Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-28249
PRIME AIR, INC.
(Exact name of Registrant as specified in charter)
NEVADA Applied For
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
8598 112 STREET, FT. SASKATCHEWAN, ALBERTA, CANADA T8L 3V8
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (403) 998-3400
Check whether the Issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act 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 fling requirements for the past 90 days. (1) Yes
[X] No [ ] (2) Yes [X] No [ ]
State the number of shares outstanding of each of the Issuer's classes of
common equity as of the latest practicable date: At June 1, 1998, there were
17,664,310 shares of the Registrant's Common Stock outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS
The financial statements attached hereto and included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles nave been condensed or omitted.
However, in the opinion of management, all adjustments (which include only
normal recurring accruals) necessary to present fairly the financial position
and results of operations for the periods presented have been made. The
results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a development stage company and conducts all
operations through its wholly owned subsidiary, Prime Air (BC). The Company
has had no material revenues in the past. During the year ended December 31,
1997, the only income received was bank interest of $4,020.
During the last three years, the operations of the Company have been
funded from equity participation of the owners. Total cash raised from equity
funding from March 1992 to December 31, 1994 was $349,808, $131,755 for 1995
and $756,763 for 1996. No funds were raised during 1997, but the Company did
convert $130,751 into common stock of the Company.
The Company has realized a cumulative loss of $855,443 since March 1992,
and anticipates similar losses until operations begin, which is expected in
late 1998.
The Company has sufficient working capital to meet its immediate
obligations, but does not have any cash available to allow operations to
commence. The Company requires $1,500,000 million to commence flight
operations. The Company intends to raise a total of $3,000,000 by way of an
equity offering, the net proceeds of which will facilitate the operational
start-up and provide sufficient working capital to sustain operations for some
time. The only significant capital expenditures anticipated in the next year
are airport and runway lighting improvements which are expected to cost
approximately $350,000.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board of Directors called a special meeting of shareholders to be
held on April 23, 1998. The Company had 8,282,155 shares of its common stock
outstanding on the record date of the special meeting. On April 23, 1998, the
meeting was held and the shareholders of the Company authorized a forward
split of the outstanding shares of common stock of the Company at the rate of
two shares for each one share outstanding. The number of shares voted in
regard to such item were as follows: For 4,386,803; against none; abstain
none; broker non-votes none. The forward stock split was effective on May 15,
1998. In addition, the shareholders approved a stock option plan. The number
of shares voted in regard to such item were as follows: For 4,386,803; against
none; abstain none; broker non-votes none.
ITEM 5. OTHER INFORMATION
On June 19, 1998, the number of directors was increased to three persons
and Greg Duffy was appointed as a director of the Company to file the vacancy
created by the increase in the number of directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are included as part of this
report:
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
2.1 Plan and Agreement of Merger dated March 10, 1997 *
2.2 Merger Agreement dated June 29, 1994 *
3.1 Articles of Incorporation *
3.2 Articles of Merger dated November 26, 1997 **
3.4 Bylaws of the Company *
4.1 Stock Option Plan Attached
10.1 Airport Lease and Operating Agreement, as amended *
10.2 Employment Agreement with Blaine Haug *
10.3 Employment Agreement with Royle Smith *
10.4 Consulting Agreement with Siverthorn Investments, Ltd. *
10.5 Memorandum of Agreement with Voyageur Airways *
10.6 Addendum to Haug Employment Agreement *
10.7 Addendum to Smith Employment Agreement *
* Incorporated by reference from the Company's registration statement
on Form S-4 filed with the Securities and Exchange Commission, file no.
333-28249.
** Incorporated by reference from the Company's annual report
statement on Form 10-KSB filed with the Securities and Exchange Commission,
file no. 333-28249.
(b) Reports on Form 8-K: A report on Form 8-K dated February 27, 1998 was
filed during the quarter ended March 31, 1998, to report under item 4 a change
in the Company's certifying accountant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PRIME AIR, INC.
Date: June 24, 1998 By /s/ Royle Smith, President
Date: June 24, 1998 By /s/ Greg Duffy, Principal Financial
and Accounting Officer
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER)
March 31 December 31 December 31
1998 1997 1996
(Unaudited) (Audited) (Audited)
ASSETS
Current Assets
Cash and short-term deposits $ 11,328 $ 11,388 $ 101,314
Prepaid expenses and deposit - - 12,592
GST recoverable 1587 1587 51,207.61
12,915 12,975 165,114
Capital Assets (Note 4) 607,868 613,516 620,208
$ 620,783 $ 626,491 $ 785,322
LIABILITIES
Current Liabilities
Accounts payable and accruals $ 104,471 $ 83,655 $ 158,174
Notes and advances payable
(Note 5) 3,495 3,495 9,067
Notes and advances from related
parties (Note 6) 5,400 5,400 25,522
113,366 92,550 192,763
SHAREHOLDERS' EQUITY
Capital Stock (Note 7)
Authorized:
50,000,000 common shares with a
stated par value of $ .001/share
3,000,000 preferred cumulative
convertible shares with a stated
par value of $ .001/share
Issued:
7,140,213 common shares
(1996: 6,556,781) 7,140 7,140 6,557
Share subscription receivable (20) (20) (20)
Capital in excess of par value 1,355,740 1,355,740 1,225,244
1,362,860 1,362,860 1,231,781
Accumulated Deficit During
Development Stage (855,443) (828,919) (639,222)
507,417 533,941 592,559
$ 620,783 $ 626,491 $ 785,322
Approved on Behalf of the Board:
Director
Director
See Accompanying Notes
(0) 0 0
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER)
Period from
Date of Inception
Three Months Year Ended Year Ended on March 10, 1989
Ended March 31 December 31 December 31 to March 31
1998 1997 1996 1998
(Unaudited) (Audited) (Audited) (Unaudited)
(Note 1)
Direct Costs
Flight operations $ - $ - $ 114,720 $ 114,720
Administrative and
General
Audit and accounting - 23,826 10,140 50,199
Advertising - - 9,017 9,094
Amortization 5,648 21,603 21,809 49,366
Automotive - - - 19,164
Consulting fees - 24,583 7,156 94,368
Insurance 1,977 9,240 6,342 17,559
Interest and service
charges - 1,769 7,547 9,565
Legal 3,586 34,192 25,610 63,388
Management remuneration - - - 77,287
Office and general 2,578 10,176 5,728 87,831
Promotion and
entertainment - 711 2,702 22,004
Rent - 279 2,399 34,603
Telephone and utilities 6,025 18,039 14,865 61,586
Transfer agent and
filing fees 3,544 13,636 7,149 28,409
Travel 3,165.84 25,464 11,172 59,045
26,523.87 183,518 131,636 683,468
Other Income (Expense)
Gain (loss) on foreign
exchange conversion - (10,199) 5,581 14,890
Interest income - 4,020 2,358.82 6,379
0 -6,179 7,939.82 21,269
Net Loss Before
Non-recurring Item (26,524) (189,697) (238,416) (776,919)
Non-recurring Expense
Consulting costs to
set up US corporation - - - (78,524)
Net Loss For Period $ -26,523.87 $ -189,697 $ -238,416.18 $ -855,443
Net Loss Per Common
Share $ (0.0037) $ (0.0275) $ (0.0424)
Weighted Average
Common Shares
Outstanding 6,896,225 6,896,225 5,624,974
See Accompanying Notes
<PAGE>
PRIME AIR, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(all figures in US dollars)
(UNAUDITED - SEE NOTICE TO READER)
Period from
Date of Inception
Three Months Year ended Year ended on March 10, 1989
Ended March 31 December 31 December 31 to March 31
1998 1997 1996 1998
(Unaudited) (Audited) (Audited) (Unaudited)
(Note 1)
NET INFLOW (OUTFLOW)
OF CASH RELATED
TO THE FOLLOWING
ACTIVITIES:
OPERATING
Net loss $ (26,524) $ (189,697) $ (238,416) $ (828,919)
Non-cash charge
- amortization 5,648 21,603 21,809 43,721
(20,876) (168,094) (216,607) (785,198)
Change in non-cash
working capital
balances relating
to operations 0 (12,306) (118,373) 82,068
(20,876) (180,400) (334,980) (703,130)
FINANCING
Notes and advances
payable (5,572) (5,572) 5,425 3,495
Notes and advances
from related parties - (20,122) (2,822) 5,400
Issue of capital stock - 131,079 756,763 1,362,860
(5,572) 105,385 759,366 1,371,755
INVESTING
Acquisition of capital
assets - (14,911) (327,647) (657,237)
NET CASH INFLOW
(OUTFLOW) (26,448) (89,926) 96,739 11,388
CASH, BEGINNING OF
PERIOD 11,388 101,314 4,575 -
CASH, END OF
PERIOD $ -15,059.87 $ 11,388 $ 101,314 $ 11,388
See Accompanying Notes
<PAGE>
PRIME AIR INC.
(A Development Stage Company)
(A NevadaCorporation)
Consolidated Financial Statements
December 31, 1997 and 1996
Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity and Deficit
Consolidated Statements of Cash Flows
Consolidated Notes to Financial Statements
Rutherford & Company
Chartered Accountants
________________________________________________________________
9511 Bates Road, Richmond, B.C.
CANADA V7A 1E3
Telephone (604)272-5454 Fax (604)272-5874
AUDITOR'S REPORT
To the Shareholders of
Prime Air Inc. (A Delaware Corporation)
We have audited the consolidated balance sheets of Prime Air Inc. (A
Development Stage Company) as at December 31, 1997 and 1996 and the
consolidated statements of operations and deficit and cash flows for the years
then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1997 and
1996 and the results of its operations and cash flows for the years then ended
in accordance with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the company has a working capital deficiency and has had
no income from operations to date. Management's plans in regard to these
matters are also described in the Note. These factors raise substantial doubt
about the company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Richmond, Canada Chartered Accountants
April 4, 1997
ACCOUNTANTS' CONSENT
We hereby consent to the use of our audit report of Prime Air, Inc. (Nevada),
dated April 4, 1998, for the years ended December 31, 1997 and 1996 in the
Form 10K SB Statement for Prime Air, Inc. (Nevada).
We also consent to the use of our auditing firm as experts in the 10K SB
Registration Statement for Prime Air, Inc. (Nevada).
April 6, 1998
Richmond, Canada CHARTERED ACCOUNTANTS
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. Incorporation and Principles of Consolidation
The Company was incorporated under the laws of the State of Delaware, USA on
April 4, 1996 and acquired all of the assets, liabilities and shareholders of
a previous Utah Corporation of the same name. The Utah Corporation was
reincorporated on August 30, 1993 as Astro Enterprises, Inc. On June 28,
1994, pursuant to appropriate shareholder agreements, Astro Enterprises, Inc.
acquired all outstanding shares of Prime Air Inc. (a Canadian Corporation) in
exchange for shares of its capital stock on a .787796 to 1 basis, thereby
providing the shareholders of Prime Air Inc. with 90% of the outstanding
capital stock of Astro Enterprises, Inc. Astro Enterprises, Inc. then changed
its name to Prime Air, Inc. Upon incorporation of the Delaware Company, the
Utah Corporation was dissolved on May 15, 1996.
On November 10, 1997, Prime Air Inc (a Nevada corporation) was formed, the
purpose of which will be to change the domicile of the Company to the State of
Nevada. Prime Air Inc (Nevada) is a wholly-owned subsidiary of Prime Air Inc
(Delaware); however, to December 31, 1997 it has engaged in no activities
except in relation to the organization of that entity.
These consolidated financial statements include the accounts of the Company
and its wholly-owned operating subsidiary, Prime Air Inc. (the Canadian
Corporation) and have been prepared in accordance with U.S. GAAP standards.
2. Nature of Operations / Going Concern Considerations
The Company is presently in its developmental stage and currently has minimal
sources of revenue to provide incoming cash flows to sustain future
operations. The Company's present activities relate to the construction and
ultimate exclusive operation of an international passenger and cargo air
terminal facility in the Village of Pemberton, British Columbia and the
operation of scheduled flight services between that facility and certain major
centers in Canada and the United States in conjunction with Voyageur Airways
Limited. Terminal building construction was substantially completed in May
1997. The future successful operation of the Company is dependent upon its
ability to obtain the financing required to complete the terminal construction
and commence operation thereof on an economically viable basis.
These consolidated financial statements have been prepared on a "going
concern" basis which assumes the company will be able to realize its assets,
obtain the required financing and discharge its liabilities and commitments in
the normal course of business.
3. Significant Accounting Policies
Capital Assets
Air Terminal Construction Costs: Expenditures relating directly to the
construction of the air terminal facility and related engineering and design
have been recorded in the accounts of the Company at cost, net of amortization
thereof which is provided on a straight-line basis over the 30 year term of
the property lease.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
3. Significant Accounting Policies (continued)
Furniture and Equipment: Furniture and equipment are stated at cost, net of
amortization which is provided for at the rate of 20% per annum on the
declining balance basis.
Reporting Currency
All amounts in these consolidated financial statements are reported in U.S.
funds being converted from Canadian funds where applicable at the average
annual rate as posted by the Internal Revenue Service of the United States as
follows:
1997: $ 0.7334 U.S. / $ 1. CDN
1996: $ 0.7284 U.S. / $ 1. CDN
4. Capital Assets
1997 1996
Accumulated Net Book Net Book
Cost Amortization Value Value
Air terminal construction
costs $ 639,490 $ 21,304 $ 618,186 $ 313,146
Furniture and equipment 2,836 814 2,022 1,224
$ 642,326 $ 22,118 $ 620,208 $ 314,370
5. Notes and Advances Payable
The notes and advances payable are unsecured, non-interest bearing and are
without specific terms of repayment.
6. Related Party Transactions
During the year ended December 31, 1997, the Company paid no remuneration to
any director (year ended December 31, 1996: $16,265).
Directors have advanced funds to the Company in the amount of $ 25,522 to
December 31, 1997 (1996: $28,344). These advances are unsecured, non-interest
bearing and are without specific terms of repayment.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
7. Capital Stock
Authorized:
25,000,000 common shares with a
stated par value of $ .001/share
3,000,000 preferred cumulative convertible shares
with a stated par value of $ .001/share
Common Shares Issued:
Number of Shares Consideration
To August 31, 1993
- for cash 300,000 $ 300
Prime Air Inc. share exchange
- June 28, 1994 2,700,000 350,296
During year ended December 31, 1996
- for cash 562,550 131,756
Balance at December 31, 1996 3,562,550 482,352
During year ended December 31, 1997
- for cash 1,510,558 755,279
- consulting and related services 1,483,673 1,483
2,994,231 756,762
Balance, December 31, 1997 6,556,781 $ 1,239,114
The directors of the Company have authorized the issue of up to a further
500,000 common shares in the form of a director, officer and employee stock
options at a price to be determined. The granting of these options is subject
to the receipt of regulatory approval.
In July, 1997, management of the Company voluntarily halted trading of its
common shares based upon the conclusion that information concerning the
history of the Company provided by former management may not have been
complete. The Company completed a registration statement in connection with
the change of domicile (referred to in Note 1) to register all of the
outstanding common shares of capital stock in the Company.
8. Subsequent Event
The major supplier of flight operations services to the Canadian subsidiary
corporation agreed to settle a portion of its outstanding account through the
receipt of free-trading common shares of capital stock of the Company. The
amount settled of $54,791 represents 109,582 common shares to be issued at a
deemed price of $ 0.50 /share. The shares were subsequently issued in March,
1997.
PRIME AIR INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
8. Lease Commitment
The Canadian subsidiary corporation has entered into an Airport Lease and
Operating Agreement with The Corporation of The Village of Pemberton in
British Columbia whereby it has been granted an exclusive and irrevocable
lease over the lands and airport facilities associated with the Pemberton
Airport. The term of the Lease and Operating Agreement, including extension
options relating thereto, is for a total of 30 years with Terminal Rent
payable as follows:
12-183; $100 per annum for the initial six (6) years (1993 through
1998); and thereafter
12-183; 5% of gross receipts per annum derived from the operation of
the Terminal Facilities, excluding amounts received in connection with the
sale of airline tickets and other forms of transportation.
<PAGE>
EXHIBIT 4.1
PRIME AIR, INC.- STOCK OPTION AND STOCK APPRECIATION RIGHT PLAN
I. PURPOSES OF THE PLAN.
Prime Air, Inc., a Nevada corporation (the "Company") desires to afford
certain of its directors and key employees and the directors and key employees
of any subsidiary corporation or parent corporation of the Company who are
responsible for the continued growth of the Company an opportunity to acquire
a proprietary interest in the Company, and thus to create in such key
employees an increased interest in and a greater concern for the welfare of
the Company.
The Company, by means of this 1998 Stock Option and Stock Appreciation
Right Plan (the "Plan"), seeks to retain the services of persons now holding
key positions and to secure the services of persons capable of filling such
positions.
The stock options ("Options") and stock appreciation rights ("Rights")
offered pursuant to the Plan are a matter of separate inducement and are not
in lieu of any salary or other compensation for the services of any director
or key employee.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an
Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN.
The total number of shares of common stock of the Company which either
may be purchased pursuant to the exercise of options granted under the Plan or
acquired pursuant to the exercise of Rights granted under the Plan shall not
exceed, in the aggregate, (1,000,000) shares of the authorized common stock,
($0.001) par value per share, of the Company (the "Shares"). Shares which are
subject to Rights and related options shall be counted only once in
determining whether the maximum number of Shares which may be purchased or
acquired under the Plan has been exceeded.
Shares which may be acquired under the Plan may be either authorized but
unissued Shares, Shares of issued stock held in the Company's treasury, or
both, at the discretion of the Company. If and to the extent that Options or
Rights granted under the Plan expire or terminate without having been
exercised, new options or Rights may be granted with respect to the Shares
covered by such expired or terminated Options or Rights, provided that the
grant and the terms of such new Options or Rights shall in all respects comply
with the provisions of the Plan.
III. EFFECTIVE DATE AND TERM OF THE PLAN.
The Plan shall become effective on the date (the "Effective Date") on
which it is adopted by the board of directors of the Company (the "Board of
Directors"); provided, however, that if the Plan is not approved by a vote of
the shareholders of the Company within twelve (12) months before or after the
Effective Date, the Plan and any Options and Rights granted thereunder shall
terminate.
The Company may, from time to time during the period beginning on the
Effective Date and ending on April 23, 2008 (the "Termination Date"), grant to
persons eligible to participate in the Plan Options, Rights or both Options
and Rights, under the terms of the Plan. Options and Rights granted prior to
the Termination Date may extend beyond that date, in accordance with the terms
thereof.
Provisions of the Plan which pertain to Options or Rights shall apply to
Options, Rights or a combination thereof.
As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall have the meanings ascribed to such terms, respectively, in
Sections 425(f) and 425(e) of the Code.
An employee or director to whom Options or Rights are granted hereunder
may be referred to herein as a "Participant".
IV. ADMINISTRATION.
The Board of Directors shall designate an option committee (the
"Committee") which shall consist of no fewer than three directors, each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or
any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to administer the Plan. A
majority of the members of the Committee shall constitute a quorum, and the
act of a majority of the members of the Committee shall be the act of the
Committee. Any member of the Committee may be removed at any time either with
or without cause by resolution adopted by the Board of Directors, and any
vacancy on the Committee may at any time be filled by resolution adopted by
the Board of Directors.
Any or all powers and functions of the Committee may at any time and from
time to time be exercised by the Board of Directors; provided, however, that,
with respect to the participation in the Plan by members of the Board of
Directors, such powers and functions of the Committee may be exercised by the
Board of Directors only if, at the time of such exercise, a majority of the
members of the Board of Directors, as the case may be, and a majority of the
directors acting in the particular matter, are "disinterested persons" within
the meaning of Rule 16b-3 (or any successor regulation) promulgated under the
Exchange Act. Any reference in the Plan to the Committee shall be deemed also
to refer to the Board of Directors, to the extent that the Board of Directors
is exercising any of the powers and functions of the Committee.
Subject to the express provisions of the Plan, the Committee shall have
the authority, in its discretion,
(i) to determine the directors and employees to whom Options or Rights
shall be granted, the time when such Options or Rights shall be granted, the
number of Shares which shall be subject to each Option or Right, the purchase
price or exercise price of each Share which shall be subject to each Option or
Right, the period(s) during which such Options or Rights shall be exercisable
(whether in whole or in part), and the other terms and provisions of the
respective options (which need not be identical) and Rights (which need not be
identical);
(ii) to construe the Plan and Options and Rights granted thereunder;
(iii) to prescribe, amend and rescind rules and regulations relating to
the Plan; and
(iv) to make all other determinations necessary or advisable for
administering the Plan.
Without limiting the foregoing, the Committee also shall have the
authority to require, in its discretion, as a condition of the granting of any
Option or Right, that the Participant agree (i) not to sell or otherwise
dispose of Shares acquired pursuant to the Option or Right for a period of six
(6) months following the date of acquisition of such Shares and (ii) that in
the event of termination of directorship or employment of such Participant,
other than as a result of dismissal without cause, such Participant will not,
for a period to be fixed at the time of the grant of the Option or Right,
enter into any employment or participate directly or indirectly in any
business or enterprise which is competitive with the business of the Company
or any subsidiary corporation or parent corporation of the Company, or enter
into any employment in which such employee will be called upon to utilize
special knowledge obtained through directorship or employment with the Company
or any subsidiary corporation or parent corporation thereof.
The determination of the Committee on matters referred to in this Article
IV shall be conclusive.
The Committee may employ such legal counsel, consultants and agents as it
may deem advisable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company. No member or former member of the Committee or of the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any Option or Right.
V. ELIGIBILITY.
Non-Qualified Options and Rights may be granted only to directors,
officers and other salaried key employees of the Company, or of any subsidiary
corporation or parent corporation of
the Company now existing or hereafter formed or acquired, except as
hereinafter provided. Any person who shall have retired from active employment
by the Company, although such person shall have entered into a consulting
contract with the Company, shall not be eligible to receive an Option or a
Right.
An Incentive Option may be granted only to salaried key employees of the
Company or any subsidiary corporation or parent corporation of the Company now
existing or hereafter formed or acquired, and not to any director or officer
who is not also an employee.
VI. LIMITATION ON EXERCISE OF INCENTIVE OPTIONS
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of Shares with respect to which Incentive Options
are exercisable for the first time by an employee during any calendar year
(under all stock options plans of the Company and any parent corporation or
subsidiary corporation of the Company) exceeds $100,000, such Options shall be
treated as Non-Qualified Options. For purposes of this limitation, (i) the
fair market value of Shares is determined as of the time the Option is
granted, (ii) the limitation will be applied by taking into account Options in
the order in which they were granted, and (iii) Incentive Options granted
before 1998 shall not be taken into account.
VII. OPTIONS: PRICE AND PAYMENT.
The purchase price for each Share purchasable under any Non-Qualified
Option granted hereunder shall be such amount as the Committee shall deem
appropriate.
The purchase price for each Share purchasable under any Incentive Option
granted hereunder shall be such amount as the Committee shall, in its best
judgement, determine to be not less than one hundred percent (100%) of the
fair market value per Share on the date the Option is granted; provided,
however, that in the case of an Incentive Option granted to a Participant who,
at the time such Incentive Option is granted, owns stock of the Company or any
subsidiary corporation or parent corporation of the Company possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any subsidiary corporation or parent corporation of
the Company, the purchase price for each Share shall be such amount as the
Committee shall, in its best judgement, determine to be not less than one
hundred ten percent (110%) of the fair market value per Share at the date the
option is granted.
If the Shares are listed on a national securities exchange in the United
States, Canada or both on any date on which the fair market value per Share
is to be determined, the fair market value per Share shall be deemed to the
average high and low quotations at which such Shares are sold on such national
securities exchange on such date. If the Shares are listed on a national
securities exchange in the United States, Canada or both on such date but the
Shares are not traded on such date, or such national securities exchange is
not open for business on such date, the fair market value per Share shall be
determined as of the closest preceding date on which such exchange shall have
been open for business and the Shares were traded. If the Shares are listed on
more than one national securities exchange in the United States, Canada or
both on the date any such Option is granted, the Committee shall determine
which national securities exchange shall be used for the purpose of
determining the fair market value per Share.
If no public market exists for the Shares on any date on which the fair
market value per Share is to be determined but the Shares are not listed on a
national securities exchange in the United States, Canada or both, the fair
market value per Share shall be deemed to the mean between the closing bid and
asked quotations in the over-the-counter market for the Shares on such date.
If there are no bid and asked quotations for the Shares on such date, the fair
market value per Share shall be deemed to be the mean between the closing bid
and asked quotations in the over-the-counter market for the Shares on the
closest date preceding such date for which such quotations are available.
If no public market exists for the Shares on any date on which the fair
market value per Share is to be determined, the Committee shall, in its sole
discretion and best judgement, determine the fair market value of a Share.
For the purposes of this Plan, the determination by the Committee of the
fair market value of a Share shall be conclusive.
Upon the exercise of an Option, the Company shall cause the purchased
Shares to be issued only when it shall have received the full purchase price
for the Shares in cash or by certified check.
VIII. USE OF PROCEEDS.
The cash proceeds of the sale of Shares subject to Options are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
IX. TERMS OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE.
Any Option shall be exercisable at such times, in such amounts and during
such period or periods as the Committee shall determine at the date of the
grant of such Option; provided, however, that an Incentive Option shall not be
exercisable after the expiration of ten (10) years for the date such Option is
granted; and provided further that, in the case of an Incentive Option granted
to a Participant who, at the time such Option is granted, owns stock of the
Company or any subsidiary corporation or parent corporation of the Company
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of any subsidiary corporation or parent
corporation of the Company, such Option shall not be exercisable after the
expiration of five (5) years from such date such option is granted.
Subject to the provisions of Article XX, the Committee shall have the
right to accelerate, in whole or in part, from time to time, conditionally or
unconditionally, rights to exercise any Option.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
In no event shall an Option granted hereunder be exercisable for a
fraction of a Share.
X. EXERCISE OF OPTIONS.
Any Option shall be exercised by the Participant holding such Option as
to all or part of the Shares covered by such Option by giving written notice
of such exercise to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be
purchased and specifying a business day not more than fifteen (15) days from
the date such notice is given, for the payment of the purchase price against
delivery of the Shares being purchased. Subject to the terms of Articles XVI,
XVIII, and XIX, the Company shall cause certificates for the Shares so
purchased to be delivered to the Participant at the principal business office
of the Company, against payment of the full purchase price, on the date
specified in the notice of exercise.
XI. STOCK APPRECIATION RIGHTS.
In the discretion of the Committee, a Right may be granted (i) alone,
(ii) simultaneously with the grant of an Option (either Incentive or
Non-Qualified) and in conjunction therewith or in the alternative thereto or
(iii) subsequent to the grant of a Non-Qualified Option and in conjunction
therewith or in the alternative thereto.
The exercise price of a Right granted alone shall be determined by the
Committee, but shall not be less than one hundred percent (100%) of the fair
market value of one Share on the date of grant of such Right. A Right granted
simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as
the related Option, shall be transferable only upon the same terms and
conditions as the related Option, and shall be exercisable only to the same
extent as the related Option; provided, however, that a Right, by its terms,
shall be exercisable only when the fair market value per Share subject to the
Right and related Option exceeds the exercise price per Share thereof.
Upon any exercise of a Right, the number of Shares for which any related
Option shall be exercisable shall be reduced by the number of Shares for which
the Right shall have been exercised. The number of Shares for which a Right
shall be exercisable shall be reduced upon any exercise of any related Option
by the number of Shares for which such Option shall have been exercised.
Any Right shall be exercised upon such additional terms and conditions as
may from time to time be prescribed by the Committee.
A Right shall entitle the Participant upon exercise thereof to receive
from the Company, upon written request filed with the Secretary of the Company
at its principal offices (the "Request"), a number of Shares (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Shares and cash, as specified in the Request (but subject to
the approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having
an aggregate fair market value equal to the product of (i) the excess of the
fair market value, on the date of such Request, of one Share over the exercise
price per Share specified in such Right or it related Option, multiplied by
(ii) the number of Shares for which such Right shall be exercised.
Any election by a Participant to receive cash in full of partial
settlement of a Right, and any exercise of such Right for cash, may be made
only by a Request filed with the Corporate Secretary of the Company during the
period beginning on the third business day following the date of release for
publication by the Company of quarterly or annual summary statements of
earnings and ending on the twelfth business day following such date. Within
thirty (30) days of the receipt by the Company of a Request to receive cash in
full or partial settlement of a Right or to exercise such Right for cash, the
Committee shall, in its sole discretion, either consent to or disapprove, in
whole or in part, such Request. A Request to receive cash in full or partial
settlement of a Right or to exercise a Right for cash may provide that, in the
event the Committee shall disapprove such Request, such Request shall be
deemed to be an exercise of such Right for Shares.
If the Committee disapproves in whole or in part any election by a
Participant to receive cash in full or partial settlement of a Right or to
exercise such Right for cash, such disapproval shall not affect such
Participant's right to exercise such Right at a later date, to the extent that
such Right shall be otherwise exercisable, or to elect for form of payment at
a later date, provided that an election to receive cash upon such later
exercise shall be subject to the approval of the Committee. Additionally, such
disapproval shall not affect such Participant's right to exercise any related
Option.
A Participant shall not be entitled to request or receive cash in full or
partial payment of a Right, is such Right or any related Option shall have
been exercised during the first six (6) months of its respective term;
provided, however, that such prohibition shall not apply if the Participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the expiration of such six month period, or if such Participant is
not a director or officer of the Company or a beneficial owner of the Company
(within the meaning of Section 16(a) of the Exchange Act.)
A Right shall be deemed exercised on the last day of its term, if not
otherwise exercised by the holder thereof, provided that the fair market value
of the Shares subject to the Right exceeds the exercise price thereof on such
date.
For all purposes of this Article XI, the fair market value of the Shares
shall be determined in accordance with the principals set forth in Article
VII.
XII. NON-TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS.
No Option or Right shall be transferable, whether by operation of law or
otherwise, other than by will or the laws of descent and distribution, and any
Option or Right shall be exercisable, during the lifetime of the Participant,
only by such Participant.
XIII. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT.
Upon termination of the directorship or employment of any Participant with the
Company and all subsidiary corporations and parent corporations of the
Company, any Option or Right previously
granted to the Participant, unless otherwise specified by the Committee in the
Option or Right, shall, to the extent not theretofore exercised, terminate and
become null and void, provided that:
(a) if the Participant shall die while serving as a director or
while in the employ of such corporation or during either the three (3) month
or one (1) year period, whichever is applicable, specified in clause (b) below
and at a time when such Participant was entitled to exercise an Option or
Right as herein provided, the legal representative of such Participant, or
such person who acquired such Option or Right by bequest or inheritance or by
reason of death of the Participant, may, not later than one (1) year from the
date of death, exercise such Option or Right, to the extent not theretofore
exercised, in respect of any or all of such number of Shares as specified by
the Committee in such Option or Right; and
(b) if the directorship or employment of any Participant to whom
such Option or Right shall have been granted shall terminate by reason of the
Participant's retirement (at such age or upon such conditions as shall be
specified by the Committee), disability (as described in Section 22(e)(3) of
the Code) or dismissal by the employer other than for cause (as defined
below), and while such Participant is entitled to exercise such Option or
Right as herein provided, such Participant shall have the right to exercise
such Option or Right, to the extent not theretofore exercised, in respect of
any or all of such number of Shares as specified by the Committee in such
Option or Right, at any time up to and including (i) three (3) months after
the date of such termination of directorship or employment in the case of
termination by reason of retirement or dismissal other than for cause and (ii)
one (1) year after the date of termination of directorship or employment in
the case of termination by reason of disability.
In no event, however, shall any person be entitled to exercise any Option
or Right after the expiration of the period of exercisability of such Option
or Right as specified therein.
If a Participant voluntarily terminates his directorship or employment,
or is discharged for cause, any Option or Right granted hereunder shall,
unless otherwise specified by the Committee in the Option or Right, forthwith
terminate with respect to any unexercised portion thereof.
If an Option or Right shall be exercised by the legal representative of a
deceased Participant, or by a person who acquired an Option or Right by
bequest or inheritance or by reason of the death of any Participant, written
notice of such exercise shall be accompanied by a certified copy of letter
testamentary or equivalent proof of the right of such legal representative or
other person to exercise such Option or Right.
For the purposes of the Plan, the term "for cause" shall mean (i) with
respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company
or a subsidiary corporation or parent corporation of the Company, which
agreement or plan contains a definition of "for cause" or "cause" (or words of
like import) for purposes of termination of employment thereunder by the
Company or such subsidiary corporation or parent corporation of the Company,
"for cause" or "cause" as defined in the most recent of such agreements or
plans, or (ii) in all other cases, as determined by the Board of Directors, in
its sole discretion, (a) the willful commission by an employee of a criminal
or other act that causes or probably will cause substantial economic damage to
the Company or a subsidiary corporation or parent corporation of the Company
or substantial injury to the business reputation of the Company or a
subsidiary corporation or parent corporation of the Company; (b) the
commission by an employee of an act of fraud in the performance of such
employee's duties on behalf of the Company or a subsidiary corporation or
parent corporation of the Company; (c) the continuing willful failure of an
employee to perform the duties of such employee to the Company or a subsidiary
corporation or parent corporation of the Company (other than such failure
resulting from the employee's incapacity due to physical or mental illness)
after written notice thereof (specifying the particulars thereof in reasonable
detail) and a reasonable opportunity to be heard and cure such failure are
given to the employee by the Board of Directors; or (d) the order of a court
of competent jurisdiction requiring the termination of the employee's
employment. For the purposes of the Plan, no act, or failure to act, on the
employee's part shall be considered "willful" unless done or omitted to be
done by the employee not in good faith and without reasonable belief that the
employee's action or omission was in the best interest of the Company or a
subsidiary corporation or parent corporation of the Company.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for
purposes of Section 422A(a) of the Code. If an individual is on maternity,
military, or sick leave or other bona fide leave of absence, such individual
shall be considered and "employee" for purposes of the exercise of an Option
or Right and shall be entitled to exercise such Option or Right during such
leave if the period of such leave does not exceed ninety (90) days, or, if
longer, so long as the individual's right to reemployment with his employer is
guaranteed either by statute or by contract. If the period of leave exceeds
ninety (90) days, the employment relationship shall be deemed to have
terminated on the ninety-first (91) day of such leave, unless the individual's
right to reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of a Participant from employment by the Company to employment by
a subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of a Participant from employment by a subsidiary corporation or a
parent corporation of the Company to employment by the Company or by another
subsidiary corporation or parent corporation of the Company.
XIV. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS.
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination or exchange of shares, or other
like change in the capital structure of the Company, an adjustment shall be
made to each outstanding Option and Right such that each such Option and Right
shall thereafter be exercisable for such securities, cash and/or other
property as would have been received in respect to the Shares subject to such
Option or Right had such Option or Right been exercised in full immediately
prior to such change, and such an adjustment shall be made successively each
time any such change shall occur. The term "Shares" after any such change
shall refer to securities, cash and/or property then receivable upon exercise
of an Option or Right. In addition, in the event of any such change, the
Committee shall make any further adjustment as may be appropriate to the
maximum number of Shares subject to the Plan, the maximum number of Shares, if
any, for which Options or Rights may be granted to any one employee, and the
number of Shares and price per Share subject to outstanding Options or Rights
as shall be equitable to prevent dilution or enlargement or rights under such
Options or Rights, and the determination of the Committee as to these matters
shall be conclusive. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Option and any related Right shall comply with
the rules of Section 425(a) of the Code, and (ii) in no event shall any
adjustment be made which would render any Incentive Option granted hereunder
other than an "incentive stock option" for purposes of Section 422A of the
Code.
For purposes of the Plan, a "change in control" of the Company occurs if:
(a) any "person" (defined as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act, as amended) other than Phillip M. Johnston is or becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's
outstanding securities then entitled to vote for the election of directors; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof; or (c) the Board of
Directors shall approve the sale of all or substantially all of the assets of
the Company or any merger, consolidation, issuance of securities or purchase
of assets, the result of which would be the occurrence of any event described
in clause (a) or (b) above.
In the event of a change in control of the Company (defined above), the
Committee, in its discretion, may determine that, upon the occurrence of a
transaction described in the preceding paragraph, each Option or Right
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each
Share subject to such Option or Right, an amount of cash equal to the excess
of the fair market value of such Share immediately prior to the occurrence of
such transaction over the exercise price per Share of such Option or Right.
The provisions contained in the preceding sentence shall be inapplicable to an
Option or Right granted within six (6) months before the occurrence of a
transaction described in Section 16(a) of the Exchange Act, unless such holder
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the expiration of such six month period.
Alternatively, the Committee may determine, in its discretion, that all
then outstanding Options and Rights shall immediately become exercisable upon
a change of control of the Company.
XV. RIGHT TO TERMINATE EMPLOYMENT.
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the
employment of any Participant; and it shall not impose
any obligation on the part of any Participant to remain in the employ of the
Company or of any subsidiary corporation or parent corporation thereof.
XVI. PURCHASE FOR INVESTMENT.
Except as hereafter provided, a Participant shall, upon any exercise of
an Option or Right, execute and deliver to the Company a written statement, in
form satisfactory to the Company, in which such Participant represents and
warrants that such Participant is purchasing or acquiring the Shares acquired
thereunder for such Participant's own account, for investment only and not
with a view to the resale of distribution thereof, and agrees that any
subsequent offer for sale or sale or distribution of any such Shares shall be
made only pursuant to either (a) a Registration Statement on an appropriate
form under the Securities Act of 1933, as amended (the "Securities Act"),
which Registration Statement has become effective and is current with regard
to the Shares being offered or sold, or (b) a specific exemption from the
registration requirements of the Securities Act, but in claiming such
exemption the holder shall, if so requested by the Company, prior to any offer
for sale or sale of such Shares, obtain a prior favorable written opinion, in
form and substance satisfactory to the Company, from counsel for or approved
by the Company, as to the applicability of such exemption thereto. The
foregoing restriction shall not apply to (i) issuances by the Company so long
as the Shares being issued are registered under the Securities Act and a
prospectus in respect thereof is current or (ii) re-offerings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) if the Shares being
re-offered are registered under the Securities Act and a prospectus in respect
thereof is current.
XVII. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES.
Upon any exercise of an Option or Right and, in the case of an Option,
payment of the purchase price, a certificate or certificates for the Shares as
to which the Option or Right has been exercised shall be issued by the Company
in the name of the person exercising the Option or Right and shall be
delivered to or upon the order of such person or persons.
The Company may endorse such legend or legends upon the certificates for
Shares issued upon exercise of an Option or Right granted hereunder and may
issue such "stop transfer" instructions to its transfer agent in respect of
such Shares as, in its discretion, it determines to be necessary or
appropriate to (i) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act, (ii) implement the
provisions of the Plan and any agreement between the Company and the optionee
with respect to such Shares, or (iii) permit the Company to determine the
occurrence of a disqualifying disposition, within the meaning of Section
421(b) of the Code, of Shares transferred upon exercise of an Incentive Option
granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses incurred by
the Company in connection with such issuance or transfer.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVIII. WITHHOLDING TAXES.
The Company may require an employee exercising a Right or a Non-Qualified
Option granted hereunder, or disposing of Shares acquired pursuant to the
exercise of an Incentive Option in a disqualifying disposition (within the
meaning of Section 421(b) of the Code), to reimburse the corporation that
employs such employee for any taxes required by any government to be withheld
or otherwise deducted and paid by such corporation in respect of the issuance
or disposition of such Shares. In lieu thereof, the employer corporation shall
have the right to withhold the amount of such taxes from any other sums due or
to become due from such corporation to the employee upon such terms and
conditions as the Committee shall prescribe. The employer corporation may, in
its discretion, hold the stock certificate to which such employee is entitled
upon the exercise of an Option or Right as security for the payment of such
withholding tax liability, until cash sufficient to pay that liability has
been accumulated.
XIX. LISTING OF SHARES AND RELATED MATTERS.
If at any time the Board of Directors shall determine in its discretion
that the listing, registration or qualification of the Shares covered by the
Plan upon any national securities exchange or under any state or federal law,
or the consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
Shares under the Plan, no Shares shall be issued unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
XX. AMENDMENT OF THE PLAN.
The Board of Directors or the Committee may, from time to time, amend the
Plan, provided that, notwithstanding anything to the contrary herein, no
amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares reserved for
Options under the Plan (other than an increase resulting from an adjustment
provided for in Article XIII), (ii) reduce the exercise price of any Incentive
Option granted hereunder below the price required by Article VI, (iii) modify
the provisions of the Plan relating to eligibility, or (iv) materially
increase the benefits accruing to participants under the Plan. The Board of
Directors or the Committee shall be authorized to amend the Plan and the
Options granted thereunder to permit the Incentive Options granted thereunder
to qualify as "incentive stock options" within the meaning of Section 422A of
the Code. The rights and obligations under any Option or Right granted before
amendment of the Plan or any unexercised portion of such Option or Right shall
not be adversely affected by the amendment of the Plan or the Option or Right
without the consent of the holder of the Option or Right.
XXI. TERMINATION OR SUSPENSION OF THE PLAN.
The Board of Directors or the Committee may at any time and for any or no
reason suspend or terminate the Plan. The Plan, unless sooner terminated under
Article III or by action of the Board of Directors, shall terminate at the
close of business on the Termination Date. An Option or Right may not be
granted while the Plan is suspended or after it is terminated. Options and
Rights granted while the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except upon the consent of the person
to whom the Option or Right was granted. The power of the Committee under
Article IV to construe and administer any Options of Rights granted prior to
the termination or suspension of the Plan shall continue after such
termination or during such suspension.
XXII. GOVERNING LAW.
The Plan, such Options and Rights as may be granted thereunder and all
related matters shall be governed by, and construed and enforced in accordance
with the laws of the State of Nevada.
XXIII. PARTIAL INVALIDITY.
The invalidity or illegality of any provision herein shall not be deemed
to affect the validity of any other provision.
/s/ Greg Duffy, Secretary Prime Air, Inc.
Dated: April 24, 1998
[ARTICLE] 5
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS 12-MOS
[FISCAL-YEAR-END] DEC-31-1998 DEC-31-1997
[PERIOD-END] MAR-31-1998 DEC-31-1997
[CASH] (15,060) 11,388
[SECURITIES] 0 0
[RECEIVABLES] 0 0
[ALLOWANCES] 0 0
[INVENTORY] 0 0
[CURRENT-ASSETS] 12,915 12,975
[PP&E] 0 0
[DEPRECIATION] 0 0
[TOTAL-ASSETS] 620,783 626,491
[CURRENT-LIABILITIES] 113,366 92,550
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 7,140 7,140
[OTHER-SE] 0 0
[TOTAL-LIABILITY-AND-EQUITY] 620,783 626,491
[SALES] 0 0
[TOTAL-REVENUES] 0 0
[CGS] 0 0
[TOTAL-COSTS] 0 0
[OTHER-EXPENSES] 0 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 0 0
[INCOME-PRETAX] 0 0
[INCOME-TAX] 0 0
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (26,524) (189,697)
[EPS-PRIMARY] 0 0
[EPS-DILUTED] 0 0
</TABLE>
