of the nominees. Management
has no reason to believe that a nominee will be unwilling or unable to serve as
a director. However, if a nominee is unwilling or unable to serve, your proxy
will be voted for another nominee designated by our Board of Directors.
DIRECTOR NOMINEES
The following are management's director nominees
NAME DIRECTOR SINCE
Joseph Isaac Gutnick March 1988
David Stuart Tyrwhitt November 1996
Peter James Lee February 1996
Paul Lawrence Ehrlich November 2001
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists our directors and executive officers.
NAME AGE POSITION(S) CURRENTLY HELD WITH THE COMPANY
Joseph Gutnick 52 Chairman of the Board, President, Chief
Executive Officer
and Director
David Tyrwhitt 64 Vice President and Director
Peter Lee 47 Director, Secretary and Chief Financial Officer
Paul Ehrlich 46 Director
Pinchas Althaus Chief Operating Officer
Craig Alford Vice President Exploration
Biographical information provided to us by our directors and executive officers
is as follows.
-3-
JOSEPH GUTNICK
Mr Gutnick has been Chairman of the Board, President and Chief Executive Officer
since March, 1988. He has been a Director of numerous public listed companies in
Australia specialising in the mining sector since 1980 and is currently a
Director of Astro Mining N.L., Great Gold Mines N.L.,. and Quantum Resources
Limited. Mr. Gutnick was previously Executive Chairman of Tahera Corporation, a
company that is listed on Toronto Stock Exchange from May 2000 to October 2003
and has previously been a Director of the World gold Council. He is a Fellow of
the Australasian Institute of Mining & Metallurgy and the Australian Institute
of Management and a Member of the Australian Institute of Company Directors.
DAVID TYRWHITT
Dr Tyrwhitt was appointed a Director in November 1996. He is a geologist,
holding a Bachelor of Science and PhD degrees and has 40 years experience in
mineral exploration and management development and operation of gold mines in
Australia. Dr Tyrwhitt has been a Director of numerous public listed companies
in Australia in the mining industry and is currently a Director of Astro Mining
N.L., Great Gold Mines N.L., and Quantum Resources Limited.
PETER LEE
Mr Lee has been Chief Financial Officer and Principal Accounting Officer since
August 1989 and was appointed a Director in February 1996. Mr Lee is a Member of
the Institute of Chartered Accountants in Australia, a Fellow of Chartered
Secretaries Australia Ltd., a Member of the Australian Institute of Company
Directors and holds a Bachelor of Business (Accounting) from Royal Melbourne
Institute of Technology. He has over 20 years commercial experience and is
currently General Manager Corporate and Company Secretary of several listed
public companies in Australia.
PAUL EHRLICH
Mr. Ehrlich is an attorney of 20 years experience in the fields of commercial
law and commercial litigation. From 1989 to 2001 Mr. Ehrlich was a partner in a
major national Australian law firm. He has expertise in a range of corporate
areas including mergers and acquisition (with an emphasis on public company
takeovers, litigation and trade sales), securities law, public raisings, IPO's,
government privatisation, corporate reconstructions and the negotiation and
drafting of complex contractual and commercial arrangements. Mr. Ehrlich
specialises in areas of complex corporate litigation and has conducted such
litigation on behalf of clients in the Supreme Courts of Victoria, New South
Wales, South Australia, Western Australia and in the Federal Court of Australia
and in the High Court of Australia. He also specialises in all areas of mining
resource law and project finance.
PINCHAS (PINI) ALTHAUS
Mr Althaus has 9 years business experience in insurance, sales, business
development and investor relations. More recently Mr Althaus was Director of
Business Development for Ambient Corporation (February 2000 to February 2003), a
company providing power line communications technology. In this role, Pini
initiated and maintained relationships with U.S. & International electrical
utilities and power companies, and managed and initiated relationships with
strategic and business development partners. He played a major role in Ambient
completing two successful rounds of funding, acted as liaison between Ambient
and its investors/financial community, managed public relations and corporate
communications duties, including press releases and media interviews, and
created and delivered presentations for Ambient. He joined Tahera Corporation, a
diamond exploration company, in February 2003 as Director of Investor Relations
& Business Development where he managed public relations and investor relations
activities, including press releases, conducting media interviews, responding to
shareholder inquiries and representing Tahera at conferences.
-4-
In October 2003, Pini left Tahera and since that time, has provided consulting
services to Bay Resources and its subsidiary company covering investor relations
and public relations activities, including fund raising, press releases, media
interviews, and shareholder inquiries. In addition to this, he has coordinated
road-shows and delivered presentations on the Company's behalf. On October 15,
2004, he was appointed Chief Operating Officer of Bay Resources Ltd.
CRAIG ALFORD
Mr. Alford has over 20 years of experience in the exploration business including
5 years as Senior Geologist to District Manager for Teck Cominco's exploration
programs in Kyrgyzstan, Argentina and Chile. Most recently Mr. Alford
participated in various successful exploration programs within Canada and the
former Soviet Union, including as a Geologic Consultant for Placer Dome, one of
the world's largest gold mining companies. Mr. Alford has worked in exploration
for several major and junior mining companies including Falconbridge, Golden
Star Resources, Granges, and Homestake Minerals. In addition, he has worked with
the Geologic Survey of Canada. Mr. Alford holds a Masters degree with
Commendation in Geology from Lakehead University. He has extensive exploration
experience in many commodities, including gold, silver, copper, lead, zinc, oil,
and diamonds. Mr. Alford's exploration experience is throughout Canada and
several other countries including Venezuela, Guyana, Chile, Argentina, Suriname,
and Kyrgyzstan.
Executive officers of Bay Resources are appointed by the Board of Directors and
serve at the discretion of the Board, subject to the terms of applicable
employment agreements. There are no family relationships among any of the
directors or executive officers of Bay Resources.
Mr. Gutnick was formerly the Chairman of the Board, Dr. Tyrwhitt was formerly an
independent Director and Mr. Lee was formerly Company Secretary of Centaur
Mining & Exploration Ltd., an Australian corporation, which commenced an
insolvency proceeding in Australia in March 2001.
BOARD, AUDIT COMMITTEE AND REMUNERATION COMMITTEE MEETINGS
Our Board of Directors consists of four members, of whom two have been, and
continue to be, independent under applicable regulations. During fiscal 2004,
our Board of Directors met three times. The Board of Directors also uses
resolutions in writing to deal with certain matters and during fiscal 2004, five
resolutions in writing were signed by all Directors.
Historically our entire Board has selected nominees for election as directors.
The Board believes this process has worked well thus far particularly since it
has been the Board's practice to require unanimity of Board members with respect
to the selection of director nominees. In determining whether to elect a
director or to nominate any person for election by our stockholders, the Board
assesses the appropriate size of the Board of Directors, consistent with our
bylaws, and whether any vacancies on the Board are expected due to retirement or
otherwise. If vacancies are anticipated, or otherwise arise, the Board will
consider various potential candidates to fill each vacancy. Candidates may come
to the attention of the Board through a variety of sources, including from
current members of the Board, stockholders, or other persons. The Board of
Directors has not yet had the occasion to, but will, consider properly submitted
proposed nominations by stockholders who are not directors, officers, or
employees of Bay Resources on the same basis as candidates proposed by any other
person. Stockholders can make proposals as provided below under the caption
"Requirements, Including Deadlines, for Submission of Stockholder Proposals and
Nominations of Directors."
-5-
AUDIT COMMITTEE:
Dr David Tyrwhitt and Mr. Paul Ehrlich constitute our Audit Committee. It is the
opinion of the Board of Directors that each of them is an independent director
as defined in applicable regulations. Our Audit Committee does not include a
"financial expert" as defined in Item 401 (e) of Regulation S-B. The Company
only has two independent Directors and neither of these independent Directors
has a finance background. The Audit Committee met three times during fiscal
2004.
The Board's current written charter for its Audit Committee is a statement
attached as Annex A to this proxy statement.
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REPORT OF THE AUDIT COMMITTEE
Management is responsible for Bay Resources' financial reporting process,
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Bay Resources' independent auditors are responsible for
auditing those financial statements.
In performing our oversight duties we rely on management's representation that
the financial statements have been prepared with integrity and objectivity and
in conformity with accounting principles generally accepted in the United
States. We also rely on the representations of the independent auditors included
in their report on Bay Resources' financial statements.
Our oversight does not provide us with an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or policies, or appropriate internal controls and procedures.
Furthermore, our contacts with management and the independent auditors do not
assure that:
o Bay Resources' financial statements are presented in accordance with
generally accepted accounting principles,
o the audit of Bay Resources' financial statements has been carried out in
accordance with generally accepted auditing standards or
o Bay Resources' independent accountants are in fact "independent."
In connection with the inclusion of the audited financial statements in Bay
Resources' 2004 annual report on Form 10-KSB, the Audit Committee:
o reviewed and discussed the audited financial statements with management,
o discussed with our independent auditors the materials required to be
discussed by SAS 61,
o reviewed the written disclosures and the letter from our independent
auditors required by Independent Standards Board Standard No. 1 and
discussed with our independent auditors their independence, and
o based on the foregoing review and discussion, recommended to the Board of
Directors that the audited financial statements be included in Bay
Resources' 2004 annual report on form 10-KSB.
David S Tyrwhitt, Audit Committee Chairman
Paul L Ehrlich., Audit Committee Member
REMUNERATION COMMITTEE
The Board has a Remuneration Committee comprised of two independent directors.
During fiscal 2004, the Remuneration Committee met once. During the year, the
Remuneration Committee reviewed employment agreements and salary levels of our
executive officers were considered.
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STOCKHOLDER COMMUNICATIONS WITH THE BOARD
Stockholders who wish to communicate with the Board of Directors should send
their communications to the Chairman of the Board at the address listed below.
The Chairman of the Board is responsible for forwarding communications to the
appropriate Board members.
Mr. Peter Lee Bay Resources Ltd.
PO Box 6315
St Kilda Road Central
Melbourne, Victoria 8008
Australia
ANNUAL MEETING ATTENDANCE
The Company encourages all Directors to attend the Annual Meeting of
Stockholders either in person or by telephone.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows compensation paid for the years ended June 30, 2004,
2003, and 2002 to Bay Resources' Chief Executive Officer and its other highest
paid executive officers who earned more than $100,000 in fiscal 2004.
Annual Compensation Long Term Compensation Awards
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Securities
Other Annual Restricted Underlying
Name and Principal Position Year Salary Compensation Stock Awards Options
--------------------------------- ----- ------ ------------ ------------ ---------------
Joseph Gutnick, Chairman
of the Board and CEO 2004 $76,000 (1)(2) $16,484(1) -- --
2003 $ - (1)(2) $28,553(3) -- --
2002 $108,000(1)(2) $ - -- --
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1. The amounts listed were paid by us to AXIS, which provides the services of
Mr. Gutnick and Mr. Lee as well as certain other officers and employees to
us.
2. Excludes options granted to Edensor of which Mr. J.I. Gutnick is a Director
and Shareholder (see - Certain Relationships and Related Party
Transactions).
3. Includes amounts paid by AXIS to an accumulation superannuation plan on
behalf of Joseph Gutnick.
OPTION GRANTS IN LAST FISCAL YEAR
Nil
DIRECTOR COMPENSATION
In 2004, Directors who were not officers or employees of Bay Resources were paid
fees of A$20,000 per annum.
EMPLOYMENT AGREEMENTS
Mr. Craig Alford has an employment agreement with Bay Resources. The agreement
with Mr. Alford expires March 31, 2005, and provides for his employment as Vice
President Exploration of Bay Resources. He is required to spend his full
business time performing his duties and his annual salary is currently
CDN$120,000. The employment agreement entitles the officer to participate in the
health, insurance, pension and other benefits, if any, generally provided to our
employees.
Bay Resources can terminate the employment of Mr. Alford for cause. If
terminated for cause, Bay Resources is not required to make any payment to Mr.
Alford other than entitlements up to the date of termination.
-9-
If the employment of Mr. Alford is terminated by Bay Resources without cause,
Bay Resources must provide 2 weeks notice of termination (or payment in lieu of
notice).
On October 15, 2004, the Company appointed Mr. Pinchas Althaus as Chief
Operating Officer.
The appointment was effective May 1, 2004 and the employment agreement with Mr.
Althaus expires on December 31, 2006. Mr. Althaus shall be paid a salary of
US$110,000 exclusive of bonus benefits and other compensation. The Company has
agreed to provide Mr. Althaus with executive benefits comparable to those
provided by the Company to other executives of the Company generally and shall
permit Mr. Althaus to participate in any bonus place, share purchase plan,
retirement plan or similar plan offered by the Company to its executives
generally in the manner and the extent authorized by the Remuneration Committee
of the Company. In addition, Mr. Althaus will be able to participate in such
extended health, medical, disability insurance and other benefit plans
established by the Company and made available to other executives of the
Company.
The Company has agreed to grant Mr. Althaus options to purchase 750,000 shares
of common stock of the Company at an exercise price of US$1.00 per option which
will vest as follows:-
o 250,000 shall vest immediately;
o a further 250,000 will vest at the mid term date of the contract; and
o the remaining 250,000 will vest on December 31, 2006.
The options will be issued subject to applicable securities laws, the
availability of options within the Company stock option plan and may be subject
to whole periods.
In the case of the change of control, all options then outstanding will
immediately vest for the purpose of such transaction.
The Company may terminate the employment of Mr. Althaus without notice or any
payment in law of notice for cause. The agreement may also be terminated by the
Company upon 30 days written notice to Mr. Althaus if Mr. Althaus becomes
permanently disabled and the agreement shall terminate without notice upon the
death of Mr. Althaus. If Mr. Althaus' employment is terminated during the term
for cause or by voluntarily termination by Mr. Althaus, Mr. Althaus shall not be
entitled to any severance payment other than pro rata entitlements up to the
date of termination.
Mr. Althaus may terminate his employment with the Company at any time
upon the occurrence of any one of the following:-
(i) A reduction of diminution in Mr. Althaus' authority, duties or
responsibilities (including without limitation, with respect to
office or title) hereunder,
(ii) Any reduction in the then applicable base salary or Mr. Althaus'
eligibility to participate in any executive benefits program,
retirement plan or executive incentive bonus programs,
(iii) Unless without his prior consent, his place of work is relocated to
more than 30 miles from New York,
(iv) Any other material failure on the part of the Company to comply with
any other provision of this agreement or any stock option agreement
executed by the parties as contemplated herein.
If Mr. Althaus' employment is terminated for other than cause, Mr. Althaus will
be entitled to receive the lesser of the total of three months salary at the
applicable base salary rate and the present value of the salary of Mr. Althaus
during the next 24 months.
-10-
If Mr. Althaus' employment is terminated as a result of permanent disability or
death, a payment will be made to Mr. Althaus or his estate of the balance of the
base salary that would otherwise have been paid to Mr. Althaus during the
remainder of the term of the agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our Directors,
executive officers and beneficial owners of more than 10% of the outstanding
common stock are required to file reports with the Securities and Exchange
Commission concerning their ownership of and transactions in our common stock
and are also required to provide to us copies of such reports. Based solely on
such reports and related information furnished to us, we believe that in fiscal
2004 all such filing requirements were complied with in a timely manner by all
Directors and executive officers.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
During fiscal 2004, no securities were authorised for issuance under equity
compensation plants.
On October 15, 2004, the Remuneration Committee and Board of Directors adopted
the 2004 Share Option Plan, subject to stockholder approval (refer section on
Approval of the 2004 Share Option Plan).
On October 15, 2004, the Remuneration Committee and Board of Directors agreed to
issue 1,600,000 options under the Share Option Plan, subject to stockholder
approval of the 2004 Share Option Plan.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets out, to the best of our knowledge, the numbers of
shares in us beneficially owned as at November 16, 2004 by:
(i) each of our present Executive Officers and Directors,
(ii) each person (including any "group" as that term is defined in
Section 13(d)(3) of the Securities Exchange Act) who
beneficially owns more than 5% of our common stock, and
(iii) all of our present Directors and officers as a group.
NAME NUMBER OF SHARES OWNED(1) PERCENTAGE OF
SHARES (*)
Edensor Nominees
Pty Ltd 8,894,590 48.2
Kerisridge Pty Ltd 3,507,968 19.0
Joseph Gutnick 12,454,208 (2)(3) 67.4
(4)(5)(6)(7)
Stera Gutnick 12,428,558 (4)(5)(6)(7) 67.3
Delkern Investments Ltd 3,050,778 18.2
David Tyrwhitt - (2) -
Peter Lee - (2) -
Paul Ehrlich - -
Craig Alford - -
Pini Althaus 900 -
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All officers and Directors
As a group 12,455,108 74.5
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NOTES:
(*) Based on 16,714,130 shares outstanding as of November 16, 2004
(1) Does not include shares issuable upon exercise of options that have been
granted to certain officers, subject to the approval by stockholders of the
2004 Share Option Plan.
(2) Does not include:
-12-
(i) 8,949 shares of common stock beneficially owned Great Gold Mines
NL or
(ii) 1,918 shares of common stock beneficially owned by Quantum
Resources Limited or (iii) 229,489 shares of common stock
beneficially owned by AXIS,
of which companies Messrs Gutnick, Lee, and Dr. Tyrwhitt are officers
and/or Directors, as they disclaim beneficial ownership of those
shares.
(3) Does not include 2,500 shares of common stock beneficially owned by us.
(4) Includes 8,894,590 shares of common stock owned by Edensor Nominees,
1,753,984 shares of common stock owned by Kerisridge and 26,000 shares of
common stock owned by Pearlway Investments Proprietary Limited, of both of
which Mr Joseph Gutnick, Stera M. Gutnick and members of their family are
officers, Directors and principal stockholders.
(5) Includes 1,753,984 shares issuable upon exercise of stock purchase warrants
owned by Kerisridge.
(6) Joseph Gutnick is the beneficial owner of 25,650 shares of common stock.
(7) Joseph Gutnick and Stera Gutnick are husband and wife.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We are one of five affiliated companies of which four are Australian public
companies listed on Australian Stock Exchange. Each of the companies have some
common Directors, officers and shareholders. In addition, each of the companies
owns equity in and is substantially dependent upon AXIS for its senior
management and certain mining and exploration staff. The Company owns 9.09% of
the outstanding shares of AXIS. A number of arrangements and transactions have
been entered into from time to time between such companies. It has been the
intention of the affiliated companies and respective Boards of Directors that
each of such arrangements or transactions should accommodate the respective
interest of the relevant affiliated companies in a manner which is fair to all
parties and equitable to the shareholders of each. Currently, there are no
material arrangements or planned transactions between the Company and any of the
other affiliated companies other than AXIS.
AXIS is paid by each company for the costs incurred by it in carrying out the
administration function for each such company. Pursuant to the Service
Agreement, AXIS performs such functions as payroll, maintaining employee records
required by law and by usual accounting procedures, providing insurance, legal,
human resources, company secretarial, land management, certain exploration and
mining support, financial, accounting advice and services. AXIS procures items
of equipment necessary in the conduct of the business of the Company. AXIS also
provides for the Company various services, including but not limited to the
making available of office supplies, office facilities and any other services as
may be required from time to time by the Company as and when requested by the
Company.
We are required to reimburse AXIS for any direct costs incurred by AXIS for the
Company. In addition, we are required to pay a proportion of AXIS's overhead
cost based on AXIS's management estimate of our utilisation of the facilities
and activities of AXIS plus a service fee of not more than 15% of the direct and
overhead costs. AXIS has not charged the 15% service fee to us. Amounts invoiced
by AXIS are required to be paid by us. We are also not permitted to obtain from
sources other than AXIS, and we are not permitted to perform or provide
ourselves, the services contemplated by the Service Agreement, unless we first
requests AXIS to provide the service and AXIS fails to provide the service
within one month.
-13-
The Service Agreement may be terminated by AXIS or ourselves upon 60 days prior
notice. If the Service Agreement is terminated by AXIS, we would be required to
independently provide, or to seek an alternative source of providing, the
services currently provided by AXIS. There can be no assurance that we could
independently provide or find a third party to provide these services on a
cost-effective basis or that any transition from receiving services under the
Service Agreement will not have a material adverse effect on us. Our inability
to provide such services or to find a third party to provide such services may
have a material adverse effect on our operations.
In accordance with the Service Agreement AXIS provides the Company with the
services of our Chief Executive Officer, Chief Financial Officer and clerical
employees, as well as office facilities, equipment, administrative and clerical
services. We pay AXIS for the actual costs of such facilities plus a maximum
service fee of 15%. The Company paid AXIS A$759,410 (being A$335,987 in respect
to the current year and A$486,000 in respect to prior years) in respect of the
Service Agreement for the fiscal year ended June 30, 2004, A$201,688 for the
fiscal year ended June 30, 2003 and A$169,770 for the fiscal year ended June 30,
2002. At June 30, 2002, 2003 and 2004, the Company owed AXIS A$389,000,
A$486,000 and A$104,000 respectively for services provided in accordance with
the Service Agreement. During fiscal 2002, 2003 and 2004, AXIS Consultants
charged interest of A$29,198, A$46,642 and A$42,742 respectively on outstanding
balances. AXIS charged interest at rates between 9.60% and 10.10% for fiscal
2002, 9.60% and 10.10% for fiscal 2003 and 10.10% and 10.60% for fiscal 2004.
Chevas, a company associated with our President, Joseph Gutnick, has provided
loan funds to enable us to meet our liabilities and has paid certain expenses on
our behalf. At June 30, 2002 we had a liability to Chevas of A$783,743. During
the 2003 fiscal year, Chevas loaned a further A$369,155 and charged A$86,417 in
interest to us on the loan account. At June 30 2003, we owed Chevas A$1,239,315.
During the 2004 fiscal year, Chevas loaned a further A$187,122 and charged
A$82,776 in interest to us on the loan account. During fiscal 2004, we repaid
the loan in full. Chevas charged interest to us on outstanding balances of the
loan account at the ANZ Banking Group Limited reference rate for overdrafts over
A$100,000 plus 1%. In accordance with this formula, the actual interest rate
charged during the 2003 fiscal year was 8.60% and during the 2004 fiscal year
was 8.60% to 9.10%.
Edensor Gold Pty Ltd , a company associated with our President, Joseph Gutnick,
provided loan funds during fiscal 2004 to enable us to meet our liabilities.
During the 2004 fiscal year, Edensor Gold loaned A$69,000 and charged A$670 in
interest to us on the loan account. During fiscal 2004, we repaid the loan in
full. Edensor Gold charged interest to us on outstanding balances of the loan
account at the ANZ Banking Group Limited reference rate for overdrafts over
A$100,000 plus 1%. In accordance with this formula, the actual interest rate
charged during the 2004 fiscal year was 8.85% to 9.10%.
On January 20, 2000, we issued 8,000,000 options over fully paid shares in our
capital at an issue price of US$0.01 per option and an exercise price of US$1.00
per option to Edensor. The options had a term of 5 years with a non-exercise
period of 2 years subject to a further board approval for Edensor, either
directly of indirectly, to exercise options in the case we required to raise
further working capital. On March 22, 2001, the Directors agreed to extend the
term of the options from 5 years to 10 years. Edensor advised us in June 2003
that it had sold 2,000,000 options to Delkern Investments Ltd. In March 2004, we
received notification from Edensor that it was exercising all of the options it
held utilising the cashless exercise feature of the terms and conditions of the
options. As a result of the exercise of the options, we issued 5,142,857 shares
to Edensor.
-14-
In mid 2002, we entered into an agreement to explore for gold on properties owed
by Tahera Resources Ltd.. Mr Gutnick, our President, was Executive Chairman of
Tahera and his family company, Edensor Nominees, who are our controlling
stockholder, was a shareholder of Tahera. During fiscal 2002, Tahera incurred
certain exploration and administration costs in Canada on our behalf amounting
to A$36,365 and this amount was owing to Tahera at June 30, 2002. During fiscal
2003, Tahera incurred further exploration and administration costs in Canada on
our behalf amounting to A$65,314. During fiscal 2003, Mr. J.I. Gutnick and
Chevas paid Tahera A$47,368 and A$53,350 respectively on our behalf. During
fiscal 2002 and 2003, Tahera did not charge us interest on amounts outstanding.
At June 30, 2003, we owed Tahera A$1,361 (US$900) and Mr. J.I. Gutnick A$47,368
(US$31,594). During fiscal 2004 we paid Mr J I Gutnick the amount in full and
Tahera advised the Company in writing that there was no monies owing to it by
the Company.
Quantum Resources Limited incurred certain costs on our behalf amounting to
A$43,941 (US$29,308) in respect to our activities in Tibet China in late 2002 as
a result of Quantum's contacts in China. This amount was outstanding at June 30,
2003. During fiscal 2004, we repaid the principal in full.
Kerisridge Pty Ltd, a company associated with our President, Mr J I Gutnick,
loaned us A$2,273,186 in March 2004 for the purpose of repaying our long term
debt. On March 31, 2004, Kerisridge agreed to convert all of the debt we owed to
it into common stock and warrants in us. We issued 1,753,984 shares of common
stock and 1,753,984 warrants exercisable at US$1.30 and at any time up to March
31, 2006 in full repayment of the amount owing to Kerisridge.
TRANSACTIONS WITH MANAGEMENT.
We have a policy that we will not enter into any transaction with an Officer,
Director or affiliate of Bay Resources or any member of their families unless
the transaction is approved by the Audit Committee and the Audit Committee
determines that the terms of the transaction are no less favorable to us than
the terms available from non-affiliated third parties or are otherwise deemed to
be fair to us at the time authorized.
-15-
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK FROM 25,000,000 TO 50,000,000 SHARES
INTRODUCTION
Our Certificate of Incorporation currently authorizes the issuance of
twenty-five million (25,000,000) shares of common stock, par value $0.0001 per
share. In October, 2004, the Board of Directors adopted a resolution proposing
that our Certificate of Incorporation be amended to increase the authorized
number of shares of common stock to fifty million (50,000,000), subject to
stockholder approval of the amendment.
CURRENT USE OF SHARES
We currently have on issue 16,714,130 shares of common stock and 3,423,984
warrants exercisable into 3,423,984 shares of common stock, leaving 4,861,886
shares of common stock available for future issuance. In addition, we propose to
issue 1,600,000 options under the 2004 Share Option Plan. We will continue to
require additional shares of common stock for the purposes discussed below and
accordingly, we propose to increase the authorized number of shares we can issue
to 50 million shares of common stock, par value US$0.0001 per common share.
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has adopted resolutions setting forth (i) the proposed
amendment to Article VIII of the Company's Certificate of Incorporation; (ii)
the advisability of the amendment; and (iii) a call for submission of the
amendment for approval by the Company's stockholders at the annual meeting.
The following is the text of Article VIII of the Certificate of Incorporation of
the Company, as proposed to be amended:
"VIII. The corporation shall be authorized to issue a total of fifty
million (50,000,000) shares of common stock, par value $.0001 per
share."
COMMON STOCK
The shares of common stock shall be alike and equal in all respects and shall
have one vote for each share. Dividends payable in cash or in any other medium
may be declared by the Board of Directors and paid on the shares of common
stock. In the event of voluntary or involuntary liquidation, dissolution,
distribution of assets or winding-up of the Corporation, the holders of the
common stock shall be entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to shareholders ratably
in proportion to number of shares of common stock held by them respectively.
-16-
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that the availability of additional authorized
but unissued shares will provide the Company with the flexibility to issue
common stock for a variety of corporate purposes, such as to raise capital, make
acquisitions, effect future stock splits and stock dividends and to adopt
additional employee benefit plans or to reserve additional shares for issuance
under such plans.
Other than as described above, the Board of Directors has no immediate plans,
understanding, agreements or commitments to issue additional common stock for
any purposes. No additional action or authorization by the Company's
stockholders would be necessary prior to the issuance of such additional shares,
unless required by applicable law or the rules of any stock exchange or national
securities association trading system on which the common stock is then listed
or quoted. The Company reserves the right to seek a further increase in
authorized shares from time to time in the future as considered appropriate by
the Board of Directors.
Under the Company's Certificate of Incorporation, the Company's stockholders do
not have preemptive rights with respect to common stock. Thus, should the Board
of Directors elect to issue additional shares of common stock, existing
stockholders would not have any preferential rights to purchase such shares. In
addition, if the Board of Directors elects to issue additional shares of common
stock, such issuance could have a dilutive effect on the earnings per share,
voting power and shareholdings of current stockholders.
The issuance of the additional shares of common stock could have the effect of
diluting earnings per share and book value per share, which could adversely
affect the Company's existing stockholders. Issuing additional shares of common
stock may also have the effect of delaying or preventing a change of control of
the Company. The Company's authorized but unissued common stock could be issued
in one or more transactions that would make it more difficult or costly, and
less likely, a takeover of the Company. The proposed amendment to the
Certificate of Incorporation is not being recommended in response to any
specific effort of which the Company is aware to obtain control of the Company,
and the Board of Directors has no present intention to use the additional shares
of common stock in order to impede a takeover attempt.
If the proposed amendment is adopted, it will become effective upon filing of a
Certificate of Amendment to the Company's Certificate of Incorporation with the
Delaware Secretary of State. However, if the Company's stockholders approve the
proposed amendment to the company's Certificate of Incorporation, the Board
retains discretion under Delaware law not to implement the proposed amendment.
If the Board exercised such discretion, the number of authorized shares would
remain at current levels.
VOTE NECESSARY TO APPROVE THE AMENDMENT
The affirmative vote of the holders of a majority of the outstanding shares of
common stock entitled to vote at the annual meeting, assuming a quorum is
present, is necessary for approval of the amendment.
Recommendation of the Board
-17-
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM TWENTY-FIVE MILLION (25,000,000) TO FIFTY MILLION
(50,000,000).
PROPOSAL 3
APPROVAL OF THE 2004 SHARE OPTION PLAN
REASONS FOR THE 2004 PLAN
Effective October 15, 2004, our Board of Directors unanimously adopted the 2004
Bay Resources Ltd Share Option Plan (the "2004 Plan"), subject to stockholder
approval at the Annual Meeting.
The Board believes it is critical for Bay Resources' continued success to be
able to offer employees, officers, directors and consultants of outstanding
ability, who are eligible to participate in the 2004 Plan, equity interests in
Bay Resources parallel to that of Bay Resources' stockholders. Our board of
directors strongly prefers stock incentives over cash bonus payments as ways to
attract and retain our key personnel. We can use the cash for other purposes and
can also further align the interests of management with our stockholders as we
continue to meet our goals of increasing shareholder value by improving our
performance and increasing our profitability.
The following summary of the 2004 Plan is qualified in its entirety by the full
text of the 2004 Plan, a copy of which is attached hereto as Annex B.
GENERAL
The 2004 Plan provides for the granting of options.
The maximum number of shares available for awards is 10% of the issued and
outstanding shares of common stock on issue at any time. If an option expires or
is cancelled without having been fully exercised or vested, the remaining shares
will generally be available for grants of other awards.
On November 16, 2004, the last sales price of our common stock, as reported by
the OTC-Bulletin Board, was US$7.00.
ADMINISTRATION
The 2004 Plan will be administered by the Remuneration Committee of the Board
comprised solely of directors who are not employees or consultants to Bay
Resources or any of its affiliated entities.
ELIGIBILITY
Any employee, director, officer, consultant of or to Bay Resources or an
affiliated entity (including a company that becomes an affiliated entity after
the adoption of the 2004 Plan) is eligible to participate in the 2004 Plan if
the Committee, in its sole discretion, determines that such person has
contributed significantly or can be expected to contribute significantly to the
success of Bay Resources or an affiliated entity. As of October 15, 2004,
approximately four employees or consultants and our four non-employee directors
would be eligible to participate in the 2004 Plan. During any one year period,
no participant is eligible to be granted options to purchase more than 5% shares
of our issued and outstanding common stock or if they provide investor relations
activities, or are a consultant to the Company, 2% of the issued and outstanding
shares of common stock in any 12 month period.
-18-
TERM, PRICE AND METHOD OF PAYMENT FOR STOCK UNDERLYING OPTIONS
Options granted under the 2004 Plan are to purchase Bay Resources common stock.
The term of each option will be fixed by the Remuneration Committee, but no
option will be exercisable more than 10 years after the date of grant. The
option exercise price is fixed by the Remuneration Committee at the time the
option is granted. The exercise price must be paid in cash.
Options granted to participants vest and have a term of 10 years.
NON-TRANSFERABILITY/ASSIGNABILITY
No award is transferable, or assignable by the participant except upon his or
her death.
AMENDMENT
The Board may amend the 2004 Plan, except that no amendment may adversely affect
the rights of a participant without the participant's consent or be made without
stockholder approval if such approval is necessary to qualify for or comply with
any applicable law, rule or regulation the Board deems necessary or desirable to
qualify for or comply with.
TERMINATION
Subject to earlier termination by the Board, the 2004 Plan has an indefinite
term except that no ISO may be granted following the tenth anniversary of the
date the 2004 Plan is approved by stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general and brief summary of the federal income tax treatment
of stock options granted under the 2004 Plan. This discussion is not complete
and its application may vary in particular circumstances or as a result of
changes in federal income tax laws and regulations.
A participant generally will not incur any U.S. federal income tax liability
as a result of the grant of an option.
A participant will recognize ordinary income for federal income tax purposes
when the participant exercises an option. The amount of income recognized upon
exercise of an option is the fair market value of the shares of common stock
acquired upon exercise (determined as of the date of exercise) reduced by the
amount the participant paid for the shares. The participant's tax basis in the
shares will equal the fair market value of the shares on the date of exercise
and the participant's holding period will begin on the date after the date of
exercise. Any gain or loss upon sale of the shares will be treated as a capital
gain or loss. The capital gain or loss will generally be treated as long-term
gain or loss if the shares are held for more than one year.
-19-
The Company is generally entitled to a business expense deduction on its federal
income tax return with respect to stock options in the same amount and at the
same time that participant recognizes ordinary income with respect to the stock
option. Amounts treated as capital gain to the participant are not deductible by
the Company.
PLANNED GRANTS
Options to purchase the following shares of common stock have been
issued as follows:-
NAME QUANTITY EXERCISE PRICE
J. I. Gutnick 500,000 US$1.00
P.J. Lee 250,000 US$1.00
D S Tyrwhitt 50,000 US$1.00
P L Ehrlich 50,000 US$1.00
P. Althaus 750,000 US$1.00
C. Alford 150,000 US$1.00
None of the proposed recipients have received any stock options or other equity
based forms of compensation from us for at least the last three years.
Other than the issue of these Options, there are no other current plans or
arrangements to grant any options under the 2004 Plan.
REQUIRED VOTE
The approval of the 2004 Plan requires the affirmative vote of a majority of the
votes cast at the Meeting on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE 2004 PLAN.
-20-
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF STOCKHOLDER
PROPOSALS AND NOMINATIONS OF DIRECTORS
Stockholder proposals that are intended to be included in our proxy statement
for our 2005 Annual Meeting pursuant to Proxy Rule 14a-8 must be received by us
no later than July 2, 2005, and must otherwise comply with that rule.
-21-
OTHER MATTERS
We know no other matters to be submitted to the Annual Meeting. If any other
matters properly come before the Annual Meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent as
the Board of Directors recommends.
By order of the Board of Directors,
/s/ Peter J. Lee
----------------
Peter J. Lee
Secretary
November 16, 2004
-22-
ANNEX A
BAY RESOURCES LTD
AUDIT COMMITTEE CHARTER
TERMS OF REFERENCE
1. OBJECTIVE:
To assist the Board of Directors in (i) fulfilling its responsibilities
relating to accounting and reporting practices of Bay Resources Ltd; (ii)
improving the quality of internal reporting; and (iii) monitoring,
examining and where appropriate recommending action in relation to the
Company's risk management including such areas as insurance and the use of
derivatives.
2. REPRESENTATION
To ensure compliance with the proposed Bulletin Board Exchange corporate
governance rules, at least one of the Directors on the Committee must be
independent.
3. QUORUM
The quorum for a meeting of the Audit Committee shall be two Directors, one
of which must be an independent Director.
4. FREQUENCY AND CONDUCT OF MEETINGS
The Committee will hold at least two regular meetings per year, and such
additional meetings as the Chairman shall decide in order to fulfill its
duties. The Secretary or other appropriate executive will act as Secretary
of the Committee and shall be responsible, in conjunction with the
Chairman, for drawing up the agenda and circulating it, supported by
explanatory documentation to Committee members prior to each meeting.
The Committee shall conduct its proceedings in the manner set out for the
Board in the By-Laws except as provided in these Terms of Reference.
The Secretary will also be responsible for keeping the minutes of meeting
of the Committee, and circulating them to Committee members and to the
other members of the Board of Directors.
5. ACCESS:
The Committee shall have unlimited access to the external auditors and to
senior management of the Company. The Committee shall also have the ability
to consult independent experts where they consider it necessary to carry
out their duties.
-23-
6. DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Audit Committee should be read in
conjunction with the objective set out in 1 above and are as follows:
o Discuss the audit plan of the external auditors and evaluate the
effectiveness of the annual audit.
o Decide and implement any internal investigations thought appropriate,
including internal audit.
o Monitor the adequacy and effectiveness of the Company's administrative,
operating and accounting policies.
o Monitor the adequacy of the Company's internal control system.
o Review the Form 10-K and 10-Q financial statements where applicable and
recommend acceptance to the Board of Directors.
o Recommend to the Board of Directors the appointment of the external
auditors.
o Review proposed audit fees and make recommendations to the Board of
Directors.
o Determine that no management restrictions are being placed upon the
external auditors.
o Review any regulatory reports submitted to the Company and monitor
management's response to them.
o Require reports from management and external auditors on any significant
proposed regulatory, accounting or reporting issue and to assess the
potential impact upon the Company's financial reporting process.
o Review and approve all significant accounting policy changes.
o Receive and consider the external auditor's management letter(s) in
relation to their audit of the Company's accounts.
o Assessing the performance of financial management.
o Review of risk management practices including use of derivatives, insurance
coverage and environmental matters that may have a material impact on
financial results.
o Review all related party transactions to ensure they are at arms length and
in the best interests of the Company.
-24-
ANNEX B
BAY RESOURCES LTD 2004
INCENTIVE STOCK PLAN
-25-
BAY RESOURCES LTD
(THE "COMPANY")
2004 SHARE OPTION PLAN
DATED FOR REFERENCE OCTOBER 15, 2004.
ARTICLE 1
PURPOSE AND INTERPRETATION
PURPOSE
1.1 The purpose of this Plan is to advance the interests of the Company by
encouraging equity participation in the Company through the acquisition
of Common Shares of the Company. It is the intention of the Company
that this Plan will at all times be in compliance with the laws
applicable to the Company.
DEFINITIONS
1.2 In this Plan
AFFILIATE means a company that is a parent or subsidiary of the
Company, or that is controlled by the same entity as the Company;
ASSOCIATE has the meaning assigned by law;
BOARD means the board of directors of the Company or any committee
thereof duly empowered or authorized to grant Options under this Plan;
CHANGE OF CONTROL includes situations where after giving effect to the
contemplated transaction or series of transactions and as a result of
such transaction or series of transactions:
(i) any one Person holds a sufficient number of voting shares
of the Company or resulting company to affect materially the
control of the Company or resulting company, or,
(ii) any combination of Persons, acting in concert by virtue
of an agreement, arrangement, commitment or understanding,
hold in total a sufficient number of voting shares of the
Company or its successor to affect materially the control of
the Company or its successor,
where such Person or combination of Persons did not previously hold a
sufficient number of voting shares to affect materially control of the
Company or its successor. In the absence of evidence to the contrary,
any Person or combination of Persons acting in concert by virtue of an
agreement, arrangement, commitment or understanding, holding more than
20% of the voting shares of the Company or its successor is deemed to
materially affect the control of the Company or its successor;
A Change of Control will also include a situation whereby individuals
who, as of the date of this Plan, constitute the Board of Directors of
the Company (or similar body elected to manage the affairs of the
Company) cease for any reason to constitute at least a majority of the
Board of Directors (or similar body) as constituted from time to time;
or the sale or other disposition of all or substantially all of the
assets of the Company or any subsidiary in one transaction or series of
related transactions,
-26-
COMMON SHARES means common shares in the capital of the Company means
the company named at the top hereof and includes, unless the context
otherwise requires, all of its Affiliates and successors according to
law;
CONSULTANT means an individual or Consultant Company, other than an
Employee, Officer or Director that:
(i) provides on an ongoing bona fide basis, consulting,
technical, managerial or like services to the Company or an
Affiliate of the Company, other than services provided in
relation to a Distribution;
(ii) provides the services under a written contract between
the Company or an Affiliate and the individual or the
Consultant Company;
(iii) in the reasonable opinion of the Company, spends or will
spend a significant amount of time and attention on the
business and affairs of the Company or an Affiliate of the
Company; and
(iv) has a relationship with the Company or an Affiliate of
the Company that enables the individual or Consultant Company
to be knowledgeable about the business and affairs of the
Company;
CONSULTANT COMPANY means for an individual consultant, a company or
partnership of which the individual is an employee, shareholder or
partner;
DIRECTORS means the directors of the Company as may be elected from
time to time;
DISINTERESTED SHAREHOLDER APPROVAL means approval by a majority of the
votes cast by all the Company's shareholders at a duly constituted
shareholders' meeting or pursuant to an action by written consent,
excluding votes attached to Common Shares beneficially owned by Service
Providers or their Associates;
DISTRIBUTION has the meaning assigned by the Canadian Securities Act,
and generally refers to a distribution of securities by the Company
from treasury;
EFFECTIVE DATE for an Option means the date of grant thereof
by the Board;
EMPLOYEE means:
(a) an individual who is considered an employee under the
Canadian Income Tax Act (i.e. for whom income tax, employment
insurance and CPP deductions must be made at source);
(b) an individual who works full-time for the Company or a
subsidiary thereof providing services normally provided by an
employee and who is subject to the same control and direction
by the Company over the details and methods of work as an
employee of the Company, but for whom income tax deductions
are not made at source; or
(c) an individual who works for the Company or its subsidiary
on a continuing and regular basis for a minimum amount of time
per week providing services normally provided by an employee
and who is subject to the same control and direction by the
Company over the details and methods of work as an employee of
the Company, but for whom income tax deductions need not be
made at source;
-27-
EXERCISE PRICE means the amount payable per Common Share on the
exercise of an Option, as determined in accordance with the terms
hereof;
EXPIRY DATE means the day on which an Option lapses as specified in the
Option Commitment therefor or in accordance with the terms of this
Plan;
INSIDER means an insider as defined in the TSX Venture Policies or as
defined in securities legislation applicable to the Company;
INVESTOR RELATIONS ACTIVITIES has the meaning assigned by Policy 1.1 of
the TSX Venture Policies, and means generally any activities or
communications that can reasonably be seen to be intended to or be
primarily intended to promote the merits or awareness of or the
purchase or sale of securities of the Company;
MANAGEMENT COMPANY EMPLOYEE means a Person employed by another Person
or a corporation providing management services to the Company which are
required for the ongoing successful operation of the business
enterprise of the Company, but excluding a Person engaged primarily in
Investor Relations Activities;
OFFICER means a Board appointed officer of the Company;
OPTION means the right to purchase Common Shares granted hereunder
to a Service Provider;
OPTION COMMITMENT means the notice of grant of an Option delivered by
the Company hereunder to a Service Provider and substantially in the
form of Schedule A hereto;
OPTIONED SHARES means Common Shares that may be issued in the future to
a Service Provider upon the exercise of an Option;
OPTIONEE means the recipient of an Option hereunder;
OUTSTANDING SHARES means at the relevant time, the number of issued and
outstanding Common Shares of the Company from time to time;
PARTICIPANT means a Service Provider that becomes an Optionee;
PERSON means a company, any unincorporated entity, or an individual;
PLAN means this share option plan, the terms of which are set out
herein or as may be amended;
PLAN SHARES means the total number of Common Shares which may be
reserved for issuance as Optioned Shares under the Plan as provided in
ss.2.2;
REGULATORY APPROVAL means the approval of and any securities regulatory
authority that may have lawful jurisdiction over the Plan and any
Options issued hereunder;
SERVICE PROVIDER means a Person who is a bona fide Director, Officer,
Employee, Management Company Employee, Consultant or Company
Consultant, and also includes a company, of which 100% of the share
capital is beneficially owned by one or more Service Providers;
SHARE COMPENSATION ARRANGEMENT means any Option under this Plan but
also includes any other stock option, stock option plan, employee stock
purchase plan or any other compensation or incentive mechanism
involving the issuance or potential issuance of Common Shares to a
Service Provider;
SHAREHOLDER APPROVAL means approval by a majority of the votes cast by
eligible shareholders of the Company at a duly constituted
shareholders' meeting or pursuant to an action by written consent;
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GENDER
1.3 Words importing the masculine gender include the feminine or neuter,
words in the singular include the plural, words importing a corporate
entity include individuals, and vice versa.
ARTICLE 2
SHARE OPTION PLAN
ESTABLISHMENT OF SHARE OPTION PLAN
2.1 The Plan is hereby established to recognize contributions made by
Service Providers and to create an incentive for their continuing
assistance to the Company and its Affiliates.
MAXIMUM PLAN SHARES
2.2 The maximum aggregate number of Plan Shares that may be reserved for
issuance under the Plan at any point in time is 10% of the Outstanding
Shares at the time Plan Shares are reserved for issuance as a result of
the grant of an Option, less any Common Shares reserved for issuance
under share options granted under Share Compensation Arrangements other
than this Plan .
ELIGIBILITY
2.3 Options to purchase Common Shares may be granted hereunder to Service
Providers from time to time by the Board. Service Providers that are
not individuals will be required to undertake in writing not to effect
or permit any transfer of ownership or option of any of its securities,
nor issue more of its securities (so as to indirectly transfer the
benefits of an Option), as long as such Option remains outstanding,
unless the written permission of the Company is obtained.
OPTIONS GRANTED UNDER THE PLAN
2.4 All Options granted under the Plan will be evidenced by an Option
Commitment in the form attached as Schedule A, showing the number of
Optioned Shares, the term of the Option, a reference to vesting terms,
if any, and the Exercise Price.
2.5 Subject to specific variations approved by the Board, all
terms and conditions set out herein will be deemed to be
incorporated into and form part of an Option Commitment made hereunder.
LIMITATIONS ON ISSUE
2.6 Subject to ss.2.9, the following restrictions on issuances of Options
are applicable under the Plan:
no Service Provider can be granted an Option if that Option would
result in the total number of Options, together with all other Share
Compensation Arrangements granted to such Service Provider in the
previous 12 months, exceeding 5% of the Outstanding Shares;
no Options can be granted under the Plan if the Company is inactive;
the aggregate number of Options granted to Service Providers conducting
Investor Relations Activities in any 12-month period must not exceed 2%
of the Outstanding Shares, calculated at the time of grant; and
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the aggregate number of options granted to any one Consultant in any
12-month period must not exceed 2% of the Outstanding Shares,
calculated at the time of grant.
OPTIONS NOT EXERCISED
2.7 In the event an Option granted under the Plan expires unexercised or is
terminated by reason of dismissal of the Optionee for cause or is
otherwise lawfully cancelled prior to exercise of the Option, the
Optioned Shares that were issuable thereunder will be returned to the
Plan and will be eligible for re-issue.
POWERS OF THE BOARD
2.8 The Board will be responsible for the general administration
of the Plan and the proper execution of its provisions, the
interpretation of the Plan and the determination of all questions
arising hereunder. Without limiting the generality of the
foregoing, the Board has the power to
(a) allot Common Shares for issuance in connection with the exercise
of Options;
(b) grant Options hereunder;
(c) amend, suspend, terminate or discontinue the Plan, or revoke or
alter any action taken in connection therewith, except that no
general amendment or suspension of the Plan will, without the
prior written consent of all Optionees, alter or impair any
Option previously granted under the Plan;
(d) delegate all or such portion of its powers hereunder as it may
determine to one or more committees of the Board, either
indefinitely or for such period of time as it may specify, and
thereafter each such committee may exercise the powers and
discharge the duties of the Board in respect of the Plan so
delegated to the same extent as the Board is hereby authorized so
to do; and (e) may in its sole discretion amend this Plan (except
for previously granted and outstanding Options) to reduce the
benefits that may be granted to Service Providers (before a
particular Option is granted) subject to the other terms hereof.
TERMS OR AMENDMENTS REQUIRING DISINTERESTED SHAREHOLDER APPROVAL
2.9 The Company will be required to obtain Disinterested Shareholder
Approval prior to any of the following actions becoming
effective:
(a) the Plan, together with all of the Company's previous Share
Compensation Management, could result at any time in:
(i) the aggregate number of Common Shares reserved for issuance
under Options granted to Insiders exceeding 10% of the
Outstanding Shares in the event that this Plan is amended to
reserve for issuance more than 10% of the Outstanding
Shares;
(ii) the number of Optioned Shares issued to Insiders within a
one-year period exceeding 10% of the Outstanding Shares in
the event that this Plan is amended to reserve for issuance
more than 10% of the Outstanding Shares; or, (b) any
reduction in the Exercise Price of an Option previously
granted to an Insider.
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ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
EXERCISE PRICE
3.1 The Exercise Price of an Option will be set by the Board at the time
such Option is allocated under the Plan.
TERM OF OPTION
3.2 An Option can be exercisable for a maximum of 10 years
from the Effective Date.
OPTION AMENDMENT
3.3 Subject to ss.2.9(b), the Exercise Price of an Option may be amended
only if at least six (6) months have elapsed since the later of the
date of commencement of the term of the Option, or the date of the last
amendment of the Exercise Price.
3.4 An Option must be outstanding for at least one year before the
Company may extend its term, subject to the limits contained
in ss.3.2.
3.5 Any proposed amendment to the terms of an Option must be approved
by the Board prior to the exercise of such Option.
VESTING OF OPTIONS
3.6 Subject to ss.3.7 and 3.8, vesting of Options is otherwise at the
discretion of the Board, and will generally be subject to:
(a) the Service Provider remaining employed by or continuing to
provide services to the Company or any of its Affiliates as well
as, at the discretion of the Board, achieving certain milestones
which may be defined by the Board from time to time or receiving
a satisfactory performance review by the Company or any of its
Affiliates during the vesting period; or
(b) remaining as a Director of the Company or any of its Affiliates
during the vesting period.
VESTING OF OPTIONS GRANTED FOR INVESTOR RELATIONS ACTIVITIES
3.7 Notwithstanding ss.3.6 and 3.8, Options granted to Consultants
conducting Investor Relations Activities will vest:
(a) over a period of not less than 12 months as to 25% on the date
that is three months from the date of grant, and a further 25% on
each successive date that is three months from the date of the
previous vesting; or
(b) such longer vesting period as the Board may determine.
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CHANGE OF CONTROL
3.8 Notwithstanding ss.3.6, in the case of a Change of Control all
options then outstanding will immediately vest for the purpose
of such transaction.
OPTIONEE CEASING TO BE DIRECTOR, EMPLOYEE OR SERVICE PROVIDER
3.9 No Option may be exercised after the Service Provider has left the
employ/office or has been advised his services are no longer required
or his service contract has expired, except as follows:
(a) in the case of the death of an Optionee, any vested Option held
by him at the date of death will become exercisable by the
Optionee's lawful personal representatives, heirs or executors
until the earlier of one year after the date of death of such
Optionee and the date of expiration of the term otherwise
applicable to such Option;
(b) Options granted to a Service Provider conducting Investor
Relations Activities will expire within 30 days of the date the
Optionee ceases to conduct such activities, but only to the
extent that such Optionee was vested in the Option at the date
the Optionee ceased to conduct such activities,
(c) Options granted to an Optionee other than one conducting Investor
Relations Activities will expire within 90 days after the
Optionee ceases to be employed with or provide services to the
Company, but only to the extent that such Optionee was vested in
the Option at the date the Optionee ceased to be so employed or
to provide services to the Company; and
(d) in the case of an Optionee being dismissed from employment or
service for cause, such Optionee's Options, whether or not vested
at the date of dismissal will immediately terminate without right
to exercise same.
NON ASSIGNABLE
3.10 Subject to ss.3.9, all Options will be exercisable only by the
Optionee to whom they are granted and will not be assignable or
transferable.
ADJUSTMENT OF THE NUMBER OF OPTIONED SHARES
3.11 The number of Common Shares subject to an Option will be subject
to adjustment in the events and in the manner following:
(a) in the event of a subdivision of Common Shares as constituted on
the date hereof, at any time while an Option is in effect, into a
greater number of Common Shares, the Company will thereafter
deliver at the time of purchase of Optioned Shares hereunder, in
addition to the number of Optioned Shares in respect of which the
right to purchase is then being exercised, such additional number
of Common Shares as result from the subdivision without an
Optionee making any additional payment or giving any other
consideration therefor;
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(b) in the event of a consolidation of the Common Shares as
constituted on the date hereof, at any time while an Option is in
effect, into a lesser number of Common Shares, the Company will
thereafter deliver and an Optionee will accept, at the time of
purchase of Optioned Shares hereunder, in lieu of the number of
Optioned Shares in respect of which the right to purchase is then
being exercised, the lesser number of Common Shares as result
from the consolidation;
(c) in the event of any change of the Common Shares as constituted on
the date hereof, at any time while an Option is in effect, the
Company will thereafter deliver at the time of purchase of
Optioned Shares hereunder the number of shares of the appropriate
class resulting from the said change as an Optionee would have
been entitled to receive in respect of the number of Common
Shares so purchased had the right to purchase been exercised
before such change;
(d) in the event of a capital reorganization, reclassification or
change of outstanding equity shares (other than a change in the
par value thereof) of the Company, a consolidation, merger or
amalgamation of the Company with or into any other company or a
sale of the property of the Company as or substantially as an
entirety at any time while an Option is in effect, an Optionee
will thereafter have the right to purchase and receive, in lieu
of the Optioned Shares immediately theretofore purchasable and
receivable upon the exercise of the Option, the kind and amount
of shares and other securities and property receivable upon such
capital reorganization, reclassification, change, consolidation,
merger, amalgamation or sale which the holder of a number of
Common Shares equal to the number of Optioned Shares immediately
theretofore purchasable and receivable upon the exercise of the
Option would have received as a result thereof. The subdivision
or consolidation of Common Shares at any time outstanding
(whether with or without par value) will not be deemed to be a
capital reorganization or a reclassification of the capital of
the Company for the purposes of this ss.3.11;
(e) an adjustment will take effect at the time of the event giving
rise to the adjustment, and the adjustments provided for in this
Section are cumulative;
(f) the Company will not be required to issue fractional shares in
satisfaction of its obligations hereunder. Any fractional
interest in a Common Share that would, except for the provisions
of this ss.3.11, be deliverable upon the exercise of an Option
will be cancelled and not be deliverable by the Company; and
(g) if any questions arise at any time with respect to the Exercise
Price or number of Optioned Shares deliverable upon exercise of
an Option in any of the events set out in this ss.3.11, such
questions will be conclusively determined by the Company's
auditors, or, if they decline to so act, any other firm of
Chartered Accountants, in Vancouver, British Columbia (or in the
city of the Company's principal executive office) that the
Company may designate and who will have access to all appropriate
records and such determination will be binding upon the Company
and all Optionees.
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ARTICLE 4
COMMITMENT AND EXERCISE PROCEDURES
OPTION COMMITMENT
4.1 Upon grant of an Option hereunder, an authorized officer of the Company
will deliver to the Optionee an Option Commitment detailing the terms
of such Options and upon such delivery the Optionee will be subject to
the Plan and have the right to purchase the Optioned Shares at the
Exercise Price set out therein subject to the terms and conditions
hereof.
MANNER OF EXERCISE
4.2 An Optionee who wishes to exercise his Option may do so by delivering
(a) a written notice to the Company specifying the number of Optioned
Shares being acquired pursuant to the Option; and
(b) cash or a certified cheque payable to the Company for the
aggregate Exercise Price for the Optioned Shares being acquired.
DELIVERY OF CERTIFICATE AND HOLD PERIODS
4.3 As soon as practicable after receipt of the notice of exercise
described in ss.4.2 and payment in full for the Optioned Shares being
acquired, the Company will direct its transfer agent to issue a
certificate to the Optionee for the appropriate number of Optioned
Shares. Such certificate issued will bear a legend stipulating any
resale restrictions required under applicable securities laws.
ARTICLE 5
GENERAL
EMPLOYMENT AND SERVICES
5.1 Nothing contained in the Plan will confer upon or imply in favour of
any Optionee any right with respect to office, employment or provision
of services with the Company, or interfere in any way with the right of
the Company to lawfully terminate the Optionee's office, employment or
service at any time pursuant to the arrangements pertaining to same.
Participation in the Plan by an Optionee will be voluntary.
NO REPRESENTATION OR WARRANTY
5.2 The Company makes no representation or warranty as to the future market
value of Common Shares issued in accordance with the provisions of the
Plan or to the effect of the INCOME TAX ACT IN EITHER THE COUNTRY OF
WHICH THE OPTIONEE IS A RESIDENT OR THE COUNTRY IN WHICH THE COMPANY IS
RESIDENT or any other taxing statute governing the Options or the
Common shares issuable thereunder or the tax consequences to a Service
Provider. Compliance with applicable securities laws as to the
disclosure and resale obligations of each Participant is the
responsibility of such Participant and not the Company.
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INTERPRETATION
5.3 The Plan will be governed and construed in accordance with the
laws of the State of Delaware.
AMENDMENT OF THE PLAN
5.4 The Board reserves the right, in its absolute discretion, at any time
to amend, modify or terminate the Plan with respect to all Common
Shares in respect of Options which have not yet been granted hereunder.
Any amendment to any provision of the Plan will be subject to any
necessary Regulatory Approvals unless the effect of such amendment is
intended to reduce (but not to increase) the benefits of this Plan to
Service Providers or unless the amendment is merely cosmetic in nature
and will not negatively affect the holders of Common Shares of the
Company.
CONTINUATION OF PLAN
5.5 The Plan will become effective from and after October 15, 2004,
and will remain effective for a period of 10 years.
TAX WITHHOLDING
5.6 An Option holder shall, upon notification of the amount due and prior
to or concurrently with delivery to such holder of a certificate
representing such Common Shares, pay promptly any amount necessary to
satisfy applicable federal, state, local or other tax requirements.
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SCHEDULE A
SHARE OPTION PLAN
OPTION COMMITMENT
Notice is hereby given that, effective this ________ day of ________________,
__________ (the "Effective Date") Bay Resources Ltd (the "Company") has granted
to ___________________________________________ (the "Service Provider") , an
Option to acquire ______________ Common Shares ("Optioned Shares") up to 5:00
p.m. Melbourne Australia Time on the __________ day of ____________________,
__________ (the "Expiry Date") at a Exercise Price of US$____________ per share.
Optioned Shares will vest and may be exercised as follows:
____________ In accordance with the vesting provisions set out in Schedule B of
the Plan
or
____________ As follows:
The grant of the Option evidenced hereby is made subject to the terms and
conditions of the Company's Plan, the terms and conditions of which are hereby
incorporated herein.
To exercise your Option, deliver a written notice specifying the number of
Optioned Shares you wish to acquire, together with cash or a certified cheque
payable to the Company for the aggregate Exercise Price, to the Company. A
certificate for the Optioned Shares so acquired will be issued by the transfer
agent as soon as practicable thereafter and will bear a non-transferability
legend from the date of this Option Commitment, if required by law or any
applicable stock exchange. The Company and the Service Provider represent that
the Service Provider under the terms and conditions of the Plan is a bona fide
Service Provider of the Company, entitled to receive Options under applicable
laws..
BAY RESOURCES LTD
---------------------------------------
Authorized Signatory
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SCHEDULE B
SHARE OPTION PLAN
VESTING SCHEDULE
1. Options granted pursuant to the Plan to Directors, Officers and all
Employees and Consultants employed or retained by the Company for a period
of more than six months at the time the Option is granted will vest as
follows: (a) 1/3 of the total number of Options granted will vest six
months after the date of grant; (b) a further 1/3 of the total number of
Options granted will vest one year after the date of grant; and (c) the
remaining 1/3 of the total number of Options granted will vest eighteen
months after the date of grant. 2. Options granted pursuant to the Plan to
an Employee or a Consultant who has been employed or retained by the
Company for a period of less than six months at the time the Option is
granted will vest as follows:
(a) 1/3 of the total number of Options granted will vest one year after
the date of grant;
(b) a further 1/3 of the total number of Options granted will vest
eighteen months after the date of grant; and
(c) the remaining 1/3 of the total number of Options granted will vest two
years after the date of grant.
3. Options granted to Consultants retained by the Company pursuant to a short
term contract or for a specific project with a finite term, will be subject
to such vesting provisions determined by the Board of Directors of the
Company at the time the Option Commitment is made.
4. Options granted to Service Providers involved in Investor Relations
Activities shall vest in accordance with Section 3.7 of the Plan.
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BAY RESOURCES LTD
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
-------------------------------------------------------------------------------
PROXY
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
Please mark
your VOTES
like this
|X|
FOR AGAINST ABSTAIN
1. To elect four directors:
Joseph Isaac Gutnick [ ] [ ] [ ]
David Stuart Tyrwhitt [ ] [ ] [ ]
Peter James Lee [ ] [ ] [ ]
Paul Lawrence Ehrlich [ ] [ ] [ ]
2. Proposal To Approve Amendment Of Certificate Of
Incorporation To Increase The Number Of Authorized Shares [ ] [ ] [ ]
Of Common Stock
3. Proposal To Approve The 2004 Incentive Stock Plan. [ ] [ ] [ ]
4. To Transact Such Other Business As May Properly Come [ ] [ ] [ ]
Before The Meeting Or Any Adjournment.
Company Id:
Proxy Number:
Account Number:
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Signature ______________________________ Signature ____________________________
Date_____________
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership
Bay Resources Ltd
2004 ANNUAL MEETING OF STOCKHOLDERS
(Thursday January 27, 2005 at 3:00 p.m.)
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
-------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BAY RESOURCES LTD
The undersigned appoints Joseph I. Gutnick and Peter Lee, and each of them, as
proxies, each with the power to appoint his substitute, and authorizes each of
them to represent and to vote, as designated on the reverse hereof, all of the
shares of common stock of Bay Resources Ltd held of record by the undersigned at
the close of business on December 15, 2004 at the 2004 Annual Meeting of
Stockholders of Bay Resources Ltd to be held on January 27, 2005 or at any
adjournment thereof.
The Board unanimously recommends that stockholders vote FOR each director
nominee and proposals 2, 3 and 4.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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