James Bay Resources Announces Closing of Second Tranche of Offering - Seite 2

Upon completion of the final tranche of the Ongoing Financing, the Company will also concurrently sell and assign, pursuant to separate agreements with each Holder, a pro rata (based on all the Holders) entitlement for up to an aggregate of 30% of the net proceeds of the Litigation, if any (whether as a result of final judgement by a court of competent jurisdiction or settlement for which no appeal or further proceeding may be taken (the "Final Award")), after deduction of all related costs and taxes incurred by the Company in the Litigation (the "Net Final Amount"), payable to the Holders within 60 days from the receipt of the Final Award, if any. In the event the Company prepays the Debentures in full prior to that date which is one year from the date of issue and prior to date of the Final Award, then the amount payable to the Holders under the agreement will be adjusted to reflect an aggregate entitlement of 15%.

Mr. Mark Brennan, a director of the Company, purchased an aggregate of $175,000 of Debentures in the Offering. Mr. Brennan will also enter into a separate agreement of purchase and sale entitling him to a pro rata share of the Net Final Amount of any Litigation, as described above. The Financing was considered and approved by the board of directors of the Company, with Mr. Shefsky and Brennan declaring a conflict and recusing themselves from voting on the Offering. There was no materially contrary view or abstention by any director approving the Offering. Following completion of the Offering, Mr. Brennan owns or controls, directly and indirectly, an aggregate of 4,902,000 Common Shares. Assuming the conversion into Common Shares of the full principal amount of the Debentures purchased by Mr. Brennan in the Offering, Mr. Brennan will beneficially own or control, directly and indirectly, an aggregate of 5,931,411 Common Shares, or 12.51% of the issued and outstanding Common Shares on a partially-diluted basis.

Pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"), the issuance of Debentures to Mr. Brennan is a "related party transaction". The Company is exempt from the requirements to obtain a formal valuation or minority shareholder approval in connection with the Offering in reliance on sections 5.5(b) and 5.7(b), respectively, of MI 61-101, as the Company is not listed on a stock exchange specified in section 5.5(b) of MI 61-101 and neither the fair market value of the Debentures that were and may be purchased by Mr. Brennan, nor the proceeds of the Offering received and to be received by the Company in respect of Mr. Brennan's participation in the Offering, exceeds $2.5 million. The material change report in respect of the Offering is being filed less than 21 days before the closing of the Offering as the Company requires the net proceeds from the Offering immediately in order to fund its working capital needs, including the Litigation.