U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[ X ] Annual report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the fiscal year ended December 31, 1996
[ ] Transition report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the transition period from_____to _______
Commission File Number 33-28562
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Toucan Gold Corporation
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 75-2661571
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
26 Wellington Street East
Suite 905
Toronto, Ontario, Canada M5E 1S2
(Address of Principal Executive Offices) (Zip code)
(416)350-3657
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code.)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each
NONE Exchange
on Which Registered
N/A
Securities registered under Section 12(g) of the Exchange Act:
NONE
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $ 0
----
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 7, 1997 was $6,015,062 based upon the average bid and ask
price of the common stock on such date of $1 5/8 per share on the OTC Electronic
Bulletin Board of NASDAQ. For purposes of this computation, all executive
officers, directors and 10% stockholders were deemed affiliates. Such a
determination should not be an admission that such executive officers, directors
or 10% stockholders are affiliates.
As of April 7, 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: Yes X No
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TOUCAN GOLD CORPORATION
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PART I Page Number
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Item 1 and 2. Description of Business and Property..............................................................1
Item 3. Legal Proceedings.................................................................................6
Item 4. Submission of Matters to a Vote of Security-Holders...............................................6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters..........................................7
Item 6. Management's Discussion and Analysis of Financial Condition or Plan of Operation..................9
Item 7. Financial Statements
Report of Independent Certified Public Accountants..............................................F-2
Consolidated Balance Sheet as of December 31, 1996..............................................F-3
Consolidated Statements of Operations for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995......................................F-4
Consolidated Statement of Stockholders' Equity for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995......................................F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995......................................F-6
Notes to Financial Statements...................................................................F-7
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................................................11
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.....................................13
Item 10. Executive Compensation...........................................................................14
Item 11. Security Ownership of Certain Beneficial Owners
and Management.................................................................................14
Item 12. Certain Relationships and Related Transactions...................................................16
Item 13. Exhibits, List and Reports on Form 8-K...........................................................16
SIGNATURES.......................................................................................................18
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS...........................................19
INDEX TO EXHIBITS...........................................................................................INDEX-1
EXHIBIT 21 -- SUBSIDIARIES OF THE COMPANY....................................................................E-21-1
</TABLE>
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PART I
ITEM 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTY
General
Toucan Gold Corporation (the "Company" or "Toucan") was organized in
the State of Delaware on July 22, 1996. The Certificate of Incorporation of
Toucan authorizes a class of 30,000,000 shares of common stock, par value $.01
per share (the "Company Common Stock"), and 2,000,000 shares of preferred stock,
par value $.01 per share. The Company was formed for the purposes of
reincorporating Starlight Acquisitions, Inc., a Colorado corporation
("Starlight"), in the State of Delaware (the "Reincorporation"). Starlight was
incorporated on January 20, 1989. The Reincorporation was effected by merging
(the "Merger") Starlight into the Company, which, prior to the Reincorporation,
was a wholly owned subsidiary of Starlight, pursuant to an Agreement and Plan of
Merger (the "Merger Agreement"). Upon completion of the Merger, Starlight ceased
to exist, and Toucan continued to operate the business of Starlight under the
name Toucan Gold Corporation. The Reincorporation became effective on July 29,
1996. As a result of the Reincorporation, each then outstanding share of
Starlight common stock, no par value (the "Starlight Common Stock"), was
converted into one share of Company Common Stock. Existing warrants (the
"Starlight Warrants") to purchase an aggregate of 100,000 shares of Starlight
Common Stock at an exercise price of $4.00 per share were exchanged into
warrants (the "Toucan Warrants") to purchase an aggregate of 100,000 shares of
Company Common Stock at an exercise price of $4.00 per share.
The Share Exchange
Effective May 10, 1996, Toucan Mining Limited, an exploration stage
company incorporated on November 3, 1995 under the laws of the Isle of Man
(British Isles) ("Toucan Mining"), became a wholly owned subsidiary of Starlight
when Starlight acquired all of the outstanding capital stock of Toucan Mining in
exchange for 4,534,999 shares of Starlight Common Stock (the "Share Exchange)
pursuant to a Share Exchange Agreement (the "Share Exchange Agreement"). As a
result of the Share Exchange, each shareholder of Toucan Mining received seven
shares of Starlight Common Stock for each share of common stock of Toucan Mining
held by such shareholder. The shares of Starlight Common Stock received by the
Toucan Mining shareholders in the Share Exchange were issued in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, are restricted securities. The Starlight
Warrants issued in connection with Starlight's initial public offering expired
pursuant to their terms prior to the Share Exchange and the Starlight Warrants
were issued on May 10, 1996 to purchase an additional 100,000 shares of
Starlight Common Stock at an exercise price of $4.00 per share, which were
immediately exercisable and expire on the later of (i) the eighteenth month
anniversary of the issuance date or (ii) the six month anniversary of the
closing of the first registration of securities by the Company. The new
Starlight Warrants were issued to former officers and directors of Starlight in
consideration of, among other things, their agreement to indemnify Toucan Mining
and Starlight with respect to certain representations in the Share Exchange
Agreement and the cancellation of their prior warrants to purchase Starlight
Common Stock. The Starlight Warrants provided for certain piggy-back
registration rights with respect to the shares of Starlight Common Stock
underlying the Starlight Warrants. Pursuant to the Reincorporation, the
Starlight Warrants were exchanged into the Toucan Warrants to purchase an
aggregate of 100,000 shares of Company Common Stock at an exercise price of
$4.00 per share. The holders of the Toucan Warrants have certain piggy-back
registration rights with respect to the shares of Company Common Stock
underlying the Toucan Warrants. The Toucan Warrants are immediately exercisable
and expire on the later of (i) the eighteenth month anniversary of the Share
Exchange or (ii) the six month anniversary of the closing of the first
registration of securities by the Company.
Toucan Mining Limited
General. Toucan conducts its operations primarily through its wholly
owned subsidiary, Toucan Mining. The principal executive office of Toucan Mining
is located at Celtic House, Victoria Street, Douglas, Isle of Man IM99 1QZ. In
turn, Toucan Mining 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. The shares of MBL are held in trust
by related Brazilian parties for the benefit of Toucan Mining. The registered
office of MBL is located at Rua 24 de Outubro n(degrees) 3313, Santarem, state
of Para, Brazil. The assets of MBL are mineral claims in the Cuiaba Basin, Mato
Grosso, Brazil. See "Description of Exploration and Mining Concessions" below.
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Management. The directors of Toucan Mining are Robert P. Jeffcock,
Paraic O'Dowd and David Karran. Mr. Jeffcock serves as Managing Director of
Toucan Mining. The directors of MBL are Julio Lambertson Rabello and Carlos
Edvardo Lins E Silva. Igor Mousasticoshvily, a U.S. trained geologist, serves as
Chief of Operations of MBL. Neither Toucan Mining nor MBL are required to have
titled officers.
Mining Claims
As of December 31, 1996, MBL had exploration claims to 1,359,263
Hectares [5,246 square miles] ("Ha") (2.47 Acres to 1 Ha) in the Cuiaba Basin,
Mato Grosso, Brazil. This area is approximately 160 kilometers long in a
northeast/southwest direction and is from 30-100 kilometers wide. The claims are
located between 15 - 16(degrees) 30' South latitude and between 55(degrees) 40'
- - 57(degrees) West longitude. The large, provincial city of Cuiaba, the capital
of Mato Grosso, is located within MBL's claim area.
MBL is the beneficial owner of exploration claims to 1,234,948 Ha
[4,766 square miles] that were filed in 1995 with the Departamento Nacional De
Produca Mineral ("DNPM"), the Brazilian governmental agency responsible for
regulating mineral rights. These claims included 303,190 Ha, which were
contested by a previous claimant. The Ministry of Mines and Energy ruled against
the previous claimant, and the decision was published in the Government Gazette
on April 22, 1996. Accordingly, MBL's claim to the additional 303,190 Ha became
effective on May 23, 1996, after which MBL was able to apply to the National
Mineral Production Department (the "DNPM"), an agency of the Ministry of Mines
and Energy, for formal documentation of the claim. See "Description of
Exploration and Mining Concessions" below.
In November 1996, the Company entered into an agreement with a
Brazilian individual ("the seller") to acquire twenty-five (25) additional
priority claims in the Cuiaba Basin. Pursuant to this agreement, the "seller"
granted to a representative (the "Representative") of the Company an irrevocable
power-of-attorney over all twenty-five (25) claims in the aggregate in the
Cuiaba Basin in exchange for the Company (i) paying to the seller an initial
payment in cash; (ii) paying to the seller additional payments in cash and
issuing shares of Company Common Stock the amounts of both to be determined by
the number of claims the DNPM certifies is held with priority, having good,
clean and transferable title. The Representative has executed an agreement with
Toucan Mining pursuant to which the Representative holds the power of attorney
and such claims in trust on behalf of Toucan Mining. See "Description of
Exploration and Mining Concessions" and "Market for Common Equity and Related
Stockholder Matters - Recent Sales of Unregistered Securities" below.
The Representative now holds on behalf of the Company an irrevocable
power of attorney, over all of such claims, which entitles the Company, upon
payment for such claims as hereinabove provided, to transfer such claims to MBL
or another subsidiary of Toucan Mining. Sixteen (16) of the twenty-five (25)
claims, which cover approximately 135,915 Ha, have been certified by the DNPM as
held in priority, with good, clean and transferable title. Legal title to these
sixteen (16) claims is in the process of being transferred to MBL or such other
subsidiary of Toucan Mining pursuant to the power-of-attorney. There is no
assurance that the remaining nine (9) claims will be certified by the DNPM and
transferred to the Company.
Access to Claims. The Cuiaba Basin has a network of hard top roads that
are generally in good condition. MBL's claims are also criss-crossed with sand
and gravel roads, the majority of which are well maintained. Daily scheduled
commercial air service is available to and from Cuiaba.
Mining Operations
The following discussion of MBL's mining operations includes a
discussion of Brazilian law. The discussion of Brazilian law matters represents
the Company's current understanding of applicable Brazilian law based on it and
its advisors' and consultants' review of information relating thereto made
available to them as of the date hereof.
Description of Exploration and Mining Concessions. Under the Brazilian
Federal Constitution, all mineral resources belong to Brazil. The government of
Brazil does not grant outright ownership of a mineral deposit to a mining
company. Prospecting and mining of mineral resources may be carried out only
following the grant of a prospecting authorization or mining concession by the
DNPM, an agency of the Ministry of Mines and Energy, which administers the
Brazilian Mining Code and other laws and regulations governing prospecting and
mining operations in Brazil. Mining concessions are granted only to Brazilian
companies that have been duly authorized by the Ministry of Mines and Energy to
act as a mining company. In 1995, the Brazilian government approved a
constitutional amendment that eliminated the
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requirement of Brazilian control of mining companies, so that a Brazilian mining
company can be 100% foreign owned and still qualify as a mining company.
Under Brazilian law, in order to obtain a mining concession, a mining
company must first obtain an exploration permit (referred to herein as a claim).
The first step in obtaining a mining claim is filing an application with the
DNPM, which must include an exploration plan as well as comply with certain
other requirements.
Under Brazilian law, if a claim is granted, the granting of the claim
will, in due course, be published by the Brazilian authorities in the Government
Gazette. Such publication can occur from one to twenty years from the date of
the claimant making such application with respect to such claim. Once the claim
is published in the Government Gazette an annual tax of $0.20 per item is
payable on the published claim.
The granting of a mining claim conveys the right to explore the area
covered by the claim. Claims are granted for a three-year term, renewable on
request, subject to an annual fee. Exploration must begin in accordance with the
exploration plan forming part of the application within a specified period of
the claim being granted. The claim may be canceled at the discretion of the DNPM
if the claim holder suspends exploration for a period of more than three
consecutive months or 120 non-consecutive days. The holder of a terminated claim
may reapply to regain the claim area. The onus is on the claim holder to notify
the DNPM of any changes to the exploration plan. On completion of the work, a
final report must be filed with the DNPM describing the results of the
exploration program.
Mining concessions are granted only after exploration demonstrates the
existence of a mineral deposit that is economically exploitable. Therefore, the
report filed by the claimant with the DNPM must include an economic assessment
of the claim area and a feasibility analysis. Moreover, the claimant must
demonstrate to the DNPM that it has the financial capability to carry out the
proposed plan. The application for a concession must also include an
environmental plan, covering water treatment, soil erosion, air quality control,
re-vegetation and reforestation and site reclamation. Once granted, the terms of
the concession will include conditions concerning mitigating environmental
impacts, site safety, construction codes, waste disposal and site reclamation.
Following application, the DNPM may request additional information.
A mining concession grants the right to extract and process the mineral
contained in the deposit in accordance with the plan approved by the DNPM and
allows a mining company to exploit the deposit to exhaustion, usually without a
predetermined or fixed term. The concession holder also has the right to sell,
transfer or lease such rights to a third party subject to DNPM approval. After
the grant of the mining concession is published in the Government Gazette, a
concession holder has 90 days to request possession of the deposit, and initial
work in accordance with the mining plan must begin within six months of the
publishing date. Once begun, mining may not be suspended for a period of more
than six months on penalty of a possible cancellation of the concession at the
discretion of the DNPM. However, management understands that longer suspensions
have been granted by the DNPM. Annual statistical data on production must be
reported to the DNPM, which will also send representatives on periodic site
inspections. Failure to comply with regulations and mining plans may result in
penalties ranging from fines and other restitution to cancellation of the mining
concession and/or prison terms for officers of the company.
The Brazilian Mining Code and the Federal Constitution of Brazil impose
on mining companies requirements relating to, among other things, the manner in
which mineral deposits are exploited, the health and safety of workers, the
protection and restoration of the environment, the prevention of pollution and
the promotion of the health and safety of local communities where the mines are
located. The Mining Code also imposes certain notification and reporting
requirements.
Landowners. The majority of land covered by MBL's claims is a sandy
gravely soil covered in light scrub. Cattle ranching is the principal
agricultural activity. Except where the claims fall within a township such as
Cuiaba, the majority of the land is agricultural and has a low value.
The Brazilian Mining Code requires a claim holder to obtain the consent
of the surface owners to access the surface of the property. This usually
entails some form of an agreement between the claim owner and the surface owner
involving the payment of compensation to the surface owners for damage and loss
of income caused by the use and occupation of their land in connection with
mining activities. In the event that an agreement cannot be reached with the
surface owner, MBL may seek legal recourse under Brazilian law, which provides
that a claim holder has the right of
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access if conducting mineral exploration activities, by seeking a judicial order
to determine the amount of surface damage to the property and to grant the
surface owner a royalty on future production.
Brief History of Previous Operations. Gold mining in the Cuiaba Basin
began around 1719. Mining activity was sporadic, tending to coincide with
periods of high gold price or technical innovations that enabled profitable
extraction of the gold. The most recent phase of activity occurred during the
1980's when a period of high gold prices coincided with the availability of
sophisticated metal detectors. Miners quickly realized that by using this
equipment, near-surface gold mineralization (nuggets) could be readily located
and recovered with the help of earth moving equipment. Thousands of hectares
were stripped of soil and vegetation. The easily located nugget fields now
appear to be exhausted as do the majority of the easily mined mineralized quartz
veins.
Climate. Exploration and mining operations are possible throughout the
year. The rainy season is from December through to April. There are only
occasional thunder storms from May to December. In summer (December - February)
the temperature can reach as high as 45 degrees Centigrade although the mean
temperature is 35 degrees Centigrade.
Environmental Laws. Previous miners have stripped thousands of hectares
of soil and vegetation in the Cuiaba Basin. MBL will arrange to document the
existing environmental condition of its claims to place on record with the
environmental authorities the damage done to the environment by previous
operators. Environmental regulation and protection in Brazil is based on
provisions of the Federal Constitution, and of federal, state and municipal
legislation. Mining and industrial activities require the preparation of an
environmental impact statement and the acquisition of an environmental permit.
In addition, the Mining Code requires the reclamation and restoration of mined
areas.
Gold Sales. Gold mined in Brazil must be sold (i) to the Central Bank
of Brazil (via one of their registered agents), (ii) to the Sao Paulo gold
exchange or (iii) to any registered gold buyer in Brazil. The price paid is
normally the London afternoon Gold Fix. On occasion a premium is paid of
typically 2%. The agent charges a commission that is normally between 0.5 -
1.0%. The seller of the gold is paid in U.S. Dollars.
Brazilian Taxation. In general, Brazilian mining companies are subject
to a 25% income tax and an 8% social security contribution. Dividends paid to
shareholders domiciled abroad are subject to a 15% withholding tax by the
Brazilian taxing authority.
Exchange Controls. Exchange transactions are generally controlled by
the Central Bank of Brazil which authorizes a series of banks to act in the
foreign exchange market, selling and buying currencies. There is a commercial
rate of exchange published daily by the Central Bank based upon market results
on said day. A free market, and quotation system exists, mainly dealing with
tourist activities. Both rates have been extremely close since the inception of
the stabilization plan ("Plano Real") several years ago. Subject to certain
registration requirements with the Central Bank of Brazil and compliance with
certain regulations, MBL may repatriate U.S. Dollars earned from its Brazilian
operations to Toucan Mining or the Company through the repayment of loans and
the payment of dividends. On occasions in the past, Brazil has imposed temporary
restrictions on the conversion and remittance of foreign capital, for example
when there was a serious imbalance in Brazil's balance of payments. In such
circumstances, the Company could be adversely affected, if the exchange control
rules were changed to delay or deny remittances abroad from MBL.
Description of Present Condition of Property; Modernization and
Physical Condition of Plan and Equipment. MBL intends to obtain mining
concessions by undertaking 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. A mapping program based
upon satellite imagery will precede field investigation, which will include
detailed geologic mapping, geochemical sampling and drilling in accordance with
standard exploration practice. A program of this nature (bearing in mind the
size of MBL's claim area) is likely to take several years and could involve
joint ventures. In the event of encouraging results in a particular area, a more
concentrated study (with closely spaced drilling and metallurgical analysis)
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.
At this time, MBL is an exploration stage company and has no probable
or proven reserves as defined by the rules and regulations of the Securities and
Exchange Commission.
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Description of the Rock Formations and Mineralization. The rocks of the
Cuiaba Basin are phyllites of Archean age, which means they are amongst the
oldest rocks known and, although they were originally formed from fine grained
sediments (mudstones and siltstones), they have been converted to micaceous
metamorphic rocks as a result of exposure to elevated temperatures and
pressures.
The Cuiaba Basin has apparently been unusually tectonically stable over
an extended period of geologic time, allowing the development of a very deep
weathering profile in a climate characterized by alternating wet and dry
conditions.
Primary gold mineralization appears to be related to irregular quartz
veins thought to have formed during a period of metamorphism. The near surface
gold mineralization (nuggets, flakes and colors) is believed by management to
have developed as a result of leaching and upward migration of gold in solution
during development of the soil profile. Similar gold occurrences or "nugget
patches" recently recognized in Western Australia have been found to be
associated with primary gold mineralization at depth. Management believes that
the broad areas of nugget development in the Cuiaba Basin suggest surface
manifestations of deeper, disseminated and probably very fine grained, primary
gold mineralization of the sort found in Western Australia.
Exploration and Development Risks
The exploration for and development of mineral deposits involves
significant risks that even a combination of careful evaluation, experience and
knowledge may not eliminate. While the discovery of gold reserves may result in
substantial rewards, few properties that are explored are ultimately developed
into producing mines. Major expenses may be required to establish gold reserves,
to develop metallurgical processes and to construct mining and processing
facilities at a particular site. There can be no assurance that the exploration
programs planned by the Company, Toucan Mining and/or MBL will result in a
profitable commercial mining operation. There is aggressive competition within
the mining industry for the discovery and acquisition of properties considered
to have commercial potential. Toucan Mining, MBL and the Company will compete
with other interests, many of which have greater financial resources than they
will have, for the opportunity to participate in promising projects. Significant
capital investment is required to achieve commercial production from successful
exploration efforts.
Whether a mineral deposit will be commercially viable depends on a
number of factors, some of which are the particular attributes of the deposit,
such as size, grade and proximity to infrastructure, as well as gold prices
which are highly cyclical and government regulations, including regulations
relating to prices, taxes, royalties, land use, importing and exporting of
minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but the combination of these factors may result in the
Company not receiving an adequate return on investment capital.
The economic feasibility of prospective projects such as the mineral
claims in the Cuiaba Basin is based upon, among other things, estimates of
reserves, metallurgic recoveries, capital and operating costs of such projects
and future gold prices. These and other prospective projects are also subject to
the successful completion of feasibility studies, issuance of necessary permits
and receipt of adequate financing.
Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating costs are
to a large extent based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques and feasibility studies which derive
estimates of cash operating costs based upon anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body, expected
recovery rates from metals from the ore, comparable facility and equipment
costs, anticipated climate conditions and other factors. As a result it is
possible that actual cash operating costs and economic returns of any and all
development projects may materially differ from the costs and returns initially
estimated.
In addition, mining operations generally involve a high degree of risk.
If MBL were to discover gold reserves and bring them into production, MBL would
be subject to all of the hazards and risks normally encountered in the
exploration, development and production of gold, including unusual and
unexpected geology formations, rock bursts, cave-ins, flooding and other
conditions involved in the drilling and removal of materials, and of which could
result in damage to, or destruction of, mines and other producing facilities,
damage to life or property, environmental damage and possible legal liability.
Although adequate precautions to minimize risk will be taken, mining operations
are subject to
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hazards such as equipment failure or failure of retaining dams around tailings,
disposal areas which may result in environmental pollution and consequent
liability.
Proposed Canadianization Transaction
On November 1, 1996, the Company completed an offering pursuant to
Regulation S promulgated under the Securities Act in which the Company raised
aggregate gross proceeds of $4 million. The placement agent for the offering was
Yorkton Securities Inc. ("Yorkton"). See "Item 5. Market for Common Equity and
Related Stockholder Matters-- Recent Sales of Unregistered Securities."
Pursuant to the placement agreement with Yorkton, the Company has
agreed that (a) it will use its reasonable best efforts to call a meeting of the
stockholders of Toucan (or otherwise obtain any required stockholder approval)
before October 15, 1997, for the purpose of requesting the stockholders to
authorize and approve a merger of Toucan with a Canadian company (the "Canadian
Successor Company") quoted on the Canadian Dealer Network that has been a
reporting issuer in Canada for at least one year and that is not in default. In
addition, pursuant to the placement agreement with Yorkton, the Canadian
Successor Company will appoint Yorkton as exclusive agent for and on behalf of
the Canadian Successor Company to sell certain securities in a placement on
behalf of the Canadian Successor Company on or prior to October 15, 1998
pursuant to certain terms set forth in the placement agreement. This subsequent
offering is subject to a number of conditions, including the determination by
the Board of Directors of the Canadian Successor Company in its sole discretion
that raising additional capital in the minimum amount of U.S. $5,000,000 is in
the best interests of the Canadian Successor Company.
The Company has had discussions with prospective Canadian successor
companies, but no definitive agreement with a Canadian successor company has
been reached at this time.
Employees.
As of March 31, 1997, the Company employed seven (7) individuals.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding, nor is the
Company's property the subject of a pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 1996 to a vote of the Company's stockholders through the
solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company Common Stock is listed on the OTC Electronic Bulletin Board
of NASDAQ. The following table indicates the quarterly high and low bid price
for the Company Common Stock on the OTC Electronic Bulletin Board for the period
during 1996 in which quotations were available for Starlight Common Stock or
Company Common Stock and for the first quarter of fiscal year ending December
31, 1997. Prior to the consummation of the Share Exchange Agreement on May 10,
1996, there was no public trading market for Starlight Common Stock. For the
purposes of the following table, the periods prior to July 29, 1996 refer to
Starlight Common Stock. Such inter-dealer quotations do not necessarily
represent actual transactions, and do not reflect retail mark-ups, mark-downs or
commissions.
OTC ELECTRONIC
BULLETIN BOARD
BID PRICE
HIGH LOW
CALENDAR 1996
1st Quarter $ N/A $ N/A
2nd Quarter (May 9-June 30) $ 2.65 $ .25
3rd Quarter $ 4.125 $ 1.25
4th Quarter $ 3.9375 $ 2
CALENDAR 1997
1st Quarter $ 2.125 $ 1.25
On April 7, 1997, the bid price of the Company Common Stock as reported
on the OTC Electronic Bulletin Board was $1 5/8.
As of April 7, 1997, there were approximately 347 holders of record of
the Company Common Stock.
The Company has not declared or paid any cash or other dividends on the
Company Common Stock to date for the last two (2) fiscal years and in any
subsequent period for which financial information is required and has no
intention of doing so in the foreseeable future.
Recent Sales of Unregistered Securities
The following contains information for all securities that the Company
sold within the past year without registering the securities under the
Securities Act:
1. Effective May 10, 1996, Toucan Mining Limited became a wholly owned
subsidiary of Starlight when Starlight acquired all of the outstanding
capital stock of Toucan Mining in exchange for 4,534,999 shares of
Starlight Common Stock pursuant to the Share Exchange Agreement. As a
result of the Share Exchange, each shareholder of Toucan Mining received
seven shares of Starlight Common Stock for each share of common stock of
Toucan Mining held by such shareholder. The shares of Starlight Common
Stock received by the Toucan Mining shareholders in the Share Exchange were
issued in a transaction exempt from registration under Section 4(2) and
Regulation D promulgated under the Securities Act and, therefore, are
restricted securities. The Starlight Warrants were issued to former
officers and directors of Starlight in consideration of, among other
things, their agreement to indemnify Toucan Mining and Starlight with
respect to certain representations in the Share Exchange Agreement. The
Starlight Warrants were issued in a transaction exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act
and, therefore, are restricted securities. The holders of such warrants
were granted certain piggy-back registration rights with respect to the
shares of Starlight Common Stock underlying such warrants.
2. On May 20, 1996, Starlight consummated an offering of 563,141 shares of
Starlight Common Stock pursuant to Regulation S promulgated under the
Securities Act. The offering price was $0.20 per share of Starlight
CORPDAL:64048.5 29976-00001
7
<PAGE>
Common Stock, and the shares of Starlight Common Stock issued pursuant to said
offering were issued on June 17, 1996.
3. The Company was organized in the State of Delaware for the purposes of
reincorporating Starlight, a Colorado corporation, in the State of
Delaware. The Reincorporation was effected by merging Starlight into the
Company, which, prior to the Reincorporation, was a wholly owned subsidiary
of Starlight, pursuant to an Agreement and Plan of Merger. Upon completion
of the Merger, Starlight ceased to exist, and Toucan continued to operate
the business of Starlight under the name Toucan Gold Corporation. The
Reincorporation became effective on July 29, 1996. As a result of the
Reincorporation, each then outstanding share of Starlight Common Stock, no
par value, was converted into one share of Company Common Stock. The
Starlight Warrants to purchase an aggregate of 100,000 shares of Starlight
Common Stock at an exercise price of $4.00 per share were exchanged into
Toucan Warrants to purchase an aggregate of 100,000 shares of Company
Common Stock. The Toucan Warrants provided for certain piggy-back
registration rights with respect to the shares of Company Common Stock
underlying such warrants. The shares of Company Common Stock and the Toucan
Warrants issued pursuant to the Merger were issued in a transaction exempt
from registration under Rule 145(d) of the Securities Act.
4. On November 1, 1996, the Company completed the offering (the "Yorkton
Offering") of 1,600,000 Units for aggregate gross proceeds of U.S. $4
million. Each Unit consisted of one share of Company Common Stock, par
value $.01 per share and one Company Common Stock share purchase warrant
(the "Company Warrants"). Each Company Warrant entitles the holder to
subscribe for one additional share of Company Common Stock at a price of
U.S. $3.50 per share at any time prior to the close of business on the
first anniversary of the original date of issue of the Company Warrants,
subject to adjustment in connection with certain anti-dilution provisions.
The price of the Units was U.S. $2.50 per Unit. The placement agent for the
offering was Yorkton Securities Inc. ("Yorkton"). Yorkton received a
commission of 8% of the gross proceeds of the offering and was reimbursed
for its fees and expenses. The net proceeds to the Company were
approximately U.S. $3,600,000. The offering was conducted pursuant to
Regulation S promulgated under the Securities Act and to exemptions from
the offering requirements in any jurisdiction in which the Units were
offered. Accordingly, the Units were not offered or sold in the United
States or to U.S. persons, as defined in Regulation S.
5. Certain of the net proceeds of the Yorkton Offering were to be used by MBL
or another Brazilian mining subsidiary of the Company to acquire mining
claims in the Cuiaba Basin. These claims, which number twenty-five (25) in
the aggregate, are in the process of being acquired pursuant to the
following agreement and understanding:
(i) The Company will make an initial payment to the seller in
the amount of U.S. $500,000. Upon receiving this initial
payment, the seller will grant to the Representative of the
Company an irrevocable power-of-attorney over all twenty-five
(25) Claims.
(ii) The Company will pay to the seller cash in the amount of
U.S. $36,000 for each claim that the DNPM certifies is held
with priority, having good, clean and transferable title. See
"Description of Exploration and Mining Concessions" below.
(iii) The Company will issue to the seller 12,000 shares of
the Company Common Stock for each claim that DNPM certifies is
held with priority, having good, clean and transferable title.
(iv) The Company will issue to the seller a bonus payment of
50,000 shares of the Company Common Stock if and when the
seller transfers good and clean title to all twenty-five (25)
claims to the Company.
The initial payment of U.S. $500,000 has been made by the Company to
the seller. Hence, the Representative on behalf of the Company now
holds an irrevocable power of attorney over all such claims, which
entitles the Company, upon payment for such claims as hereinabove
provided, to transfer such claims to MBL or another subsidiary of
Toucan Mining. In December 1996, fourteen (14) of the twenty-five (25)
claims were certified by the DNPM as held in priority, with good, clean
and transferable title. In April 1997, two (2) additional claims were
certified by the DNPM as held in priority, with good, clean and
transferrable title. These sixteen (16) claims cover approximately
135,916 Ha. Accordingly, in December 1996, the Company made an
additional
CORPDAL:64048.5 29976-00001
8
<PAGE>
payment to the seller of U.S. $504,000 (14 x 36,000). In addition, the
Company is obligated to pay to seller $72,000 (2 x $36,000) and to
issue to the seller 193,000 (16 x 12,000) shares of the Company Common
Stock with respect to such claims. Legal title to these sixteen (16)
claims is in the process of being transferred to MBL pursuant to the
power-of-attorney.
If all remaining nine (9) claims are so certified by the DNPM, the
Company will pay to the seller an additional $324,000 and will issue to
the seller an additional 108,000 shares of the Company Common Stock,
and legal title to these claims will be transferred to MBL. There is no
assurance that these remaining claims will be certified by the DNPM and
transferred to the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION
Effective May 10, 1996, Starlight acquired all of the outstanding
capital stock of 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, 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 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 Common Stock.
The consolidated financial statements for the fiscal year ended
December 31, 1996, reflect the results of the Company's operations, which
consisted primarily of legal and consulting fees incurred by Toucan Mining with
respect to the Share Exchange and by the Company for the Reincorporation
transaction between Starlight and the Company, compliance with reporting
requirements of applicable securities laws, and financing and joint venture
transactions by the Company. In addition, Starlight and the Company incurred
travel and interest expense on short-term loans.
The Company intends to undertake 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. A mapping program based upon
satellite imagery will precede field investigation, which will include detailed
geologic mapping, geochemical sampling and drilling in accordance with standard
exploration practice. A program of this nature is likely to 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.
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.
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.
CORPDAL:64048.5 29976-00001
9
<PAGE>
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 $1,004,000 has been paid to date and 168,000
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. See "Item 1 and 2. Description of Business
and Property - Mining Claims" and "Item 5. Market for Common Equity and Related
Stockholder Matters - Recent Sales of Unregistered Securities."
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 in 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 has
expired by its terms. Eldorado has asserted the position that the Letter of
Intent constituted a binding agreement that it may seek to enforce if definitive
documents reflecting the terms of the Letter of Intent are not executed. The
Company believes that El Dorado's position is without merit.
Certain of the information contained in this Annual Report on Form
10-KSB 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.
ITEM 7. FINANCIAL STATEMENTS
Filed herewith beginning on page F-1 are the following audited
financial statements of the Company:
<TABLE>
<CAPTION>
Page No.
<S> <C>
Report of Independent Certified Public Accountants..............................................................F-2
Consolidated Balance Sheet as of December 31, 1996..............................................................F-3
Consolidated Statements of Operations for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995.....................................................F-4
Consolidated Statements of Stockholders' Equity for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995.....................................................F-5
Consolidated Statement of Cash Flows for the year ended December 31, 1996
and the period from November 3, 1995 to December 31, 1995.....................................................F-6
Notes to Financial Statements...................................................................................F-7
</TABLE>
CORPDAL:64048.5 29976-00001
10
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Toucan Gold Corporation
We have audited the accompanying consolidated balance sheet of Toucan Gold
Corporation, as of December 31, 1996, and the related statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1996 and
the period from November 3, 1995 (inception) to December 31, 1995. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note C, Toucan Gold Corporation is a development stage company
with a significant investment in unproven mineral rights. The Company is
undertaking a program of mineral exploration.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Toucan Gold
Corporation as of December 31, 1996, and the results of its operations and its
cash flows for the year ended December 31, 1996 and the period from November 3,
1995 (inception) to December 31, 1995, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Dallas, Texas
March 31, 1997
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash $2,031,045
Prepaid expenses 6,374
Total current assets 2,037,419
Mineral rights 1,691,442
$3,728,861
LIABILITIES AND STOCKHOLDERS' EQUITY
Amounts payable to related parties $ 9,051
Accrued expenses and other liabilities 29,311
Total current liabilities 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, 7,432,600 shares 74,326
Additional paid-in capital 4,050,679
Deficit accumulated during the development stage (434,506)
---------
Total stockholders' equity 3,690,499
$3,728,861
---------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1996 and the period from
November 3, 1995 to December 31, 1995
<TABLE>
<CAPTION>
For the period
November 3, 1995
(commencement
of operations)
through
1996 1995 December 31,1996
------ ------ ----------------
Cost and expenses
<S> <C> <C> <C>
Legal and professional fees $ 180,442 $ 2,500 $ 182,942
Travel and entertainment 114,264 42,553 156,817
Public relations 33,655 - 33,655
Other 31,452 9,120 40,572
------- ------ -------
Total cost and expenses 359,813 54,173 413,986
Other (income) expense
Foreign currency gain (1,342) (8,830) (10,172)
Interest income (17,650) - (17,650)
Interest expense 48,342 - 48,342
------- --- -------
Total other (income) expense 29,350 (8,830) 20,520
------- ------- -------
Net loss $ 389,163 $ 45,343 $ 434,506
======== ======= ========
Loss per share $.09 $.07 $.09
=== === ===
Weighted average shares outstanding 4,210,334 647,857 4,858,191
========= ======= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1996 and the period from
November 3, 1995 to December 31, 1995
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during
Common stock paid-in development
Shares Amount capital stage Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at November 3, 1995 - $ - $ - $ - $ -
Issuance of common stock 647,857 96,170 - - 96,170
Net loss - - - (45,343) (45,343)
--- --- --- -------- --------
Balance at December 31, 1995 647,857 96,170 - (45,343) 50,827
Recapitalization of Toucan Mining
Limited and merger with Starlight
Acquisitions, Inc. 4,453,602 (50,787) 150,787 - 100,000
Issuance of common stock, net of
expenses of $519,700 2,331,141 28,943 3,899,892 - 3,928,835
Net loss - - - (389,163) (389,163)
--- --- --- -------- ---------
Balance at December 31, 1996 7,432,600 $ 74,326 $4,050,679 $(434,506) $3,690,499
========= ======= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 1996 and the period from
November 3, 1995 to December 31, 1995
<TABLE>
<CAPTION>
For the period
November 3, 1995
(commencement
of operations)
through
1996 1995 December 31,1996
------ ------ ----------------
Operating activities
<S> <C> <C> <C>
Net loss $ (389,163) $ (45,343) $ (434,506)
Net changes in operating assets and liabilities
Prepaid expenses 1,626 (8,000) (6,374)
Accrued expenses (11,289) 40,600 29,311
-------- ------- -------
Net cash used in operating activities (398,826) (12,743) (411,569)
Investing activities
Acquisition of mineral rights (1,235,912) (119,530) (1,355,442)
Financing activities
Net repayments/borrowings from related parties (72,260) 81,311 9,051
Issuance of common stock, net of expenses 3,624,835 64,170 3,689,005
Proceeds from merger with Starlight Acquisitions, Inc. 100,000 - 100,000
-------- --- --------
Net cash provided by financing activities 3,652,575 145,481 3,798,056
---------- -------- ----------
Net increase in cash 2,017,837 13,208 2,031,045
Cash at beginning of period 13,208 - -
------- --- --
Cash at end of period $ 2,031,045 $ 13,208 $ 2,031,045
========== ======= ==========
Cash paid during the year for:
Interest $ 48,342 $ -
<FN>
Noncash investing and financing activities:
Mineral rights were acquired for 168,000 shares of common stock valued at
$336,000.
In 1995, Toucan Mining Limited issued 135,000 shares, valued at $22,500 to certain suppliers of goods and
services in lieu of cash payments.
</FN>
</TABLE>
F-6
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - ORGANIZATION AND NATURE OF OPERATIONS
Organization
Starlight Acquisitions, Inc. (Starlight) was formed in 1989 and was a
publicly-held development stage company with no principal operations since
its incorporation. On May 10, 1996, Starlight merged with Toucan Mining
Limited (Toucan Mining), an Isle of Man corporation which began operations
on November 3, 1995. Pursuant to the terms of the merger agreement, each
stockholder of Toucan Mining received seven shares of Starlight common
stock for each share of Toucan Mining common stock. Immediately after the
merger, the stockholders of Toucan Mining owned approximately 89% of the
outstanding common stock of Starlight. Therefore, the merger has been
accounted for as a reverse merger, whereby Toucan Mining is deemed for
accounting purposes to have acquired Starlight.
During July 1996, Starlight formed Toucan Gold Corporation (Toucan Gold or
the Company), a wholly-owned subsidiary and a Delaware corporation. On July
29, 1996, Starlight merged into Toucan Gold, and pursuant to the terms of
the merger, the outstanding shares of Starlight were canceled in exchange
for shares of Toucan Gold. (See Note F)
Nature of Operations
The Company is engaged in acquiring, exploring and developing mineral
rights in Brazil.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Toucan Mining and Mineradora de Bauxita
Ltda. (MBL), a Brazilian company whose shares are held in trust by a
Brazilian related party for the benefit of Toucan Mining. All material
intercompany accounts and transactions have been eliminated.
Mineral Rights
Acquisition costs of mineral rights and related exploration and development
expenditures are deferred. If deferred expenditures exceed estimated net
realizable values, the assets will be written down to their estimated net
realizable values. Costs relating to abandoned properties will be
written-off when such a decision is made.
F-7
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Financial Instruments
The carrying amounts reported in the balance sheet for cash, payables and
accrued expenses approximate fair value due to the short-term maturity of
these financial instruments.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE C - MINERAL RIGHTS
Mineral rights include the following as of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Consideration paid for priority claims $1,340,000
Other acquisition and exploration costs (Note D) 351,442
---------
$1,691,442
---------
</TABLE>
The Company owns priority claims for 1,234,948 hectares which were filed in
1995 with the Departamento Nacional De Produca Mineral (DNPM), the
Brazilian governmental agency responsible for regulating mineral rights.
The Company was not required to make any payments to the DNPM or third
parties in relation to the filing of these claims.
In November 1996, the Company entered into a transaction with a Brazilian
individual to acquire 25 additional priority claims, over a period of time,
as each of these claims were confirmed by the DNPM. As of December 31,
1996, the Company had acquired 14 of these claims, approximately 480 square
miles, in consideration for $1,004,000 in cash and 168,000 shares of common
stock, to be issued in 1997. The issuance of these shares has been
reflected as of December 31, 1996 in the accompanying financial statements.
The Company's current business plan includes undertaking a program of
mineral exploration to target and explore selected areas of its priority
claims to determine which areas are most likely to contain economic gold
reserves or to enter into joint ventures or other arrangements to explore
and develop mineral rights.
F-8
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE C - MINERAL RIGHTS - CONTINUED
The recoverability of amounts shown for mineral rights is dependent upon
the discovery of economically recoverable reserves, the ability of the
Company to obtain necessary financing to develop these mineral rights,
future profitable production, or proceeds from disposition of the rights.
NOTE D - RELATED PARTIES
From November 3, 1995 (inception) until November 1996, the Company's
activities were primarily financed by related parties in the form of
short-term loans. Advances and repayments during 1996 under the short-term
loans were $646,704 and $767,564, respectively. Interest expense paid to
related parties in relation to these loans was $48,342 and $-0- in 1996 and
1995, respectively.
Amounts payable to related parties consist of the following at December 31,
1996:
Stockholders $8,137
Other 914
-----
$9,051
-----
The loans from the stockholders are noninterest-bearing, unsecured and with
no specific maturity date. Other related party loans bear interest at 10%,
are unsecured and are due upon demand.
In 1996 and 1995, the Company made payments of approximately $307,000 and
$61,000, respectively, to five stockholders for various consulting services
including, geological surveys and advice, working with the DNPM to
establish beneficial ownership of the priority claims, Brazilian legal and
regulatory advice in relation to the priority claims, and the registration
of MBL. Included in these costs are approximately $318,000 which are
considered to be costs relating to the acquisition and exploration of
mineral rights and have been capitalized as mineral rights as of December
31, 1996.
NOTE E - PER SHARE DATA
Loss per share is determined by dividing net loss by the weighted average
number of common shares outstanding during the period.
F-9
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE F - STOCK WARRANTS
As described in Note A, Starlight's outstanding shares were cancelled in
exchange for shares of the Company. Additionally, Starlight warrants were
issued on May 10, 1996 to purchase an additional 100,000 shares of
Starlight common stock at an exercise price of $4.00 per share, which were
exchanged for the Company's warrants to purchase 100,000 shares of the
Company's common stock at an exercise price of $4.00 per share. The holders
of these warrants have certain piggy-back registration rights with respect
to the shares of the Company's common stock underlying the warrants. The
warrants are immediately exercisable and expire on the later of January 10,
1998, or the six month anniversary of closing of the first registration of
securities by the Company.
On November 1, 1996, the Company completed an offering of 1,600,000 units
for gross proceeds of $4 million. Each unit consisted of one share of
Company common stock, par value $.01 per share and one Company common stock
share purchase warrant (the "Company Warrants"). Each Company Warrant
entitles the holder to subscribe for one additional share of Company common
stock at a price of $3.50 per share at any time prior to the close of
business on the first anniversary of the original date of issue of the
Company Warrants, subject to adjustment in connection with certain
anti-dilution provisions.
NOTE G - INCOME TAXES
Income tax expense for the year ended December 31, 1996 and the period from
November 3, 1995 to December 31, 1995 differs from the amount computed by
applying the applicable U.S. corporate income tax rate of 34% to net loss
before taxes because a benefit has not been recorded for net operating loss
carryforwards. At December 31, 1996, the Company had approximately $172,000
of net operating loss carryforwards which expire through 2011. Toucan
Mining and MBL had approximately $223,000 and $36,000, respectively, of net
operating loss carryforwards at December 31, 1996.
The Company's deferred tax asset at December 31, 1996 and 1995 relating to
net operating loss carryforwards was approximately $147,000 and $15,000,
respectively. A valuation allowance for this asset has been recorded in
each period.
NOTE H - COMMITMENT AND CONTINGENCY
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 in 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 has expired by its terms. Eldorado has asserted the position that
the Letter of Intent constituted a binding agreement that it may seek to
enforce if definitive documents reflecting the terms of the Letter of
Intent are not executed. The Company believes that Eldorado's position is
without merit.
F-10
<PAGE>
TOUCAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE H - COMMITMENT AND CONTINGENCY - CONTINUED
Under an agreement with a Brazilian individual (Note C), the Company is
committed to acquire 11 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 11 claims are delivered to the Company.
F-11
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Removal of Former Certifying Accountant of Starlight
On May 10, 1996, the Board of Directors of Starlight removed Comiskey &
Company, P.C., as the Company's principal accountants.
None of the reports of Comiskey & Company, P.C. on the financial
statements of Starlight for either of the past two fiscal years contained an
adverse opinion or a disclaimer of opinion, or was qualified as to uncertainty,
audit scope, or accounting principles. During the Starlight's two most recent
fiscal years and the subsequent interim period preceding such resignation, there
were no disagreements with Comiskey & Company, P.C. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures. None of the reportable events listed in Item 304(a)(1)(iv) of
Regulation S-B promulgated by the Securities and Exchange Commission (the
"Commission") occurred with respect to Starlight and Comiskey & Company, P.C.
Pursuant to Item 304(a)(3) of Regulation S-B promulgated by the
Commission, Starlight has provided Comiskey & Company, P.C. with a copy of
Starlight's Current Report on Form 8-K dated May 13, 1996, which disclosed the
information in this Item 8 regarding the removal of Comiskey & Company as
Starlight's principal accountants, and Comiskey & Company, P.C. has provided to
Starlight a response addressed to the Commission as to Comiskey & Company,
P.C.'s agreement with the statements made in such Current Report dated May 13,
1996 with respect to Comiskey & Company, P.C. Comiskey & Company, P.C.'s
response letter is incorporated by reference to this Form 10- KSB.
Engagement of New Certifying Accountant of Company
On August 1, 1996, Grant Thornton LLP was engaged as the certifying
accountants of the Company. This appointment was unanimously approved by the
Board of Directors of the Company during a meeting of the Board of Directors
held that same day.
During the Company's two most recent fiscal years and the subsequent
interim period prior to its engagement, Grant Thornton LLP was not consulted
regarding any of the items, events or circumstances listed in Item 304(a)(2) of
Regulation S-B, except that Starlight, the predecessor corporation to the
Company, consulted with Grant Thornton LLP as to the accounting treatment of the
Merger as defined and discussed in Items 1 and 2 hereof. Grant Thornton LLP
advised Starlight that accounting treatment similar to a pooling would be
available with respect to the Merger and that, except to reflect the changes in
par value, the Company's financial statements would be substantially similar to
Starlight's financial statements immediately prior to the Merger.
Neither Starlight's former accountant nor Toucan Mining's former
accountant was consulted by the Company regarding any such issues.
Pursuant to Item 304(a)(2)(D) of Regulation S-B, the Company has
requested Grant Thornton LLP to review the disclosure concerning Grant Thornton
LLP in the Company's Current Report on Form 8-K dated July 29, 1996, which
disclosed the information in this Item 8 regarding the engagement of a new
certifying accountant of the Company, and has provided Grant Thornton LLP the
opportunity to furnish the Company a letter addressed to the Commission
containing any new information, clarification of the Company's expression of its
views, or the respects in which it does not agree with the statements by the
Company made in such Current Report dated July 29, 1996 in response to Item
304(a)(2)(D) of Regulation S-B. Grant Thornton LLP reviewed the information
provided in response to such Current Report dated July 29, 1996 and has advised
the Company that it does not have any new information or clarification of the
Company's views and it agrees with the statements made by the Company under such
Current Report dated July 29, 1996.
Resignation of Former Certifying Accountant of Toucan Mining
On July 21, 1996, the Board of Directors of Toucan Mining accepted the
resignation of Deloitte & Touche as the certifying accountants of Toucan Mining.
Deloitte & Touche has never been the certifying accountants of the Company or
its predecessor Starlight.
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Toucan Mining is a significant subsidiary of the Company; however,
neither the Company's nor Starlight's certifying accountants ever expressed
reliance on Deloitte & Touche's report with respect to Toucan Mining in their
reports. Accordingly, the Company does not believe it is required to report the
resignation of Deloitte & Touche as the certifying accountant of Toucan Mining.
The Company voluntarily reported that the report submitted by Deloitte & Touche
on the financial statements of Toucan Mining for the fiscal period beginning
with inception (November 3, 1995) and ending March 31, 1996 (the "Report"), did
not contain an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope, or accounting principles, as set forth
in Item 304(a)(1)(ii) of Regulation S-B, except that the Report contained the
following going concern qualifications:
The accompanying financial statements have been prepared assuming that
Toucan Mining Limited will continue as a going concern. Toucan Mining
Limited is a development stage enterprise engaged in the development of
mineral rights in Brazil. As discussed in Note 1 to the accounts,
Toucan Mining Limited is in the initial stage of exploration and it is
not possible to ascertain whether future revenues will be sufficient to
allow Toucan Mining Limited to continue as a going concern. The
consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
During such fiscal period of Toucan Mining, there were no disagreements with
Deloitte & Touche on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure as set forth in Item
304(a)(1)(iv) of Regulation S-B. None of the reportable events listed in Item
304(a)(1)(iv)(B) or 304(b) of Regulation S-B occurred with respect to Toucan
Mining or the Company and Deloitte & Touche.
Pursuant to Item 304(a)(3) of Regulation S-B, the Company and Toucan
Mining have provided Deloitte & Touche with a copy of the Company's Current
Report on Form 8-K, dated July 29, 1996, which disclosed the information in this
Item 8 regarding the resignation of Deloitte & Touche as Toucan Mining's
certifying accountant, and Deloitte & Touche has provided to Toucan Gold and
Toucan Mining a response addressed to the Securities and Exchange Commission as
to Deloitte & Touche's agreement with the statements made in such portion of the
Current Report on Form 8-K dated July 29, 1996 with respect to Deloitte &
Touche. Deloitte & Touche's response letter incorporated by reference to this
Form 10-KSB.
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Board of Directors currently consists of four (4) persons, Oliver
Lennox-King, Robert P. Jeffcock, L. Clark Arnold, and Don Box. The following
table sets forth information about all directors and executive officers of the
Company and all persons nominated or chosen to become such:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AND BUSINESS ADDRESS AGE OFFICE DIRECTOR
------------------------- --- ------ --------
<S> <C> <C> <C>
Oliver Lennox-King 48 Director, President and Chief Executive 1997
26 Wellington Street Officer
Suite 905
Toronto, Ontario CANADA
Robert P. Jeffcock 58 Chairman of the Board of Directors and Vice 1996
Apt. B42 ROC Fleuri President-Chief Financial Officer, and
1 Rue du Tenao MONACO Secretary
L. Clark Arnold 57 Director and Executive Vice President- 1996
201 East Rudasill Road Exploration
Tucson, Arizona
Don Box 47 Director and Assistant Secretary 1996
8201 Preston Road, Suite 600
Dallas, Texas
</TABLE>
Oliver Lennox-King - Mr. Lennox-King has served as the Director,
President and Chief Executive Officer of the Company since February 1, 1997. Mr.
Lennox-King has considerable experience with small to medium size gold
exploration companies based in Canada. Mr. Lennox-King is a founder of Tiomin
Resources, Inc. and served as a director and the Chief Executive Officer of
Tiomin Resources, Inc. from 1991 through 1996. Tiomin Resources, Inc. was
involved in copper and titanium exploration in Panama, Canada and Kenya.
Robert Jeffcock - Mr. Jeffcock has served as the Chairman of the Board
of Directors, Chief Financial Officer and Secretary of the Company since the
date of the Share Exchange (May 10, 1996), and also served as President and
Chief Executive Officer of the Company from the date of the Share Exchange until
December 31, 1996. Since 1995, Mr. Jeffcock has been a Director of TML. From
1987 until 1990 Mr. Jeffcock was the Managing Director of Blue Angel Mining
Ltd., a gold exploration company in Ecuador and from 1990 until 1994 he was a
director of Atlantis Diamonds Ltd., which was involved in diamond exploration
and production in Brazil. From 1990 until 1994, Mr. Jeffcock was President of
Rand Industries Inc., a mining company. In 1981, Mr. Jeffcock was the co-founder
and President of Isle Resources Inc., a public oil and gas company. In 1984, Mr.
Jeffcock co-founded Lysander Petroleum Ltd., which is now Melrose Energy Plc.
Mr. Jeffcock was educated at Bedales School and at Aiglon School Villars,
Switzerland.
L. Clark Arnold - Mr. Arnold has served as a Director and Executive
Vice President-Exploration of the Company since the date of the Share Exchange.
Mr. Arnold is a registered professional geologist in the State of Arizona. Since
the mid-1970s Mr. Arnold has engaged in a consulting practice located in Tucson,
Arizona, focused on mineral exploration in Southwest U.S., South America and the
Southwest Pacific. Mr. Arnold holds a MS Degree and a Pd.D. Degree in Geology,
both from the University of Arizona.
Don Box - Mr. Box has served as a Director and Assistant Secretary of
the Company since the date of the Share Exchange. Mr. Box has served as the
Chairman of the Board of Directors of Box Energy Corporation, a public company
owning oil and gas interests in the Gulf of Mexico and mainland U.S., since
1993. Since 1992 Mr. Box has been President and a Director of Box Brothers
Holding Company ("Box Brothers"), which is engaged in the oil and gas
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<PAGE>
business. Box Brothers underwent a plan of reorganization pursuant to Chapter 11
of the U.S. Bankruptcy Code in Federal Bankruptcy Court in Delaware in 1995.
Since 1988, Mr. Box has been the President of CKB Petroleum, which is engaged in
the oil and gas business. Since 1984, Mr. Box has been the President of CKB
Petroleum, which is engaged in the oil and gas business. From 1990 until 1996
Mr. Box was President of Race Circuit Management of Texas, which is engaged in
motor sports promotion. Mr. Box holds a Bachelor of Arts degree from the
University of Pennsylvania, a Bachelor of Science degree in Economics from the
Warton School of Business and a Masters degree in Business Administration from
Southern Methodist University.
The Company is not aware of any "family relationships" (as defined in
Item 401(c) of Regulation S-B promulgated by the Commission) among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
The Company is not aware of any event (as listed in Item 401(d) of
Regulation S-B promulgated by the Commission) that occurred during the past five
years that are material to an evaluation of the ability or integrity of any
director, person nominated to become a director, executive officer, promoter or
control person of the Company.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer during the fiscal year ended December 31, 1996; no
executive officer earned in excess of $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
YEAR
NAME/PRINCIPAL ENDING OTHER ANNUAL
POSITION DECEMBER 31 SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
ROBERT P. JEFFCOCK, CEO 1994 N/A N/A N/A
1995 N/A N/A N/A
1996 $32,000 $ 0 $ 0
</TABLE>
EFFECTIVE FEBRUARY 1, 1997, OLIVER LENNOX-KING WAS ELECTED THE
PRESIDENT OF THE COMPANY AND A DIRECTOR OF THE COMPANY PURSUANT TO AN AGREEMENT
IN WHICH MR. LENNOX-KING IS ENTITLED TO AN ANNUAL SALARY OF $100,000 (CANADIAN)
AND WAS GRANTED OPTIONS TO PURCHASE 500,000 SHARES OF COMPANY COMMON STOCK AT AN
EXERCISE PRICE OF $2.50 PER SHARE. THE OPTIONS ARE EXERCISABLE OVER A PERIOD OF
FIVE YEARS AND WILL VEST, SUBJECT TO MR. LENNOX-KING'S CONTINUED EMPLOYMENT
DURING THAT FIVE-YEAR PERIOD AS FOLLOWS: 166,000 SHARES VESTED AS OF FEBRUARY 1,
1997; 166,000 SHARES WILL VEST ON FEBRUARY 1, 1998 AND THE REMAINING 168,000
SHARES WILL VEST ON FEBRUARY 1, 1999. THE COMPANY AND MR. LENNOX-KING ARE IN THE
PROCESS OF NEGOTIATING AN EMPLOYMENT AGREEMENT REFLECTING, INTER ALIA, THESE
TERMS.
HAYDN SILLECK WAS THE PRESIDENT OF STARLIGHT FROM JANUARY 1, 1996 UNTIL
HIS RESIGNATION, EFFECTIVE MAY 10, 1996, THE EFFECTIVE DATE OF THE SHARE
EXCHANGE AGREEMENT. MR. SILLECK RECEIVED NO COMPENSATION FOR SERVICE AS THE
PRESIDENT OF STARLIGHT DURING 1996.
THE DIRECTORS OF THE COMPANY RECEIVED NO DIRECTOR'S FEES FOR SERVICE AS
A DIRECTOR OF THE COMPANY. EACH DIRECTOR (THE "PRIOR DIRECTORS") OF STARLIGHT IN
1996 PRIOR TO SHARE EXCHANGE AGREEMENT WAS PAID DIRECTORS FEES IN 1996 IN THE
AMOUNT OF $1,200.00.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on April 7,
1997, information as to the beneficial ownership of shares of the Company Common
Stock for all directors, each of the named executive officers (as defined in
Item 402(a)(2) of Regulation S-B promulgated by the Securities and Exchange
Commission), for all directors and executive officers as a group, and any person
or "group" (as that term is defined in Item 403 of Regulation S-B promulgated by
the Securities and Exchange Commission) who or which is known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of Company
Common Stock. In addition, except as set forth below, the Company does not know
of any person or group who or which owns beneficially more than 5% of its
outstanding shares of Company Common Stock as of the close of business on April
7, 1997.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 7, 1997 by (i) each person
known by the Company to own more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors and executive officers, and (iii) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT
NUMBER OF PERSONS IN GROUP OWNER(1) OF CLASS(2)
<S> <C> <C>
Robert P. Jeffcock(3)(5)............................................. 0 *
Don D. Box(3)........................................................ 0 *
Oliver Lennox-King(3)(4)............................................. 166,000 2.3
L. Clark Arnold(3)................................................... 420,000 5.8
Caithness Limited(5)................................................. 1,082,445 14.9
Zalcany Limited(6)................................................... 504,000 6.9
Roy G. Williams(6)(7)................................................ 756,000 10.4
Reeds Trustees Limited(5)............................................ 1,671,453 23.1
J. P. Jeffcock No. 2 Settlement(5)................................... 484,008 6.7
Carlos Lins E. Silva(8).............................................. 210,000 2.9
Igor Mousasticoshvily(8)............................................. 210,000 2.9
All directors and executive
officers as a group (4 persons)...................................... 586,000 8.1
<FN>
* Less than 1%
(1) The persons named in this table have record ownership of such
shares and except as indicated in the footnotes to this table,
the persons name in the table have sole voting power with
respect to shares shown as beneficially owned by them.
(2) Based on 7,264,600 shares of Company Common Stock outstanding.
(3) Director and officer of the Company.
(4) Includes an option to acquire 166,000 shares of Common Stock
that is presently exercisable. Does not include options to
purchase 334,000 shares of Common Stock that are not
exercisable within 60 days of the date hereof.
(5) Reads Trustees Limited, as trustee, has sole voting and
investment control with respect to the shares held by the
following shareholders: Caithness Limited (1,082,445); J.P.
Jeffcock No. 2 Settlement (484,008); The Magnum Trust
(105,000). Peter Edward Francis Newbald, a director of Reads
Trustees Limited, owns individually, beneficially and of
record, 211,570 shares.
Mr. Robert Jeffcock is included in a class of potential
beneficiaries in a Trust which owns Caithness Limited.
(6) Zalcany Limited is a company ultimately controlled and owned
by Mr. R.G. Williams, Mr. R.M. Harris and Mr. J.D. Harris.
Together they effectively share the voting and investment
power of the shares in the Company held by Zalcany Limited.
Each of R.M. Harris and J.D. Harris owns individually,
beneficially and of record, 42,000 shares.
(7) Mr. R.G. Williams' family owns the equity share capital of
Mustardseed Estates Limited. Accordingly, Mr. R.G. Williams
controls or shares voting investment power over the following
shareholders: R.G. Williams (42,000); Zalcany Limited
(504,000); and Mustardseed Estates Limited (210,000).
(8) Officer of MBL, the principal mining subsidiary of the
Company.
</FN>
</TABLE>
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<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Prior Directors of Starlight received the Starlight Warrants in
consideration of, among other things, their agreement to indemnify Toucan Mining
and Starlight with respect to certain representations in the Share Exchange
Agreement and the cancellation of their prior warrants to purchase Starlight
Common Stock. See "Items 1 and 2. Description of Business and Property - The
Share Exchange." Each Prior Director (except Peter Daly) also received in 1996
consulting fees in the amount of $2,000.00 for certain consulting services
provided by the Prior Directors to Starlight prior to or in connection with the
Share Exchange.
Cardinal Holdings, a company affiliated with Roy G. Williams, made two
unsecured loans to the Company to permit the Company to fund the Initial Payment
with respect to the November 1996 agreement with the Brazilian individual to
acquire additional mining claims in the Cuiaba Basin prior to the consummation
of the Yorkton Offering. See "Items 1 and 2. Description of Business and
Property - Mining Claims." One loan was made in October 18, 1996 in the
principal amount of $100,000 at an interest ate of 10% per annum plus a
commitment fee of $10,000. The other loan was made on October 23, 1996 in the
principal amount of $400,000 at an interest rate of 10% per annum plus a
commitment fee of $20,000. Both loans were repaid by the Company on November 15,
1996.
Certain officers of the Company or MBL received consulting fees for
various consulting services as follows:
Mr. Arnold, Vice President - Exploration of the Company, received in
1996 fees totaling $22,368.00 in return for geological consulting services. In
addition, Mr. Arnold received payment for $4,571.64 in fees for geological
consulting services in the form of shares of Toucan Mining Limited capital
stock, which shares were exchanged into shares of Starlight Common Stock in the
Share Exchange.
In addition, Igor Mousasticoshvily, an officer of MBL, received in 1996
fees totaling $158,503 for geological and general consulting services. Carlos E.
Lins e Silva, an officer of MBL, received in 1996 fees totaling $50,000 for
certain success fees in connection with certain transactions.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Merger, dated July 29, 1996, and among
Toucan Gold Corporation and Starlight Acquisitions, Inc.
(incorporated by reference from the Current Report on Form 8-K
dated July 29, 1996, Exhibit 2.1).
2.2 Share Exchange Agreement, dated May 10, 1996, by and among
Starlight Acquisitions, Inc. and Toucan Mining Limited
(incorporated by reference from the Current Report on Form 8-K
dated May 13, 1996, Exhibit 2).
3.1 Certificate of Incorporation of Toucan Gold Corporation filed on
July 22, 1996 with the Secretary of State of the State of
Delaware (incorporated by reference from the Current Report on
Form 8-K dated July 29, 1996, Exhibit 4.1).
3.2* Bylaws of Toucan Gold Corporation.
10.1* Warrant Agreement, dated July 29, 1996, by and between Toucan
Gold Corporation and R. Haydn Silleck.
10.2* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and John B. Marvin.
10.3* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and Peter S. Daley.
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10.4* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and Jay Lutsky.
10.5 Indemnification Agreement, dated May 10, 1996, by and between R.
Haydn Silleck, John B. Marvin, Peter S. Daley, Jay Lutsky,
Starlight Acquisitions, Inc. and Toucan Mining Limited
(incorporated by reference from the Current Report on Form 8-K
dated May 13, 1996, Exhibit 10.2).
10.6 Letter of Intent, dated August 23, 1996, by and among Toucan Gold
Corporation, Toucan Mining Limited, HRC Development Corporation
and Eldorado Gold Corporation (Schedule A to the Letter of Intent
has been omitted pursuant to Item 601(b)(2) of Regulation S-B)
(incorporated by reference from the Current Report on form 8-K ,
dated August 23, 1996, Exhibit 10).
10.7 Agreement with Yorkton Securities, Inc., dated October 17, 1996
(incorporated by reference from the Current Report on form 8-K,
dated October 21,1 996, Exhibit 10).
10.8 Amendment to the Agreement with Yorkton Securities, Inc., dated
October 23, 1996 (incorporated by reference from the Current
Report on Form 8-K, dated October 29, 1996, Exhibit 10.2).
16.1 Statement from Comiskey & Company, P.C. regarding change in
certifying accountants (incorporated by reference from the
Current Report on Form 8-K dated May 13, 1996, Exhibit 16).
16.2 Statement from Deloitte & Touche regarding change in certifying
accountants (incorporated by reference from the Current Report on
Form 8-K dated July 29, 1996, Exhibit 16-1).
21* Subsidiaries of the Company.
22.1* Notice and Proxy Statement dated July 16, 1996.
22.2* Form of Supplement, dated July 19, 1996, to Notice and Proxy
Statement, dated July 16, 1996.
27* Financial Data Schedules.
*Filed herewith
(b) Reports on Form 8-K
The Company filed the following Reports on Form 8-K during the last
quarter of the Company's fiscal year ended December 31, 1996:
(i) On October 21, 1996, the Company filed a Current Report on
Form 8-K reporting the execution of a placement agreement (the
"Placement Agreement") with Yorkton Securities Inc. with
respect to an offering (the "Offering") pursuant to Regulation
S of the Securities Act of 1,200,000 units (the "Units") to
raise gross proceeds up to $3 million.
(ii) On October 29, 1996, the Company filed a Current Report on
Form 8-K/A reporting an amendment to the Placement Agreement
increasing the size of the Offering to 1,600,000 Units to
raise gross proceeds up to $4 million.
(iii) On November 1, 1996, the Company filed a Current Report on
Form 8-K in which the Company reported on a Regulation S
offering raising net proceeds of approximately $3.6 million.
(iv) On November 14, 1996, the Company filed a Current Report on
Form 8-K reporting the consummation of the sale of 1,600,000
Units in the Offering at a purchase price of $2.50 per Unit,
which raised gross proceeds of $4 million. Each Unit had a
purchase price of $2.50 and consisted of one share of common
stock and a warrant to purchase one share of common stock at
an exercise price of $3.50.
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<PAGE>
(v) On December 19, 1996, the Company filed a Current Report on
Form 8-K in which the Company reported on (A) the payment by
the Company of $504,000 to the seller (the "Seller") of mining
claims; and (B) the Company's obligation to issue to the
Seller 168,000 shares of Company Common Stock.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this annual report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.
Toucan Gold Corporation
(Registrant)
Date: April 30, 1997 By:/s/ Oliver Lennox-King
----------------------
Oliver Lennox-King, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report on Form 10-KSB has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE OFFICE DATE
------------- ---------- --------
<S> <C> <C>
/s/ Oliver Lennox-King Director, President and Chief Executive Officer April 30, 1997
- ------------------------------------ (Principal Executive Officer)
Oliver Lennox-King
/s/ Robert P. Jeffcock Chairman of the Board of Directors, Director April 30, 1997
- ------------------------------------ and Vice President-Chief Financial Officer
Robert P. Jeffcock (Principal Financial Officer)
/s/ L. Clark Arnold Director and Executive Vice President- April 30, 1997
- ------------------------------------ Exploration
L. Clark Arnold
/s/ Don Box Director and Assistant Secretary April 30, 1997
- ------------------------------------
Don Box
</TABLE>
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<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
PURSUANT TO SECTION 15(D) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
The Company hereby furnishes the Securities and Exchange Commission
(the "Commission") for its information, at the time of filing of the Company's
annual report on Form 10-KSB, four (4) copies of the following documents (the
"Proxy Materials"):
1. Notice and Proxy Statement, dated July 16, 1996, and Form of Proxy; and
2. Supplement, dated July 19, 1996, to Notice and Proxy Statement dated
July 16, 1996, and Amended Form of Proxy.
The foregoing documents shall not be considered "filed" or subject to
the liabilities of Section 18 of the Exchange Act as the Company specifically
has not incorporated the Proxy Materials in this Company's annual report on Form
10- KSB.
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<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Merger, dated July 29, 1996, and among
Toucan Gold Corporation and Starlight Acquisitions, Inc.
(incorporated by reference from the Current Report on Form
8-K dated July 29, 1996, Exhibit 2.1).
2.2 Share Exchange Agreement, dated May 10, 1996, by and among
Starlight Acquisitions, Inc. and Toucan Mining Limited
(incorporated by reference from the Current Report on Form
8-K dated May 13, 1996, Exhibit 2).
3.1 Certificate of Incorporation of Toucan Gold Corporation
filed on July 22, 1996 with the Secretary of State of the
State of Delaware (incorporated by reference from the
Current Report on Form 8-K dated July 29, 1996, Exhibit
4.1).
3.2* Bylaws of Toucan Gold Corporation.
10.1* Warrant Agreement, dated July 29, 1996, by and between
Toucan Gold Corporation and R. Haydn Silleck.
10.2* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and John B. Marvin.
10.3* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and Peter S. Daley.
10.4* Warrant Agreement dated July 29, 1996, by and between Toucan
Gold Corporation and Jay Lutsky.
10.5 Indemnification Agreement, dated May 10, 1996, by and
between R. Haydn Silleck, John B. Marvin, Peter S. Daley,
Jay Lutsky, Starlight Acquisitions, Inc. and Toucan Mining
Limited (incorporated by reference from the Current Report
on Form 8-K dated May 13, 1996, Exhibit 10.2).
10.6 Letter of Intent, dated August 23, 1996, by and among Toucan
Gold Corporation, Toucan Mining Limited, HRC Development
Corporation and Eldorado Gold Corporation (Schedule A to the
Letter of Intent has been omitted pursuant to Item 601(b)(2)
of Regulation S-B) (incorporated by reference from the
Current Report on form 8-K , dated August 23, 1996, Exhibit
10).
10.7 Agreement with Yorkton Securities, Inc., dated October 17,
1996 (incorporated by reference from the Current Report on
form 8-K, dated October 21,1 996, Exhibit 10).
10.8 Amendment to the Agreement with Yorkton Securities, Inc.,
dated October 23, 1996 (incorporated by reference from the
Current Report on Form 8-K, dated October 29, 1996, Exhibit
10.2).
16.1 Statement from Comiskey & Company, P.C. regarding change in
certifying accountants (incorporated by reference from the
Current Report on Form 8-K dated May 13, 1996, Exhibit 16).
16.2 Statement from Deloitte & Touche regarding change in
certifying accountants (incorporated by reference from the
Current Report on Form 8-K dated July 29, 1996, Exhibit
16-1).
21* Subsidiaries of the Company.
22.1* Notice and Proxy Statement dated July 16, 1996.
22.2* Form of Proxy Supplement, dated July 19, 1996 to Notice and
Proxy Statement, dated July 16, 1996.
27* Financial Data Schedule.
*Filed herewith
CORPDAL:64048.5 29976-00001
INDEX-1
TOUCAN GOLD CORPORATION
BYLAWS
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The corporation may also have offices at
such other places, either within or without the State of Delaware, as the board
of directors may from time to time to determine or as the business of the
corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.l. Place of Meetings. All meetings of the stockholders shall
be held at the office of the corporation or at such other places as may be fixed
from time to time by the board of directors, either within or without the State
of Delaware, and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1997, shall be held at the time and place to be
selected by the board of directors. If the day is a legal holiday, then the
meeting shall be held on the next following business day. At the meeting, the
stockholders shall elect a board of directors by written ballot and transact
such other business as may properly be brought before the meeting.
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Section 2.3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 2.4. Voting List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 2.5. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by (a) the chairman of the board, or
(b) the president and shall be called by the president or secretary at the
request in writing of a majority of the board of directors, or (c) by the
holders of ten percent or more of the outstanding shares of stock of the
corporation. Such request shall state the purpose or purposes of the proposed
meeting.
Section 2.6. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less than ten nor
more than sixty days before the date of the meeting, to each
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stockholder entitled to vote at such meeting. Business transacted at any special
meeting of the stockholders shall be limited to the purposes stated in the
notice.
Section 2.7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.8. Order of Business. At each meeting of the stockholders,
one of the following persons, in the order in which they are listed (and in the
absence of the first, the next, and so on), shall serve as chairman of the
meeting: president, chairman of the board, vice presidents (in the order of
their seniority if more than one) and secretary. The order of business at each
such meeting shall be as determined by the chairman of the meeting. The chairman
of the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments on the affairs
of the corporation,
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restrictions on entry to such meeting after the time prescribed for the
commencement thereof, and the opening and closing of the voting polls.
Section 2.9. Majority Vote. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes or of the certificate of incorporation, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 2.10. Method of Voting. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period.
ARTICLE 3
DIRECTORS
Section 3.1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors, which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by law or by the certificate of incorporation
of the corporation or by these Bylaws directed or required to be exercised or
done by the stockholders.
Section 3.2. Number of Directors. Except as otherwise fixed by or
pursuant to the provisions of Article 6 of the Certificate of Incorporation of
the corporation relating to the rights of the holders of any class or series of
stock having preference over the common stock as to dividends or upon
liquidation, the board of directors shall have not less than One (1) nor more
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than Nine (9) directors. The number of directors constituting the board shall be
such number as shall be from time to time specified by resolution of the board
of directors; provided, however, no director's term shall be shortened by reason
of a resolution reducing the number of directors; and further provided that the
number of directors constituting the initial board of directors shall be Four
(4) and, shall remain such number unless and until changed by resolution of the
board of directors aforesaid.
Section 3.3. Election Qualification and Term of Office of Directors.
Directors shall be elected at each annual meeting of stockholders to hold office
until the next annual meeting. Directors need not be stockholders unless so
required by the certificate of incorporation or these Bylaws, wherein other
qualifications for directors may be prescribed. Each director, including a
director elected to fill a vacancy, shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Elections of
directors need not be by written ballot.
Section 3.4. Notification of Nominations. Subject to the rights of the
holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the board of directors or by any stockholder entitled
to vote for the election of directors. Any stockholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such stockholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the secretary of the corporation not later than (i) with
respect to an election to be held at an annual meeting of stockholders, ninety
days in advance of such meeting, and (ii) with respect to an election to be held
at a special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth: (a) the
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name and address of the stockholder who intends to make the nomination and of
the person or persons intended to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the board of directors; and (e) the consent of
each nominee to serve as a director of the corporation if so elected. The
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
Section 3.5. First Meetings. The first meeting of each newly elected
board of directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
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Section 3.6. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such times and at such places as shall
from time to time be determined by the board.
Section 3.7. Special Meetings. Special meetings of the board may be
called by the chairman of the board or the president, and shall be called by the
president or secretary on the written request of two directors unless the board
consists of only one director, in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
Section 3.8. Quorum, Majority Vote. At all meetings of the board, a
majority of the entire board of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 3.9. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the board or committee.
Section 3.10. Telephone and Similar Meetings. Unless otherwise
restricted by the certificate of incorporation or these Bylaws, members of the
board of directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any
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committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
Section 3.11. Notice of Meetings. Notice of regular meetings of the
board of directors or of any adjourned meeting thereof need not be given. Notice
of each special meeting of the board shall be mailed to each director, addressed
to such director at such director's residence or usual place of business, at
least two days before the day on which the meeting is to be held or shall be
sent to such director at such place by telegraph or be given personally or by
telephone, not later than the day before the meeting is to be held, but notice
need not be given to any director who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice to such
director. Every such notice shall state the time and place but need not state
the purpose of the meeting.
Section 3.12. Rules and Regulations. The board of directors may adopt
such rules and regulations not inconsistent with the provisions of law, the
certificate of incorporation of the corporation or these Bylaws for the conduct
of its meetings and management of the affairs of the corporation as the board
may deem proper.
Section 3.13. Resignations. Any director of the corporation may at any
time resign by giving written notice to the board of directors, the chairman of
the board, the president or the secretary of the corporation. Such resignation
shall take effect at the time specified therein or, if the time be not
specified, upon receipt thereof; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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Section 3.14. Removal of Directors. Unless otherwise restricted by
statute, by the certificate of incorporation or by these Bylaws, any director or
the entire board of directors may be removed, with or without cause by the
holders of a majority of the shares then entitled to vote at an election of
directors.
Section 3.15. Vacancies. Subject to the rights of the holders of any
class or series of stock having a preference over the common stock of the
corporation as to dividends or upon liquidation, any vacancies on the board of
directors resulting from death, resignation, removal or other cause, shall only
be filled by the affirmative vote of a majority of the remaining directors then
in office, even though less than a quorum of the board of directors, or by a
sole remaining director, and newly created directorships resulting from any
increase in the number of directors shall be filled by the board of directors,
or if not so filled, by the stockholders at the next annual meeting thereof or
at a special meeting called for that purpose in accordance with Section 2.5 of
Article II of these Bylaws. Any director elected in accordance with the
preceding sentence of this Section 3.14 shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such successor shall have been elected
and qualified.
Section 3.16.Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation or these Bylaws, the board of directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members
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of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE 4
EXECUTIVE AND OTHER COMMITTEES
Section 4.1. Executive Committee. The board of directors may, by
resolution adopted by a majority of the entire board, designate annually one (1)
or more of its members to constitute members or alternate members of an
executive committee, which committee shall have and may exercise, between
meetings of the board, all the powers and authority of the board in the
management of the business and affairs of the corporation, including, if such
committee is so empowered and authorized by resolution adopted by a majority of
the entire board, the power and authority to declare a dividend and to authorize
the issuance of stock, and may authorize the seal of the corporation to be
affixed to all papers which may require it, except that the executive committee
shall not have such power or authority with reference to:
(a) amending the certificate of incorporation of the corporation;
(b) adopting an agreement of merger or consolidation involving the
corporation;
(c) recommending to the stockholders the sale, lease or exchange of all or
substantially all of the property and assets of the corporation;
(d) recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution;
(e) adopting, amending or repealing any Bylaw;
(f) filling vacancies on the board or on any committee of the board,
including the executive committee;
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(g) fixing the compensation of directors for serving on the board or on
any committee of the board, including the executive committee; or
(h) amending or repealing any resolution of the board which by its terms
may be amended or repealed only by the board.
Section 4.2.Other Committees. The board of directors may, by resolution
adopted by a majority of the entire board, designate from among its members one
or more other committees, each of which shall, except as otherwise prescribed by
law, have such authority of the board as may be specified in the resolution of
the board designating such committee. A majority of all the members of such
committee may determine its action and fix the time and place of its meetings,
unless the board shall otherwise provide. The board shall have the power at any
time to change the membership of, to increase or decrease the membership of, to
fill all vacancies in and to discharge any such committee, or any member
thereof, either with or without cause.
Section 4.3. Procedure; Meetings; Quorum. Regular meetings of the
executive committee or any other committee of the board of directors, of which
no notice shall be necessary, may be held at such times and places as shall be
fixed by resolution adopted by a majority of the members thereof. Special
meetings of the executive committee or any other committee of the board shall be
called at the request of any member thereof. Notice of each special meeting of
the executive committee or any other committee of the board shall be sent by
mail, telegraph or telephone, or be delivered personally to each member thereof
not later than the day before the day on which the meeting is to be held, but
notice need not be given to any member who shall, either before or after the
meeting, submit a signed waiver of such notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of such notice to
such member. Any special meeting of the executive committee or any other
committee of the board
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shall be a legal meeting without any notice thereof having been given, if all
the members thereof shall be present thereat. Notice of any adjourned meeting of
any committee of the board need not be given. The executive committee or any
other committee of the board may adopt such rules and regulations not
inconsistent with the provisions of law, the certificate of incorporation of the
corporation or these Bylaws for the conduct of its meetings as the executive
committee or any other committee of the board may deem proper. A majority of the
executive committee or any other committee of the board shall constitute a
quorum for the transaction of business at any meeting, and the vote of a
majority of the members thereof present at any meeting at which a quorum is
present shall be the act of such committee. In the absence or disqualification
of a member, the remaining members, whether or not a quorum, may fill a vacancy.
The executive committee or any other committee of the board of directors shall
keep written minutes of its proceedings, a copy of which is to be filed with the
secretary of the corporation, and shall report on such proceedings to the board.
ARTICLE 5
NOTICES
Section 5.l. Method. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these Bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 5.2. Waiver. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE 6
OFFICERS
Section 6.1. Election, Qualification. The officers of the corporation
shall be chosen by the board of directors and shall be a president, one or more
vice presidents, a secretary and a treasurer. The board of directors may also
choose a chairman of the board, one or more assistant secretaries and assistant
treasurers and such other officers and agents as it shall deem necessary. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these Bylaws otherwise provide.
Section 6.2. Salary. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 6.3. Term, Removal. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
Section 6.4. Resignation. Subject at all times to the right of removal
as provided in Section 6.3 of this Article 6, any officer may resign at any time
by giving notice to the board of directors, the president or the secretary of
the corporation. Any such resignation shall take effect at the date of receipt
of such notice or at any later date specified therein; provided that the
president or, in the event of the resignation of the president, the board of
directors may designate
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an effective date for such resignation which is earlier than the date specified
in such notice but which is not earlier than the date of receipt of such notice;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 6.5. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term in the manner prescribed in these Bylaws for election to such
office.
Section 6.6. Chairman of the Board. The chairman of the board shall, if
there be such an officer, preside at meetings of the board of directors and, if
present, and in the absence of the president, preside at meetings of the
stockholders. The chairman of the board shall counsel with and advise the
president and perform such other duties as the president or the board or the
executive committee may from time to time determine. Except as otherwise
provided by resolution of the board, the chairman of the board shall be
ex-officio a member of all committees of the board. The chairman of the board
may sign and execute in the name of the corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the board of any committee thereof
empowered to authorize the same.
Section 6.7. President. The president shall be the chief executive
officer of the corporation, shall preside at all meetings of the stockholders
and the board of directors, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
board of directors are carried into effect. He shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.
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Section 6.8. Vice Presidents. In the absence of the president and the
chairman of the board or, in the event of their inability or refusal to act, the
vice president (or in the event there be more than one vice president, the vice
presidents in the order designated by the directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. The vice presidents shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
Section 6.9. Secretary. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 6.10. Assistant Secretary. The assistant secretary, or if there
be more than one, the assistant secretaries in the order determined by the board
of directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary
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and shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
Section 6.11. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 6.12. Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
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ARTICLE 7
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Third-Party Actions. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against all expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that such
person had reasonable cause to believe that his or her conduct was unlawful.
The corporation may indemnify any employee or agent of the corporation,
or any employee or agent serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, in the manner and to the extent that it shall indemnify any
director or officer under this Section 7.1.
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Section 7.2. Derivative Actions. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against all expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such person's duty to
the corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
Section 7.3. Determination of Indemnification. Any indemnification
under Section 7.1 or 7.2 of this Article 7 (unless ordered by a court) shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because such person has met the applicable
standard of conduct set forth in Section 7.1 or 7.2 of this Article 7. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding,
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even though less than a quorum, or (ii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(iii) by the stockholders.
Section 7.4. Right to Indemnification. Notwithstanding the other
provisions of this Article 7, to the extent that a director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 7.1 or 7.2 of
this Article 7, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 7.5. Advance of Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation on
behalf of a director, officer, employee or agent in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that such person is entitled to be indemnified by the
corporation as authorized in this Article 7.
Section 7.6. Indemnification Not Exclusive. The indemnification
provided by this Article 7 shall not be deemed exclusive of any other rights to
which any person seeking indemnification may be entitled under any law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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Section 7.7. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against liability under the provisions of this
Article 7.
Section 7.8. Definitions of Certain Terms. For purposes of this Article
7, references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article 7 with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
For purposes of this Article 7, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by such director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a
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manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article 7.
Section 7.9. Liability of Directors. Notwithstanding any provision of
the Certificate of Incorporation or any other provision herein, no director
shall be personally liable to the Corporation or any stockholder for monetary
damages for breach of fiduciary duty as a director, except for any matter in
respect of which such director shall be liable under Section 174 of Title 8 of
the Delaware Code (relating to the Delaware General Corporation Law) or any
amendment thereto or successor provision thereto or shall be liable by reason
that, in addition to any and all other requirements for such liability, he (i)
shall have breached his duty of loyalty to the Corporation or its stockholders,
(ii) shall not have acted in good faith, (iii) shall have acted in a manner
involving intentional misconduct or a knowing violation of law or, in failing to
act, shall have acted in a manner involving intentional misconduct or a knowing
violation of law or (iv) shall have derived an improper personal benefit.
ARTICLE 8
CERTIFICATES OF STOCK
Section 8.1. Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 8.2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile
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signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 8.3. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8.4. Transfers of Stock. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 8.5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose
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<PAGE>
of any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
Section 8.6. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE 9
AFFILIATED TRANSACTIONS
Section 9.1. Validity. Except as otherwise provided for in the
certificate of incorporation and except as otherwise provided in this Bylaw, if
Section 9.2 is satisfied, no contract or transaction between the corporation and
any of its directors, officers or security holders, or any corporation,
partnership, association or other organization in which any of such directors,
officers or security holders are directly or indirectly financially interested,
shall be void or voidable solely because of this relationship, or solely because
of the presence of the director, officer or security holder at the meeting
authorizing the contract or transaction, or solely because of his or their
participation in the authorization of such contract or transaction or vote at
the meeting therefor, whether or not such participation or vote was necessary
for the authorization of such contract or transaction.
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Section 9.2. Disclosure, Approval; Fairness. Section 9.1 shall apply
only if:
(a) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known:
(i) to the board of directors (or committee thereof)
and it nevertheless in good faith authorizes or ratifies the
contract or transaction by a majority of the directors
present, each such interested director to be counted in
determining whether a quorum is present but not in calculating
the majority necessary to carry the vote; or
(ii) to the stockholders and they nevertheless
authorize or ratify the contract or transaction by a majority
of the shares present at a meeting considering such contract
or transaction, each such interested person (stockholder) to
be counted in determining whether a quorum is present and for
voting purposes; or
(b) the contract or transaction is fair to the corporation as
of the time it is authorized or ratified by the board of directors (or
committee thereof) or the stockholders.
Section 9.3. Nonexclusive. This provision shall not be construed to
invalidate a contract or transaction which would be valid in the absence of this
provision.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
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Section 10.2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 10.3. Annual Statement. The board of directors shall present at
each annual meeting, and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 10.4. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 10.5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 10.6. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE 11
AMENDMENTS
Section 11.1. Amendments. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by a majority of the entire board of
directors, at any meeting of the board of directors if notice of such
alteration, amendment, repeal or adoption of new Bylaws be
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contained in the notice of such meeting. The stockholders of the corporation
shall have the power to adopt, amend or repeal any provisions of the Bylaws only
to the extent and in the manner provided in the certificate of incorporation of
the corporation.
CORPDAL:53745.1 29976-00001
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March 17, 1997
VIA CMRRR NO. P 115 327 044
Mr. R. Haydn Silleck
1328 Starwood Lane
Evergreen, Colorado 80439
Re: Toucan Gold Corporation (the "Company")
Dear John:
Enclosed herewith are the Warrant Agreement and Warrant Certificate,
which have been executed by the Company, that replace the Starlight Acquisition
Warrants. The material terms of the replacement warrant are identical to the
Starlight Acquisition Warrants.
Please do not hesitate to call me if you have any questions concerning
the foregoing.
Very truly yours,
/s/Mark D. Wigder
-----------------
Mark D. Wigder
MDW:sam
enclosures
CORPDAL:63158.1 29976-00001
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement"), dated as of July 29, 1996
(the "Effective Date"), is made by and between Toucan Gold Corporation, a
Delaware corporation (the "Company"), and R. Haydn Silleck (the
"Warrantholder").
The Company is the successor to Starlight Acquisitions, Inc., a
Colorado corporation ("Starlight"), pursuant to the reincorporation of Starlight
into the Company on the Effective Date (the "Reincorporation"). This Agreement
is being entered into pursuant to the terms of that certain Warrant Agreement,
dated May 10, 1996, by and between Starlight and each of Jay Lutsky, John B.
Marvin, R. Haydn Silleck and Peter S. Daley (the "Prior Warrant Agreement"),
which is being reissued in the form hereof as a result of the Reincorporation.
The Prior Warrant Agreement was issued in connection with the Share Exchange
Agreement, dated as of May 10, 1996, by and between Starlight and the
shareholders of Toucan Mining Limited.
The Company hereby agrees to issue to the Warrantholder, the warrants
hereinafter described (the "Warrants") to purchase an aggregate of 25,000 shares
(the "Warrant Shares") (subject to adjustment pursuant to SECTION 8 hereof) of
the Company's common stock, par value $0.01 per share (the "Common Shares"), at
an Exercise Price determined in accordance with SECTION 7 hereunder.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
SECTION 1. FORM OF WARRANT CERTIFICATES; TRANSFERABILITY OF WARRANTS.
1.1 FORM OF WARRANT CERTIFICATE. The Warrants shall be evidenced by a
certificate substantially as set forth in EXHIBIT A attached hereto (a "Warrant
Certificate"). The Warrant Certificate shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer or a Vice
President. A Warrant Certificate bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such office prior
to the delivery of such Warrant or did not hold such office on the date of this
Agreement. Each Warrant Certificate shall be numbered and registered on the
books of the Company when it is issued, and shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
1.2 TRANSFER. The Warrant Certificate shall be transferable only on the
books of the Company maintained at its principal office at 8201 Preston Road,
Suit 600, Dallas, Texas 75225, or wherever its principal executive offices may
then be located upon delivery thereof duly endorsed by the Warrantholder or its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant Certificate to the
person entitled
CORPDAL:61597.2 29976-00001
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thereto. All transfers shall be made subject to the provisions of SECTION 13
hereof. In the event the Warrants or any portion thereof are transferred, the
subsequent holder thereof shall have no greater rights than those afforded the
Warrantholder hereunder.
1.3 DIVISION OF WARRANTS. Subject to all federal and state securities
laws, a Warrant Certificate may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Warrant Shares. Unless the
context indicates otherwise, the term "Warrantholder" shall include any
transferee or transferees of the Warrants pursuant to this SUBSECTION 1.3, and
the term "Warrants" shall include any and all Warrants outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
SECTION 2. LEGEND ON WARRANT SHARES. Each certificate for Warrant
Shares initially issued upon exercise of the Warrant, unless at the time of
exercise such Warrant Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"), shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and applicable state securities laws, and may not be sold. exchanged,
hypothecated or transferred in any manner in the absence of such
registration or an exemption therefrom. The shares are subject to the
terms of a certain Warrant Agreement, dated July 29, 1996, pursuant to
which they were issued."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the Warrant Shares represented thereby) shall also bear the
above legend unless, in the opinion of counsel satisfactory to the Company, the
securities represented thereby need no longer be subject to such restrictions.
SECTION 3. TERM OF WARRANTS. Subject to the terms of this Agreement,
the Warrantholder shall have the right, at any time during the period commencing
at 9:00 a.m., Dallas, Texas time, on May 10, 1996, and ending at 5:00 p.m.,
Dallas, Texas time, on the later of (i) the eighteenth month anniversary of May
10, 1996, or (ii) the sixth month anniversary of the closing of the first
registration of the offering of the Company's securities pursuant to SECTION 10
hereof (the "Termination Date"), to purchase from the Company up to the number
of fully paid and nonassessable Warrant Shares that the Warrantholder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Warrants to
be exercised, duly completed and signed, and upon payment to the Company of the
Exercise Price (as defined in and determined in accordance with the provisions
of SECTIONS 7 AND 8 hereof), for the number of Warrant Shares in respect of
which such Warrants are then exercised, but in no event for less than 25 Warrant
Shares, unless the Warrant entitled the Warrantholder on exercise to less than
25 Warrant Shares, in which event the Warrant can be exercised for such lesser
number of Warrant Shares.
CORPDAL:61597.2 29976-00001
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SECTION 4. EXERCISE. Payment of the aggregate Exercise Price shall be
made in cash or by check. Upon surrender of the Warrant Certificates and payment
of such Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrants, together with cash, as provided in SECTION 9
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of the
Warrant Certificate and the payment of the Exercise Price, as aforesaid,
notwithstanding that the certificates representing the Warrant Shares shall not
actually have been delivered or that the stock transfer books of the Company
shall then be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a certificate evidencing the Warrants is exercised in respect of less than
all of the Warrant Shares specified therein at any time prior to the Termination
Date, a new certificate evidencing the remaining Warrants will be issued by the
Company.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATES. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, a new Warrant Certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrants and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
requirements and pay such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF WARRANT SHARES. There has been reserved, and
the Company shall at all times keep reserved so long as all or any portion of
the Warrants remains outstanding, out of its authorized Common Shares, such
number of Warrant Shares as shall be subject to purchase under such portion of
the Warrant that remains outstanding.
SECTION 7. EXERCISE PRICE. The price per Share (the "Exercise Price")
at which Warrant Shares shall be purchasable upon the exercise of the Warrant
shall be $4.00. The Exercise Price as determined hereunder shall be subject to
further adjustment pursuant to Section 8 hereof.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
8.1 GENERAL. The number of Warrant Shares purchasable upon the exercise
of the Warrants and the Exercise Price shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(A) In case the Company shall (i) pay a dividend in Common
Shares or make a distribution in Common Shares, (ii) subdivide its
outstanding Common Shares, (iii) combine its outstanding Common Shares
into a smaller number of Common Shares
CORPDAL:61597.2 29976-00001
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(by way of a reverse stock split or otherwise) or (iv) issue by
reclassification of its Common Shares other securities of the Company,
the number of Warrant Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company that it would have owned or would have
been entitled to receive after the happening of any of the events
described above, had the Warrants been exercised immediately prior to
the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this SUBSECTION 8.1(A) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(B) In case the Company shall issue rights, options, warrants
or convertible securities to all or substantially all of the holders of
its Common Shares, without any charge to such holders, entitling them
to subscribe for or purchase Common Shares at a price per share that is
lower at the record date mentioned below than the Exercise Price, the
number of Warrant Shares thereafter purchasable upon the exercise of
the Warrants shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of the Warrants by a
fraction, of which the numerator shall be the number of Common Shares
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional Common
Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares offered
would purchase at the Exercise Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities are
issued, and shall become effective immediately and retroactively after
the record date for the determination of shareholders entitled to
receive such rights, options, warrants or convertible securities.
(C) In case the Company shall distribute to all or
substantially all of the holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or distributions out
of earnings) or issue, to all or substantially all of such holders,
without any charge to such holders, rights, options, warrants or
convertible securities containing the right to subscribe for or
purchase Common Shares (excluding those referred to in PARAGRAPH (B)
above), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of the Warrants by a fraction, of which the numerator shall be
the Exercise Price on the date of such distribution, and of which the
denominator shall be the Exercise Price on such date minus the then
fair value of the portion of the assets or evidences of indebtedness so
distributed or of such rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on
the date of distribution retroactive to the record date for the
determination of shareholders entitled to receive such distribution.
CORPDAL:61597.2 29976-00001
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(D) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the aggregate number of
Warrant Shares then purchasable upon the exercise of the Warrants or,
if the Warrants are not then exercisable, the number of Warrant Shares
purchasable upon the exercise of the Warrants on the first date
thereafter that the Warrants become exercisable; provided however, that
any adjustments that by reason of this SUBSECTION 8.1(D) are not
required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(E) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided in this
SUBSECTION 8.1, the Exercise Price payable upon exercise of the
Warrants shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(F) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants or the Exercise Price is adjusted as herein
provided in this SUBSECTION 8.1, the Company shall cause to be promptly
mailed to the Warrantholder in accordance with the provisions or
SECTION 12 hereof, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of the Warrants and the Exercise Price
after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(G) For the purpose of this SUBSECTION 8.1, the term "Common
Shares" shall mean (i) the class of shares designated as the Common
Shares of the Company at the date of this Agreement or (ii) any other
class of shares resulting from successive changes or reclassifications
of such Common Shares including changes in par value, or from par value
to no par value, or from no par value to par value, in the event that
at any time, as a result of an adjustment made pursuant to this SECTION
8, the Warrantholder shall become entitled to purchase any shares of
the Company other than Common Shares, thereafter the number of such
other shares so purchasable upon exercise of the Warrants and the
Exercise Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions of this SECTION 8.
(H) Upon the expiration of any rights, options, warrants or
conversion privileges referred to in this SECTION 8, if such shall not
have been exercised, the number of Warrant Shares purchasable upon
exercise of the Warrants and the Exercise Price, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had
they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (A) the fact that the
only Common Shares so issued were the Common Shares, if any,
CORPDAL:61597.2 29976-00001
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<PAGE>
actually issued or sold upon the exercise of such privileges, options,
warrants or conversion rights and (B) the fact that such Common Shares,
if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the consideration, if any, actually
received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not
exercised; provided, however, that no such readjustment shall have the
effect of increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance,
sale or grant of such rights, options, warrants or convertible rights.
8.2 NO ADJUSTMENT OF DIVIDENDS. Except as provided in SUBSECTION 8.1,
no adjustment in respect of dividends shall be made during the term of the
Warrants or upon the exercise thereof.
8.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another person of the property, assets or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchaser, as
the case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action to purchase upon exercise of the
Warrants the kind and amount of shares and other securities and property that
the Warrantholder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the warrants
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase Warrant Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void but only if the
controlling corporation shall agree to substitute for the Warrants other
warrants that entitle the holders thereof to purchase, upon exercise thereof,
the kind and amount of shares and other securities and property that the
Warrantholder would have owned or had been entitled to receive had the Warrants
been exercised immediately prior to such merger. The adjustments required by
this SUBSECTION 8.3 shall be effected in a manner that shall be as nearly
equivalent as may be practicable to the adjustments provided for elsewhere in
this SECTION 8. The provisions of this SUBSECTION 8.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
8.4 STATEMENT ON WARRANT CERTIFICATE. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, the Warrant Certificate or certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 9. FRACTIONAL SHARES. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants. If any fraction
of a Warrant Share would, except for the provisions of this SECTION 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price
CORPDAL:61597.2 29976-00001
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<PAGE>
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Shares are traded in the
over-the-counter market and not in the NASDAQ Market System (National Market or
SmallCap) or on any national securities exchange, the average mean between the
per share closing bid and asked prices of the Common Shares on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ Market System or an equivalent generally accepted reporting service,
or (ii) if the Common Shares are traded in the NASDAQ Market System (National
Market or SmallCap) or on a national securities exchange, the average for the 30
consecutive trading days immediately preceding the date in question of the daily
per share closing prices of the Common Shares in the NASDAQ Market System
(National Market or SmallCap) or on the principal securities exchange on which
they are listed, as the case may be. The closing price referred to in clause
(ii) above shall be the last reported sales price or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ Market System (National Market or SmallCap)
or on the principal securities exchange on which the Common Shares are then
listed.
SECTION 10. REGISTRATION RIGHTS
10.1 PIGGYBACK REGISTRATION. If the Company shall at any time propose,
on or after May 10, 1996, the registration under the Securities Act of an
offering of its equity securities, the Company shall give written notice of its
intention as promptly as practicable of such proposed registration to each and
every Warrantholder or holder of Warrant Shares. The Company shall use its best
efforts to cause the registration (and the offering if requested by the
Warrantholder) of the Warrant Shares owned by the Warrantholder as the
Warrantholder shall request (within 10 days after the receipt of notice) to be
included, upon the same terms (including the method of distribution), in any
such offering; provided, however, that:
(A) the Company shall not be required to give notice or include such
Warrant Shares in any such registration if the proposed registration is (A)
a registration of a stock option or compensation plan or of securities
issued or issuable pursuant to any such plan or (B) a registration of
securities proposed to be issued in exchange for securities or assets of,
or in connection with a merger or consolidation with another corporation;
(B) the Company may, without the consent of the Warrantholder,
withdraw such registration statement and abandon the proposed offering in
which the Warrantholder had requested to participate; and
(C) the registration rights set forth in this Section 10.1 shall be
applicable to all Warrant Shares owned by the Warrantholder.
10.2 TERMS AND CONDITIONS. The registration rights of the Warrantholde
pursuant to this SECTION 10 are subject to the following terms and conditions:
(A) The Warrantholder shall provide the Company with such
information with respect to the Warrant Shares to be sold, the plans
for the proposed disposition thereof and
CORPDAL:61597.2 29976-00001
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<PAGE>
such other information as shall, in the opinion of counsel for the
Company, be necessary to enable the Company to include in such
registration statement all material facts required to be disclosed with
respect to the Warrantholder.
(B) All expenses incurred by the Company in connection with
any registration requested under this Section will be paid by the
Company. Such expenses include, but are not limited to, printing
expenses (including for such number of registration statements,
prospectuses and other filed material as the Warrantholder shall
reasonably request), "blue sky" fees and expenses and fees and
disbursements of counsel and accountants for the Company, except that
in any such requested registration, the Warrantholder shall pay the
fees and disbursements of its counsel and any underwriting discounts
and commissions with respect to such Warrantholder's Warrant Shares.
(C) The Company will take all necessary action that may be
required in qualifying or registering the Warrant Shares included in a
registration statement, for offering and sale under the securities or
blue sky laws of such states as are requested by the Warrantholder of
such securities.
10.3 UNDERWRITING. The Warrantholder and the Company each agree in
connection with any registration of Warrant Shares contemplated by this section:
(I) to enter into an appropriate underwriting agreement containing
terms and provisions (including reasonable provisions as to
indemnification) customary in such agreements. The Warrantholder shall
indemnify the Company and the underwriters as to information provided
pursuant to SECTION 10.2, the Company shall indemnify the Warrantholder as
to information contained in the registration statement, and the
underwriters shall indemnify the Company and the Warrantholder as to
information provided by such underwriters;
(II) to permit the Company, in its sole discretion, to select the
managing underwriter(s) for any registration under SECTION 10.1;
(III) to provide the Warrantholder and its representatives with
reasonable opportunity for due diligence, if any; and
(IV) notwithstanding the foregoing, if the offering of the Company's
securities pursuant to such registration statement is to be made by or
through underwriters, the Company shall not be required to include Warrant
Shares therein if and to the extent that the underwriter managing the
offering reasonably believes in good faith that such inclusion would
materially adversely affect such offering. The number of Common Shares to
be included in the registration shall be reduced as follows: the number of
Common Shares held by Warrantholder and by other shareholders pursuant to
other piggyback registration rights ("Additional Holders") shall be reduced
pro rata among the Warrantholder(s) and the Additional Holder(s) in
accordance with the number of Common Shares entitled to be registered
pursuant to piggyback registration rights by such Warrantholder(s) and
Additional Holder(s).
CORPDAL:61597.2 29976-00001
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<PAGE>
11. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing
contained in this Agreement or in the Warrant Certificate shall be construed as
conferring upon the Warrantholder, or its transferees, any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
the exercise thereof, any of the following events shall occur:
(A) any action that would require an adjustment pursuant to SECTION
8.1 OR 8.3; or
(B) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder as provided in SECTION 12 hereof at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(A) If to the Warrantholder - to the address as set forth on the
signature page hereof.
(B) If to the Company - to the address first set forth above;
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or three days after they are mailed in the manner set forth above.
SECTION 13. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties; provided,
however, that upon 10 days' prior written notice to the Company, the
Warrantholder may assign this Agreement and its rights and obligations hereunder
to any person or entity, without the consent of the Company, provided, that the
transferee agrees to be bound by the terms of this Agreement as if such
transferee were a Warrantholder and, provided further, that the assignment is
made pursuant to a valid exemption from registration
CORPDAL:61597.2 29976-00001
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<PAGE>
under the Securities Act. If requested by the Company, the Warrantholder shall
have furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to such effect.
SECTION 14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 15. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such state, without regard to
its principles of conflicts of laws.
SECTION 17. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
CORPDAL:61597.2 29976-00001
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
TOUCAN GOLD CORPORATION
By:/s/Oliver Lennox-King
---------------------
Name:Oliver Lennox-King
Title:President and CEO
WARRANTHOLDER:
/s/R. Haydn Silleck
- ------------------- Address: 1328 Starwood Lane
R. Haydn Silleck Evergreen, Colorado 80439
CORPDAL:61597.2 29976-00001
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<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, R. Haydn Silleck ("Holder"),
is the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
CORPDAL:61597.2 29976-00001
<PAGE>
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61597.2 29976-00001
<PAGE>
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, R. Haydn Silleck ("Holder"),
is the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
CORPDAL:61597.2 29976-00001
<PAGE>
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61597.2 29976-00001
March 17, 1997
VIA CMRRR NO. P 115 327 042
Mr. John B. Marvin
32721 Meadow Mountain Road
Evergreen, Colorado 80439
Re: Toucan Gold Corporation (the "Company")
Dear John:
Enclosed herewith are the Warrant Agreement and Warrant Certificate,
which have been executed by the Company, that replace the Starlight Acquisition
Warrants. The material terms of the replacement warrant are identical to the
Starlight Acquisition Warrants.
Please do not hesitate to call me if you have any questions concerning
the foregoing.
Very truly yours,
/s/Mark D. Wigder
-----------------
Mark D. Wigder
MDW:sam
enclosures
CORPDAL:63158.1 29976-00001
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement"), dated as of July 29, 1996
(the "Effective Date"), is made by and between Toucan Gold Corporation, a
Delaware corporation (the "Company"), and John B. Marvin (the "Warrantholder").
The Company is the successor to Starlight Acquisitions, Inc., a
Colorado corporation ("Starlight"), pursuant to the reincorporation of Starlight
into the Company on the Effective Date (the "Reincorporation"). This Agreement
is being entered into pursuant to the terms of that certain Warrant Agreement,
dated May 10, 1996, by and between Starlight and each of Jay Lutsky, John B.
Marvin, R. Haydn Silleck and Peter S. Daley (the "Prior Warrant Agreement"),
which is being reissued in the form hereof as a result of the Reincorporation.
The Prior Warrant Agreement was issued in connection with the Share Exchange
Agreement, dated as of May 10, 1996, by and between Starlight and the
shareholders of Toucan Mining Limited.
The Company hereby agrees to issue to the Warrantholder, the warrants
hereinafter described (the "Warrants") to purchase an aggregate of 25,000 shares
(the "Warrant Shares") (subject to adjustment pursuant to SECTION 8 hereof) of
the Company's common stock, par value $0.01 per share (the "Common Shares"), at
an Exercise Price determined in accordance with SECTION 7 hereunder.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
SECTION 1. FORM OF WARRANT CERTIFICATES; TRANSFERABILITY OF WARRANTS.
1.1 FORM OF WARRANT CERTIFICATE. The Warrants shall be evidenced by a
certificate substantially as set forth in EXHIBIT A attached hereto (a "Warrant
Certificate"). The Warrant Certificate shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer or a Vice
President. A Warrant Certificate bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such office prior
to the delivery of such Warrant or did not hold such office on the date of this
Agreement. Each Warrant Certificate shall be numbered and registered on the
books of the Company when it is issued, and shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
1.2 TRANSFER. The Warrant Certificate shall be transferable only on the
books of the Company maintained at its principal office at 8201 Preston Road,
Suit 600, Dallas, Texas 75225, or wherever its principal executive offices may
then be located upon delivery thereof duly endorsed by the Warrantholder or its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant Certificate to the
person entitled
CORPDAL:61599.2 29976-00001
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<PAGE>
thereto. All transfers shall be made subject to the provisions of SECTION 13
hereof. In the event the Warrants or any portion thereof are transferred, the
subsequent holder thereof shall have no greater rights than those afforded the
Warrantholder hereunder.
1.3 DIVISION OF WARRANTS. Subject to all federal and state securities
laws, a Warrant Certificate may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Warrant Shares. Unless the
context indicates otherwise, the term "Warrantholder" shall include any
transferee or transferees of the Warrants pursuant to this SUBSECTION 1.3, and
the term "Warrants" shall include any and all Warrants outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
SECTION 2. LEGEND ON WARRANT SHARES. Each certificate for Warrant
Shares initially issued upon exercise of the Warrant, unless at the time of
exercise such Warrant Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"), shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and applicable state securities laws, and may not be sold. exchanged,
hypothecated or transferred in any manner in the absence of such
registration or an exemption therefrom. The shares are subject to the
terms of a certain Warrant Agreement, dated July 29, 1996, pursuant to
which they were issued."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the Warrant Shares represented thereby) shall also bear the
above legend unless, in the opinion of counsel satisfactory to the Company, the
securities represented thereby need no longer be subject to such restrictions.
SECTION 3. TERM OF WARRANTS. Subject to the terms of this Agreement,
the Warrantholder shall have the right, at any time during the period commencing
at 9:00 a.m., Dallas, Texas time, on May 10, 1996, and ending at 5:00 p.m.,
Dallas, Texas time, on the later of (i) the eighteenth month anniversary of May
10, 1996, or (ii) the sixth month anniversary of the closing of the first
registration of the offering of the Company's securities pursuant to SECTION 10
hereof (the "Termination Date"), to purchase from the Company up to the number
of fully paid and nonassessable Warrant Shares that the Warrantholder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Warrants to
be exercised, duly completed and signed, and upon payment to the Company of the
Exercise Price (as defined in and determined in accordance with the provisions
of SECTIONS 7 AND 8 hereof), for the number of Warrant Shares in respect of
which such Warrants are then exercised, but in no event for less than 25 Warrant
Shares, unless the Warrant entitled the Warrantholder on exercise to less than
25 Warrant Shares, in which event the Warrant can be exercised for such lesser
number of Warrant Shares.
CORPDAL:61599.2 29976-00001
2
<PAGE>
SECTION 4. EXERCISE. Payment of the aggregate Exercise Price shall be
made in cash or by check. Upon surrender of the Warrant Certificates and payment
of such Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrants, together with cash, as provided in SECTION 9
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of the
Warrant Certificate and the payment of the Exercise Price, as aforesaid,
notwithstanding that the certificates representing the Warrant Shares shall not
actually have been delivered or that the stock transfer books of the Company
shall then be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a certificate evidencing the Warrants is exercised in respect of less than
all of the Warrant Shares specified therein at any time prior to the Termination
Date, a new certificate evidencing the remaining Warrants will be issued by the
Company.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATES. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, a new Warrant Certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrants and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
requirements and pay such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF WARRANT SHARES. There has been reserved, and
the Company shall at all times keep reserved so long as all or any portion of
the Warrants remains outstanding, out of its authorized Common Shares, such
number of Warrant Shares as shall be subject to purchase under such portion of
the Warrant that remains outstanding.
SECTION 7. EXERCISE PRICE. The price per Share (the "Exercise Price")
at which Warrant Shares shall be purchasable upon the exercise of the Warrant
shall be $4.00. The Exercise Price as determined hereunder shall be subject to
further adjustment pursuant to Section 8 hereof.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
8.1 GENERAL. The number of Warrant Shares purchasable upon the exercise
of the Warrants and the Exercise Price shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(A) In case the Company shall (i) pay a dividend in Common
Shares or make a distribution in Common Shares, (ii) subdivide its
outstanding Common Shares, (iii) combine its outstanding Common Shares
into a smaller number of Common Shares
CORPDAL:61599.2 29976-00001
3
<PAGE>
(by way of a reverse stock split or otherwise) or (iv) issue by
reclassification of its Common Shares other securities of the Company,
the number of Warrant Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company that it would have owned or would have
been entitled to receive after the happening of any of the events
described above, had the Warrants been exercised immediately prior to
the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this SUBSECTION 8.1(A) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(B) In case the Company shall issue rights, options, warrants
or convertible securities to all or substantially all of the holders of
its Common Shares, without any charge to such holders, entitling them
to subscribe for or purchase Common Shares at a price per share that is
lower at the record date mentioned below than the Exercise Price, the
number of Warrant Shares thereafter purchasable upon the exercise of
the Warrants shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of the Warrants by a
fraction, of which the numerator shall be the number of Common Shares
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional Common
Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares offered
would purchase at the Exercise Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities are
issued, and shall become effective immediately and retroactively after
the record date for the determination of shareholders entitled to
receive such rights, options, warrants or convertible securities.
(C) In case the Company shall distribute to all or
substantially all of the holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or distributions out
of earnings) or issue, to all or substantially all of such holders,
without any charge to such holders, rights, options, warrants or
convertible securities containing the right to subscribe for or
purchase Common Shares (excluding those referred to in PARAGRAPH (B)
above), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of the Warrants by a fraction, of which the numerator shall be
the Exercise Price on the date of such distribution, and of which the
denominator shall be the Exercise Price on such date minus the then
fair value of the portion of the assets or evidences of indebtedness so
distributed or of such rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on
the date of distribution retroactive to the record date for the
determination of shareholders entitled to receive such distribution.
CORPDAL:61599.2 29976-00001
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(D) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the aggregate number of
Warrant Shares then purchasable upon the exercise of the Warrants or,
if the Warrants are not then exercisable, the number of Warrant Shares
purchasable upon the exercise of the Warrants on the first date
thereafter that the Warrants become exercisable; provided however, that
any adjustments that by reason of this SUBSECTION 8.1(D) are not
required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(E) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided in this
SUBSECTION 8.1, the Exercise Price payable upon exercise of the
Warrants shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(F) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants or the Exercise Price is adjusted as herein
provided in this SUBSECTION 8.1, the Company shall cause to be promptly
mailed to the Warrantholder in accordance with the provisions or
SECTION 12 hereof, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of the Warrants and the Exercise Price
after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(G) For the purpose of this SUBSECTION 8.1, the term "Common
Shares" shall mean (i) the class of shares designated as the Common
Shares of the Company at the date of this Agreement or (ii) any other
class of shares resulting from successive changes or reclassifications
of such Common Shares including changes in par value, or from par value
to no par value, or from no par value to par value, in the event that
at any time, as a result of an adjustment made pursuant to this SECTION
8, the Warrantholder shall become entitled to purchase any shares of
the Company other than Common Shares, thereafter the number of such
other shares so purchasable upon exercise of the Warrants and the
Exercise Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions of this SECTION 8.
(H) Upon the expiration of any rights, options, warrants or
conversion privileges referred to in this SECTION 8, if such shall not
have been exercised, the number of Warrant Shares purchasable upon
exercise of the Warrants and the Exercise Price, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had
they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (A) the fact that the
only Common Shares so issued were the Common Shares, if any,
CORPDAL:61599.2 29976-00001
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<PAGE>
actually issued or sold upon the exercise of such privileges, options,
warrants or conversion rights and (B) the fact that such Common Shares,
if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the consideration, if any, actually
received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not
exercised; provided, however, that no such readjustment shall have the
effect of increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance,
sale or grant of such rights, options, warrants or convertible rights.
8.2 NO ADJUSTMENT OF DIVIDENDS. Except as provided in SUBSECTION 8.1,
no adjustment in respect of dividends shall be made during the term of the
Warrants or upon the exercise thereof.
8.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another person of the property, assets or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchaser, as
the case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action to purchase upon exercise of the
Warrants the kind and amount of shares and other securities and property that
the Warrantholder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the warrants
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase Warrant Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void but only if the
controlling corporation shall agree to substitute for the Warrants other
warrants that entitle the holders thereof to purchase, upon exercise thereof,
the kind and amount of shares and other securities and property that the
Warrantholder would have owned or had been entitled to receive had the Warrants
been exercised immediately prior to such merger. The adjustments required by
this SUBSECTION 8.3 shall be effected in a manner that shall be as nearly
equivalent as may be practicable to the adjustments provided for elsewhere in
this SECTION 8. The provisions of this SUBSECTION 8.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
8.4 STATEMENT ON WARRANT CERTIFICATE. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, the Warrant Certificate or certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 9. FRACTIONAL SHARES. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants. If any fraction
of a Warrant Share would, except for the provisions of this SECTION 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price
CORPDAL:61599.2 29976-00001
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<PAGE>
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Shares are traded in the
over-the-counter market and not in the NASDAQ Market System (National Market or
SmallCap) or on any national securities exchange, the average mean between the
per share closing bid and asked prices of the Common Shares on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ Market System or an equivalent generally accepted reporting service,
or (ii) if the Common Shares are traded in the NASDAQ Market System (National
Market or SmallCap) or on a national securities exchange, the average for the 30
consecutive trading days immediately preceding the date in question of the daily
per share closing prices of the Common Shares in the NASDAQ Market System
(National Market or SmallCap) or on the principal securities exchange on which
they are listed, as the case may be. The closing price referred to in clause
(ii) above shall be the last reported sales price or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ Market System (National Market or SmallCap)
or on the principal securities exchange on which the Common Shares are then
listed.
SECTION 10. REGISTRATION RIGHTS
10.1 PIGGYBACK REGISTRATION. If the Company shall at any time propose,
on or after May 10, 1996, the registration under the Securities Act of an
offering of its equity securities, the Company shall give written notice of its
intention as promptly as practicable of such proposed registration to each and
every Warrantholder or holder of Warrant Shares. The Company shall use its best
efforts to cause the registration (and the offering if requested by the
Warrantholder) of the Warrant Shares owned by the Warrantholder as the
Warrantholder shall request (within 10 days after the receipt of notice) to be
included, upon the same terms (including the method of distribution), in any
such offering; provided, however, that:
(A) the Company shall not be required to give notice or include such
Warrant Shares in any such registration if the proposed registration is (A)
a registration of a stock option or compensation plan or of securities
issued or issuable pursuant to any such plan or (B) a registration of
securities proposed to be issued in exchange for securities or assets of,
or in connection with a merger or consolidation with another corporation;
(B) the Company may, without the consent of the Warrantholder,
withdraw such registration statement and abandon the proposed offering in
which the Warrantholder had requested to participate; and
(C) the registration rights set forth in this Section 10.1 shall be
applicable to all Warrant Shares owned by the Warrantholder.
10.2 TERMS AND CONDITIONS. The registration rights of the Warrantholder
pursuant to this SECTION 10 are subject to the following terms and conditions:
(A) The Warrantholder shall provide the Company with such
information with respect to the Warrant Shares to be sold, the plans
for the proposed disposition thereof and
CORPDAL:61599.2 29976-00001
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<PAGE>
such other information as shall, in the opinion of counsel for the
Company, be necessary to enable the Company to include in such
registration statement all material facts required to be disclosed with
respect to the Warrantholder.
(B) All expenses incurred by the Company in connection with
any registration requested under this Section will be paid by the
Company. Such expenses include, but are not limited to, printing
expenses (including for such number of registration statements,
prospectuses and other filed material as the Warrantholder shall
reasonably request), "blue sky" fees and expenses and fees and
disbursements of counsel and accountants for the Company, except that
in any such requested registration, the Warrantholder shall pay the
fees and disbursements of its counsel and any underwriting discounts
and commissions with respect to such Warrantholder's Warrant Shares.
(C) The Company will take all necessary action that may be
required in qualifying or registering the Warrant Shares included in a
registration statement, for offering and sale under the securities or
blue sky laws of such states as are requested by the Warrantholder of
such securities.
10.3 UNDERWRITING. The Warrantholder and the Company each agree in
connection with any registration of Warrant Shares contemplated by this section:
(I) to enter into an appropriate underwriting agreement containing
terms and provisions (including reasonable provisions as to
indemnification) customary in such agreements. The Warrantholder shall
indemnify the Company and the underwriters as to information provided
pursuant to SECTION 10.2, the Company shall indemnify the Warrantholder as
to information contained in the registration statement, and the
underwriters shall indemnify the Company and the Warrantholder as to
information provided by such underwriters;
(II) to permit the Company, in its sole discretion, to select the
managing underwriter(s) for any registration under SECTION 10.1;
(III) to provide the Warrantholder and its representatives with
reasonable opportunity for due diligence, if any; and
(IV) notwithstanding the foregoing, if the offering of the Company's
securities pursuant to such registration statement is to be made by or
through underwriters, the Company shall not be required to include Warrant
Shares therein if and to the extent that the underwriter managing the
offering reasonably believes in good faith that such inclusion would
materially adversely affect such offering. The number of Common Shares to
be included in the registration shall be reduced as follows: the number of
Common Shares held by Warrantholder and by other shareholders pursuant to
other piggyback registration rights ("Additional Holders") shall be reduced
pro rata among the Warrantholder(s) and the Additional Holder(s) in
accordance with the number of Common Shares entitled to be registered
pursuant to piggyback registration rights by such Warrantholder(s) and
Additional Holder(s).
CORPDAL:61599.2 29976-00001
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<PAGE>
11. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing
contained in this Agreement or in the Warrant Certificate shall be construed as
conferring upon the Warrantholder, or its transferees, any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
the exercise thereof, any of the following events shall occur:
(A) any action that would require an adjustment pursuant to SECTION
8.1 OR 8.3; or
(B) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder as provided in SECTION 12 hereof at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(A) If to the Warrantholder - to the address as set forth on the
signature page hereof.
(B) If to the Company - to the address first set forth above;
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or three days after they are mailed in the manner set forth above.
SECTION 13. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties; provided,
however, that upon 10 days' prior written notice to the Company, the
Warrantholder may assign this Agreement and its rights and obligations hereunder
to any person or entity, without the consent of the Company, provided, that the
transferee agrees to be bound by the terms of this Agreement as if such
transferee were a Warrantholder and, provided further, that the assignment is
made pursuant to a valid exemption from registration
CORPDAL:61599.2 29976-00001
9
<PAGE>
under the Securities Act. If requested by the Company, the Warrantholder shall
have furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to such effect.
SECTION 14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 15. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such state, without regard to
its principles of conflicts of laws.
SECTION 17. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
CORPDAL:61599.2 29976-00001
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
TOUCAN GOLD CORPORATION
By:/s/Oliver Lennox-King
---------------------
Name:Oliver Lennox-King
Title:President and CEO
WARRANTHOLDER:
/s/John B. Marvin
- ----------------- Address: 32721 Meadow Mountain Road
John B. Marvin Evergreen, Colorado 80439
CORPDAL:61599.2 29976-00001
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<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, John B. Marvin ("Holder"), is
the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
CORPDAL:61599.2 29976-00001
<PAGE>
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61599.2 29976-00001
<PAGE>
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, John B. Marvin ("Holder"), is
the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
CORPDAL:61599.2 29976-00001
<PAGE>
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61599.2 29976-00001
March 17, 1997
VIA CMRRR NO. P 115 327 043
Mr. Peter S. Daley
15925 Berlin Turnpike
Purcellville, Virginia 22132
Re: Toucan Gold Corporation (the "Company")
Dear John:
Enclosed herewith are the Warrant Agreement and Warrant Certificate,
which have been executed by the Company, that replace the Starlight Acquisition
Warrants. The material terms of the replacement warrant are identical to the
Starlight Acquisition Warrants.
Please do not hesitate to call me if you have any questions concerning
the foregoing.
Very truly yours,
/s/Mark D. Wigder
-----------------
Mark D. Wigder
MDW:sam
enclosures
CORPDAL:63158.1 29976-00001
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement"), dated as of July 29, 1996
(the "Effective Date"), is made by and between Toucan Gold Corporation, a
Delaware corporation (the "Company"), and Peter S. Daley (the "Warrantholder").
The Company is the successor to Starlight Acquisitions, Inc., a
Colorado corporation ("Starlight"), pursuant to the reincorporation of Starlight
into the Company on the Effective Date (the "Reincorporation"). This Agreement
is being entered into pursuant to the terms of that certain Warrant Agreement,
dated May 10, 1996, by and between Starlight and each of Jay Lutsky, John B.
Marvin, R. Haydn Silleck and Peter S. Daley (the "Prior Warrant Agreement"),
which is being reissued in the form hereof as a result of the Reincorporation.
The Prior Warrant Agreement was issued in connection with the Share Exchange
Agreement, dated as of May 10, 1996, by and between Starlight and the
shareholders of Toucan Mining Limited.
The Company hereby agrees to issue to the Warrantholder, the warrants
hereinafter described (the "Warrants") to purchase an aggregate of 25,000 shares
(the "Warrant Shares") (subject to adjustment pursuant to SECTION 8 hereof) of
the Company's common stock, par value $0.01 per share (the "Common Shares"), at
an Exercise Price determined in accordance with SECTION 7 hereunder.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
SECTION 1. FORM OF WARRANT CERTIFICATES; TRANSFERABILITY OF WARRANTS.
1.1 FORM OF WARRANT CERTIFICATE. The Warrants shall be evidenced by a
certificate substantially as set forth in EXHIBIT A attached hereto (a "Warrant
Certificate"). The Warrant Certificate shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer or a Vice
President. A Warrant Certificate bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such office prior
to the delivery of such Warrant or did not hold such office on the date of this
Agreement. Each Warrant Certificate shall be numbered and registered on the
books of the Company when it is issued, and shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
1.2 TRANSFER. The Warrant Certificate shall be transferable only on the
books of the Company maintained at its principal office at 8201 Preston Road,
Suit 600, Dallas, Texas 75225, or wherever its principal executive offices may
then be located upon delivery thereof duly endorsed by the Warrantholder or its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant Certificate to the
person entitled
CORPDAL:61596.2 29976-00001
1
<PAGE>
thereto. All transfers shall be made subject to the provisions of SECTION 13
hereof. In the event the Warrants or any portion thereof are transferred, the
subsequent holder thereof shall have no greater rights than those afforded the
Warrantholder hereunder.
1.3 DIVISION OF WARRANTS. Subject to all federal and state securities
laws, a Warrant Certificate may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Warrant Shares. Unless the
context indicates otherwise, the term "Warrantholder" shall include any
transferee or transferees of the Warrants pursuant to this SUBSECTION 1.3, and
the term "Warrants" shall include any and all Warrants outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
SECTION 2. LEGEND ON WARRANT SHARES. Each certificate for Warrant
Shares initially issued upon exercise of the Warrant, unless at the time of
exercise such Warrant Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"), shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and applicable state securities laws, and may not be sold. exchanged,
hypothecated or transferred in any manner in the absence of such
registration or an exemption therefrom. The shares are subject to the
terms of a certain Warrant Agreement, dated July 29, 1996, pursuant to
which they were issued."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the Warrant Shares represented thereby) shall also bear the
above legend unless, in the opinion of counsel satisfactory to the Company, the
securities represented thereby need no longer be subject to such restrictions.
SECTION 3. TERM OF WARRANTS. Subject to the terms of this Agreement,
the Warrantholder shall have the right, at any time during the period commencing
at 9:00 a.m., Dallas, Texas time, on May 10, 1996, and ending at 5:00 p.m.,
Dallas, Texas time, on the later of (i) the eighteenth month anniversary of May
10, 1996, or (ii) the sixth month anniversary of the closing of the first
registration of the offering of the Company's securities pursuant to SECTION 10
hereof (the "Termination Date"), to purchase from the Company up to the number
of fully paid and nonassessable Warrant Shares that the Warrantholder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Warrants to
be exercised, duly completed and signed, and upon payment to the Company of the
Exercise Price (as defined in and determined in accordance with the provisions
of SECTIONS 7 AND 8 hereof), for the number of Warrant Shares in respect of
which such Warrants are then exercised, but in no event for less than 25 Warrant
Shares, unless the Warrant entitled the Warrantholder on exercise to less than
25 Warrant Shares, in which event the Warrant can be exercised for such lesser
number of Warrant Shares.
CORPDAL:61596.2 29976-00001
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SECTION 4. EXERCISE. Payment of the aggregate Exercise Price shall be
made in cash or by check. Upon surrender of the Warrant Certificates and payment
of such Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrants, together with cash, as provided in SECTION 9
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of the
Warrant Certificate and the payment of the Exercise Price, as aforesaid,
notwithstanding that the certificates representing the Warrant Shares shall not
actually have been delivered or that the stock transfer books of the Company
shall then be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a certificate evidencing the Warrants is exercised in respect of less than
all of the Warrant Shares specified therein at any time prior to the Termination
Date, a new certificate evidencing the remaining Warrants will be issued by the
Company.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATES. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, a new Warrant Certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrants and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
requirements and pay such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF WARRANT SHARES. There has been reserved, and
the Company shall at all times keep reserved so long as all or any portion of
the Warrants remains outstanding, out of its authorized Common Shares, such
number of Warrant Shares as shall be subject to purchase under such portion of
the Warrant that remains outstanding.
SECTION 7. EXERCISE PRICE. The price per Share (the "Exercise Price")
at which Warrant Shares shall be purchasable upon the exercise of the Warrant
shall be $4.00. The Exercise Price as determined hereunder shall be subject to
further adjustment pursuant to Section 8 hereof.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
8.1 GENERAL. The number of Warrant Shares purchasable upon the exercise
of the Warrants and the Exercise Price shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(A) In case the Company shall (i) pay a dividend in Common
Shares or make a distribution in Common Shares, (ii) subdivide its
outstanding Common Shares, (iii) combine its outstanding Common Shares
into a smaller number of Common Shares
CORPDAL:61596.2 29976-00001
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(by way of a reverse stock split or otherwise) or (iv) issue by
reclassification of its Common Shares other securities of the Company,
the number of Warrant Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company that it would have owned or would have
been entitled to receive after the happening of any of the events
described above, had the Warrants been exercised immediately prior to
the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this SUBSECTION 8.1(A) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(B) In case the Company shall issue rights, options, warrants
or convertible securities to all or substantially all of the holders of
its Common Shares, without any charge to such holders, entitling them
to subscribe for or purchase Common Shares at a price per share that is
lower at the record date mentioned below than the Exercise Price, the
number of Warrant Shares thereafter purchasable upon the exercise of
the Warrants shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of the Warrants by a
fraction, of which the numerator shall be the number of Common Shares
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional Common
Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares offered
would purchase at the Exercise Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities are
issued, and shall become effective immediately and retroactively after
the record date for the determination of shareholders entitled to
receive such rights, options, warrants or convertible securities.
(C) In case the Company shall distribute to all or
substantially all of the holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or distributions out
of earnings) or issue, to all or substantially all of such holders,
without any charge to such holders, rights, options, warrants or
convertible securities containing the right to subscribe for or
purchase Common Shares (excluding those referred to in PARAGRAPH (B)
above), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of the Warrants by a fraction, of which the numerator shall be
the Exercise Price on the date of such distribution, and of which the
denominator shall be the Exercise Price on such date minus the then
fair value of the portion of the assets or evidences of indebtedness so
distributed or of such rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on
the date of distribution retroactive to the record date for the
determination of shareholders entitled to receive such distribution.
CORPDAL:61596.2 29976-00001
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(D) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the aggregate number of
Warrant Shares then purchasable upon the exercise of the Warrants or,
if the Warrants are not then exercisable, the number of Warrant Shares
purchasable upon the exercise of the Warrants on the first date
thereafter that the Warrants become exercisable; provided however, that
any adjustments that by reason of this SUBSECTION 8.1(D) are not
required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(E) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided in this
SUBSECTION 8.1, the Exercise Price payable upon exercise of the
Warrants shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(F) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants or the Exercise Price is adjusted as herein
provided in this SUBSECTION 8.1, the Company shall cause to be promptly
mailed to the Warrantholder in accordance with the provisions or
SECTION 12 hereof, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of the Warrants and the Exercise Price
after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(G) For the purpose of this SUBSECTION 8.1, the term "Common
Shares" shall mean (i) the class of shares designated as the Common
Shares of the Company at the date of this Agreement or (ii) any other
class of shares resulting from successive changes or reclassifications
of such Common Shares including changes in par value, or from par value
to no par value, or from no par value to par value, in the event that
at any time, as a result of an adjustment made pursuant to this SECTION
8, the Warrantholder shall become entitled to purchase any shares of
the Company other than Common Shares, thereafter the number of such
other shares so purchasable upon exercise of the Warrants and the
Exercise Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions of this SECTION 8.
(H) Upon the expiration of any rights, options, warrants or
conversion privileges referred to in this SECTION 8, if such shall not
have been exercised, the number of Warrant Shares purchasable upon
exercise of the Warrants and the Exercise Price, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had
they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (A) the fact that the
only Common Shares so issued were the Common Shares, if any,
CORPDAL:61596.2 29976-00001
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<PAGE>
actually issued or sold upon the exercise of such privileges, options,
warrants or conversion rights and (B) the fact that such Common Shares,
if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the consideration, if any, actually
received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not
exercised; provided, however, that no such readjustment shall have the
effect of increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance,
sale or grant of such rights, options, warrants or convertible rights.
8.2 NO ADJUSTMENT OF DIVIDENDS. Except as provided in SUBSECTION 8.1,
no adjustment in respect of dividends shall be made during the term of the
Warrants or upon the exercise thereof.
8.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another person of the property, assets or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchaser, as
the case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action to purchase upon exercise of the
Warrants the kind and amount of shares and other securities and property that
the Warrantholder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the warrants
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase Warrant Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void but only if the
controlling corporation shall agree to substitute for the Warrants other
warrants that entitle the holders thereof to purchase, upon exercise thereof,
the kind and amount of shares and other securities and property that the
Warrantholder would have owned or had been entitled to receive had the Warrants
been exercised immediately prior to such merger. The adjustments required by
this SUBSECTION 8.3 shall be effected in a manner that shall be as nearly
equivalent as may be practicable to the adjustments provided for elsewhere in
this SECTION 8. The provisions of this SUBSECTION 8.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
8.4 STATEMENT ON WARRANT CERTIFICATE. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, the Warrant Certificate or certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 9. FRACTIONAL SHARES. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants. If any fraction
of a Warrant Share would, except for the provisions of this SECTION 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price
CORPDAL:61596.2 29976-00001
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<PAGE>
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Shares are traded in the
over-the-counter market and not in the NASDAQ Market System (National Market or
SmallCap) or on any national securities exchange, the average mean between the
per share closing bid and asked prices of the Common Shares on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ Market System or an equivalent generally accepted reporting service,
or (ii) if the Common Shares are traded in the NASDAQ Market System (National
Market or SmallCap) or on a national securities exchange, the average for the 30
consecutive trading days immediately preceding the date in question of the daily
per share closing prices of the Common Shares in the NASDAQ Market System
(National Market or SmallCap) or on the principal securities exchange on which
they are listed, as the case may be. The closing price referred to in clause
(ii) above shall be the last reported sales price or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ Market System (National Market or SmallCap)
or on the principal securities exchange on which the Common Shares are then
listed.
SECTION 10. REGISTRATION RIGHTS
10.1 PIGGYBACK REGISTRATION. If the Company shall at any time propose,
on or after May 10, 1996, the registration under the Securities Act of an
offering of its equity securities, the Company shall give written notice of its
intention as promptly as practicable of such proposed registration to each and
every Warrantholder or holder of Warrant Shares. The Company shall use its best
efforts to cause the registration (and the offering if requested by the
Warrantholder) of the Warrant Shares owned by the Warrantholder as the
Warrantholder shall request (within 10 days after the receipt of notice) to be
included, upon the same terms (including the method of distribution), in any
such offering; provided, however, that:
(A) the Company shall not be required to give notice or include such
Warrant Shares in any such registration if the proposed registration is (A)
a registration of a stock option or compensation plan or of securities
issued or issuable pursuant to any such plan or (B) a registration of
securities proposed to be issued in exchange for securities or assets of,
or in connection with a merger or consolidation with another corporation;
(B) the Company may, without the consent of the Warrantholder,
withdraw such registration statement and abandon the proposed offering in
which the Warrantholder had requested to participate; and
(C) the registration rights set forth in this Section 10.1 shall be
applicable to all Warrant Shares owned by the Warrantholder.
10.2 TERMS AND CONDITIONS. The registration rights of the Warrantholder
pursuant to this SECTION 10 are subject to the following terms and conditions:
(A) The Warrantholder shall provide the Company with such
information with respect to the Warrant Shares to be sold, the plans
for the proposed disposition thereof and
CORPDAL:61596.2 29976-00001
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<PAGE>
such other information as shall, in the opinion of counsel for the
Company, be necessary to enable the Company to include in such
registration statement all material facts required to be disclosed with
respect to the Warrantholder.
(B) All expenses incurred by the Company in connection with
any registration requested under this Section will be paid by the
Company. Such expenses include, but are not limited to, printing
expenses (including for such number of registration statements,
prospectuses and other filed material as the Warrantholder shall
reasonably request), "blue sky" fees and expenses and fees and
disbursements of counsel and accountants for the Company, except that
in any such requested registration, the Warrantholder shall pay the
fees and disbursements of its counsel and any underwriting discounts
and commissions with respect to such Warrantholder's Warrant Shares.
(C) The Company will take all necessary action that may be
required in qualifying or registering the Warrant Shares included in a
registration statement, for offering and sale under the securities or
blue sky laws of such states as are requested by the Warrantholder of
such securities.
10.3 UNDERWRITING. The Warrantholder and the Company each agree in
connection with any registration of Warrant Shares contemplated by this section:
(I) to enter into an appropriate underwriting agreement containing
terms and provisions (including reasonable provisions as to
indemnification) customary in such agreements. The Warrantholder shall
indemnify the Company and the underwriters as to information provided
pursuant to SECTION 10.2, the Company shall indemnify the Warrantholder as
to information contained in the registration statement, and the
underwriters shall indemnify the Company and the Warrantholder as to
information provided by such underwriters;
(II) to permit the Company, in its sole discretion, to select the
managing underwriter(s) for any registration under SECTION 10.1;
(III) to provide the Warrantholder and its representatives with
reasonable opportunity for due diligence, if any; and
(IV) notwithstanding the foregoing, if the offering of the Company's
securities pursuant to such registration statement is to be made by or
through underwriters, the Company shall not be required to include Warrant
Shares therein if and to the extent that the underwriter managing the
offering reasonably believes in good faith that such inclusion would
materially adversely affect such offering. The number of Common Shares to
be included in the registration shall be reduced as follows: the number of
Common Shares held by Warrantholder and by other shareholders pursuant to
other piggyback registration rights ("Additional Holders") shall be reduced
pro rata among the Warrantholder(s) and the Additional Holder(s) in
accordance with the number of Common Shares entitled to be registered
pursuant to piggyback registration rights by such Warrantholder(s) and
Additional Holder(s).
CORPDAL:61596.2 29976-00001
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11. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing
contained in this Agreement or in the Warrant Certificate shall be construed as
conferring upon the Warrantholder, or its transferees, any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
the exercise thereof, any of the following events shall occur:
(A) any action that would require an adjustment pursuant to SECTION
8.1 OR 8.3; or
(B) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder as provided in SECTION 12 hereof at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(A) If to the Warrantholder - to the address as set forth on the
signature page hereof.
(B) If to the Company - to the address first set forth above;
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or three days after they are mailed in the manner set forth above.
SECTION 13. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties; provided,
however, that upon 10 days' prior written notice to the Company, the
Warrantholder may assign this Agreement and its rights and obligations hereunder
to any person or entity, without the consent of the Company, provided, that the
transferee agrees to be bound by the terms of this Agreement as if such
transferee were a Warrantholder and, provided further, that the assignment is
made pursuant to a valid exemption from registration
CORPDAL:61596.2 29976-00001
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under the Securities Act. If requested by the Company, the Warrantholder shall
have furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to such effect.
SECTION 14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 15. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such state, without regard to
its principles of conflicts of laws.
SECTION 17. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
CORPDAL:61596.2 29976-00001
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
TOUCAN GOLD CORPORATION
By:/s/Oliver Lennox-King
---------------------
Name:Oliver Lennox-King
Title:President and CEO
WARRANTHOLDER:
/s/Peter S. Daley
- ----------------- Address: 15925 Berlin Turnpike
Peter S. Daley Purcellville, Virginia 22132
CORPDAL:61596.2 29976-00001
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EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, Peter S. Daley ("Holder"), is
the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
CORPDAL:61596.2 29976-00001
<PAGE>
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61596.2 29976-00001
<PAGE>
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, Peter S. Daley ("Holder"), is
the holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
CORPDAL:61596.2 29976-00001
<PAGE>
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61596.2 29976-00001
March 17, 1997
VIA CMRRR NO. P115 327 045
Mr. Jay Lutsky
4807 South Zang Way
Morrison, Colorado 80465
Re: Toucan Gold Corporation (the "Company")
Dear John:
Enclosed herewith are the Warrant Agreement and Warrant Certificate,
which have been executed by the Company, that replace the Starlight Acquisition
Warrants. The material terms of the replacement warrant are identical to the
Starlight Acquisition Warrants.
Please do not hesitate to call me if you have any questions concerning
the foregoing.
Very truly yours,
/s/Mark D. Wigder
-----------------
Mark D. Wigder
MDW:sam
enclosures
CORPDAL:63158.1 29976-00001
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement"), dated as of July 29, 1996
(the "Effective Date"), is made by and between Toucan Gold Corporation, a
Delaware corporation (the "Company"), and Jay Lutsky (the "Warrantholder").
The Company is the successor to Starlight Acquisitions, Inc., a
Colorado corporation ("Starlight"), pursuant to the reincorporation of Starlight
into the Company on the Effective Date (the "Reincorporation"). This Agreement
is being entered into pursuant to the terms of that certain Warrant Agreement,
dated May 10, 1996, by and between Starlight and each of Jay Lutsky, John B.
Marvin, R. Haydn Silleck and Peter S. Daley (the "Prior Warrant Agreement"),
which is being reissued in the form hereof as a result of the Reincorporation.
The Prior Warrant Agreement was issued in connection with the Share Exchange
Agreement, dated as of May 10, 1996, by and between Starlight and the
shareholders of Toucan Mining Limited.
The Company hereby agrees to issue to the Warrantholder, the warrants
hereinafter described (the "Warrants") to purchase an aggregate of 25,000 shares
(the "Warrant Shares") (subject to adjustment pursuant to SECTION 8 hereof) of
the Company's common stock, par value $0.01 per share (the "Common Shares"), at
an Exercise Price determined in accordance with SECTION 7 hereunder.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
SECTION 1. FORM OF WARRANT CERTIFICATES; TRANSFERABILITY OF WARRANTS.
1.1 FORM OF WARRANT CERTIFICATE. The Warrants shall be evidenced by a
certificate substantially as set forth in EXHIBIT A attached hereto (a "Warrant
Certificate"). The Warrant Certificate shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer or a Vice
President. A Warrant Certificate bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such office prior
to the delivery of such Warrant or did not hold such office on the date of this
Agreement. Each Warrant Certificate shall be numbered and registered on the
books of the Company when it is issued, and shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
1.2 TRANSFER. The Warrant Certificate shall be transferable only on the
books of the Company maintained at its principal office at 8201 Preston Road,
Suit 600, Dallas, Texas 75225, or wherever its principal executive offices may
then be located upon delivery thereof duly endorsed by the Warrantholder or its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant Certificate to the
person entitled
CORPDAL:61598.2 29976-00001
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<PAGE>
thereto. All transfers shall be made subject to the provisions of SECTION 13
hereof. In the event the Warrants or any portion thereof are transferred, the
subsequent holder thereof shall have no greater rights than those afforded the
Warrantholder hereunder.
1.3 DIVISION OF WARRANTS. Subject to all federal and state securities
laws, a Warrant Certificate may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Warrant Shares. Unless the
context indicates otherwise, the term "Warrantholder" shall include any
transferee or transferees of the Warrants pursuant to this SUBSECTION 1.3, and
the term "Warrants" shall include any and all Warrants outstanding pursuant to
this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
SECTION 2. LEGEND ON WARRANT SHARES. Each certificate for Warrant
Shares initially issued upon exercise of the Warrant, unless at the time of
exercise such Warrant Shares are registered under the Securities Act of 1933, as
amended (the "Securities Act"), shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and applicable state securities laws, and may not be sold. exchanged,
hypothecated or transferred in any manner in the absence of such
registration or an exemption therefrom. The shares are subject to the
terms of a certain Warrant Agreement, dated July 29, 1996, pursuant to
which they were issued."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the Warrant Shares represented thereby) shall also bear the
above legend unless, in the opinion of counsel satisfactory to the Company, the
securities represented thereby need no longer be subject to such restrictions.
SECTION 3. TERM OF WARRANTS. Subject to the terms of this Agreement,
the Warrantholder shall have the right, at any time during the period commencing
at 9:00 a.m., Dallas, Texas time, on May 10, 1996, and ending at 5:00 p.m.,
Dallas, Texas time, on the later of (i) the eighteenth month anniversary of May
10, 1996, or (ii) the sixth month anniversary of the closing of the first
registration of the offering of the Company's securities pursuant to SECTION 10
hereof (the "Termination Date"), to purchase from the Company up to the number
of fully paid and nonassessable Warrant Shares that the Warrantholder may at the
time be entitled to purchase pursuant to this Agreement, upon surrender to the
Company, at its principal office, of the certificate evidencing the Warrants to
be exercised, duly completed and signed, and upon payment to the Company of the
Exercise Price (as defined in and determined in accordance with the provisions
of SECTIONS 7 AND 8 hereof), for the number of Warrant Shares in respect of
which such Warrants are then exercised, but in no event for less than 25 Warrant
Shares, unless the Warrant entitled the Warrantholder on exercise to less than
25 Warrant Shares, in which event the Warrant can be exercised for such lesser
number of Warrant Shares.
CORPDAL:61598.2 29976-00001
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<PAGE>
SECTION 4. EXERCISE. Payment of the aggregate Exercise Price shall be
made in cash or by check. Upon surrender of the Warrant Certificates and payment
of such Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrantholder and in such name or names as the Warrantholder may designate a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of the Warrants, together with cash, as provided in SECTION 9
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of the
Warrant Certificate and the payment of the Exercise Price, as aforesaid,
notwithstanding that the certificates representing the Warrant Shares shall not
actually have been delivered or that the stock transfer books of the Company
shall then be closed. The Warrants shall be exercisable, at the election of the
Warrantholder, either in full or from time to time in part and, in the event
that a certificate evidencing the Warrants is exercised in respect of less than
all of the Warrant Shares specified therein at any time prior to the Termination
Date, a new certificate evidencing the remaining Warrants will be issued by the
Company.
SECTION 5. MUTILATED OR MISSING WARRANT CERTIFICATES. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, a new Warrant Certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company of such loss, theft or
destruction of such Warrants and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
requirements and pay such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF WARRANT SHARES. There has been reserved, and
the Company shall at all times keep reserved so long as all or any portion of
the Warrants remains outstanding, out of its authorized Common Shares, such
number of Warrant Shares as shall be subject to purchase under such portion of
the Warrant that remains outstanding.
SECTION 7. EXERCISE PRICE. The price per Share (the "Exercise Price")
at which Warrant Shares shall be purchasable upon the exercise of the Warrant
shall be $4.00. The Exercise Price as determined hereunder shall be subject to
further adjustment pursuant to Section 8 hereof.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
8.1 GENERAL. The number of Warrant Shares purchasable upon the exercise
of the Warrants and the Exercise Price shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(A) In case the Company shall (i) pay a dividend in Common
Shares or make a distribution in Common Shares, (ii) subdivide its
outstanding Common Shares, (iii) combine its outstanding Common Shares
into a smaller number of Common Shares
CORPDAL:61598.2 29976-00001
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<PAGE>
(by way of a reverse stock split or otherwise) or (iv) issue by
reclassification of its Common Shares other securities of the Company,
the number of Warrant Shares purchasable upon exercise of the Warrants
immediately prior thereto shall be adjusted so that the Warrantholder
shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company that it would have owned or would have
been entitled to receive after the happening of any of the events
described above, had the Warrants been exercised immediately prior to
the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this SUBSECTION 8.1(A) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(B) In case the Company shall issue rights, options, warrants
or convertible securities to all or substantially all of the holders of
its Common Shares, without any charge to such holders, entitling them
to subscribe for or purchase Common Shares at a price per share that is
lower at the record date mentioned below than the Exercise Price, the
number of Warrant Shares thereafter purchasable upon the exercise of
the Warrants shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of the Warrants by a
fraction, of which the numerator shall be the number of Common Shares
outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of additional Common
Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible securities plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares offered
would purchase at the Exercise Price. Such adjustment shall be made
whenever such rights, options, warrants or convertible securities are
issued, and shall become effective immediately and retroactively after
the record date for the determination of shareholders entitled to
receive such rights, options, warrants or convertible securities.
(C) In case the Company shall distribute to all or
substantially all of the holders of its Common Shares evidences of its
indebtedness or assets (excluding cash dividends or distributions out
of earnings) or issue, to all or substantially all of such holders,
without any charge to such holders, rights, options, warrants or
convertible securities containing the right to subscribe for or
purchase Common Shares (excluding those referred to in PARAGRAPH (B)
above), then in each case the number of Warrant Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of the Warrants by a fraction, of which the numerator shall be
the Exercise Price on the date of such distribution, and of which the
denominator shall be the Exercise Price on such date minus the then
fair value of the portion of the assets or evidences of indebtedness so
distributed or of such rights, options, warrants or convertible
securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on
the date of distribution retroactive to the record date for the
determination of shareholders entitled to receive such distribution.
CORPDAL:61598.2 29976-00001
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<PAGE>
(D) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent in the aggregate number of
Warrant Shares then purchasable upon the exercise of the Warrants or,
if the Warrants are not then exercisable, the number of Warrant Shares
purchasable upon the exercise of the Warrants on the first date
thereafter that the Warrants become exercisable; provided however, that
any adjustments that by reason of this SUBSECTION 8.1(D) are not
required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(E) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided in this
SUBSECTION 8.1, the Exercise Price payable upon exercise of the
Warrants shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(F) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrants or the Exercise Price is adjusted as herein
provided in this SUBSECTION 8.1, the Company shall cause to be promptly
mailed to the Warrantholder in accordance with the provisions or
SECTION 12 hereof, notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of the Warrants and the Exercise Price
after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
(G) For the purpose of this SUBSECTION 8.1, the term "Common
Shares" shall mean (i) the class of shares designated as the Common
Shares of the Company at the date of this Agreement or (ii) any other
class of shares resulting from successive changes or reclassifications
of such Common Shares including changes in par value, or from par value
to no par value, or from no par value to par value, in the event that
at any time, as a result of an adjustment made pursuant to this SECTION
8, the Warrantholder shall become entitled to purchase any shares of
the Company other than Common Shares, thereafter the number of such
other shares so purchasable upon exercise of the Warrants and the
Exercise Price of such shares shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to
the provisions of this SECTION 8.
(H) Upon the expiration of any rights, options, warrants or
conversion privileges referred to in this SECTION 8, if such shall not
have been exercised, the number of Warrant Shares purchasable upon
exercise of the Warrants and the Exercise Price, to the extent the
Warrants have not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had
they been originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (A) the fact that the
only Common Shares so issued were the Common Shares, if any,
CORPDAL:61598.2 29976-00001
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<PAGE>
actually issued or sold upon the exercise of such privileges, options,
warrants or conversion rights and (B) the fact that such Common Shares,
if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the consideration, if any, actually
received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion rights whether or not
exercised; provided, however, that no such readjustment shall have the
effect of increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect of the issuance,
sale or grant of such rights, options, warrants or convertible rights.
8.2 NO ADJUSTMENT OF DIVIDENDS. Except as provided in SUBSECTION 8.1,
no adjustment in respect of dividends shall be made during the term of the
Warrants or upon the exercise thereof.
8.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another person of the property, assets or business of the Company as an entirety
or substantially as an entirety, the Company or such successor or purchaser, as
the case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter upon payment of the Exercise Price
in effect immediately prior to such action to purchase upon exercise of the
Warrants the kind and amount of shares and other securities and property that
the Warrantholder would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the warrants
been exercised immediately prior to such action. In the event of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, in which the Company is the surviving corporation, the right to
purchase Warrant Shares under the Warrants shall terminate on the date of such
merger and thereupon the Warrants shall become null and void but only if the
controlling corporation shall agree to substitute for the Warrants other
warrants that entitle the holders thereof to purchase, upon exercise thereof,
the kind and amount of shares and other securities and property that the
Warrantholder would have owned or had been entitled to receive had the Warrants
been exercised immediately prior to such merger. The adjustments required by
this SUBSECTION 8.3 shall be effected in a manner that shall be as nearly
equivalent as may be practicable to the adjustments provided for elsewhere in
this SECTION 8. The provisions of this SUBSECTION 8.3 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
8.4 STATEMENT ON WARRANT CERTIFICATE. Irrespective of any adjustments
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, the Warrant Certificate or certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrants initially issuable pursuant to this
Agreement.
SECTION 9. FRACTIONAL SHARES. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants. If any fraction
of a Warrant Share would, except for the provisions of this SECTION 9, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the then Current Market Price
CORPDAL:61598.2 29976-00001
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multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Shares are traded in the
over-the-counter market and not in the NASDAQ Market System (National Market or
SmallCap) or on any national securities exchange, the average mean between the
per share closing bid and asked prices of the Common Shares on the 30
consecutive trading days immediately preceding the date in question, as reported
by NASDAQ Market System or an equivalent generally accepted reporting service,
or (ii) if the Common Shares are traded in the NASDAQ Market System (National
Market or SmallCap) or on a national securities exchange, the average for the 30
consecutive trading days immediately preceding the date in question of the daily
per share closing prices of the Common Shares in the NASDAQ Market System
(National Market or SmallCap) or on the principal securities exchange on which
they are listed, as the case may be. The closing price referred to in clause
(ii) above shall be the last reported sales price or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices, in either case in the NASDAQ Market System (National Market or SmallCap)
or on the principal securities exchange on which the Common Shares are then
listed.
SECTION 10. REGISTRATION RIGHTS
10.1 PIGGYBACK REGISTRATION. If the Company shall at any time propose,
on or after May 10, 1996, the registration under the Securities Act of an
offering of its equity securities, the Company shall give written notice of its
intention as promptly as practicable of such proposed registration to each and
every Warrantholder or holder of Warrant Shares. The Company shall use its best
efforts to cause the registration (and the offering if requested by the
Warrantholder) of the Warrant Shares owned by the Warrantholder as the
Warrantholder shall request (within 10 days after the receipt of notice) to be
included, upon the same terms (including the method of distribution), in any
such offering; provided, however, that:
(A) the Company shall not be required to give notice or
include such Warrant Shares in any such registration if the proposed
registration is (A) a registration of a stock option or compensation
plan or of securities issued or issuable pursuant to any such plan or
(B) a registration of securities proposed to be issued in exchange for
securities or assets of, or in connection with a merger or
consolidation with another corporation;
(B) the Company may, without the consent of the Warrantholder,
withdraw such registration statement and abandon the proposed offering
in which the Warrantholder had requested to participate; and
(C) the registration rights set forth in this Section 10.1
shall be applicable to all Warrant Shares owned by the Warrantholder.
10.2 TERMS AND CONDITIONS. The registration rights of the Warrantholder
pursuant to this SECTION 10 are subject to the following terms and conditions:
(A) The Warrantholder shall provide the Company with such
information with respect to the Warrant Shares to be sold, the plans
for the proposed disposition thereof and
CORPDAL:61598.2 29976-00001
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<PAGE>
such other information as shall, in the opinion of counsel for the
Company, be necessary to enable the Company to include in such
registration statement all material facts required to be disclosed with
respect to the Warrantholder.
(B) All expenses incurred by the Company in connection with
any registration requested under this Section will be paid by the
Company. Such expenses include, but are not limited to, printing
expenses (including for such number of registration statements,
prospectuses and other filed material as the Warrantholder shall
reasonably request), "blue sky" fees and expenses and fees and
disbursements of counsel and accountants for the Company, except that
in any such requested registration, the Warrantholder shall pay the
fees and disbursements of its counsel and any underwriting discounts
and commissions with respect to such Warrantholder's Warrant Shares.
(C) The Company will take all necessary action that may be
required in qualifying or registering the Warrant Shares included in a
registration statement, for offering and sale under the securities or
blue sky laws of such states as are requested by the Warrantholder of
such securities.
10.3 UNDERWRITING. The Warrantholder and the Company each agree in
connection with any registration of Warrant Shares contemplated by this section:
(I) to enter into an appropriate underwriting agreement containing
terms and provisions (including reasonable provisions as to
indemnification) customary in such agreements. The Warrantholder shall
indemnify the Company and the underwriters as to information provided
pursuant to SECTION 10.2, the Company shall indemnify the Warrantholder as
to information contained in the registration statement, and the
underwriters shall indemnify the Company and the Warrantholder as to
information provided by such underwriters;
(II) to permit the Company, in its sole discretion, to select the
managing underwriter(s) for any registration under SECTION 10.1;
(III)to provide the Warrantholder and its representatives with
reasonable opportunity for due diligence, if any; and
(IV) notwithstanding the foregoing, if the offering of the Company's
securities pursuant to such registration statement is to be made by or
through underwriters, the Company shall not be required to include Warrant
Shares therein if and to the extent that the underwriter managing the
offering reasonably believes in good faith that such inclusion would
materially adversely affect such offering. The number of Common Shares to
be included in the registration shall be reduced as follows: the number of
Common Shares held by Warrantholder and by other shareholders pursuant to
other piggyback registration rights ("Additional Holders") shall be reduced
pro rata among the Warrantholder(s) and the Additional Holder(s) in
accordance with the number of Common Shares entitled to be registered
pursuant to piggyback registration rights by such Warrantholder(s) and
Additional Holder(s).
CORPDAL:61598.2 29976-00001
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11. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing
contained in this Agreement or in the Warrant Certificate shall be construed as
conferring upon the Warrantholder, or its transferees, any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
If, however, at any time prior to the expiration of the Warrants and prior to
the exercise thereof, any of the following events shall occur:
(A) any action that would require an adjustment pursuant to SECTION
8.1 OR 8.3; or
(B) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger or sale of its property,
assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder as provided in SECTION 12 hereof at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any
relevant dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed by certified mail, return
receipt requested, postage prepaid, addressed as follows:
(A) If to the Warrantholder - to the address as set forth on the
signature page hereof.
(B) If to the Company - to the address first set forth above;
or to such other address as any such party may designate by notice to the other
party. Notices shall be deemed given at the time they are delivered personally
or three days after they are mailed in the manner set forth above.
SECTION 13. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties; provided,
however, that upon 10 days' prior written notice to the Company, the
Warrantholder may assign this Agreement and its rights and obligations hereunder
to any person or entity, without the consent of the Company, provided, that the
transferee agrees to be bound by the terms of this Agreement as if such
transferee were a Warrantholder and, provided further, that the assignment is
made pursuant to a valid exemption from registration
CORPDAL:61598.2 29976-00001
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under the Securities Act. If requested by the Company, the Warrantholder shall
have furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to such effect.
SECTION 14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 15. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed entirely within such state, without regard to
its principles of conflicts of laws.
SECTION 17. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
CORPDAL:61598.2 29976-00001
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
TOUCAN GOLD CORPORATION
By:/s/Oliver Lennox-King
---------------------
Name:Oliver Lennox-King
Title:President and CEO
WARRANTHOLDER:
/s/Jay Lutsky
- ---------------- Address: 4807 South Zang Way
Jay Lutsky Morrison, Colorado 80465
CORPDAL:61598.2 29976-00001
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EXHIBIT A
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, Jay Lutsky ("Holder"), is the
holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
CORPDAL:61598.2 29976-00001
<PAGE>
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61598.2 29976-00001
<PAGE>
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACT,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT IN ACCORDANCE WITH SUCH ACTS AND THE RULES AND REGULATIONS THEREUNDER.
TO PURCHASE SHARES OF
TOUCAN GOLD CORPORATION
THIS CERTIFIES THAT for value received, Jay Lutsky ("Holder"), is the
holder of Warrants to purchase from Toucan Gold Corporation, a Delaware
corporation ("Toucan"), at such time as provided in the Warrant Agreement (as
hereinafter defined), 25,000 fully paid and nonassessable shares of the Common
Stock, $.01 par value ("Shares"), of Toucan, at the purchase price and subject
to the adjustments provided in the Warrant Agreement (the "Exercise Price") upon
presentation and surrender of this Warrant Certificate. As provided in the
Warrant Agreement, the Shares that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. In the event that upon
any exercise of Warrants evidenced hereby the number of Warrants exercised shall
be less than the total number of Warrants evidenced hereby, there shall be
issued to Holder a new Warrant Certificate evidencing the number of Warrants not
exercised. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of this Warrant.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of a Warrant Agreement, dated as
of July 29, 1996 (the "Warrant Agreement"), between Toucan and Holder, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitation of rights, obligations, duties and
immunities hereunder of Toucan and Holder. Copies of the Warrant Agreement are
on file at the principal office of Toucan.
Holder shall not be entitled to vote or receive dividends or be deemed
the holder of Common Stock of Toucan that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon Holder, as such, any of the
rights of a shareholder of Toucan or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or, to receive rights or otherwise, until the Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
CORPDAL:61598.2 29976-00001
<PAGE>
IN WITNESS WHEREOF, Toucan has caused this Warrant Certificate to be
duly executed as of the date first written above.
TOUCAN GOLD CORPORATION
By:
Print Name:
Title:
CORPDAL:61598.2 29976-00001
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
The following is a list of all subsidiaries, the state or other
jurisdiction of incorporation or organization of each, and the names under which
such subsidiaries do business:
1. Toucan Mining Limited ("Toucan Mining"), an exploration stage company
incorporated under the laws of the Isle of Man (British Isles), is a wholly
owned subsidiary of the Company.
2. Mineradora de Bauxita Ltda. ("MBL"), an authorized mining company organized
under the laws of Brazil, is a wholly owned subsidiary of Toucan Mining.
CORPDAL:64048.5 29976-00001
E-21-1
STARLIGHT ACQUISITIONS, INC.
1328 STARWOOD LANE
EVERGREEN, COLORADO 80439
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Starlight Acquisitions, Inc.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders (the
"Special Meeting") of Starlight Acquisitions, Inc. (the "Company") will be held
at the offices of Jenkens & Gilchrist, a Professional Corporation, 1445 Ross
Avenue, 29th Floor, Dallas, Texas in the Henry Gilchrist Conference and Training
Center on the 26th day of July, 1996 at 10:00 a.m. (local time) for the
following purposes:
1. To consider and act upon a proposal to reincorporate the
Company in the State of Delaware by merging the Company into
a wholly-owned Delaware subsidiary, Toucan Gold Corporation,
pursuant to an Agreement and Plan of Merger; and
2. To transact such other business as may be properly brought
before the meeting.
The Board of Directors has fixed the close of business on June 18,
1996, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at such meeting or any
adjournment(s) thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT JEFFCOCK
Secretary
DATED: JULY 16, 1996
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS
IMPORTANT FOR YOU TO BE REPRESENTED AT THE SPECIAL MEETING. THE EXECUTION OF
YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT
THE SPECIAL MEETING.
CORPSA:2173.1 29976-00001
<PAGE>
STARLIGHT ACQUISITIONS. INC.
1328 STARWOOD LANE
EVERGREEN, COLORADO 80439
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 26, 1996
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Starlight Acquisitions, Inc. (the "Company"), to be voted at the special meeting
of Stockholders of the Company to be held on July 26, 1996 (the "Special
Meeting"), at the time and place, and for the purposes, set forth in the
accompanying Notice of Special Meeting of Stockholders, and at any
adjournment(s) of that meeting. When proxies in the accompanying form are
properly executed and received, the shares represented thereby will be voted at
the Special Meeting in accordance with the directions noted thereon; if no
directions are indicated, the shares will be voted in favor of the proposal set
forth in this Proxy Statement, and in the discretion of the persons appointed as
proxies in the accompanying form of proxy with respect to any other matter that
is properly brought before the meeting.
Each Stockholder of the Company has the unconditional right to revoke
the proxy at any time prior to its exercise, either in person at the Special
Meeting or by written notice to the Company addressed as follows: Robert
Jeffcock, Secretary, Starlight Acquisitions, Inc., c/o Jenkens & Gilchrist,
P.C., 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799. No revocation by
written notice shall be effective unless such notice has been received by the
Secretary of the Company prior to the day of the Special Meeting or by the
inspector of elections at the Special Meeting.
The principal executive offices of the Company are located at 1328
Starwood Lane, Evergreen, Colorado 80439. This Proxy Statement and the
accompanying Notice of Special Meeting of Stockholders and proxy are being
mailed to the Company's Stockholders on or about July 16, 1996.
In addition to the solicitation of proxies by use of this Proxy
Statement, directors, officers, and regular employees of the Company may solicit
the return of proxies either by mail, personal interview, telephone, or
telecopy. Officers and employees of the Company will not be compensated
additionally for their solicitation efforts, but they will be reimbursed for any
out-of-pocket expenses incurred.
All costs of paying, printing, assembling, and mailing the Notice of
Special Meeting of Stockholders, this Proxy Statement, the enclosed form of
proxy, and any additional materials, as well as the cost of forwarding
solicitation materials to the beneficial owners of stock and all other costs of
solicitation, will be borne by the Company.
CORPSA:2173.1 29976-00001
1
<PAGE>
PURPOSE OF THE MEETING
At the Special Meeting, the Company's Stockholders will be asked to
consider and act upon a proposal to reincorporate the Company in the State of
Delaware by merging the Company into a wholly-owned Delaware subsidiary, Toucan
Gold Corporation, pursuant to an Agreement and Plan of Merger.
QUORUM AND VOTING
The directors have fixed the close of business on June 18, 1996 as the
record date (the "Record Date") for the determination of Stockholders to vote at
the Special Meeting and any adjournment thereof. As of the Record Date, the
Company had issued and outstanding 5,664,600 shares of Common Stock.
Each Stockholder of record of Common Stock will be entitled to one vote
per share in the matter that is called to vote at the Special Meeting.
The presence, either in person or proxy, of holders of the majority of
the voting power of the Company is necessary to constitute a quorum at the
Special Meeting. Assuming the presence of a quorum, the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock is
required for the approval of the proposal.
All proxies that are properly completed, signed and returned prior to
the Special Meeting will be voted. Any proxy given by a Stockholder may be
revoked at any time before it is exercised by (i) filing with the Secretary of
the Company an instrument revoking it, (ii) a duly executed proxy bearing a
later date or (iii) the Stockholder attending the Special Meeting and expressing
a desire to vote his shares of Common Stock in person. Abstentions, broker
non-votes and proxies directing that the shares are not to be voted will not be
counted as a vote in favor of a matter called for a vote.
CORPSA:2173.1 29976-00001
2
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY
The following table sets forth, as of the close of business on June 18,
1996, information as to the beneficial ownership of shares of Common Stock for
each director, for all directors and executive officers as a group, and any
person or "group" (as that term is used in Section 13(d)(3) of the Exchange Act)
who or which owns beneficially more than 5% of the Company's outstanding shares
of Common Stock. In addition, except as set forth below, the Company does not
know of any person or group who or which owns beneficially more than 5% of its
outstanding shares of Common Stock as of the close of business on the Record
Date.
<TABLE>
<CAPTION>
SHARES OWNED (1)
-----------------
PERCENT
NUMBER OF CLASS(2)
------ -----------
<S> <C> <C>
Clark Arnold(3).................................................... 420,000 7.41
Dunlaw Nominees................................................... 294,000 5.19
Caithness Limited(4).............................................. 1,238,734 21.87
Zalcany Limited(5)................................................ 504,000 8.90
Roy G. Williams(5)(6)............................................. 42,000 0.74
Richard M. Harris(5).............................................. 42,000 0.74
Jonathan D. Harris(5)............................................. 42,000 0.74
J. P. Jeffcock No. 2 Settlement(4)................................ 484,008 8.54
Carlos Lins E. Silva(3)........................................... 210,000 3.71
Igor Mousasticoshvily(3).......................................... 210,000 3.71
Mustardseed Estates Ltd(5)(6)..................................... 210,000 3.71
The Magnum Trust(4)............................................... 105,000 1.85
Sky Trust Company Limited......................................... 456,571 8.06
- -----------------------------
<FN>
(1) The persons named in this table have record ownership of such
shares and except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by
them.
(2) Based on 5,101,459 shares of Common Stock outstanding.
(3) Director or officer of the Company or Mineradora de Bauxita
Ltda., an authorized mining company organized under the laws
of Brazil, and which is a wholly owned subsidiary of Toucan
Mining Limited.
(4) Reads Trust Company Limited, as trustees, have sole voting and
investment control with respect to the shares held by the
following shareholders: Caithness Limited (1,238,734); J.P.
Jeffcock No. 2 Settlement (484,008); The Magnum Trust
(105,000); this represents, in the aggregate, 32.27% of the
capital of the Company following the recent Share Exchange.
Mr. Robert Jeffcock is included in a class of potential
beneficiaries in a Trust which owns Caithness Limited.
(5) Zalcany Limited is a company ultimately controlled and owned
by Mr. R.G. Williams, Mr. R.M. Harris and Mr. J.D. Harris.
Together they effectively share the voting and investment
power of the shares in the Company held by Zalcany Limited.
(6) Mr. R.G. Williams' family owns the equity share capital of
Mustardseed Estates Limited. Accordingly, Mr. R.G. Williams
controls or shares voting investment power over the following
shareholders: R.G. Williams (42,000); Zalcany Limited
(504,000); and Mustardseed Estates Limited (210,000). This
represents in the aggregate, 13.35% of the issued share
capital of the Company following the Share Exchange (as
</FN>
</TABLE>
<PAGE>
PROPOSAL TO REINCORPORATE STARLIGHT ACQUISITIONS, INC.
IN THE STATE OF DELAWARE
INTRODUCTION
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the state of incorporation of
the Company from Colorado to Delaware and changing the name of the Company from
Starlight Acquisitions, Inc. to Toucan Gold Corporation (the "Proposed
Reincorporation"). Shareholders are urged to read carefully the following
sections of this Proxy Statement before voting on this proposal.
Throughout this Proxy Statement, the terms "Company" and "Starlight"
refer to Starlight Acquisitions, Inc., a Colorado corporation, and the term
"Toucan" refers to Toucan Gold Corporation, a Delaware corporation. As of the
date this Proxy Statement was mailed, the Certificate of Incorporation of Toucan
has yet to be filed with the Secretary of State of the State of Delaware. By the
date of the Special Meeting, however, the Certificate of Incorporation will be
filed with the Secretary of State of the State of Delaware and Toucan will be in
existence. Any and all references to Toucan made in this Proxy Statement refer
to Toucan as it is contemplated to exist by the date of the Special Meeting.
Toucan is a wholly-owned subsidiary of Starlight, which is the proposed
successor of Starlight pursuant to the Proposed Reincorporation.
The Proposed Reincorporation will be effected by merging the current
Colorado company into a wholly-owned Delaware subsidiary (the "Merger"), which
subsidiary was incorporated for this purpose, pursuant to an Agreement and Plan
of Merger (the "Merger Agreement"). Upon completion of the Merger, Starlight
will cease to exist, and Toucan will continue to operate the business of the
Company under the name Toucan Gold Corporation. It is anticipated that the
Merger, and thus the Proposed Reincorporation, will become effective (the
"Effective Date") on July 26, 1996, the date of the Special Meeting. The Merger
and Proposed Reincorporation may, pursuant to the terms of the Merger Agreement,
be abandoned at the discretion of the Board of Directors if circumstances make
it inadvisable to proceed.
If the Proposed Reincorporation is approved by the Company's
stockholders, upon the Effective Date, each outstanding share of Starlight
Common Stock, no par value, will be converted into one share of Toucan Common
Stock, no par value.
Under Colorado law, the affirmative vote of a majority of the
outstanding shares of the Common Stock is required for approval of the Merger
Agreement and the other terms of the Proposed Reincorporation. See "Vote
Required for the Proposed Reincorporation."
The discussion set forth below is qualified in its entirety by
reference to the Merger Agreement, the Certificate of Incorporation of Toucan,
and the Bylaws of Toucan, copies of which will be provided by the Company to the
Company's stockholders upon written request to the Company addressed as follows:
Robert Jeffcock, Secretary, Starlight Acquisitions, Inc., c/o Jenkens &
Gilchrist, P.C., 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799.
THE APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION REQUESTED
HEREBY WILL ALSO CONSTITUTE APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE
INCORPORATION OF TOUCAN, AND THE BYLAWS OF TOUCAN.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
For many years Delaware has followed a policy of encouraging
incorporation in that state and in furtherance of that policy has been a leader
in adopting, construing and implementing comprehensive and flexible corporate
laws that are responsive to the legal and business needs of corporations. Many
publicly and privately held corporations initially choose Delaware for their
state of incorporation or subsequently change their corporate domiciles to
Delaware in a manner similar to that proposed by the Company. Because of
Delaware's prominence as the state of incorporation for many major corporations,
both the legislature and the courts in Delaware have demonstrated an ability and
a willingness to act quickly and effectively to meet changing business needs.
The Delaware courts have thereby developed considerable expertise in dealing
with corporate issues, and a substantial body of case law has developed
construing Delaware law and
<PAGE>
establishing public policies with respect to
corporate legal affairs. On the other hand, the Colorado Business Corporation
Act has not been interpreted by the courts as often as has the General
Corporation Law of Delaware. Consequently, the Proposed Reincorporation in
Delaware will provide a greater predictability with respect to the Company's
corporate legal affairs.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a
number of measures through amendment of its corporate charter, bylaws or
otherwise that are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. In addition, there is substantial judicial
precedent in the Delaware courts as to the legal principles applicable to these
defensive measures and as to the assessment of the conduct of board of directors
under the business judgment rule with respect to unsolicited takeover attempts.
Certain effects of the Proposed Reincorporation may be considered to
have anti-takeover implications. Section 203 of the Delaware General Corporation
Law ("Section 203") restricts certain "business combinations" with "interested
stockholders" for three years following the date that a person becomes an
interested stockholder, unless the Board of Directors approves the business
combination. Corporations may opt out of the provisions of Section 203 and thus
decline its potential takeover protection; however, the Company may NOT do so.
See "Significant Differences Between the Corporation Laws of Colorado and
Delaware--Stockholder Approval of Certain Business Combinations."
In addition, certain changes to the relative rights of shareholders and
management which have anti-takeover implications may be implemented under
Delaware law, although the Board of Directors does not currently plan to
implement any of these changes. For a discussion of these and other differences
between the laws of Colorado and Delaware, see "Significant Differences Between
the Corporation Laws of Colorado and Delaware."
The Board of Directors believes that unsolicited takeover attempts, in
addition to possibly seriously disrupting the business and management of the
Company, may be unfair or disadvantageous to the Company and its shareholders
because:
(i) A non-negotiated takeover bid may be timed to take advantage of a
temporarily depressed stock prices;
(ii) A non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids; and
(iii) A non-negotiated takeover bid may involve the acquisition of
only a controlling interest in the corporation's stock, without affording
all shareholders the opportunity to receive the same economic benefits.
By contrast, the Board of Directors believes that, by preserving the
process whereby an acquiror must negotiate with an independent board of
directors, the Board can and should take account of the underlying and long-term
values of assets, the possibilities for alternative transactions on more
favorable terms, possible advantages from a tax-free organization, anticipated
favorable developments in the Company's business not yet reflected in its stock
price and equality of treatment of all shareholders.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the
Proposed Reincorporation is in the best interests of the Company and its
shareholders, some shareholders may find the proposal disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which is
not approved by the Board of Directors but which a majority of the shareholders
deem to be in their best interests or in which shareholders are to receive a
substantial premium for their shares over the then-current market value or over
their cost basis in such shares unless a majority of the stockholders elected a
new board of directors. As a result of these effects, shareholders who might
wish to participate in a tender offer may not have an opportunity to do so. In
addition, to the extent that such provisions enable the Board of Directors to
<PAGE>
resist a takeover or a change in control of the Company, they could make it more
difficult to change the existing Board of Directors and management or effect a
change in control of the Company which is opposed by the Board. This
strengthened tenure and authority of the Board of Directors could enable the
Board of Directors to resist change and otherwise thwart the desires of a
majority of the shareholders.
It should be noted further that Delaware law has been criticized by
some commentators on the grounds that it does not afford minority shareholders
the same substantive right and protections as are available in a number of
states. For a comparison of shareholders' rights and the powers of management
under Delaware and Colorado, see "Significant Differences Between the
Corporation Laws of Colorado and Delaware."
The Board of Directors has considered these potential disadvantages and
has concluded the potential benefits of the Proposed Reincorporation outweigh
the possible disadvantages.
CHANGE OF COMPANY'S NAME
The Proposed Reincorporation will have the effect of changing the name
of the Company from Starlight Acquisitions, Inc. to Toucan Gold Corporation (the
"Name Change"). The name Toucan Gold Corporation more closely reflects the
actual operations of the Company. Upon merging the Company into Toucan, a
Delaware corporation and wholly-owned subsidiary of the Company, the Company
will cease to exist and Toucan will continue to operate the business of the
Company under the name Toucan Gold Corporation.
NO CHANGE IN THE BOARD MEMBERS, BUSINESS, MANAGEMENT, OR LOCATION OF PRINCIPAL
FACILITIES OF THE COMPANY
The Proposed Reincorporation will change only the legal domicile and
the name of the Company, and cause other changes of a legal nature, certain of
which are described in this Proxy Statement. The Proposed Reincorporation will
NOT result in any change in the business, management, fiscal year, assets or
location of the principal facilities of the Company. The three (3) current
directors of Starlight will continue as the directors of Toucan. In addition,
the one (1) advisory director of Starlight will continue as the advisory
director of Toucan.
THE CHARTER AND BYLAWS OF STARLIGHT AND TOUCAN.
The provisions of the Toucan Certificate of Incorporation and the
Bylaws which will be in effect immediately following the Proposed
Reincorporation are similar to those of the Starlight Articles of Incorporation
and Bylaws in most respects. The material differences between the Starlight
Articles of Incorporation and Bylaws and the Toucan Certificate of Incorporation
and Bylaws respectively are described below. AS NOTED ABOVE, APPROVAL OF THE
PROPOSED REINCORPORATION WILL BE DEEMED TO BE APPROVAL OF THE TOUCAN CERTIFICATE
OF INCORPORATION AND BYLAWS.
Delaware law permits the implementation of certain provisions in a
corporation's certificate of incorporation or bylaws which would alter some of
the rights of shareholders and the powers or management of a Colorado company.
Although the Board of Directors of the Company has no current plan to implement
several of these provisions, certain changes will be deemed approved by approval
of the Proposed Reincorporation and further changes could be implemented in the
future by amendment of the Certificate of Incorporation pursuant to stockholder
approval and by amendment of the Bylaws of Toucan by the Board of Directors
without stockholder approval. For a discussion of such changes, see the below
discussion and "Significant Differences Between the Corporation Laws of Colorado
and Delaware."
AUTHORIZED STOCK
The Articles of Incorporation of Starlight (the "Articles of
Incorporation") currently authorize two classes of capital stock, designated as
Common Stock and Preferred Stock. The Common Stock consists of 3,000,000,000
shares, no par value, and the Preferred Stock consists of 2,000,000 shares, no
par value. There are currently no shares of authorized but undesignated
Preferred Stock under the Articles of Incorporation.
<PAGE>
The Certificate of Incorporation of Toucan authorizes a class of
30,000,000 shares of Common Stock, par value $.01 per share, and a class of
2,000,000 shares of Preferred Stock, par value $.01 per share.
Change in Number of Directors Under Delaware law, the authorized number
of directors may be changed by resolution of the board of directors. Under
Colorado law, the directors can change the authorized number of directors,
unless a particular bylaw expressly prohibits the directors from doing so or the
articles of incorporation have expressly reserved such power to the shareholders
in whole or in part. The Articles of Incorporation of Starlight provide that the
directors are authorized to adopt, confirm, ratify, alter, amend, rescind and
repeal the Bylaws. The Bylaws of Starlight currently provide that the number of
directors shall be fixed from time to time by resolution of the Board of
Directors. The Bylaws also provide that there may not be less than three (3)
directors, unless the outstanding shares of the corporation are held of record
by fewer than three (3) shareholders, in which event there need be only as many
directors as there are shareholders. The currently established number is three
(3). The Certificate of Incorporation and the Bylaws of Toucan provides that the
number of directors shall not be less than one (1) nor more than nine (9), the
exact number to be fixed from time to time specified by resolution of the Board
of Directors; provided, however, no director's term
If the Proposed Reincorporation is approved, the three (3) directors of
Starlight will serve as directors of Toucan, and the one (1) advisory director
of Starlight will serve as the advisory director of Toucan.
Indemnification and Limitation of Liability Under Delaware law,
Delaware corporations are permitted to adopt a provision in their certificates
of incorporation reducing or eliminating the liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such liability does not arise from certain
prescribed conduct (including intentional misconduct and breach of the duty of
loyalty). Colorado has adopted a similar provision which is included in
Starlight's current Articles of Incorporation. Toucan has adopted such a
provision in its Certificate of Incorporation.
The Delaware General Assembly adopted an amendment to the Delaware
General Corporation Law to add Section 102(b)(7), upon the recommendation of the
Delaware Bar Association, in response to changes in the market for directors'
liability insurance, including significant increases in the number and magnitude
of lawsuits against directors and the difficulty of obtaining such insurance on
traditional terms, or on any terms at all. The General Assembly considered this
development a threat to the quality and stability of the governance of Delaware
corporations because of the unwillingness of directors to serve without the
protections traditionally available to them against claims arising out of their
services and because of the deterrent effect on entrepreneurial decision-making
by directors who do serve. Article VIII of the Certificate of Incorporation of
Toucan contains the limitation on liability permitted by Section 102(b)(7).
Article 9, subparagraph (a) of the Certificate of Incorporation of
Toucan eliminates director liability to Toucan or its stockholders for monetary
damages arising out of a director's breach of his fiduciary duty, except for
such liability as is expressly not subject to limitation under the Delaware
General Corporation Law to further limit or eliminate such liability. The duty
of care refers to the fiduciary duty of a director to be sufficiently diligent
and careful in considering a transaction or taking or refusing to take some
corporate action. A breach of the duty of care by a director may give rise to
liability for monetary damages caused to Toucan or its stockholders. Liability
for a breach of the duty of care arises when directors have failed to exercise
sufficient care in reaching decisions or otherwise amending to their
responsibilities as directors. Article 9, subparagraph (a) of the Certificate of
Incorporation of Toucan does not eliminate the duty of care, it only eliminates
monetary damage awards occasioned by a breach of that duty. Thus, if the
Proposed Reincorporation is approved and Starlight is merged with and into
Toucan, a breach of the duty of care would remain a valid basis for a suit
seeking to stop a proposed transaction from occurring. After the transaction has
occurred, however, the stockholders would no longer have a claim against
directors for money damages based on the breach of the duty of care, even if
that breach involved gross negligence on the part of the directors. See also
"Significant Differences Between the Corporation Laws of Colorado and
Delaware--Indemnification and Limitation of Liability.
The Certificate of Incorporation does not limit or eliminate liability
based on the following types of claims:
<PAGE>
1. Liability based on a breach of the director's duty of loyalty to
Toucan or its stockholders;
2. Liability based on the payment of an improper dividend or an
improper repurchase of Toucan stock under Section 174 of the Delaware
General Corporation Law;
3. Liability for actions or failures to act which the director knew
were in violation of law.
4. Liability arising out of intentional misconduct by the director.
5. Liability arising out of any transaction pursuant to which the
director received some improper personal benefit, and
6. Liability for actions taken or failures to act by the director not
in good faith.
The Company is not aware of any pending or threatened claim that would
be covered by such Article 9, nor has there been any litigation in the recent
past that would have been affected had such Article 9 been in place at the time
of the conduct referred to in such litigation.
The Board of Directors believes that Article 9 of the Certificate of
Incorporation is in the best interests of Toucan and its stockholders in that it
maintains Toucan's ability to attract and retain qualified individuals to serve
as directors of Toucan by assuring directors (and potential directors) that
their good faith decisions will not be second-guessed by a court evaluating
decisions with the benefit of hindsight. Such Article 9, however, limits the
remedies available to stockholders dissatisfied with a Board decision which is
protected by such Article 9, directors will not be liable to Toucan or its
stockholders for business decisions made in good faith, including decisions made
in connection with attempts to acquire Toucan, even if such decisions involve
gross negligence on the part of the directors. In any such case, the
stockholders' only remedy would be to sue to stop the completion of the Board's
action. In many situations, this remedy may not be effective due to completion
of the Board's action.
The Board of Directors believes that the diligence exercised by
directors stems primarily from their desire to act in the best interests of
Toucan, and not from a fear of monetary damage awards. Consequently, the Board
believes that the level of scrutiny and care exercised by directors will not be
lessened by the adoption of Article 9 of the Certificate of Incorporation.
Loans to Officers and Employees. Under Delaware law, a corporation may
make loans to, guarantee the obligations of or otherwise assist its officers or
other employees and those of its subsidiaries (including directors who are also
officers or employees) when such action, in the judgment of the directors may
reasonably be expected to benefit the corporation. Therefore, in accordance with
Delaware law, Toucan may make loans to, guarantee the obligations of or
otherwise assist its officers or other employees and those of its subsidiaries
(including the directors who are also officers or employees) when such action,
in the judgment of the directors, may reasonably be expected to benefit the
corporation.
Voting by Ballot. Starlight's Bylaws provide that the election of
directors at a shareholders' meeting may be by voice vote unless the presiding
officer shall order or any shareholder shall demand that voting be by ballot.
Under Delaware law, the need to vote by written ballot may be restricted if so
provided in the certificate of incorporation. The Certificate of Incorporation
of Toucan provides that elections of directors need not be by written ballot
unless the Bylaws provide for written ballot. The Bylaws of Toucan currently
provide that election of directors need not be by written ballot.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF COLORADO AND DELAWARE
The General Corporation Laws of Colorado and Delaware differ in many
respects. It is not practical to describe all such differences in this Proxy
Statement, but the principal differences which could materially affect the
rights of shareholders are discussed below.
<PAGE>
Size of the Board of Directors. Under Colorado law, bylaws may
establish a range for the size of the board of directors by fixing a minimum and
maximum number of directors. If a range is established, the number of directors
may be fixed or changed from time to time within the range by the shareholders
or the board. In addition, Colorado law provides that (i) the board may amend
the bylaws at any time to add, change, or delete a provision, unless the
Colorado Business Corporation Act or the articles of incorporation reserve such
power to the shareholders or a particular bylaw expressly prohibits the board
from doing so; and (ii) the shareholders may amend the bylaws even though the
bylaws may also be amended by the board. Delaware law permits the board of
directors alone to change the authorized number or the range of directors by
amendment to the bylaws, unless the directors are not authorized to amend the
bylaws or the number of directors is fixed in the certificate of incorporation
(in which case a change in the number of directors may be made only by amendment
to the certificate of incorporation following approval of such change by the
stockholders). The Certificate of Incorporation of Toucan provides that the
number of directors will be not less than one (1) nor more than nine (9), with
the exact number to be fixed from time to time in the manner provided by the
Bylaws, and authorizes the Board of Directors to make, alter, amend, or repeal
the Bylaws; provided, however, that no such adoption, amendment, or repeal shall
be valid with respect to Bylaw provisions that have been adopted, amended, or
repealed by the stockholders; and further provided, that Bylaws adopted or
amended by the Board of Directors and any powers thereby conferred may be
amended, altered, or repealed by the stockholders. The ability of the Board of
Directors to alter the size of the Board without stockholder approval enables
Toucan to respond quickly to a potential opportunity to attract the services of
a qualified director or to eliminate a vacancy for which a suitable candidate is
not available. The Bylaws of Toucan provide, consistent with Delaware law, that
the size of the Board may be changed by resolution of the Board of Directors;
provided, however, no director's term shall be shortened by reason of a
resolution reducing the number of directors. If the Proposed Reincorporation is
approved, the three (3) directors of Starlight who are currently serving will
continue as directors of Toucan after the Proposed Reincorporation is
consummated.
Cumulative Voting. Generally, under Colorado law, cumulative voting is
mandatory in the election of directors unless a statement that cumulative voting
is prohibited is made in the articles of incorporation. The Articles of
Incorporation of Starlight expressly prohibit the cumulative voting of shares
for the election of directors. Under Delaware law, cumulative voting in the
election of directors is not mandatory. The Certificate of Incorporation of
Toucan provides that no shareholder of Common Stock shall have any rights to
cumulate votes in the election of directors. Accordingly, cumulative voting
rights will continue to be prohibited if the Proposed Reincorporation is
approved.
Classified Board of Directors. A classified board is one to which a
certain number, but not all, of the directors are elected on a rotating basis
each year. Under Colorado law, directors must be elected annually, unless the
corporation's articles of incorporation provide for a classified board.
Similarly, Delaware law permits, but does not require, a classified board of
directors, with staggered terms under which one-half or one-third of the
directors are elected for terms of two or three years, respectively. This method
of electing directors makes changes in the composition of the board of directors
and thus a potential change in control of a corporation, a lengthier and more
difficult process. Neither the Certificate of Incorporation nor the Bylaws of
Toucan provide for a classified board of directors. The establishment of a
classified board following the Proposed Reincorporation would require the
approval of the stockholders of Toucan.
Power to Call Special Shareholders' Meetings, Advance Notice of
Stockholder Business, and Nominees. Under Colorado law, a special meeting of
shareholders may be called by the board of directors or the person or persons
authorized by the bylaws to call such a meeting, or the holders of shares
entitled to cast votes not less than ten percent (10%) of the votes at such
meeting. Under Delaware law, a special meeting of stockholders may be called by
the board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. Although permitted to do so, the
Bylaws of Toucan do not eliminate the right of stockholders to call a special
meeting of stockholders; instead, the Bylaws authorize the Chairman of the Board
or the President to call a special meeting, and mandate that a special meeting
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors, or by the holders of ten percent (10%) or
more of the outstanding shares of stock of the corporation. Following the
Proposed Reincorporation, the Board of Directors of Toucan could (although it
has no current intention to do so) amend the Bylaws to limit or eliminate the
right of stockholders to call a special meeting of stockholders. The right of
the stockholders to call a special meeting is not set forth in the Certificate
of Incorporation of Toucan, which may be amended only by stockholder vote or
written consent, and therefore such right may be limited or eliminated by
amendment of the Bylaws by the Board of Directors. Any such limitation could
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make it more difficult for stockholders to initiate action that is opposed by
the Board of Directors. Such action on the part of stockholders could include
the removal of an incumbent director, the election of a stockholder nominee as a
director, or the implementation of a rule requiring stockholder ratification of
specific defensive strategies that have been adopted by the Board of Directors
with respect to unsolicited takeover bids. In addition, the Toucan Bylaws
require timely advance notice in proper written form of stockholder nominees for
election as director or stockholder business to be brought before a meeting. The
ability of the board of directors under Delaware law to limit or eliminate the
right of stockholders to initiate action at stockholder meetings may make it
more difficult to change the existing board of directors and management.
Actions by Written Consent of Shareholders. Under Colorado and Delaware
law, shareholders may execute an action by written consent in lieu of a
shareholders' meeting. Delaware law provides that any action that could be taken
by shareholders at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by the holders of record
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Colorado law, on the other
hand, provides that any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if all of the shareholders
entitled to vote thereon consent to such action in writing. Therefore, unlike
Colorado law, Delaware law permits a majority of the shareholders of the Company
to take action without the need for a shareholders' meeting.
Stockholder Approval of Certain Business Combinations. In the last
several years, a number of states (but not Colorado) have adopted special laws
designed to make certain kinds of "unfriendly" corporate takeovers or other
transactions involving a corporation and one or more of its significant
shareholders more difficult. Under Section 203 of the Delaware General
Corporation Law ("Section 203"), certain "business" combinations" by Delaware
corporations with "interested stockholders" are subject to a three-year
moratorium unless specified conditions are met. There is no equivalent provision
in the Colorado Business Corporation Act to Section 203.
Section 203 prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for three years
following the date that such person becomes an interested stockholder. With
certain exceptions, an interested stockholder is a person or group who or which
owns fifteen percent (15%) or more of the corporation's outstanding voting stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
fifteen percent (15%) or more of such voting stock at any time within the
previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock, the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business, combinations by Section
203 does not apply if (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder, (ii) the interested stockholder owns eighty-five percent
(85%) of the corporation's voting stock upon consummation of the transaction
which made him or her an interested stockholder (excluding from the eighty-five
percent (85%) calculation shares owned by directors who are also officers of the
target corporation and shares held by employee stock plans which do not permit
employees to decide confidentially whether to accept a tender or exchange
offer); or (iii) on or after the date such person becomes an interested
stockholder, the board approves the business combination and it is also approved
at a stockholder meeting by sixty-six and two-thirds percent (66 2/3%) of the
voting stock not owned by the interested stockholder.
<PAGE>
Section 203 only applies to Delaware corporations which have a class of
voting stock that is listed on a national securities exchange is quoted on an
interdealer quotation system such as NASDAQ or is held of record by more than
2,000 stockholders. Although Section 203 will not be immediately applicable to
Toucan following the Proposed Reincorporation, it may become applicable to
Toucan sometime in the future. A Delaware corporation may elect not to be
governed by Section 203 by a provision in its original certificate of
incorporation or an amendment thereto or to the bylaws, which amendment must be
approved by majority stockholder vote and may not be further amended by the
board of directors. Toucan may not elect not to be governed by Section 203
should it become applicable to it, and, accordingly, Section 203 may apply to
Toucan at such time as Toucan has a class of voting stock that is listed on a
national securities exchange, is quoted on an interdealer quotation system such
as NASDAQ or is held of record by more than 2,000 stockholders.
The constitutionality of Section 203 has been challenged from time to
time in lawsuits arising out of ongoing takeover disputes, and it is not yet
clear whether and to what extent its constitutionality will be upheld by the
courts. Although the United States District Court for the District of Delaware
has consistently upheld the constitutionality of Section 203, the Delaware
Supreme Court has not yet considered the issue. The Company believes that so
long as the constitutionality of Section 203 is upheld, Section 203 will
encourage any potential acquiror to negotiate with the Company's Board of
Directors. Section 203 also has the effect of limiting the ability of a
potential acquiror to make a two-tiered bid for Toucan in which all stockholders
would not be treated equally. Shareholders should note that the application of
Section 203 to Toucan will confer upon the Board the power to reject a proposed
business combination, even though a potential acquiror may be offering a
substantial premium for Toucan's shares over the then-current market price
(assuming the stock is then publicly traded). Section 203 should also discourage
certain potential acquirors unwilling to comply with its provisions. See also
"Shareholder Voting" herein.
Removal of Directors. Under Colorado law, one or more directors may be
removed, with or without cause, only if the number of votes cast in favor of
removal exceeds the number of votes cast against removal; except that, if
cumulative voting is in effect, a director may not be removed if the number of
votes sufficient to elect the director under cumulative voting is voted against
such removal. Under Delaware law, a director of a corporation that does not have
a classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares entitled
to vote. In the case of a Delaware corporation having cumulative voting, if less
than the entire board is to be removed, a director may not be removed without
cause if the number of votes cast against such removal would be sufficient to
elect the director under cumulative voting. A director of a corporation with a
classified board of directors may be removed only for cause unless the
certificate of incorporation otherwise provides. The Certificate of
Incorporation of Toucan prohibits cumulative voting and does not provide for a
classified board of directors. Consequently, the charter documents of Starlight
and of Toucan are the same with regard to the provisions governing the removal
of directors, although the Certificate of Incorporation of Toucan could be
amended with the approval of the majority of the outstanding shares entitled to
vote to provide otherwise.
Filling Vacancies on the Board of Directors. Under Colorado law, unless
otherwise provided for in the articles of incorporation, if a vacancy occurs on
a board of directors, including a vacancy resulting from an increase in the
number of directors, the shareholders may fill the vacancy, the board of
directors may fill the vacancy, or if the directors remaining in office
constitute fewer than a quorum of the board, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office. Under
Delaware law, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum) unless
otherwise provided in the certificate of incorporation or bylaws (and unless the
certificate of incorporation directs that a particular class is to elect such
director, in which case any other directors elected by such class, or a sole
remaining director, shall fill such vacancy). The Bylaws of Toucan provide,
consistent with the Bylaws of Starlight, that any vacancy created by the removal
of a director by the stockholders of Toucan may only be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
director. If the Proposed Reincorporation is approved, the Board of Directors of
Toucan could (although it has no current intention to do so) amend the Bylaws to
provide that only stockholders may fill any vacancy created by the removal of a
director by the stockholders.
<PAGE>
Indemnification and Limitation of Liability. Colorado and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their charters eliminating the liability of
a director to the corporation or its shareholders for monetary damages for
breach of the director's fiduciary duty of care. There are nonetheless certain
differences between the laws of the two states with respect to indemnification
and limitation of liability.
The Articles of Incorporation of Starlight eliminate the liability of
directors to the fullest extent permissible under Colorado law. Colorado law
does not, however, permit the elimination of monetary liability where such
liability is based on: (a) a breach of the directors' duty of loyalty to the
corporation or to its shareholders; (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (c) a
distribution made in violation of the Colorado Business Corporation Act or the
articles of incorporation; or (d) any transaction from which the director
directly or indirectly derived an improper personal benefit. No provision in a
corporation's articles of incorporation shall eliminate or limit the liability
of a director to the corporation or to its shareholders for monetary damages for
any act or omission occurring before the date when such a provision becomes
effective.
The Certificate of Incorporation of Toucan likewise eliminates the
liability of directors to the fullest extent permissible under Delaware law as
such law exists currently or as it may be amended in the future. Under Delaware
law, such provision may not eliminate or limit director monetary liability for:
(a) breaches of the director's duty of loyalty to the corporation or its
stockholders; (b) acts or omissions not in good faith or involving the
intentional misconduct or knowing violations of law; (c) the payment of unlawful
dividends or unlawful stock repurchases or redemptions; or (d) transactions in
which the director received an improper personal benefit. Such limitation of
liability provisions also may not limit a director's liability for violation of,
or otherwise relieve Toucan or its directors from, the necessity of complying
with federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
Colorado law permits indemnification of expenses incurred in derivative
or third-party actions if the director conducted himself or herself in good
faith and the person reasonably believed that, in the case of conduct in an
official capacity, his or her conduct was in the corporation's best interest,
and in all other cases, that his or her conduct was at least not opposed to the
corporation's best interests, and in the case of any criminal proceeding, that
the person had no reasonable cause to believe his or her conduct was unlawful.
However, no indemnification without court approval may be made in connection
with a proceeding by or in the right of the corporation in which the director
was adjudged liable to the corporation, or in connection with any other
proceeding charging that the director derived an improper personal benefit,
whether or not involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an improper
personal benefit; except that the indemnification is limited to reasonable
expenses incurred in connection with the proceeding and reasonable expenses
incurred to obtain court-ordered indemnification.
Indemnification is permitted by Delaware law only for acts taken in
good faith and believed to be in the best interests of the corporation and its
shareholders (or in the case of a criminal proceeding, if the accused had no
reasonable cause to believe the conduct was unlawful) as determined by a
majority vote of a disinterested quorum of directors, independent legal counsel
(if a quorum of independent directors is not obtainable), a majority vote of a
quorum of the shareholders (excluding shares owned by the indemnified party), or
the court handling the action.
Colorado corporations may include a provision regarding indemnification
of, or advance of expenses, to directors in their articles of incorporation,
bylaws, contracts, or by other corporate actions. Said provision is valid only
to the extent that it is not inconsistent with Colorado law. The Articles of
Incorporation of Starlight do not include a provision expressly authorizing the
Company to indemnify the directors and officers of the Company to the fullest
extent permissible under Colorado law.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise. The
Certificate of Incorporation of Toucan includes a provision providing that the
Company shall indemnify the directors of the Company to the fullest extent
permissible under Delaware law.
<PAGE>
Both Colorado law and Delaware law require indemnification when the
individual has successfully defended the action on the merits or otherwise.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is
no determination by a disinterested quorum of the directors, by independent
legal counsel, or by a majority vote of a quorum of the stockholders, that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation (or in
the case of a criminal proceeding, if the accused had no reasonable cause to
believe the conduct was unlawful). Colorado law generally provides that a
corporation may indemnify a director provided there is no determination by a
majority vote of disinterested directors at a meeting at which a quorum is
present, or if a quorum cannot be obtained, by a majority vote of a committee of
the board of directors comprised of two or more disinterested directors, by
independent legal counsel, or by the shareholders, that the person seeking
indemnification acted in good faith and that the person reasonably believed
that, in the case of conduct in an official capacity, his or her conduct was in
the corporation's best interest, and in all other cases, that his or her conduct
was at least not opposed to the corporation's best interests, and in the case of
any criminal proceeding, the person had no reasonable cause to believe his or
her conduct was unlawful. Without court approval, however, both Delaware law and
Colorado law generally provide that no indemnification may be made in respect of
any derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his duty to the corporation.
Inspection of Shareholders' List. Both Colorado and Delaware law allow
shareholders to inspect and copy the shareholders' list for a purpose reasonably
related to such person's interest as a shareholder. Restricted access to
stockholder records, even though unrelated to the stockholder's interests as a
stockholder, could result in impairment of the stockholder's ability to
coordinate opposition to management proposals, including proposals with respect
to a change in control of the Company.
Dividends and Repurchases of Shares. Colorado law dispenses with the
concept of par value of shares as well as statutory definitions of capital,
surplus, and the like. The concepts of par value, capital and surplus are
retained under Delaware law.
Under Colorado law, a corporation may not make any distribution when,
after giving effect to such distribution, the corporation would not be able pay
its debts as they become due in the usual course of business, or the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved at
the time of the distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation.
Shareholder Voting. Both Colorado law and Delaware law generally
require that a majority of the acquiring and target corporations approve
statutory mergers. Both Delaware law and Colorado law do not require a
stockholder vote of the surviving corporation in a merger (unless the
corporation provides otherwise in its certificate of incorporation) if (a) the
merger agreement does not amend the existing certificate of incorporation, (b)
each share of the surviving corporation outstanding before the merger is an
identical outstanding or treasury share after the merger, and (c) the number of
shares to be issued by the surviving corporation in the merger does not exceed
20% of the shares outstanding immediately prior to the merger.
Holding Company Reorganization. A new Section 251(g) has been added to
the General Corporation Law permitting a Delaware corporation to reorganize as a
holding company without stockholder approval. The reorganization contemplated by
the statute is accomplished by merging the subject corporation with or into a
direct or indirect wholly owned subsidiary of the corporation and converting the
stock of the corporation into stock of another direct or indirect wholly owned
subsidiary of the corporation, which would be the new holding company. The
statute eliminates the requirement for a stockholder vote on such a merger but
<PAGE>
contains several provisions designed to ensure that the rights of stockholders
are not changed by or as a result of the merger, except and to the extent that
such rights could be changed without such stockholder approval under existing
law.
Thus, the resulting holding company must be a Delaware corporation and
have the same certificate of incorporation (except for provisions that could
have been amended or deleted without stockholder approval), bylaws, and
directors that the corporation had prior to the reorganization. The corporation
or its successor must, as a result of the reorganization, become a direct or
indirect wholly owned subsidiary of the holding company and must retain the same
certificate of incorporation and bylaws that the corporation had prior to the
reorganization (except that the capitalization may be reduced and except for the
addition of the provision described in the next sentence). To ensure that the
voting rights of the stockholders of the corporation are not changed or evaded
as a result of the reorganization, the statute requires that the certificate of
incorporation of the corporation provide that any extraordinary transactions
involving the corporation be approved by the stockholders of the corporation
prior to the reorganization and by the stockholders of the holding company. To
ensure that any restrictions on stockholders of the corporation imposed by
Section 203 or any exemption from such restrictions, remain unaffected by a
holding company reorganization, the statute further provides that the provisions
of Section 203 will apply to persons who are stockholders of the holding company
immediately after the effectiveness of a holding company reorganization to the
same extent that they applied to stockholders of the corporation immediately
prior to the reorganization. In order for no stockholder vote to be required, a
holding company reorganization must be tax-free for federal income tax purposes
to stockholders of the corporation. Appraisal rights are not available to
stockholders in a merger that qualifies as a holding company reorganization.
Both Colorado and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets.
With certain exceptions, Colorado law generally requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. By contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation which adversely
affects a specific class of shares. Should the Company reincorporate in Delaware
and should the Company authorize and issue shares of a new class of capital
stock, the holders thereof would vote with the holders of the previously
outstanding capital stock on proposals not adversely affecting a particular
class. In such event, the holders of previously outstanding capital stock, if in
the minority, would be unable to control the outcome of a vote, and if in the
majority, would be able to control the outcome of such a vote.
Interested Director Transactions. Under both Colorado and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under Colorado and Delaware law.
Under Colorado and Delaware law, (a) either the shareholders or the board of
directors must approve any such contract or transaction after full disclosure of
the material facts, or (b) the contract or transaction must have been fair as to
the corporation at the time it was approved.
Shareholder Derivative Suits. Under Delaware law and Colorado law, a
stockholder may only bring a derivative action on behalf of the corporation if
the stockholder was a stockholder of the corporation at the time of the
transaction in question or his or her stock thereafter devolved upon him or her
by operation of law.
Appraisal Rights. Under both Colorado and Delaware law, a shareholder
of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to appraisal rights pursuant to which
such shareholder may receive cash in the amount of the fair market value of his
or her shares in lieu of the consideration he or she would otherwise receive in
the transaction. Under Delaware law, such appraisal rights are not available (a)
with respect to the sale, lease or exchange of all or substantial all of the
assets of a corporation, (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation surviving a merger if no vote
of the stockholders of the surviving corporation is required to approve the
merger because the merger agreement does not amend the existing certificate of
incorporation, each share of the surviving corporation outstanding prior to the
merger is an identical outstanding or treasury share after the merger, and the
number of shares to be issued in the merger does not exceed 20% of the shares of
the surviving corporation outstanding immediately prior to the merger and if
certain other conditions are met.
<PAGE>
Colorado law does make dissenters' rights available to shareholders of a
corporation that merges into a 90% or more owned subsidiary, as will be the case
in the Proposed Reincorporation. Dissenters' rights of appraisal are, therefore,
not available to shareholders of Starlight with respect to the Proposed
Reincorporation.
Dissolution. Under Colorado law, a proposal to dissolve the corporation
adopted by the board of directors must be approved by each voting group entitled
to vote separately on the proposal by a majority of all the votes entitled to be
cast. Under Delaware law, unless the board of directors approves the proposal to
dissolve, the dissolution must be approved by stockholders holding 100% of the
total voting power of the corporation. Only if the dissolution is initiated by
the board of directors may it be approved by a simple majority of the
corporation's stockholders. In the event of such a board-initiated dissolution,
Delaware law and Colorado law allow a corporation to include in its certificate
of incorporation a greater voting requirement in connection with dissolutions.
Toucan's Certificate of Incorporation contains no such supermajority voting
requirement, however, and a majority of shares voting at a meeting at which a
quorum is present would be sufficient to approve a dissolution of Toucan which
had previously been approved by its Board of Directors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax
consequences to holders of Starlight capital stock who receive Toucan capital
stock in exchange for their Starlight capital stock as a result of the Proposed
Reincorporation. This discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), existing and proposed regulations thereunder, reports
of congressional committees, judicial decisions and current administrative
rulings and practices. Any of these authorities could be repealed, overruled, or
modified at any time after the date hereof. Any such change could be retroactive
and, accordingly, could modify the tax consequences discussed herein. No ruling
from the Internal Revenue Service (the "IRS") with respect to the matters
discussed herein has been requested; no opinion of counsel has been or will be
rendered to the Shareholders of the Company with respect to any of the tax
effects of the Proposed Reincorporation to the Shareholders and there is no
assurance that the IRS would agree with the conclusions set forth in this
discussion. The following discussion also is based on representations made by
the Company, Toucan, and certain Shareholders of the Company and any inaccuracy
in those representations could affect the tax consequences of the holders of the
Company's common stock in a manner that is materially adverse to such holders.
This discussion is for general information only and does not address all the tax
consequences of the Proposed Reincorporation that may be relevant to the
particular Starlight Shareholders (such as dealers in securities, holders of
stock options or those Starlight shareholders who acquired their shares upon the
exercise of stock options). Furthermore, no foreign, state or local tax
consequences are addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX
CONSEQUENCES, SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
The Proposed Reincorporation has been structured with the intent that
it qualify as a tax-free reorganization under Section 368(a) of the Code.
Subject to the limitations, qualifications and exceptions described herein, and
assuming the Proposed Reincorporation qualifies as a reorganization within the
meaning of Section 368(a) of the Code, the following federal income tax
consequences should result:
(a) No gain or loss will be recognized by holders of capital stock of
Starlight upon receipt of capital stock of Toucan pursuant to the Proposed
Reincorporation;
(b) The aggregate tax basis of the capital stock of Toucan received by
each shareholder will be the same as the aggregate tax basis of the capital
stock of Starlight held by such shareholder at the time of the Proposed
Reincorproation; and
<PAGE>
(c) The holding period of the capital stock of Toucan received by each
shareholder of Starlight will include the period for which such shareholder held
the capital stock of Starlight surrendered in exhange therefore, provided that
such Starlight capital stock was held by such shareholder as a capital asset at
the time of the Proposed Reincorporation.
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of Starlight capital stock surrendered equal to the
difference between that shareholder's basis in such share and the fair market
value, as of the time of the Proposed Reincorporation, of the Toucan capital
stock rceived in exchange therefore. In such event, a shareholder's aggregate
basis in the shares of Toucan stock received in the exchange would equal such
fair market value, and such shareholder's holding period for such shares would
not include the period during which such shareholder held Starlight capital
stock.
THE TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER. THEREFORE, EACH
SHAREHOLDER SHOULD CONSULT THEIR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES OF THE PROPOSED REINCORPORATION TO SUCH SHAREHOLDER, INCLUDING
THOSE RELATED TO STATE, LOCAL AND/OR FOREIGN TAX LAWS.
VOTE REQUIRED FOR THE PROPOSED REINCORPORATION
Approval of the Proposed Reincorporation, which includes approval of
the Merger Agreement, the Name Change, the Certificate of Incorporation, and the
Bylaws of Toucan, requires the affirmative vote of the holders of the majority
of the outstanding shares of Starlight Common Stock.
OTHER MATTERS
At the time of mailing this Proxy Statement, the management was not
aware that any matter not referred to in the form of proxy would be presented
for action at the meeting. If, however, any other business shall properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the person
voting them.
THE BOARD HAS UNANIMOUSLY ADOPTED A RESOLUTION SETTING FORTH THE
PROPOSED REINCORPORATION AND DECLARING ITS ADVISABILITY, AND HEREBY RECOMMENDS
THAT THE STOCKHOLDERS OF THE COMPANY VOTE FOR THE PROPOSED REINCORPORATION.
By Order of the Board of Directors
Robert Jeffcock
Secretary
JULY 16, 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE SPECIAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE
URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
STARLIGHT ACQUISITIONS, INC.
1328 STARWOOD LANE
EVERGREEN, COLORADO 80439
AMENDED NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders of Starlight Acquisitions, Inc.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders (the
"Special Meeting") of Starlight Acquisitions, Inc. (the "Company") will be held
at the offices of Jenkens & Gilchrist, a Professional Corporation, 1445 Ross
Avenue, Suite 3200, Dallas, Texas on the 29th day of July, 1996 at 10:00 a.m.
(local time) for the following purposes:
1. To consider and act upon a proposal to reincorporate the
Company in the State of Delaware by merging the Company into
a wholly-owned Delaware subsidiary, Toucan Gold Corporation,
pursuant to an Agreement and Plan of Merger; and
2. To transact such other business as may be properly brought
before the meeting.
The Board of Directors has fixed the close of business on June 18,
1996, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at such meeting or any
adjournment(s) thereof. Only stockholders of record at the close of business on
the Record Date are entitled to notice of and to vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT JEFFCOCK
Secretary
DATED: JULY 19, 1996
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS
IMPORTANT FOR YOU TO BE REPRESENTED AT THE SPECIAL MEETING. THE EXECUTION OF
YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT
THE SPECIAL MEETING.
CORPDAL:52781.1 29976-00001
<PAGE>
PROXY
STARLIGHT ACQUISITIONS, INC.
1328 STARWOOD LANE
EVERGREEN, COLORADO 80439
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert Jeffcock and L. Clark Arnold and
each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated below, all of the
shares of the Common Stock, no par value, of Starlight Acquisitions, Inc. (the
"Company"), held of record by the undersigned on June 18, 1996, at the special
meeting (the "Special Meeting") of Stockholders to be held on July ___, 1996,
and any adjournment(s) thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ITEM 1, AND OTHERWISE IN THE DISCRETION OF
PROXIES WITH RESPECT TO ANY MATTER REFERRED TO IN ITEM 2.
1. PROPOSAL TO APPROVE THE REINCORPORATION OF THE COMPANY IN THE STATE
OF DELAWARE BY MERGING THE COMPANY INTO A WHOLLY-OWNED DELAWARE SUBSIDIARY,
TOUCAN GOLD CORPORATION, PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, AS
DESCRIBED IN THE COMPANY'S PROXY STATEMENT RELATING TO THE SPECIAL MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY BE PROPERLY BROUGHT BEFORE THE MEETING.
Dated: ________________, 1996
------------------------------------------------------------
Signature
------------------------------------------------------------
Signature, If Held Jointly
Please execute this proxy as your name appears hereon. When
shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person. PLEASE MARK, SIGN,
DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE, TO THE TRANSFER AGENT WHO WILL SERVE AS THE
INSPECTOR OF ELECTION.
CORPSA:2402.1 29976-00001
<PAGE>
SUPPLEMENT DATED JULY 19, 1996
TO PROXY STATEMENT
DATED JULY 16, 1996
OF STARLIGHT ACQUISITIONS, INC.
This Supplement should be read in conjunction with Starlight
Acquisition, Inc.'s Proxy Statement dated July 16, 1996 (the "Proxy Statement").
Terms not defined herein shall have the same meaning as in the Proxy Statement.
The Section entitled "Appraisal Rights" found on pages 14 -15 of the
Proxy Statement should be omitted and replaced with the following paragraphs:
Appraisal Rights. Under both Colorado and Delaware law, a
shareholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to appraisal
rights pursuant to which such shareholder may receive cash in the
amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction.
Under Delaware law, such appraisal rights are not available (a) with
respect to the sale, lease or exchange of all or substantial all of the
assets of a corporation, (b) with respect to a merger or consolidation
by a corporation the shares of which are either listed on a national
securities exchange or are held of record by more than 2,000 holders if
such stockholders receive only shares of the surviving corporation
surviving a merger if no vote of the stockholders of the surviving
corporation is required to approve the merger because the merger
agreement does not amend the existing certificate of incorporation,
each share of the surviving corporation outstanding prior to the merger
is an identical outstanding or treasury share after the merger, and the
number of shares to be issued in the merger does not exceed 20% of the
shares of the surviving corporation outstanding immediately prior to
the merger and if certain other conditions are met.
Under Colorado law, a shareholder, whether or not entitled to
vote, is entitled to dissent and obtain payment of the fair value of
his or her shares in the event of any of the following corporate
actions: (1) consummation of a plan of merger to which the corporation
is a party if approval by the shareholders is required either by
statute or by the articles of incorporation or the corporation is a
subsidiary that is merged with its parent corporation; (2) consummation
of a plan of share exchange to which the corporation is a party as the
corporation whose shares will be acquired; (3) consummation of a sale,
lease, exchange, or other disposition of all, or substantially all, of
the property of the corporation for which a shareholder vote is
required; and (4) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the corporation
were entitled to vote upon the consent of the corporation to the
disposition. In addition, a shareholder, whether or not entitled to
vote, is entitled to dissent and obtain payment of the fair value of
the shareholder's shares in the event of an amendment to the articles
of incorporation that materially and adversely affects certain rights
in respect of the shares.
Under Colorado law, if the Proposed Reincorporation is
approved, shareholders of the Company who dissent from the Merger will
be entitled to receive payment in cash of the fair value of all of the
shares of Common Stock in the Company registered in their names. A
dissenting shareholder who wishes to receive cash for his shares must
do the following: (1) file a written notice to the Company prior to the
vote on the approval of the Proposed Reincorporation being taken at the
Special Meeting; and (2) not vote in favor of approval of the Proposed
Reincorporation at the Special Meeting. Within ten (10) days after the
Effective Date, the Company shall give a written dissenters' notice to
all shareholders who complied with the steps described in the preceding
sentence. The dissenters' notice shall be accompanied by a form for
demanding payment and set the date by which the Company must receive
the payment demand form and certificates representing the shares. To be
entitled to payment for the shares, the dissenting shareholder must
demand payment and deposit the shareholder's stock certificates as
required by the date set in the dissenters' notice. If these and
certain other required procedures are not followed exactly as set forth
in Section 7-113-201, et seq. the Colorado Business Corporation Act,
dissenting shareholders of the Company may be unable to enforce their
right to receive
CORPSA:2402.1 29976-00001
<PAGE>
payment for their shares. As required by Section 7-113-201 of the
Colorado Business Corporation Act, a copy of Sections 7-113-101 through
7-113-302 is attached hereto as Exhibit A.
The discussion set forth herein and in the Proxy Statement is qualified
in its entirety by reference to the Agreement and Plan of Merger, in
substantially the form attached hereto as Exhibit B, and the Certificate of
Incorporation of Toucan attached hereto as Exhibit C.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE SPECIAL MEETING AND WISH THEIR STOCK TO BE VOTED ARE
URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PLEASE NOTE, HOWEVER, THAT THE PROXY ACCOMPANIED BY THE PROXY STATEMENT
DATED JULY 16, 1996 REMAINS VALID. THEREFORE, IF YOU HAVE ALREADY RETURNED SUCH
PROXY, THAT PROXY REMAINS VALID AND IT IS NOT NECESSARY FOR YOU TO RETURN THE
ATTACHED PROXY. IT IS ONLY NECESSARY TO RETURN THE ATTACHED PROXY IF, IN LIGHT
OF THIS SUPPLEMENT TO THE PROXY STATEMENT OR FOR ANY OTHER REASON, YOU WISH TO
CHANGE YOUR VOTE. YOU MAY CHANGE YOUR VOTE BY RETURNING THE ATTACHED PROXY, AND
THE PROXY YOU PREVIOUSLY RETURNED WILL AUTOMATICALLY BE WITHDRAWN AND THE
ATTACHED PROXY WILL BE VIEWED BY THE COMPANY AS YOUR VOTE. THE EXECUTION OF YOUR
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT AT THE
SPECIAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT JEFFCOCK
SECRETARY
JULY 19, 1996
CORPSA:2402.1 29976-00001
<PAGE>
EXHIBIT A
<PAGE>
Exhibit A conists of the state of Colorado's Dissenter's Right Statute.
(Colorado Business Corporation Act, Section 7, Article 113)
<PAGE>
EXHIBIT B
<PAGE>
AGREEMENT AND PLAN OF MERGER
OF TOUCAN GOLD CORPORATION
A DELAWARE CORPORATION
AND
STARLIGHT ACQUISITIONS, INC.
A COLORADO CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of July 29, 1996 (the
"Agreement") is between Toucan Gold Corporation, a Delaware corporation
("Toucan") and Starlight Acquisitions, Inc., a Colorado corporation
("Starlight"). Toucan and Starlight are sometimes referred to herein as the
"Constituent Corporations."
RECITALS
WHEREAS, Toucan is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 32,000,000
shares, 30,000,000 of which are designated "Common Stock," par value $.01 per
share, and 2,000,000 of which are designated "Preferred Stock," par value $.01
per share. As of July 29, 1996, 1,000 shares of Common Stock were issued and
outstanding, all of which were held by Starlight. No shares of Preferred Stock
are outstanding;
WHEREAS, Starlight is a corporation duly organized and existing under
the laws of the State of Colorado and has an authorized capital of 32,000,000
shares, 30,000,000 of which are designated "Common Stock," no par value, and
2,000,000 of which are designated "Preferred Stock," no par value. As of July
29, 1996, 5,664,600 shares of Common Stock were issued and outstanding. No
shares of Preferred Stock are issued and outstanding;
WHEREAS, the Board of Directors of Starlight has determined that for
the purpose of effecting the reincorporation of Starlight in the State of
Delaware, it is advisable and in the best interests of Starlight that Starlight
merge with and into Toucan upon the terms and conditions herein provided; and
WHEREAS, the respective Boards of Directors of Toucan and Starlight
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective stockholders and executed by the undersigned
officers;
NOW THEREFORE, in consideration of the mutual agreements and covenants
set forth herein Toucan and Starlight hereby agree, subject to the terms and
conditions hereinafter set forth, as follows:
CORPDAL:52778.1 29976-00001
1
<PAGE>
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the Colorado Business Corporation Act,
Starlight shall be merged with and into Toucan (the "Merger"), the separate
existence of Starlight shall cease and Toucan shall be and is herein sometimes
referred as, the "Surviving Corporation," and the name of the Surviving
Corporation shall be Toucan Gold Corporation.
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed.
(a) This Agreement and Merger shall have been adopted and
approved by the stockholders of each Constituent Corporation in accordance with
the requirements of the Delaware General Corporation Law and the Colorado
Business Corporation Act.
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly waived by
the party entitled to satisfaction thereof.
(c) An executed Agreement and Plan of Merger or a Certificate
of Merger with respect thereto meeting the requirements of the Delaware General
Corporation Law shall have been filed with the Secretary of State of the State
of Delaware, and
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "Effective Date of the Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Starlight shall cease and Toucan as the Surviving
Corporation, (i) shall continue to possess all of its assets, rights, powers and
property as constituted immediately prior to the Effective Date of the Merger;
(ii) shall be subject to all actions previously taken by its and Starlight's
Board of Directors; (iii) shall succeed without other transfer to all of the
assets, rights, powers and property of Starlight in the manner more fully set
forth in Section 259 of the Delaware General Corporation Law; (iv) shall
continue to be subject to all of the debts, liabilities and obligations of
Toucan as constituted immediately prior to the Effective Date of the Merger; and
(v) shall succeed, without other transfer, to all of the debts, liabilities and
obligation of Starlight in the same manner as if Toucan had itself incurred
them, all as more fully provided under the applicable provisions of the Delaware
General Corporation Law and the Colorado Business Corporation Act.
CORPDAL:52778.1 29976-00001
2
<PAGE>
II. CHARTER DOCUMENTS DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Toucan as in effect immediately prior to the Effective Date of the Merger shall
continue in full force and effect as the Certificate of Incorporation of the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2 Bylaws. The Bylaws of Toucan as in effect immediately prior to the
Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Starlight
immediately prior to the Effective Date of the Merger shall be elected as the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 Starlight Common Shares. Upon the Effective Date of the Merger,
each share of Starlight Common Stock, no par value, issued and outstanding
immediately prior thereto (other than such shares (the "Dissenters' Shares") as
to which dissenters' rights have been validly perfected and not withdrawn or
otherwise forfeited pursuant to the Colorado Business Corporation Act) shall by
virtue of the Merger and without any action by the Constituent Corporations, the
holder of such shares or any other person be converted into and exchanged for
one fully paid and nonassessable share of Common Stock, no par value, of the
Surviving Corporation.
3.2 Starlight Preferred Shares. There are no shares of Preferred Stock
of Starlight, no par value, issued and outstanding immediately prior to the
Merger, and no shares of Preferred Stock shall be converted to and exchanged for
any securities of Toucan.
3.3 Toucan Common Stock. Upon the Effective Date of the Merger, each
share of Common Stock, no par value, of Toucan issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by Toucan, the holder of such shares or any other person, be canceled and
returned to the status of authorized but unissued shares.
3.4 Exchange of Certificates. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of Starlight
Common Stock (other than any "Dissenters' Shares") may be asked to surrender the
same for cancellation to an exchange agent, whose name will be delivered to
holders prior to any requested exchange (the "Exchange Agent"), and each such
holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of the Surviving Corporation's
Common Stock into which the
CORPDAL:52778.1 29976-00001
3
<PAGE>
surrendered shares were converted as herein provided. Until so surrendered, each
outstanding certificate theretofore representing shares of Starlight Common
Stock shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock into which such shares of Starlight Common
were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation
so issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Starlight so converted
and given in exchange therefore, unless otherwise determined by the Board of
Directors of the Surviving Corporation in compliance with applicable laws.
If any certificate for shares of the Surviving Corporation's stock is
to be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of issuance of
such new certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
IV. GENERAL
4.1 Covenants of Toucan. Toucan covenants and agrees that it will, on
or before the Effective Date of the Merger:
(a) File any and all documents with the Franchise Tax Board
for the State of Colorado necessary for the assumption by Toucan of all of the
franchise tax liabilities of Starlight.
(b) Take such other actions as may be required by the Colorado
Business Corporation Act.
4.2 Further Assurances. From time to time, as and when required by
Toucan or by its successors or assigns, there shall be executed and delivered on
behalf of Starlight such deeds and other instruments, and there shall be taken
or caused to be taken by it such further and other actions as shall be
appropriate or necessary in order to vest or perfect in or conform of record or
otherwise by Toucan the title to and possession of all the property, interests,
assets, nights,
CORPDAL:52778.1 29976-00001
4
<PAGE>
privileges, immunities, powers, franchises and authority of Starlight and
otherwise to carry out the purpose of this Agreement, and the officers and
directors of Toucan are fully authorized in the name and on behalf of Starlight
or otherwise to take any and all such action and to execute and deliver any and
all such deeds and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Starlight or of Toucan, or of
both, notwithstanding the approval of this Agreement by the shareholders of
Starlight or by the sole stockholder of Toucan or by both.
4.4 Amendment. The Board of Directors of the Constituent Corporations
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided than an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not (i)
alter or change the amounts of kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation; (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger; or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any
Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving
Corporation in the State of Delaware is 1013 Centre Road, in the City of
Wilmington 19805-1297, County of New Castle, and the Prentice-Hall Corporation
System is the registered agent of the Surviving Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at c/o Jenkens &
Gilchrist, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202-2799, and copies
thereof will be furnished to any stockholder of either Constituent Corporation,
upon request and without cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
Colorado Business Corporation Act.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Toucan and Starlight is hereby executed
on behalf of each of such two corporations and attested by their respective
officers thereunto duly authorized.
CORPDAL:52778.1 29976-00001
5
<PAGE>
TOUCAN GOLD CORPORATION
a Delaware corporation
By: ____________________________
Robert Jeffcock, Chief Executive Officer and
Chief Financial Officer and Secretary
ATTEST
- -----------------------------
Robert Jeffcock, Secretary
STARLIGHT ACQUISITIONS, INC.
a Colorado corporation
By: ____________________________
Robert Jeffcock, Chief Executive Officer and
Chief Financial Officer
ATTEST
- -----------------------------
Robert Jeffcock, Secretary
CORPDAL:52778.1 29976-00001
6
<PAGE>
EXHIBIT C
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TOUCAN GOLD CORPORATION
-----------------------------------------------------------------
Pursuant to the provisions of Section 102
of the General Corporation Law of
the State of Delaware
-----------------------------------------------------------------
I, the undersigned, for the purpose of creating and organizing a
corporation under the provisions of and subject to the requirements of the
General Corporation Law of the State of Delaware, do HEREBY CERTIFY as follows:
1. The name of the Corporation is Toucan Gold Corporation (the
"Corporation").
2. The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, in the City of Wilmington 19805-1297, County of
New Castle. The name of the registered agent of the Corporation at such address
is The Prentice-Hall Corporation System, Inc.
3. (a) The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful business, act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (the "DGCL").
(b) The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
4. The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 32,000,000 shares, consisting of
30,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), and 2,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock").
The Preferred Stock may be issued, from time to time, in one
or more series as authorized by the Board of Directors. The Board of Directors,
by resolution, shall designate that series to distinguish it from other series
and classes of stock of the Corporation, shall specify the number of shares to
be included in the series, and shall fix the terms, rights, restrictions, and
qualifications of, the shares of the series, including any preferences, voting
powers, dividend rights and redemption, sinking fund and conversion rights. The
relative powers, preferences and rights of each series of Preferred Stock in
relation to the powers, preferences and rights of each other series of Preferred
Stock shall be as fixed from time to time by the Board of Directors in
CORPDAL:51451.1 29976-00001
-1-
<PAGE>
the resolution or resolutions authorizing the issuance of each series adopted by
the Board of Directors.
5. No holder of shares of stock of the Corporation shall have any
preemptive or other right to receive any securities of the Corporation.
6. (a) The number of directors of the Corporation shall be not less
than One (1) nor more than Nine (9), the exact number to be fixed from time to
time in the manner provided by the Bylaws of the Corporation.
(b) The power of the incorporator shall terminate upon the
filing of this Certificate of Incorporation. The number of directors
constituting the initial Board of Directors of the Corporation is Three (3), and
the name and address of the persons who are to serve as directors until the
first annual meeting of the stockholders or until their successors are elected
and qualified are:
Name Address
-------------------------------------------------
Robert P. Jeffcock 2 The Promenade
Castletown
Isle of Man
1M91BJ
L. Clark Arnold 201 E. Rudasill Road
Tucson, Arizona 85704-6024
Don D. Box 8201 Preston Road
Suite 600
Dallas, Texas 75225
(c) Election of directors need not be by written ballot unless
the Bylaws shall so provide. Except as otherwise required by law, this
Certificate of Incorporation or the provisions of any resolutions adopted by the
Board of Directors authorizing the issuance of Preferred Stock, each holder of
shares of Common Stock shall be entitled to one vote in respect of each share of
Common Stock held in his name on the books of the Corporation on each matter
voted upon by the stockholders. No holders of Common Stock of the Corporation
shall have any rights to cumulate votes in the election of directors.
7. The business affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, except as otherwise proved by law, this
Certificate of Incorporation or the Bylaws. In furtherance of, and not in
limitation of, the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of the Corporation or
adopt new Bylaws, without any action on the part of the stockholders; provided,
however, that no such adoption, amendment, or repeal shall be valid with respect
to Bylaw provisions that have
CORPDAL:51451.1 29976-00001
-2-
<PAGE>
been adopted, amended, or repealed by the stockholders and further provided,
that Bylaws adopted or amended by the Board of Directors and any powers thereby
conferred may be amended, altered, or repealed by the stockholders.
8. The Corporation is to have perpetual existence.
9. (a) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for such liability as is expressly not subject to
limitation under the DGCL, as the same exists or may hereafter be amended to
further limit or eliminate such liability.
(b) The Corporation shall, to the fullest extent permitted by
law, indemnify any and all officers and directors of the Corporation, and may,
to the fullest extent permitted by law or to such lesser extent as is determined
in the discretion of the Board of Directors, indemnify and advance expenses to
any and all other persons whom it shall have power to indemnify, from and
against all expenses, liabilities or other matters arising out of their status
as such or their acts, omissions or services rendered in such capacities.
(c) The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
(d) In addition to the powers and authority conferred upon the
Board of Directors by statute or by this Certificate of Incorporation, the Board
of Directors is hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation, subject to the
provisions of the DGCL, this Certificate of Incorporation and any Bylaws adopted
by the stockholders; provided, however, that no Bylaws adopted by the
stockholders shall invalidate any prior act of the Board of Directors that would
have been valid if such Bylaws had not been adopted.
10. The Corporation shall have the right, subject to any express
provisions or restrictions contained in the Certificate of Incorporation or
Bylaws of the Corporation, from time to time, to amend this Certificate of
Incorporation or any provision thereof in any manner now or hereafter provided
by law, and all rights and powers of any kind conferred upon a director or
stockholder of the Corporation by the Certificate of Incorporation or any
amendment thereof are conferred subject to such right.
11. The name and mailing address of the incorporator of the Corporation
is Lesley Pettengill, Jenkens & Gilchrist, a Professional Corporation, 1445 Ross
Avenue, Suite 3200, Dallas, Texas 75202.
CORPDAL:51451.1 29976-00001
-3-
<PAGE>
THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate, hereby acknowledging and
declaring and certifying that the foregoing Certificate of Incorporation is her
act and deed and the facts herein stated are true, and accordingly has hereunto
set her hand this 19th day of July, 1996.
/s/ Lesley Pettingill
------------------------
Lesley Pettengill
CORPDAL:51451.1 29976-00001
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000850083
<NAME> TOUCAN GOLD CORPORATION
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<PP&E> 1,691,442
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 38,362
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0
0
<COMMON> 74,326
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<TOTAL-LIABILITY-AND-EQUITY> 3,728,861
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<TOTAL-REVENUES> 18,992
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<INCOME-PRETAX> (389,163)
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<INCOME-CONTINUING> (389,163)
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<NET-INCOME> (389,163)
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