SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
For Quarter Ended September 30, 1997 Commission File No. 33-28562
TOUCAN GOLD CORPORATION
(Exact name of registrant as specified in charter)
Delaware 75-2661571
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
at incorporation)
8201 Preston Road, Suite 600
Dallas, Texas 75225
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (214) 890-8065
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
As of November 11, 1997, there were 7,264,600 shares of the common stock, $.01
par value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
---- ----
CORPDAL:93721.1 29976-00001
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<PAGE>
TOUCAN GOLD CORPORATION
September 30, 1997
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
------
Consolidated Balances Sheets as of
September 30, 1997 and December 31, 1996................F-1
Consolidated Statements of Operations for
the three months ended September 30, 1997
and 1996................................................F-2
Consolidated Statements of Operations for
the nine months ended September 30, 1997
and 1996................................................F-3
Consolidated Statements of Cash Flows for
the nine months ended September 30, 1997
and 1996................................................F-4
Notes to Consolidated Financial Statements................F-5
Item 2. Management's Discussion and Analysis of
------ Financial Condition and Results of Operations.............3
PART II. OTHER INFORMATION....................................................4
Item 1. Legal Proceedings...........................................4
------
Item 2. Changes in Securities.......................................4
------
Item 3. Default Upon Senior Securities..............................4
------
Item 4. Submission of Matters to a Vote of
------ Security Holders..........................................4
Item 5. Other Information...........................................4
------
Item 6. Exhibits and Reports on Form 8-K............................5
------
SIGNATURES....................................................................6
CORPDAL:93721.1 29976-00001
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<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
ASSETS 1997 1996
-------------- -----
<S> <C> <C>
Cash $863,646 $2,031,045
Prepaid expenses 29,771 6,374
------- --------------
Total current assets 893,417 2,037,419
Mineral rights 2,189,742 1,691,442
Office Equipment 2,629 -
------------ ----------------
$3,085,788 $3,728,861
LIABILITIES AND STOCKHOLDERS' EQUITY
Amounts payable to related parties $ - $ 9,051
Accrued expenses and other liabilities 87,975 29,311
------- -------------
Total current liabilities 87,975 38,362
Stockholders' equity
Preferred stock, par value .01 per share; authorized, 2,000,000
shares; issued and outstanding, none - -
Common stock, $.01 par value per share; authorized 30,000,000
shares; issued and outstanding, 7,506,600, and 7,432,600 shares,
respectively 75,066 74,326
Additional paid-in capital 4,093,939 4,050,679
Deficit accumulated during the development stage (1,171,192) (434,506)
----------- ---------
Total stockholders' equity 2,997,813 3,690,499
-------------- ----------
$3,085,788 $3,728,861
</TABLE>
The accompanying notes are an integral part of
these statements.
CORPDAL:93721.1 29976-00001
F-1
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended September 30,
(unaudited)
1997 1996
------ ------
Cost and expenses
<S> <C> <C>
Legal and professional fees $ 147,510 $ 190,890
Travel and entertainment 43,151 37,840
Public relations 20,220 15,574
Other 84,646 11,110
----------- ----------
Total cost and expenses 295,527 255,414
Other income
Interest income (12,238)
----------- -----------
Net loss $ 283,289 $ 255,414
=========== ===========
Loss per share $ .04 $ .05
===== =====
Weighted average shares outstanding 7,458,230 5,644,600
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these statements.
CORPDAL:93721.1 29976-00001
F-2
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30,
(unaudited)
For the period
November 3, 1995
(Commencement of
Operations) through
1997 1996 September 30, 1997
------------------------ ---------------------- ---------------------
Cost and expenses
<S> <C> <C> <C>
Legal and professional fees $ 565,978 $ 374,144 $ 748,920
Travel and entertainment 96,536 88,867 253,353
Public relations 27,330 25,682 60,985
Other 98,793 16,962 139,365
---------- ------------ ----------
Total cost and expenses 788,637 505,655 1,202,623
Other (income) expense
Interest income (51,951) - (79,773)
Interest expense - - 48,342
---------- ------------ ----------
Total other (income) expense (51,951) - (31,431)
---------- ------------ ----------
Net loss $ 736,686 $ 505,655 $1,171,192
========== ============ ==========
Loss per share $.10 $.09 $.21
==== ==== ====
Weighted average shares outstanding 7,447,918 5,375,810 5,615,445
========== ============ ==========
</TABLE>
The accompanying notes are an integral part of
these statements.
CORPDAL:93721.1 29976-00001
F-3
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
For the period
November 3, 1995
(Commencement of
operations) through
September 30,
1997 1996 1997
-------------------------- ---------------------- --------------------
Operating activities
<S> <C> <C> <C>
Net loss $ (736,686) $ (505,655) $ (1,171,192)
Net changes in operating assets and liabilities
Prepaid expenses (23,397) (10,000) (29,771)
Accrued expenses 58,664 250,397 87,975
---------------- ---------------- -------------
Net cash used in operating activities (701,419) (265,258) (1,112,988)
Investing activities
Acquisition of mineral rights (468,300) - (1,823,742)
Acquisition of office equipment (2,629) - (2,629)
---------------- --------------- --------------
Net cash used in investing activities (470,929) - (1,826.371)
Financing activities
Net repayments/borrowings from related parties (9,051) 49,230 -
Issuance of common stock, net of expenses 14,000 112,535 3,703,005
Proceeds from merger with Starlight Acquisitions, Inc. - 100,000 100,000
---------------- ---------------- --------------
Net cash (used in) provided by
financing activities 4,949 261,765 3,803,005
---------------- ---------------- --------------
Net (decrease) increase in cash (1,167,399) (3,493) 863,646
Cash at beginning of period 2,031,045 45,208 -
---------------- ---------------- --------------
Cash at end of period $ 863,646 $ 41,715 $ 863,646
================ ================ ==============
</TABLE>
The accompanying notes are an integral part of
these statements.
CORPDAL:93721.1 29976-00001
F-4
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(unaudited)
NOTE A - BASIS OF PRESENTATION
Organization
- ------------
The consolidated financial statements contained herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments necessary for a fair
presentation of the consolidated financial position as of September 30, 1997,
and the consolidated results of operations for the three (3) months and nine (9)
months ended September 1997 and 1996, and the consolidated cash flows for the
nine (9) months ended September 30, 1997 and 1996 have been made. In addition,
all such adjustments made, in the opinion of management, are of a normal
recurring nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the interim reporting rules of the
Securities and Exchange Commission. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and related notes for the year ended December 31, 1996, included in
the Company's 1996 Annual Report on Form 10- KSB.
NOTE B - COMMITMENT AND CONTINGENCY
Under an agreement with a Brazilian individual, as of September 30, 1997, the
Company had acquired sixteen (16) priority mineral claims in the Cuiba Basin,
Brazil and was committed to acquire nine (9) additional priority claims upon
clearance of title by the DNPM. The consideration for each claim will be $36,000
in cash and 12,000 shares of the Company. In addition, a bonus payment of 50,000
shares is due to the seller if all nine (9) claims are delivered to the Company.
The 192,000 shares of Common Stock that the Company is obligated to issue with
respect to such sixteen (16) claims pursuant to such agreement have not been
issued as of September 30, 1997 but are reflected in the number of issued and
outstanding shares of Common Stock in the September 30, 1997 balance sheet
contained in the financial statements contained herein.
CORPDAL:93721.1 29976-00001
F-5
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 1997
(unaudited)
NOTE C - NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The new
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. The adoption of this new standard is
not expected to have an effect on the disclosure of earnings per share in the
financial statements.
NOTE D - OPTIONS ISSUED
The Company issued stock options for the right to purchase 100,000 shares of the
Company's common stock on September 27, 1997. The options were granted to two
employees as follows: (i) 50,000 shares, fully vested as of the date of grant,
at an exercise price of US $1.00 per share, expiring September 27, 1999; (ii)
50,000 shares at an exercise price of US $1.00 per share, 17,000 shares vesting
on the date of grant, 17,000 shares vesting April 1, 1998 and 16,000 shares
vesting April 1, 1999. The options expire on April 1, 2002.
CORPDAL:93721.1 29976-00001
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Effective May 10, 1996, Starlight Acquisitions, Inc., a Colorado
corporation ("Starlight") acquired all of the outstanding capital stock of
Toucan Mining Limited ("Toucan Mining") in exchange for shares of Starlight
Common Stock. As a result of the Share Exchange, a change in control of
Starlight occurred, whereby Toucan Mining is deemed to have acquired Starlight.
See Notes to the Consolidated Financial Statements.
Toucan Mining is a development stage company that conducts its operations
primarily through its wholly-owned subsidiary, Mineradora de Bauxita Ltda.
("MBL"), which is an authorized mining company organized under the laws of
Brazil. MBL has been financed entirely by Toucan Mining for the purpose of
conducting mineral exploration, specifically gold exploration.
During July 1996, Starlight formed the Toucan Gold Corporation (the
"Company") as a wholly-owned subsidiary. On July 29, 1996, Starlight merged into
the Company, and pursuant to the terms of the Merger, the outstanding shares of
Starlight Common Stock were canceled in exchange for shares of the Company's
Common Stock.
The consolidated financial statements for the nine months ended September
30, 1997, reflect the results of the Company's operations, which consisted
primarily of legal, accounting and consulting fees, travel and entertainment
expenses, public relations expenses and expenses related to the establishment of
the Company's Canadian and Brazilian offices. The Company's Canadian office was
closed effective May 31, 1997.
The Company has begun a program of mineral exploration to target and
explore selected areas of its Brazilian mining claims to determine which areas
are most likely to contain economic gold mineralization or to effectuate this
program through joint ventures. During the three months ended September 30,
1997, the Company began shallow drilling to geochemically test the lower
saprolite. The samples resulting from such drilling are being processed and will
be sent to Bondar Clegg for assay. The Company chose five sites, on which
artisanal mine workings ("nugget patches") have taken place. The Company
believes that these nugget patches are de facto geochemical anomalies reflecting
the presence of disseminated gold mineralization in the subsurface. In order to
facilitate these activities, the Company has opened an office in Brazil. The
Brazilian office is staffed by thirty employees and consultants, consisting of
geologists, land acquisition personnel, mapping specialists and various support
personnel.
During the three months ended September 30, 1997, the Company commissioned
a 4,300 kilometer aerial geophysical survey of part of its priority exploration
claims and is currently awaiting appropriate government licenses prior to
proceeding with this aspect of the exploration program.
These programs (including both the mineral exploration and the geophysical
surveying) will likely be completed by the end of this year. However, the
program to fully explore and develop its entire claim area will take several
years. In the event of encouraging results in a particular area, a more
concentrated study will be undertaken to provide the basis of a feasibility
study for mineral development. MBL will also be working to acquire additional
claims in the Cuiaba Basin in the State of Mato Grosso, Brazil.
During the three months ended September 30, 1997, the Company was informed
by the National Mineral Production Department of Brazil (the "DNPM") that
certain of the Company's claims were subject to the existing claims of others
already on record with the DNPM. Conversely, the DNPM also informed the Company
that it was the owner of claims that were previously believed by the DNPM to be
held by others. As well, Brazilian law prohibits mining activity on claims
located inside the city limits of designated Brazilian cities. As a result, the
Company was forced to surrender those claims that it held which were subject to
such law. The net effect of these series of changes is that the Company's claims
were reduced by 37,385 hectares of its overall claims of approximately 1.4
million hectares.
The Company will incur major expenses to establish the existence of gold
reserves. Accordingly, to fund the Company's exploration program for up to two
years and to pay for normal expenses, the Company will need to raise substantial
funds or enter into joint ventures with industry partners who agree to provide
such funds. There can be no assurance that the Company will be able to raise
such capital if needed or on terms that are favorable to the Company or to enter
into such joint ventures on terms favorable to the Company. The plan will be
subject to review depending upon the results obtained. Costs could rise if,
among other things, the weather proves untypically harsh, unforeseen ground
conditions are encountered, equipment becomes difficult to source or
negotiations with surface owners become prolonged. MBL may spend more or less on
claim acquisitions than currently estimated. There can be no assurance that the
exploration program will result in the discovery of economic gold
mineralization. The matters discussed herein contain forward-looking statements
that involve certain risks, uncertainties and additional costs detailed herein.
The actual results that are achieved may differ materially from any
forward-looking projections, due to such risks, uncertainties and additional
costs.
CORPDAL:93721.1 29976-00001
3
<PAGE>
The Company has raised approximately $3.6 million in net proceeds through
the issuance of 1,600,000 Units at $2.50 per Unit, each Unit consisting of one
share of Company Common Stock and a warrant to purchase a share of Company
Common Stock at an exercise price of $3.50, in an offering exempt from
registration under the Securities Act pursuant to Regulation S. This offering
was completed on November 1, 1996. The expiration date for such warrants was set
at the close of business on October 31, 1997, subject to adjustment in
connection with certain anti-dilution provisions. On October 31, 1997, the
expiration date for the warrants was extended by the Company from October 31,
1997 to January 31, 1998.
The Company has used certain of the proceeds from the sale of the Units to
finance the purchase of additional mining claims in the Cuiaba Basin, to begin
its exploration program, and for general working capital purposes. If the
purchase of all of such claims is consummated, the aggregate purchase price
would consist of approximately U.S. $1,400,000 in cash and 350,000 shares of
Company Common Stock, of which $1,076,000 has been paid to date and 192,000
shares of Company Common Stock are to be issued for claims that have been
acquired to date. While the Company has an agreement with the owner of such
claims with respect to the purchase terms with respect to the remaining claims,
the Company's obligations thereunder are subject to its review of documentation
relating to such claims. There can be no assurance that the acquisition of the
remaining claims will be consummated.
In order to finance the Company's future exploration activities and general
working capital needs, including maintaining its Brazilian office and paying the
personnel of the Brazilian office, the Company will require additional capital.
The Company is exploring several financing alternatives.
Certain of the information contained in this Quarterly Report on Form
10-QSB constitutes forward looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended, that involves certain risks, uncertainties and additional costs
described herein. The actual results that are achieved may differ materially
from any forward looking projections, due to such risks, uncertainties and
additional costs. Although the Company believes that the expectations reflected
in such forward looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Subsequent written and
oral forward looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by reference to such risks,
uncertainties and additional costs.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
(a) None
(b) None
(c) None
Item 3. Default Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
(a) The Company has begun a program of mineral exploration to target
and explore selected areas of its Brazilian mining claims to determine which
areas are most likely to contain economic gold mineralization or to effectuate
this program through joint ventures. During the three months ended September 30,
1997, the Company began shallow drilling to geochemically test the lower
saprolite. The samples resulting from such drilling are being processed and will
be sent to Bondar Clegg for assay. The Company chose five sites, on which
artisanal mine workings ("nugget patches") have taken place. The Company
believes that these nugget patches are de facto geochemical anomalies reflecting
CORPDAL:93721.1 29976-00001
4
<PAGE>
the presence of disseminated gold mineralization in the subsurface. In order to
facilitate these activities, the Company has opened an office in Brazil. The
Brazilian office is staffed by thirty employees and consultants, consisting of
geologists, land acquisition personnel, mapping specialists and various support
personnel.
During the three months ended September 30, 1997, the Company
commissioned a 4,300 kilometer aerial geophysical survey of part of its priority
exploration claims and is currently awaiting appropriate government licenses
prior to proceeding with this aspect of the exploration program.
(b) During the three months ended September 30, 1997, the Company was
informed by the National Mineral Production Department (the "DNPM") that certain
of the Company's claims were subject to the existing claims of others already on
record with the DNPM. Conversely, the DNPM also informed the Company that it was
the owner of claims that were previously believed by the DNPM to be held by
others. As well, Brazilian law prohibits mining activity on claims located
inside the city limits of designated Brazilian cities. As a result, the Company
was forced to surrender those claims that it held which were subject to such
law. The net effect of these series of changes is that the Company's claims were
reduced by 37,385 hectares of its overall claims of approximately 1.4 million
hectares.
(c) On September 27, 1997, at a meeting of the Board of Directors, the
Company granted options to purchase, in the aggregate, 100,000 shares of Company
Common Stock to two separate individuals in their capacities as employees of the
Company. The options allowed each individual to purchase 50,000 shares of
Company Common Stock at an exercise price of US $1.00.
(1) The first block of options, allowing the grantee to
purchase 50,000 shares of Company Common Stock, was granted to
David Carmichael. Mr. Carmichael serves as the General Manager
for Mineradora de Bauxita Ltda. ("MBL"). These options would
vest in increments of 17,000, 17,000 and 16,000. The initial
grant of options to purchase 17,000 shares vested on the date
of grant. The remaining blocks of 17,000 and 16,000 options
will vest on April 1, 1998 and April 1, 1999, respectively,
only in the event that Mr. Carmichael is employed with the
Company on those dates.
(2) The second block of options, allowing the grantee to
purchase 50,000 shares of Company Common Stock, was granted to
L. Clark Arnold, a Director and Vice President - Exploration,
whose responsibility is overseeing the Company's exploration
program, for his continuing contributions to the Company in
discharging such responsibilities. Mr. Arnold options vested
on the date of grant and are exercisable up until September
27, 1999.
(d) On September 27, 1997, at a meeting of the Board of Directors, the
Company granted 50,000 shares of Company Common Stock to Mr. Jay Lutsky, for his
continuing contributions as an investor relations consultant to the Company. Mr.
Lutsky also served as an officer and a director of Starlight Acquisitions, Inc.
The shares were issued to Mr. Lutsky pursuant to, and subject to the
restrictions of, Rule 144 of the Securities Act of 1933, as amended.
(e) On September 27, 1997, the Board of Directors approved and
confirmed an Employment Agreement, dated as of April 1, 1997, by and between the
Company and David Carmichael (the "Agreement"). The Agreement provides that Mr.
Carmichael is to receive (i) a signing bonus of US $20,000; (ii) a base gross
salary of US $90,000 per annum payable in equal monthly installments with the
first payment being made on April 30, 1997; and (iii) an annual bonus set at a
minimum of US $20,000 and a maximum of US $30,000 to be determined at the
discretion of the Board of Directors of the Company and payable three months
following the end of each year of employment commencing with Mr. Carmicheal's
second year of employment. The Agreement further provides for a grant to Mr.
Carmicheal of options to purchase 50,000 shares of Company Common Stock. The
terms of such options are described above in sub paragraph (c) (1). The
Agreement shall continue in effect from the date of grant on a year to year
basis until terminated according to the provisions of the Agreement.
(f) The Company had entered into a letter of intent (the "Letter of
Intent") with Eldorado Gold Corporation ("Eldorado") pursuant to which Eldorado
would earn a 50% interest on 10% of MBL mining claims to be selected by
Eldorado, through the expenditure of Canadian $5 million by Eldorado within two
years. The Letter of Intent was subject to a number of conditions, including the
negotiation and execution of a definitive agreement within a certain time
period. These conditions were not fulfilled, and the Letter of Intent expired by
its terms. On October 30, 1997, the Vice President of Legal Affairs for Eldorado
sent a letter to the Company confirming that Eldorado and the Company have
agreed to terminate any obligations they may have had to the other party
pursuant to such Letter of Intent or any further agreements in connection
therewith.
(g) On October 31, 1997, the expiration date for the warrants issued in
the Company's November 1, 1996 offering was extended from October 31, 1997 to
January 31, 1998.
CORPDAL:93721.1 29976-00001
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
EXHIBITS
The following exhibits are furnished in accordance with Item 601 of Regulation
S-B.
10.1 Employment Agreement, dated as of April 1, 1997, by and between the Company
and David Carmichael
27 Financial Data Schedule
Form 8-K: No reports on Form 8-K have been filed with the Securities and
Exchange Commission in the quarter ended September 30, 1997.
CORPDAL:93721.1 29976-00001
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned thereunto duly authorized.
TOUCAN GOLD CORPORATION
(Registrant)
Date: November 19, 1997 By: /s/ Robert P. Jeffcock
---------------------------
Robert P. Jeffcock, President and Chief
Executive Office (Principal Executive
Officer) and Vice President-Chief
Financial Officer (Principal Financial
Officer
CORPDAL:93721.1 29976-00001
7
EMPLOYMENT AGREEMENT
--------------------
MEMORANDUM OF AGREEMENT, made as of the 1st day of April, 1997.
BETWEEN:
DAVID CARMICHAEL, the Employee signing this Agreement,
(hereinafter called the "Employee")
OF THE FIRST PART,
- and -
TOUCAN GOLD CORPORATION, a corporation incorporated under the laws of
Delaware,
(hereinafter called the "Employer")
OF THE SECOND PART,
THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration it is
hereby agreed as follows:
1. The Employee shall be employed by the Employer on a full-time basis in the
employment function described in Schedule "B" hereto, or in such other
capacity or capacities as may from time to time be mutually agreed by the
Employee and Employer.
2. The employment of the Employee hereunder shall continue from the date set
out in paragraph 1 of Schedule "A" hereto and thereafter from year to year
unless and until terminated in a manner provided herein.
3. This Agreement may be terminated by the Employer:
(a) upon two weeks written notice to the Employee during or before the end
of the first year of employment governed by this Agreement or payment
to the Employee of the Employee's Base Gross Salary as at the date of
notice of termination for such two week period;
(b) upon six month's written notice to the Employee during the period
commencing April 1, 1998 and ending October 1, 1998 or payment to the
Employee of the Employee's Base Gross Salary as at the date of notice
of termination for such six month period;
CORPDAL:93755.1 29976-00001
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<PAGE>
(c) upon one year's written notice to the Employee after October 1, 1998
or payment to the Employee of the Employee's Base Gross Salary as at
the date of notice for such one year period; or
(d) without notice for just cause at common law.
4. The remuneration payable, and the options issuable, to the Employee for his
services hereunder shall be as set out in paragraph 2 of Schedule "A"
hereto. In addition, the Employee may be paid such other remuneration (if
any) and shall be entitled to fringe benefits as may from time to time be
determined by the Employer. [Unless otherwise agreed or stipulated in
Schedule "A" hereto, such remuneration shall be reviewed by the Employer in
the month of May of each year following the first year during which this
Agreement is in effect.]
5. The Employee shall from time to time be entitled to such vacations as are
set out in paragraph 3 of the Schedule "A" hereto.
6. The Employee shall be reimbursed by the Employer for all reasonable
expenses properly incurred by the Employee in connection with his duties
including, without limitation, travel costs (Economy Class) to and from
Santiago, Chile to Cuiaba, Brazil or wherever else the Employee is required
to work, the cost of meals and accommodations while traveling on matters
relating directly to the Employer's business, and the cost of furnished
accommodations in Brazil. For all such expenses the Employee shall furnish
to the Employer statements and vouchers as and when required by it.
Notwithstanding the foregoing, the Employee shall not be reimbursed for any
expenses relating to meals while not traveling on the Employer's business
or personal health insurance.
7. The Employee acknowledges that the Employer presently carries on, the
general business and operations of mineral resource exploration (the
"Business"). The Employee, in the course of his employment hereunder, will
have access to and be entrusted with detailed confidential information and
trade secrets concerning the manner in which the Employer conducts the
Business and concerning the results of the Employers' exploration projects,
prospecting efforts and other business activities that the Employer is not
required to publicly disclose to the general public pursuant to applicable
securities laws. The Employee acknowledges that the disclosure of any such
detailed confidential information and trade secrets to competitors of the
Employer or to the general public, or the use by the Employee of such
detailed confidential information and trade secrets for the purposes other
than purposes of the Employer, would be highly detrimental to the best
interests of the Employer. The Employee understands and agrees with the
Employer that the right to maintain confidential such detailed confidential
information and trade secrets constitutes a proprietary right which the
Employer is entitled to protect. Accordingly, the Employee covenants and
agrees with the Employer:
(a) that he will not either during the continuance of his employment by
the Employer or at any time thereafter disclose any of such detailed
confidential information and trade secrets to any person nor shall he
use the same for any purpose other than that of the Employer; and
(b) that he will not, during the continuance of his employment hereunder,
except with the prior written consent of the Employer, at any time,
either individually or in partnership or jointly or in conjunction
CORPDAL:93755.1 29976-00001
2
<PAGE>
with any person or persons, firm, association, syndicate, company or
corporation whether as employee, principal, agent, shareholder or in
any other manner whatsoever, directly or indirectly, carry on or be
engaged in or be concerned with or interested in or advise or permit
his name or any part thereof to be used or employed by any person or
persons, firm, association, syndicate, company or corporation engaged
in or concerned with or interested in the Business or any aspect
thereof;
provided that the foregoing restrictions shall not prohibit the Employee from:
(i) purchasing, holding or selling securities or publicly traded
vehicles on the condition that his percentage ownership of the
issued and outstanding capital of such publicly traded vehicles
does not exceed 2%; or
(ii) disclosing any such detailed confidential information and trade
secrets that are required to be disclosed by law.
If any covenant or provision in this paragraph 7 is determined to be
unenforceable or declared invalid in whole or in part for any reason whatsoever,
it shall not affect the enforceability or validity of any other covenant or
provision hereof or any part thereof, and any such unenforceable or invalid
covenant or provision hereof or any part thereof are hereby conceded to be
severable and subparagraphs (a) and (b) of this paragraph 7 are hereby declared
to be separate and distinct covenants.
The Employee agrees that all restrictions contained in this paragraph 7 are
reasonable and valid and all defenses to the strict enforcement of all or any
part thereof by the Employer are hereby waived by the Employee.
The Employee acknowledges that the restrictions contained in this paragraph
7 are necessary and fundamental for the protection of the Employer and that a
breach by the Employee of any covenant or provision of this paragraph 7 would
result in damages to the Employer which could not be adequately compensated for
by a monetary award to the Employer. Accordingly, it is expressly agreed by the
Employee, that in addition to all other remedies available to it, the Employer
shall be entitled to the immediate remedy of a restraining order, injunction or
such other form of injunctive relief as may be decreed or issued by any court of
competent jurisdiction to restrain or enjoin the Employee from breaching any
such covenant or provision.
8. Any notice in writing required or permitted to be given to the Employee
hereunder shall be sufficiently given if served on the Employee personally
or mailed by registered mail postage prepaid addressed to the Employee at
his last address known to the Employer. Any notice in writing required or
permitted to be given to the Employer hereunder shall be given by
registered mail postage prepaid addressed to the Employer at the location
to which the Employee normally reports to work. Any such notice mailed as
aforesaid shall be deemed to have been received on the second business day
following the date of mailing. Either party may at any time change his
address for service by giving notice to the other party.
CORPDAL:93755.1 29976-00001
3
<PAGE>
9. Any and all previous agreements, whether oral or in writing, between the
parties hereto or made on their behalf relating to the employment of the
Employee by the Employer are hereby terminated and canceled and each of the
parties hereto hereby releases and forever discharges the other party
hereto of and from all manner of actions, causes of action, claims and
demands whatsoever under or in respect of any such agreement.
10. This Agreement shall be deemed to have been made in and shall be construed
in accordance with the laws of the Province of Ontario.
11. Schedules "A" and "B" annexed hereto shall be incorporated in and form part
of this Agreement. This Agreement and the schedules hereto may be amended
from time to time with the mutual consent of the parties hereto evidenced
in writing.
12. The provisions hereof, where the context so permits, shall enure to the
benefits of and be binding upon the heirs, executors, administrators or
other legal representatives of the Employee and the successors and assigns
of the Employer respectively. When the context so requires or permits the
masculine gender should be read as if the feminine were expressed.
13. Each of the parties to this Agreement will be entitled to rely upon
delivery by facsimile machine of an executed copy of this Agreement and
such executed copies of this Agreement will be legally effective to create
a valid and binding agreement between the Employee and the Employer in
accordance with the terms hereof.
14. This Agreement may be executed in any number of counterparts all of which
when taken together shall be deemed to be one and the same document and
notwithstanding their actual date of execution shall be deemed to be dated
as of the date first above written.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED AND DELIVERED )
In the Presence of )
) /s/ David Carmichael
) ---------------------------
DAVID CARMICHAEL
- ------------------------------------
TOUCAN GOLD CORPORATION
- ------------------------------------
By: /s/ Oliver Lennox-King
----------------------
OLIVER LENNOX-KING
CORPDAL:93755.1 29976-00001
4
<PAGE>
SCHEDULE "A"
SUPPLEMENTARY TERMS OF EMPLOYMENT
1. COMMENCEMENT OF EMPLOYMENT
The date of commencement of employment under this Employment Agreement is
April 1, 1997.
2. REMUNERATION
Remuneration is:
(a) Signing Bonus: a U.S. $20,000 signing bonus;
(b) Base Gross Salary: U.S. $90,000 per annum payable in equal monthly
installments in arrears, the first of the said installments to be paid
on the 30th day of April, 1997; and
(c) Annual Bonus: minimum of U.S. $20,000 and maximum of U.S. $30,000 to
be determined at the discretion of the board of directors of the
Employer payable [three months] following the end of each year of
employment commencing with the Employee's second year of employment.
3. VACATIONS
[three] weeks with pay for the [first year] of employment.
[three] weeks with pay after [one year] of employment.
[four] weeks with pay after [two] years of employment.
4. OTHER EMPLOYEE BENEFITS
The Employee will be issued 50,000 stock options exercisable at U.S. $2.50
each. The options will expire April 1, 2002 and will vast as to 17,000 options
on the date of grant, 17,000 options on April 1, 1998, provided that the
Employee remains employed by the Employer on such date and 16,000 options on
April 1, 1999, provided that the Employee remains employed by the Employer on
such date.
CORPDAL:93755.1 29976-00001
5
<PAGE>
SCHEDULE "B"
JOB DESCRIPTION
[OLK to insert]
CORPDAL:93755.1 29976-00001
6
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<ARTICLE> 5
<LEGEND> Financial Data Sheet
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<CIK> 0000850083
<NAME> Toucan Gold Corporation
<MULTIPLIER> 1
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.00
<CASH> 863,646
<SECURITIES> 0
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<CURRENT-ASSETS> 893,417
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<DEPRECIATION> 0
<TOTAL-ASSETS> 3,085,788
<CURRENT-LIABILITIES> 87,975
<BONDS> 0
0
0
<COMMON> 75,066
<OTHER-SE> 2,997,813
<TOTAL-LIABILITY-AND-EQUITY> 3,085,788
<SALES> 0
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<TOTAL-COSTS> 788,637
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (736,686)
<INCOME-TAX> 0
<INCOME-CONTINUING> (736,686)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (736,686)
<EPS-PRIMARY> (.10)
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