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Securities Exchange Act of 1934
£ | Preliminary Proxy Statement | |
£ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
R | Definitive Proxy Statement | |
£ | Definitive Additional Materials | |
£ | Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 |
R | No fee required. | |
£ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1 | ) | Title of each class of Securities to which Transaction applies: | ||||
2 | ) | Aggregate number of securities to which Transaction applies: | ||||
3 | ) | Per unit price or other underlying value of Transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): | ||||
4 | ) | Proposed maximum aggregate value of Transaction: | ||||
5 | ) | Total fee paid: |
£ | Fee paid previously with preliminary materials. | |
£ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1 | ) | Amount Previously Paid: | ||||
2 | ) | Form, Schedule or Registration Statement No.: | ||||
3 | ) | Filing Party: | ||||
4 | ) | Date Filed: |
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(310) 827-2737
COMMON STOCKHOLDER BEFORE | NET EFFECT AFTER THE | |
THE TRANSACTION | TRANSACTION | |
common stockholder holding 501 or more shares: | None. | |
common stockholder holding fewer than 501 shares: | The common stockholder will receive from Mercury $4.00 in cash per share, without interest. |
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Sincerely, | ||||
/s/ Joseph A. Czyzyk | ||||
Chairman of the Board, | ||||
Chief Executive Officer and President |
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5456 MCCONNELL AVENUE
LOS ANGELES, CALIFORNIA 90066
(310) 827-2737
TO BE HELD SEPTEMBER 16, 2005
1. | To consider and vote upon a proposal to amend the Company’s Certificate of Incorporation to effect a 1-for-501 reverse stock split of the Company’s common stock (the “Reverse Stock Split”). | ||
2. | To consider and vote upon a proposal to amend the Company’s Certificate of Incorporation to effect a 501-for-1 forward stock split of the Company’s common stock (the “Forward Stock Split”, and proposals 1 and 2 collectively referred to as the “Transaction”). | ||
3. | To grant the Company’s Board of Directors discretionary authority to adjourn the Special Meeting if necessary to satisfy the conditions to completing the Transaction, including for the purpose of soliciting proxies to vote in favor of the Transaction. |
By Order of the Board of Directors | ||||
/s/ Joseph A. Czyzyk | ||||
Chairman of the Board, Chief Executive | ||||
Officer and President |
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IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
5456 MCCONNELL AVENUE
LOS ANGELES, CALIFORNIA 90066
(310) 827-2737
2005 SPECIAL MEETING OF STOCKHOLDERS
— | FOR the proposal to amend the Company’s Certificate of Incorporation to effect a 1-for-501 reverse stock split of the Company’s common stock (the “Reverse Stock Split”). | ||
— | FOR the proposal to amend the Company’s Certificate of Incorporation to effect a 501-for-1 forward stock split of the Company’s common stock (the “Forward Stock Split” and both proposals collectively referred to as the “Transaction”). | ||
— | FOR granting the Company’s Board of Directors discretionary authority to adjourn the Special Meeting if necessary to satisfy the conditions to completing the Transaction, including for the purpose of soliciting proxies in favor of the Transaction. |
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APPENDICES: | ||||
Amended and Restated Certificate of Incorporation | A | |||
Opinion of Imperial Capital, LLC | B | |||
Mercury’s Annual Report on Form 10-K for the year ended June 30, 2004 | C | |||
Mercury’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 | D |
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— | Mercury’s stockholders holding fewer than 501 shares of Mercury’s common stock before the Transaction will receive a cash payment from Mercury of $4.00 per share, without interest, for each share of common stock held immediately prior to the Transaction; | ||
— | Mercury’s stockholders holding 501 or more shares of Mercury’s common stock at the effective time of the Transaction will continue to hold the same number of shares of Mercury’s common stock after completion of the Transaction and will not receive any cash payment; | ||
— | Mercury’s preferred stockholders will continue to hold the same number of shares of Mercury’s preferred stock after completion of the Transaction and will not receive any cash payment; | ||
— | the officers and directors of Mercury at the effective time will continue to serve as the officers and directors of Mercury immediately after the Transaction; | ||
— | Mercury believes it will have fewer than 300 holders of record of common stock and intends to file a Form 15 to terminate registration of its common stock with the SEC, which will terminate its obligation to continue filing periodic reports and proxy statements pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”), although Mercury currently intends to continue to provide reports as to its financial condition and results of operation which Mercury expects may be accessed atwww.pinksheets.com; | ||
— | after a 90 day period following the filing of a Form 15 with the SEC to terminate the registration of its common stock under the federal securities laws (the “90 day waiting period”), Mercury’s executive officers, directors and 10% stockholders will no longer be required to file reports relating to their transactions in Mercury’s common stock with the SEC, and trading in Mercury’s securities by such executive officers, directors and 10% stockholders will no longer become subject to the reporting and recovery of profits provision of the Exchange Act; | ||
— | after the 90 day waiting period, persons acquiring 5% of Mercury’s common stock will no longer be required to report their beneficial ownership under the Exchange Act; | ||
— | after the 90 day waiting period, tender offers for the beneficial ownership of more than 5% of Mercury’s common stock will no longer be regulated; | ||
— | after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | Mercury will not be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the cost of which is estimated to be up to $3,000,000 through June 30, 2007 and approximately $500,000 per year thereafter; |
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— | Mercury’s common stock will no longer be listed on the American Stock Exchange, any trading in its common stock will only occur in the over-the-counter markets and in privately negotiated sales, and its common stock will likely only be quoted in the “pink sheets”; | ||
— | outstanding options held by Mercury’s employees, officers, and directors to acquire Mercury’s common stock will remain outstanding following the Transaction; | ||
— | the number of Mercury’s common stockholders of record will be reduced from approximately 331 to approximately 33, and the number of outstanding shares of Mercury’s common stock will be reduced by approximately 6.3%, from 3,056,355 shares, to approximately 2,863,742 shares; | ||
— | exercise of all options exercisable within sixty days of the date of this proxy statement, the percentage ownership of Mercury’s common and preferred stock beneficially owned by the directors and officers of Mercury as a group will increase from 42.8% to 45.1% based on shares outstanding as of June 30, 2005. Because Mercury’s common and preferred stockholders vote as a single class on all matters presented to the stockholders (including the Transaction), the Transaction will not affect control of Mercury; | ||
— | aggregate stockholders’ equity of Mercury as of March 31, 2005, will be reduced from $13,869,00 on a historical basis to approximately $12,786,000 on a pro forma basis; | ||
— | the book value per share of common stock as of March 31, 2005, will be reduced from $4.54 per share on a historical basis to approximately $4.46 per share on a pro forma basis; | ||
— | Mercury will pay cash of approximately $1,092,000 in the aggregate, net of tax benefits, to repurchase fractional shares and pay the costs of the Transaction; and | ||
— | Mercury expects its business and operations to continue as they are currently being conducted and, except as disclosed in this proxy statement, the Transaction is not anticipated to have any effect upon the conduct of such business. |
— | The proposal to amend the Company’s Certificate of Incorporation to effect the Reverse Stock Split requires the affirmative vote of holders of a majority of the outstanding shares of Mercury’s common and preferred stock, counted as a single class. | ||
— | The proposal to amend the Company’s Certificate of Incorporation to effect the Forward Stock Split requires the affirmative vote of holders of a majority of the outstanding shares of Mercury’s common and preferred stock, counted as a single class. | ||
— | Approval of granting the board of directors discretionary authority to adjourn the Special Meeting requires the affirmative vote of a majority of Mercury’s common and preferred stock, voting as a single class on the proposal. |
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— | directly in your name as the “stockholder of record,” and | ||
— | for you as the “beneficial owner” either through a broker, bank or other nominee. |
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— | eliminating the costs of compliance with Section 404 of the Sarbanes-Oxley Act and related regulations estimated to be up to $3,000,000 through June 30, 2007 and approximately $500,000 per year thereafter; | ||
— | affording stockholders holding fewer than 501 shares immediately before the Transaction the opportunity to receive cash for their shares at a price that represents a premium of approximately 19% over the closing price of $3.36 on March 21, 2005, which was the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee of the Board of Directors (“Special Committee”) and by the Board, without having to pay brokerage commissions and other transaction costs; and | ||
— | reducing the substantial time that management and other employees will have to spend to implement the Section 404 internal controls certificate provisions of the Sarbanes-Oxley Act, thus enabling them to devote more of their time and energy to Mercury’s strategy and operations. |
— | Mercury will benefit from eliminating the costs of compliance with Section 404 of the Sarbanes-Oxley Act and related regulations estimated to be up to $3,000,000 through June 30, 2007 and approximately $500,000 per year thereafter; |
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— | Mercury will benefit from reducing the substantial time that management and other employees will have to spend to implement the Section 404 internal controls certificate provisions of the Sarbanes-Oxley Act, thus enabling them to devote more of their time and energy to Mercury’s strategy and operations; and | ||
— | Mercury will benefit because it will no longer be obligated to continue filing periodic reports and proxy statements pursuant to the Exchange Act, although Mercury currently intends to continue to provide reports as to its financial condition and results of operation which Mercury expects may be accessed at www.pinksheets.com. |
— | assuming the exercise of all options that are exercisable within sixty days of the date of this proxy statement, Mercury’s officers and directors, including the Transaction Affiliates, will increase their percentage ownership in Mercury from 42.8% to 45.1%; | ||
— | assuming the exercise of all options that are exercisable within sixty days of the date of this proxy statement, the Transaction Affiliates will increase their percentage ownership in Mercury from 37.7% to 39.8%; | ||
— | affiliated stockholders may benefit from the reduction in total shares outstanding or from the cost savings by Mercury not being public, either or both of which may result in higher earnings per share, which in turn may result in a higher price for their shares than they would have received if Mercury remained public; | ||
— | Mercury’s officers and employees will benefit from eliminating the time and effort associated with implementation of the Section 404 internal controls certification provisions of the Sarbanes-Oxley Act; | ||
— | Mercury’s officers and directors, and persons holding 5% or more of Mercury’s common stock, will benefit because, after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | Mercury’s officers and directors, and persons holding 5% or more of Mercury’s common stock, including the Transaction Affiliates, will benefit because after the 90 day waiting period, such officers, directors and 5% stockholders will no longer be required to report their acquisition, disposition or ownership of shares under the Exchange Act; and | ||
— | affiliated stockholders may benefit from future operating results of Mercury. |
— | Unaffiliated stockholders holding fewer than 501 shares immediately before the Transaction will have the opportunity to receive cash for their shares at a price that represents a premium of approximately 19% over the closing price of $3.36 on March 21, 2005, which was the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, without having to pay brokerage commissions and other transaction costs; | ||
— | Unaffiliated stockholders receiving $4.00 for their shares are receiving an amount that is within the range of implied equity values in the per share analysis presented by Imperial Capital, LLC (“Imperial Capital”), financial advisor to the Special Committee and the Board. (See “Special Factors—Opinion of Imperial Capital, LLC” beginning on page 34.) | ||
— | remaining unaffiliated stockholders may benefit from the reduction in total shares outstanding or from the cost savings by Mercury not being public, either or both of which may result in higher earnings per share, which in turn may result in a higher price for their shares than they would have received if Mercury remained public; | ||
— | and remaining unaffiliated stockholders may benefit from future operating results of Mercury. |
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— | Mercury’s working capital and assets will be decreased and/or indebtedness increased to fund the purchase of fractional shares, and to pay the other costs of the Transaction; and | ||
— | the limited ability that Mercury has to raise capital in the public securities markets or to use its stock as an acquisition currency will be effectively eliminated. |
— | Mercury’s officers and directors, including the Transaction Affiliates, are likely to experience reduced liquidity for their shares of common stock, even if the common stock trades on the “pink sheets”, and this reduced liquidity may adversely affect the market price of the common stock. |
— | the cash price offered to stockholders under the proposed Transaction could be less than the market price at the time the Board decides to implement the Transaction and is less than the $4.54 book value of the Common Stock as of March 31, 2005; | ||
— | remaining stockholders are likely to experience reduced liquidity for their shares of common stock, even if the common stock trades on the “pink sheets”, and this reduced liquidity may adversely affect the market price of the common stock; | ||
— | less public information about Mercury will be required or available after the Transaction and officers will no longer be required to certify the accuracy of Mercury’s financial statements, although Mercury currently intends to provide reports as to its financial condition and results of operations, which Mercury’s expects may be accessed at www.pinksheets.com (see “Special Factors— Purpose of and Reasons For the Transaction” beginning on page 22); | ||
— | after the 90 day waiting period, officers, directors and persons holding or acquiring 5% of Mercury’s common stock will no longer be required to report their beneficial ownership, or change in beneficial ownership, under the Exchange Act; | ||
— | after the 90 day waiting period, tender offers for the beneficial ownership of more than 5% of Mercury’s common stock will no longer be regulated; | ||
— | after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | stockholders who are cashed out will be unable to participate in any future operating results of Mercury unless they buy stock after the Transaction; and | ||
— | stockholders who are cashed out for $4.00 per share in the Transaction may receive less for their shares than they would if the common stock continued trading on the American Stock Exchange. |
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— | current and historical market prices; | ||
— | net book value and net tangible book value; | ||
— | going concern value; | ||
— | earnings of Mercury; | ||
— | prices at which Mercury has repurchased shares; | ||
— | the opinion and presentation of the Special Committee’s financial advisor; | ||
— | limited liquidity of Mercury’s common stock; | ||
— | future cost savings; | ||
— | interests of unaffiliated stockholders who will remain; and | ||
— | certain negative considerations. |
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— | Mercury’s stockholders holding fewer than 501 shares of Mercury’s common stock at the effective time of the Transaction will receive a cash payment from Mercury of $4.00 per share, without interest, for each share of common stock held immediately prior to the Transaction; | ||
— | Mercury ‘s stockholders holding 501 or more shares of Mercury ‘s common stock at the effective time of the Transaction will continue to hold the same number of shares of Mercury ‘s common stock after completion of the Transaction and will not receive any cash payment; | ||
— | Mercury’s preferred stockholders will continue to hold the same number of shares of Mercury’s preferred stock after completion of the Transaction and will not receive any cash payment; | ||
— | the officers and directors of Mercury at the effective time will continue to serve as the officers and directors of Mercury immediately after the Transaction; | ||
— | Mercury believes it will have fewer than 300 holders of record of common stock and therefore be eligible to terminate registration of its common stock with the SEC, which will terminate its obligation to continue filing periodic reports and proxy statements pursuant to the Exchange Act, although Mercury currently intends to continue to provide reports as to its financial condition and results of operation which Mercury expects may be accessed atwww.pinksheets.com; | ||
— | after the 90 day waiting period, Mercury’s executive officers, directors and 5% stockholders will no longer be required to file reports relating to their transactions in Mercury’s common stock with the SEC, and trading in Mercury’s securities by such executive officers, directors and 10% stockholders will no longer be subject to the recovery of profits provision of the Exchange Act; | ||
— | after the 90 day waiting period, persons acquiring 5% of Mercury’s common stock will no longer be required to report their beneficial ownership under the Exchange Act; | ||
— | after the 90 day waiting period, tender offers for the beneficial ownership of more than 5% of Mercury’s common stock will no longer be regulated; | ||
— | after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | Mercury will not be required to comply with Section 404 of the Sarbanes-Oxley Act, the cost of which is estimated to be up to $3,000,000 through June 30, 2007 and approximately $500,000 per year thereafter; | ||
— | Mercury’s common stock will no longer be listed on the American Stock Exchange, any trading in its common stock will only occur in the over-the-counter markets or in privately negotiated sales, and its common stock will likely only be quoted in the “pink sheets”; | ||
— | outstanding options held by Mercury’s employees, officers and directors to acquire Mercury’s common stock will remain outstanding following the Transaction; |
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— | the number of Mercury’s stockholders of record will be reduced from approximately 331 to approximately 33, and the number of outstanding shares of Mercury’s common stock will be reduced by approximately 6.3%, from 3,056,355 shares, to approximately 2,863,742 shares; | ||
— | assuming exercise of all options exercisable within sixty days of the date of this proxy statement, the percentage ownership of Mercury’s common and preferred stock beneficially owned by the directors and officers of Mercury as a group will increase from 42.8% to 45.1% based on shares outstanding as of June 30, 2005. Because Mercury’s common and preferred stockholders vote as a single class on all matters presented to the stockholders (including the Transaction), the Transaction will not affect control of Mercury; | ||
— | aggregate stockholders’ equity of Mercury as of March 31, 2005, will be reduced from $13,869,000 on a historical basis to approximately $12,786,000 on a pro forma basis; | ||
— | the book value per share of common stock as of March 31, 2005, will be reduced from $4.54 per share on a historical basis to approximately $4.46 per share on a pro forma basis; | ||
— | Mercury will pay cash of approximately $1,092,000 in the aggregate, net of tax benefits, to repurchase fractional shares and pay the costs of the Transaction; and | ||
— | Mercury expects its business and operations to continue as they are currently being conducted and, except as disclosed in this Proxy Statement, the Transaction is not anticipated to have any effect upon the conduct of such business. |
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— | each member of Mercury’s Board of Directors, except Michael Janowiak, and each of Mercury’s executive officers, except Kent Rosenthal, hold 501 or more shares of Mercury common stock and will retain their shares after the Transaction; | ||
— | each member of Mercury’s Board of Directors and each of Mercury’s executive officers, except Kent Rosenthal, holds options to purchase more than 501 shares of Mercury common stock, which will remain outstanding after the Transaction; and | ||
— | a result of the Transaction, the stockholders who own of record at the effective time of the Transaction 501 or more shares, including Mercury’s Board members and the majority of Mercury’s executive officers, including the Transaction Affiliates, will increase their percentage ownership in Mercury as a result of the Transaction. For example, assuming the Transaction is approved, the beneficial ownership percentage of the current directors and executive officers of Mercury as a group in Mercury’s common and preferred stock will increase from approximately 42.8% to 45.1% as a result of the reduction of the number of shares of common stock outstanding by approximately 192,613 shares. |
Q: | WHY IS THE FORWARD STOCK SPLIT PREDICATED ON THE APPROVAL OF THE REVERSE STOCK SPLIT, AND WHY IS THE REVERSE STOCK SPLIT PREDICATED ON THE APPROVAL OF THE FORWARD STOCK SPLIT? | |
A: | We need to have approval of both parts of the Transaction in order to maintain approximately the same market price for each share of common stock. If we did one without the other, the price of each share of common stock would either decrease or increase by a large amount. Also, by having the forward stock split immediately following the reverse stock split, and by cashing out only those |
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shareholders who initially hold less than 501 shares, the Company is spending substantially less money than it would if it had to cash out not only those shareholders holding less than 501 shares, but also the incremental portion of each shareholder’s holdings which is not divisible by 501 (i.e. if a shareholder held 701 shares, and we did not have a forward stock split immediately following the reverse stock split, 501 pre-split shares would be converted into one post-split share, and we would have had to pay cash for the remaining 200 pre-split shares). Finally, having the forward stock split without having the reverse stock split would not accomplish one of the principal reasons for the Transaction, which is to reduce the number of holders of common stock. | ||
Q: | IF I OWN FEWER THAN 501 COMMON SHARES, IS THERE ANY WAY I CAN CONTINUE TO BE A STOCKHOLDER OF MERCURY AFTER THE TRANSACTION? | |
A: | If you own fewer than 501 common shares before the reverse stock split, the only way you can continue to be a stockholder of Mercury after the Transaction is to purchase, prior to the effective date, sufficient additional shares to cause you to own a minimum of 501 shares on the effective date. Mercury cannot assure you, however, that any shares will be available for purchase. | |
Q: | IS THERE ANYTHING I CAN DO IF I OWN 501 OR MORE COMMON SHARES, BUT WOULD LIKE TO TAKE ADVANTAGE OF THE OPPORTUNITY TO RECEIVE CASH FOR MY SHARES AS A RESULT OF THE TRANSACTION? | |
A: | If you own 501 or more common shares before the Transaction, you can only receive cash for all of your shares if, prior to the effective date, you reduce your stock ownership to fewer than 501 shares by selling or otherwise transferring your shares. Mercury cannot assure you, however, that any purchaser for your shares will be available. Alternatively, before the effective date, you could divide the shares you own among different record holders so that fewer than 501 shares are held in each account. For example, you could divide your shares between your own name and a brokerage account so that fewer than 501 shares are held in each account. | |
Q: | WHAT HAPPENS IF I OWN A TOTAL OF 501 OR MORE COMMON SHARES BENEFICIALLY, BUT I HOLD FEWER THAN 501 COMMON SHARES OF RECORD IN MY NAME AND FEWER THAN 501 COMMON SHARES WITH MY BROKER IN “STREET NAME”? | |
A: | example of this would be if you have 251 common shares registered in your own name with Mercury’s Transfer Agent, and you have 250 common shares held through your broker in “street name.” Accordingly, you are the beneficial owner of 501 shares, but you do not own 501 shares of record or beneficially in street name. If this is the case, as a result of the Transaction, you would receive cash for the 251 shares you hold of record and the 250 shares held in street name. | |
Q: | IF I OWN AT LEAST 501 COMMON SHARES, BUT THE SHARES ARE SPLIT AMONG RECORD OWNERS AS DESCRIBED ABOVE SO THAT NO RECORD OWNER HOLDS AT LEAST 501 COMMON SHARES, BUT I WISH TO CONTINUE TO OWN COMMON STOCK OF MERCURY AFTER THE TRANSACTION, WHAT CAN I DO? | |
A: | Before the effective date, you could put all of the shares you own beneficially in one record name, either in your name or in street name, so that the total shares you own that are held of record in the same name is at least 501 shares, and then you would continue to be a stockholder after the effective date. | |
Q: | SHOULD I SEND IN MY STOCK CERTIFICATES NOW? | |
A: | No. After the Transaction has been completed, Mercury will send instructions on how to receive any cash payments you may be entitled to receive. |
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A: | The Company’s capital expenditures for the twelve month period ended June 30, 2002 were $4,500,000 exceeding the maximum allowable capital expenditures of $4,000,000 by $500,000; and |
b. | After the restatement of the Company’s quarterly financial results for the second and third quarters of fiscal 2002 to: 1) correct its accounting to properly record leasehold amortization expenses for its cargo operations; 2) to write off costs associated with unsuccessful financing transactions; 3) to correct its accounting for certain FBO operating expenses; and 4) to recognize additional compensation expenses resulting from changes in stock option terms, Mercury reported quarterly net losses of $31,000 and $380,000 for the second and third quarters of fiscal 2002, respectively, in violation of the quarterly minimum net earnings covenant of $1 for those quarters. |
1. Repayment of existing Senior Debt, including accrued interest: | $ | 13,533,000 | ||
2. Agent fee to the Company’s Financial Advisor: | 1,000,000 | |||
3. Closing fee to Lender: | 870,000 | |||
4. Accrued interest to JH Whitney on Senior Subordinated Note: | 840,000 | |||
5. Note amendment fee to JH Whitney: | 270,000 | |||
6. Closing fees: | 410,000 | |||
Total disbursement at closing | $ | 16,923,000 | ||
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— | eliminating the costs and investment of management time associated with compliance with Section 404 of the Sarbanes-Oxley Act and related regulations; and | ||
— | affording stockholders holding fewer than 501 shares immediately before the Transaction the opportunity to receive cash for their shares, without having to pay brokerage commissions and other transaction costs, at a price that represents a premium of 19% over the closing price of $3.36 on March 21, 2005, which was the last trading day before the public announcement that the proposed Transaction had been approved by the Special Committee and the Board. |
Compliance with Section 404 of the Sarbanes-Oxley Act* | $ | 500,000 | ||
American Stock Exchange Fees | $ | 15,000 | ||
Total | $ | 515,000 |
* | Initial compliance with Section 404 of the Sarbanes-Oxley Act is estimated to cost up to $3,000,000, through June 30, 2007. This figure does not take into account any additional costs that may be necessary to remediate any deficiencies, if any, in Mercury’s internal controls. Thereafter, annual costs for compliance with Section 404 are expected to be approximately $500,000. |
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— | assuming the exercise of all options that are exercisable within sixty days of the date of this proxy statement, Mercury’s officers and directors, including the Transaction Affiliates, will increase their percentage ownership in Mercury from 42.8% to 45.1%; | ||
— | assuming the exercise of all options that are exercisable within sixty days of June 30, 2005, the Transaction Affiliates will increase their percentage ownership in Mercury from 37.7% to 39.8%; | ||
— | affiliated stockholders may benefit from the reduction in total shares outstanding or from the cost savings by Mercury not being public, either or both of which may result in higher earnings per share, which in turn may result in a higher price for their shares than they would have received if Mercury remained public; | ||
— | Mercury’s officers and employees will benefit from eliminating the time and effort associated with implementation of the Section 404 internal controls certification provisions of the Sarbanes-Oxley Act; | ||
— | Mercury’s officers and directors, and persons holding 5% or more of Mercury’s common stock, including the Transaction Affiliates, will benefit because, after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | Mercury’s officers and directors, and persons holding 5% or more of Mercury’s common stock, including the Transaction Affiliates, will benefit because, after the 90 day waiting period, such officers, directors and 5% stockholders will no longer be required to report their acquisition, disposition or ownership of shares under the Exchange Act; and | ||
— | remaining affiliated stockholders may benefit from future operating results of Mercury. |
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— | unaffiliated stockholders holding fewer than 501 shares immediately before the Transaction will have the opportunity to receive cash for their shares at a price that represents a premium of approximately 19% over the closing price of $3.36 on March 21, 2005, which was the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, without having to pay brokerage commissions and other transaction costs; | ||
— | unaffiliated stockholders receiving $4.00 for their shares are receiving an amount that is within the range of implied equity values in the per share analyses presented by Imperial Capital, financial advisor to the Special Committee and the Board. (See “—Opinion of Imperial Capital, LLC” beginning on page 34); | ||
— | unaffiliated stockholders who remain stockholders of Mercury after the Transaction may benefit from the reduction in total shares outstanding or from the cost savings by Mercury not being public, either or both of which may result in higher earnings per share, which in turn may result in a higher price for their shares than they would have received if Mercury remained public; and | ||
— | remaining unaffiliated stockholders may benefit from future operating results of Mercury. |
— | Mercury’s working capital and assets will be decreased and/or indebtedness increased, to fund the purchase of fractional shares, and to pay the other costs of the Transaction; and | ||
— | the limited ability that Mercury has to raise capital in the public securities markets or to use its stock as an acquisition currency will be effectively eliminated. |
— | Mercury’s officers and directors, including the Transaction Affiliates, are likely to experience reduced liquidity for their shares of common stock, even if the common stock trades on the “pink sheets”, and this reduced liquidity may adversely affect the market price of the common stock. |
— | the cash price offered to stockholders under the proposed Transaction could be less than the market price at the time the Board decides to implement the Transaction and is less than the $4.54 book value of the common stock as of March 31, 2005; | ||
— | remaining stockholders are likely to experience reduced liquidity for their shares of common stock, even if the common stock trades on the “pink sheets”, and this reduced liquidity may adversely affect the market price of the common stock; | ||
— | less public information about Mercury will be required or available after the Transaction and officers will no longer be required to certify the accuracy of Mercury’s financial statements although Mercury currently intends to provide reports as to its financial condition and results of operations, which Mercury expects may be accessed atwww.pinksheets.com; |
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— | after the 90 day waiting period, officers, directors and persons holding or acquiring 5% of Mercury’s common stock will no longer be required to report their beneficial ownership, or changes in beneficial ownership, under the Exchange Act; | ||
— | the 90 day waiting period, tender offers for the beneficial ownership of more than 5% of Mercury’s common stock will no longer be regulated; | ||
— | after the 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated; | ||
— | stockholders who are cashed out will be unable to participate in any future operating results of Mercury unless they buy stock after the Transaction; and | ||
— | who are cashed out for $4.00 per pre-reverse split share in the Transaction may receive less for their shares than they would if the common stock continued trading on the American Stock Exchange. |
— | CASH TENDER OFFER BY MERCURY AT A SIMILAR PRICE PER SHARE. The Special Committee, the Board and the Transaction Affiliates did not believe that a tender offer would necessarily result in the purchase of a sufficient number of shares to reduce the number of record holders to fewer than 300 because many stockholders with a small number of shares might not make the effort to tender their shares and the cost of completing the tender offer could be significant in relation to the value of the shares that are sought to be purchased. Alternatively, if most of the holders of Mercury’s common stock tendered their shares, Mercury would be required to purchase shares from all tendering stockholders up to the maximum number of shares specified in the cash tender offer, which would result in a substantially greater cash amount necessary to complete the Transaction. Regardless, a tender offer would provide no guarantee that the number of record holders would ultimately be reduced to fewer than 300. In comparison, the Transaction, if successfully completed, is likely to allow Mercury to accomplish its SEC deregistration objectives. | ||
— | CASH-OUT MERGER. The Special Committee, the Board and the Transaction Affiliates considered and rejected this alternative because the proposed Transaction would be more simple and cost-effective than a cash-out merger. | ||
— | PURCHASE OF SHARES BY MERCURY IN THE OPEN MARKET. The Special Committee, the Board and the Transaction Affiliates rejected this alternative because they each concluded it was unlikely that Mercury could acquire shares from a sufficient number of record holders to accomplish the Special Committee’s and the Board’s objectives in large part because Mercury would not be able to dictate that open share purchases only be from record holders selling all of their shares. Even if enough open market purchases resulted in lowering the number of record holders to less than 300, such purchases would likely be more costly than the proposed Transaction. | ||
— | REVERSE STOCK SPLIT WITHOUT A FORWARD STOCK SPLIT. This alternative would accomplish the objective of reducing the number of record holders below the 300 threshold, assuming approval of the reverse stock split by Mercury’s stockholders. In a reverse stock split without a subsequent forward stock split, Mercury would acquire the interests of the cashed-out stockholders and the fractional share interests of those stockholders who are not cashed-out (as compared to the |
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proposed Transaction in which only those stockholders whose shares are converted to less than one whole share after the reverse stock split would have their fractional interests cashed-out; and all fractional interests held by stockholders holding more than one whole share after the reverse stock split would be reconverted to whole shares in the forward stock split). Thus, the Special Committee, the Board and the Transaction Affiliates rejected this alternative due to the higher cost involved of conducting a reverse stock split without a forward stock split. | |||
— | SALE OF CERTAIN DIVISIONS OF THE COMPANY. From time to time, the Board has explored the possibility of a sale of certain divisions of Mercury. Although the Company’s FBO Business was sold in April 2004, no acceptable firm offers for any other division of the Company were received. See “ Corporate Developments in Last Four Years” beginning on page 12. | ||
— | DIFFERENT REVERSE/FORWARD STOCK SPLIT RATIOS. The Special Committee, the Board and the Transaction Affiliates also considered reverse stock splits followed by forward stock splits at different ratios than the Transaction, such as reverse stock splits in the amount of 1-for-100, 1-for-200, 1-for-300, 1-for-400, 1-for-500, 1-for-1,000, 1-for-1,500 or 1-for-5,000 followed by, in each case, forward stock splits in the same ratio. Although the lower ratios would be less costly for the Company, and would also reduce the number of record holders below 300, the Special Committee, the Board and the Transaction Affiliates concluded that the additional cost savings would not be worth the risk of Mercury having to re-register as a reporting Company, which would be required if a sufficient number of beneficial owners elected to take record ownership of their shares, causing the number of record owners to exceed 500. |
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– | CURRENT AND HISTORICAL PRICES OF MERCURY’S COMMON STOCK. The Special Committee considered both the historical market prices and recent trading activity and current market prices of Mercury common stock. The Special Committee reviewed the high and low sales prices for the common stock from January 1, 2003 to March 21, 2005 and from March 21, 2004 to March 21, 2005, the latter period of which ranged from $3.08 to $8.45 per share. You should read the discussion under “Market for Common Stock and Related Stockholder Matters” on page 46 for more information about Mercury’s stock prices. On March 8, 2005, the day before the public announcement that the Special Committee was considering the Transaction, the closing price of the common stock was $4.49 per share. The closing price of Mercury common stock on March 21, 2005, the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, was $3.36 per share. | ||
The Special Committee noted that, as a positive factor, the cash payment of $4.00 per share payable to stockholders in lieu of fractional shares represents a premium of approximately 19% over the $3.36 closing sales price of Mercury’s common stock on March 21, 2005, which was the last trading day before the public announcement that the Special Committee and the Board had approved the Transaction. In addition to stockholders receiving a premium to the trading price of Mercury’s common stock on any shares redeemed as a result of the reverse stock split, such stockholders will achieve liquidity without incurring brokerage commissions and other transaction costs. The Special Committee also noted that although the cash consideration represented a 53% discount to the Mercury share price of $8.45 (the highest sales price since March 21, 2004) and a 34% discount to the last closing price of $6.05 one year before the last trading day prior to the public announcement of the approval of the proposed Transaction by the Board and the Special Committee, such historical price data did not take account of the special dividend of $5.70 per share paid as of November 5, 2004 and therefore was of lesser relevance than more recent trading data and in light of the premiums that the cash consideration represents over the average closing sales price of Mercury’s common stock for the 10 trading days, 20 trading days, 30 trading days, and one-month trading periods immediately prior to the public announcement of the approval of the proposed Transaction by the Special Committee and the Board and over the closing sales price of Mercury’s common stock immediately prior to such public announcement. |
— | GOING CONCERN VALUE. In determining the cash amount to be paid to cashed-out stockholders in the Transaction, the Special Committee considered the analyses as presented in Imperial Capital’s report, without giving effect to any anticipated effects of the Transaction. In considering going concern value, the Special Committee considered multiples of EBITDA and revenue of comparable SEC reporting air cargo handling and fuel services companies and discounted cash flow valuations. | ||
Also, the Special Committee did not consider the amount per share that might be realized in a sale of all or substantially all of the stock or assets of Mercury, believing that consideration of such amount was inappropriate in the context of a Transaction that would not result in a change in control of Mercury. In considering the going concern value of Mercury’s shares, the Special Committee adopted the analyses of Imperial Capital, which indicated a share price of $2.95, $3.73 or $4.17 per share, as the mean per share implied equity values of Mercury’s common stock. See “ Opinion of Imperial Capital, LLC” beginning on page 33. Accordingly, the Special Committee believes that the going concern analysis supports its determination that the Transaction is fair to stockholders. | |||
— | NET BOOK VALUE. As of December 31, 2004, the net book value per common share was $5.14, and the tangible net book value per common share (excluding intangibles) was $3.65. The Special Committee noted that book value per common share is an historical accounting value which may be more or less than the net market value of Mercury’s assets after payment of its liabilities, and a liquidation would not necessarily produce a higher value than book value per common share. | ||
— | LIQUIDATION VALUE. Although no valuation of total assets was undertaken, the Special Committee believes that a liquidation or other Transaction designed to monetize Mercury’s assets would likely result in recovery of a price for Mercury’s tangible assets that is substantially less than tangible book value. The Special Committee considered that Mercury’s non-cash assets consist primarily of accounts receivable and leasehold improvements. The Special Committee believes that the sale of accounts receivable would not sufficiently offset indebtedness and that the sale of leasehold improvements would not be practicable, given the difficulty in transferring the underlying leaseholds, and in any event would not offset the expense of satisfying lease and other contractual obligations in a liquidation. In view of these factors, the Special Committee agreed that it is highly unlikely that liquidation would generate net proceeds with a current value in excess of $4.00 per share, although the aggregate amount received over a period of time could be greater. | ||
— | EARNINGS. The Special Committee reviewed historic earnings of Mercury for the previous three years and the relevance of historic earnings to future prospects, and factored this review into the going concern analysis. For the three years ended June 30, 2004, 2003, and June 30, 2002, Mercury reported net income (loss) of $615,000, $(2,798,000) and $4,517,000, |
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respectively. The Special Committee believes the earnings analysis supports its determination that the Transaction is fair to stockholders. |
— | PRICES AT WHICH MERCURY HAS REPURCHASED SHARES. The Special Committee took account of the fact that Mercury had purchased an aggregate of (i) 343,600 shares at $10.44 per share in the fourth quarter of 2003 in a transaction with Hambro; (ii) 14,500 shares at $6.17 per share in the second quarter of 2004; (iii) 150,000 shares at $6.00 per share in the third quarter of 2004 in a transaction with Murdock; (iv) 3,000 other shares at $6.55 per share in the third quarter of 2004 in other transactions; and (v) 8,750 shares at $4.90 per share in the fourth quarter of 2004. The Special Committee believes these repurchases support its decision that the Transaction is fair to the stockholders, in that: (i) after adjusting for the $5.70 per share special dividend, the repurchase from Hambro was at $4.74 per share, which is close to the price of $4.00 but also additional consideration was given by Hambro and the Transaction with Hambro occurred almost eighteen months ago; (ii) after adjusting for the $5.70 per share special dividend, the purchase of 14,500 shares in the second quarter of 2004 was equivalent to a price of $0.47 per share; (iii) after adjusting for the $5.70 per share special dividend, the purchase of 150,000 shares in the Transaction with Murdock in the third quarter of 2004 was equivalent to a price of $0.30 per share; (iv) after adjusting for the $5.70 per share special dividend, the purchase of 150,000 shares in the Transaction with Murdock in the third quarter of 2004 was equivalent to a price of $0.30 per share; (iv) after adjusting for the $5.70 per share special dividend, the purchase of 3,000 additional shares in the third quarter of 2004 was equivalent to a price of $0.85 per share; and (v) the purchase of 8,750 shares in the fourth quarter of 2004, although occurring after the special dividend, was not significantly higher than the price of $4.00 in the Transaction and represented a purchase by Mercury from a former executive officer upon his termination of employment, and therefore is not strictly comparable to the proposed Transaction. | ||
— | The Special Committee concluded that these stock purchases by Mercury support the price of $4.00 per share to be paid in the Transaction. The Special Committee also took account of the fact that the Transaction Affiliates had purchased an aggregate of 418,807 shares at an average price of $3.15 per share in the fourth quarter of 2004. | ||
— | OPINION OF THE FINANCIAL ADVISOR. The Special Committee considered the opinion of Imperial Capital rendered to the Special Committee on March 21, 2005, to the effect that, as of the date of such opinion and based upon and subject to certain matters stated therein, the $4.00 per share in cash to be paid to those stockholders of Mercury receiving such consideration, other than affiliates of Mercury, as to whom Imperial Capital expressed no view, is fair, from a financial point of view, to Mercury’s common and preferred stockholders. For more information about the opinion you should read the discussion below under” Opinion of Imperial Capital, LLC” beginning on page 34 and a copy of the opinion of Imperial Capital attached as Appendix B to this proxy statement. | ||
— | PRESENTATION OF THE SPECIAL COMMITTEE’S FINANCIAL ADVISOR. The Special Committee also considered the various financial information, valuation analyses and other factors set forth in the written presentations delivered to the Special Committee at the meetings of the Special Committee on February 21, 2005, February 25, 2005, March 1, 2005, March 3, 2005, March 8, 2005, March 9, 2005, March 10, 2005, March 14, 2005 and March 21, 2005. | ||
— | LIMITED LIQUIDITY FOR MERCURY COMMON STOCK. The Special Committee recognized the lack of an active trading market and the very limited liquidity of Mercury’s common stock. The Special Committee considered the effects of this factor on both the stockholders who own less than 501 shares of common stock and who will receive the cash consideration and those stockholders who will remain after the Transaction. With respect to the stockholders who will receive the cash consideration and cease to be stockholders, the Special Committee recognized that this Transaction presents such stockholders with an opportunity to liquidate their holdings at a price which represented a premium to the closing price of Mercury’s common stock on March 21, 2005, the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, without incurring brokerage commissions and other transaction costs. With respect to the stockholders who will remain after the Transaction, the Special Committee noted that the effect of this Transaction on their liquidity is mitigated by the limited liquidity they currently experience and that the shares will likely be quoted on the “pink sheets.” | ||
— | FUTURE COST SAVINGS. The Special Committee considered that both affiliated and unaffiliated stockholders remaining after the Transaction will benefit from the reduction of direct and indirect costs borne by Mercury to maintain its status as an SEC reporting company. Such a reduction will include, but not be limited to, the elimination of increased costs to comply with the additional requirements of SEC reporting companies imposed by Section 404 of the Sarbanes-Oxley Act. For a full discussion of the cost savings, see “Benefits of the Transaction — Benefits and Cost Savings of Termination as an SEC Reporting Company” on page 22. |
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– | INTERESTS OF THE UNAFFILIATED STOCKHOLDERS WHO WILL REMAIN. The Special Committee considered the fairness of the Transaction to the unaffiliated common and preferred stockholders who will remain stockholders of Mercury after the Transaction. The Special Committee reasoned that such stockholders would benefit from the cost savings associated with the elimination of expenses attributable to remaining an SEC reporting company and the time and attention currently required of management to fulfill such requirements. | ||
– | NO FIRM OFFERS. The Special Committee considered that, other than with respect to the sale of Mercury’s FBOs to Allied Capital on April 12, 2004, Mercury did not receive any firm offers, during the past two years, from any unaffiliated persons, for (i) the merger or consolidation of Mercury with or into another company, (ii) the sale or other transfer of all or any substantial part of the assets of Mercury; or (iii) a purchase of Mercury’s securities that would enable the holder to exercise control of Mercury. The Special Committee recognized that the sale of the FBOs to Allied Capital has no bearing on the present value of Mercury. |
– | the Special Committee was established with sole power to make the decision to recommend the Transaction, and the Special Committee’s membership consisted entirely of independent directors; and | ||
– | the Special Committee retained its own independent legal counsel; | ||
– | the Transaction is being effected in accordance with the applicable requirements of Delaware law; | ||
– | the Transaction is being submitted to a vote of Mercury’s stockholders and is subject to approval of a majority of the outstanding shares of common and preferred stock, voting as a single class; | ||
– | stockholders can increase, divide or otherwise adjust their existing holdings, prior to the effective date of the Transaction, so as either to retain some or all other their shares or to be cased-out with respect to some or all of their shares; and | ||
– | stockholders who are cashed-out would likely have the option to repurchase shares of Mercury in the over-the-counter markets with the cash obtained in the Transaction. |
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– | CURRENT AND HISTORICAL PRICES OF MERCURY’S COMMON STOCK. | ||
The Board and the Transaction Affiliates considered both the historical market prices and recent trading activity and current market prices of Mercury common stock. | |||
The Board and the Transaction Affiliates reviewed the high and low sales prices for the common stock from January 1, 2003 to March 21, 2005 and from March 21, 2004 to March 21, 2005, the latter period of which ranged from $3.08 to $8.45 per share. You should read the discussion under “Market for Common Stock and Related Stockholder Matters” on page 19 for more information about Mercury’s stock prices. On March 8, 2005, the day before the public announcement that the Special Committee was considering the Transaction, the closing price of the common stock was $4.49 per share. The closing price of Mercury common stock on March 21, 2005, the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, was $3.36 per share. The Board and the Transaction Affiliates noted that, as a positive factor, the cash payment of $4.00 per share payable to stockholders in lieu of fractional shares represents a premium of approximately 19% over the closing sales price of Mercury’s common stock of $3.36 on March 21, 2005, which was the last trading day before the public announcement that the Special Committee and the Board had approved the Transaction. In addition to stockholders receiving a premium to the trading price of Mercury’s common stock on any shares redeemed as a result of the reverse stock split, such stockholders will achieve liquidity without incurring brokerage commissions and other transaction costs. | |||
The Board and the Transaction Affiliates also noted that although the cash consideration represented a 53% discount to Mercury share price of $8.45 (the highest sales price since March 21, 2004) and a 34% discount to the last closing price of $6.05 one year before the last trading day prior to the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, such historical price data did not take account of the special dividend of $5.70 per share paid as of November 5, 2004 and therefore was of lesser relevance than more recent trading data and in light of the premiums that the cash consideration represents over the average closing sales price of Mercury’s common stock for the 10 trading days, 20 trading days, 30 trading days, and one-month trading periods immediately prior to the public announcement of the approval of the proposed Transaction by the Special Committee and the Board and over the last trading day immediately prior to such public announcement. | |||
– | GOING CONCERN VALUE. In determining the cash amount to be paid to cashed-out stockholders in the Transaction, the Board and the Transaction Affiliates considered the analyses presented in Imperial Capital’s report, without giving effect to any anticipated effects of the Transaction. In considering going concern value, the Board and the Transaction Affiliates considered multiples of EBITDA and revenue of comparable SEC reporting air cargo and fuel services companies and discounted cash flow valuations. | ||
– | Also, the Board and the Transaction Affiliates did not consider the amount per share that might be realized in a sale of all or substantially all of the stock or assets of Mercury, believing that consideration of such amount was inappropriate in the |
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context of a Transaction that would not result in a change in control of Mercury. In considering the going concern value of Mercury’s shares, the Board and the Transaction Affiliates adopted the analyses of Imperial Capital, which indicated a share price range of $2.95, $3.73, or $4.17 per share, as the mean per share implied equity values of Mercury’s common stock. See “Special Factors — Opinion of Imperial Capital, LLC” beginning on page 34. Accordingly, the Board and the Transaction Affiliates believe that the going concern analysis supports its determination that the Transaction is fair to stockholders. | |||
– | NET BOOK VALUE. As of December 31, 2004, the net book value per common share was $5.14, and the tangible net book value per common share (excluding intangibles) was $3.65. The Board and the Transaction Affiliates noted that book value per common share is an historical accounting value which may be more or less than the net market value of Mercury’s assets after payment of its liabilities, and a liquidation would not necessarily produce a higher than book value per common share. | ||
– | LIQUIDATION VALUE. Although no valuation of total assets was undertaken, the Board and the Transaction Affiliates believe that a liquidation or other Transaction designed to monetize Mercury’s assets would likely result in recovery of a price for Mercury’s tangible assets that is substantially less than tangible book value. The Board and the Transaction Affiliates considered that Mercury’s non-cash assets consist primarily of accounts receivable and leasehold improvements. The Board and the Transaction Affiliates believe that the sale of accounts receivable would not sufficiently offset indebtedness, and that the sale of leasehold improvements would not be practicable, given the difficulty in transferring the underlying leaseholds, and in any event would not offset the expense of satisfying lease and other contractual obligations in a liquidation. In view of these factors, the Board and the Transaction Affiliates agreed that it is highly unlikely that liquidation would generate net proceeds in excess of $4.00 per share, although the aggregate amount received over a period of time would be greater. | ||
– | EARNINGS. The Board and the Transaction Affiliates reviewed historic earnings of Mercury for the previous three years and the relevance of historic earnings to future prospects, and factored this review into the going concern analysis. For the three years ended June 30, 2004, 2003, and 2002, Mercury reported net income of $615,000, $(2,798,000) and $4,517,000, respectively. The Board and the Transaction Affiliates believe the earnings analysis support its determination that the Transaction is fair to stockholders. | ||
– | PRICES AT WHICH MERCURY HAS REPURCHASED SHARES. The Board and the Transaction Affiliates took account of the fact that Mercury had purchased an aggregate of (i) 343,600 shares at $10.44 per share in the fourth quarter of 2003 in a transaction with Hambro; (ii) 14,500 shares at $6.17 per share in the second quarter of 2004; (iii) 150,000 shares at $6.00 per share in the third quarter of 2004 in a transaction with Murdock; (iv) 3,000 other shares at $6.55 per share in the third quarter of 2004 in other transactions; and (v) 8,750 shares at $4.90 per share in the fourth quarter of 2004. The Board and the Transaction Affiliates believe these repurchases support its decision that the Transaction is fair to the stockholders, in that: (i) after adjusting for the $5.70 per share special dividend, the repurchase from Hambro was at $4.74 per share, which is close to the price of $4.00 but also additional consideration was given by Hambro and the transaction with Hambro occurred almost eighteen months ago; (ii) after adjusting for the $5.70 per share special dividend, the purchase of 14,500 shares in the second quarter of 2004 was equivalent to a price of $0.47 per share; (iii) after adjusting for the $5.70 per share special dividend, the purchase of 150,000 shares in the Transaction with Murdock in the third quarter of 2004 was equivalent to a price of $0.30 per share; (iv) after adjusting for the $5.70 per share special dividend, the purchase of 3,000 additional shares in the third quarter of 2004 was equivalent to a price of $0.85 per share; and (v) the purchase of 8,750 shares in the fourth quarter of 2004, although occurring after the special dividend, was not significantly higher than the price of $4.00 in the Transaction, and this represented a purchase by Mercury from a former executive officer upon his termination of employment, and therefore is not strictly comparable to the proposed Transaction. The Board and the Transaction Affiliates concluded that these stock purchases by Mercury support the price of $4.00 per share to be paid in the Transaction. The Board and the Transaction Affiliates also took account of the fact that certain affiliates of the Company had purchased an aggregate of 419,807 shares at an average price of $3.15 per share in the fourth quarter of 2004. | ||
– | OPINION OF THE FINANCIAL ADVISOR. The Board and the Transaction Affiliates considered the opinion of Imperial Capital rendered to the Special Committee on March 21, 2005, to the effect that, as of the date of such opinion and based upon and subject to certain matters stated therein, the $4.00 per share in cash to be paid to those stockholders of Mercury receiving such consideration, other than affiliates of Mercury, as to whom Imperial Capital expressed no view, is fair, from a financial point of view, to such stockholders. For more information about the opinion you should read the discussion below under “Opinion of Imperial Capital, LLC” beginning on page 34 and a copy of the opinion of Imperial Capital attached as Appendix B to this proxy statement. |
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– | PRESENTATION OF THE SPECIAL COMMITTEE’S FINANCIAL ADVISOR. The Board and the Transaction Affiliates also considered the various financial information, valuation analyses and other factors set forth in the written presentations delivered to the Special Committee at the meetings of the Special Committee on February 25, 2005, March 1, 2005, March 3, 2005, March 8, 2005, March 10, 2005, March 14, 2005 and March 21, 2005. | ||
– | LIMITED LIQUIDITY FOR MERCURY COMMON STOCK. The Board and the Transaction Affiliates recognized the lack of an active trading market and the very limited liquidity of Mercury’s common stock. The Board and the Transaction Affiliates considered the effects of this factor on both the stockholders who own less than 501 shares of common stock and who will receive the cash consideration and those stockholders who will remain after the Transaction. With respect to the stockholders who will receive the cash consideration and cease to be stockholders, the Board and the Transaction Affiliates recognized that this Transaction presents such stockholders with an opportunity to liquidate their holdings at a price which represented a premium to the closing price of Mercury’s common stock on March 21, 2005, the last trading day before the public announcement of the approval of the proposed Transaction by the Special Committee and the Board, without incurring brokerage commissions and other transaction costs. With respect to the stockholders who will remain after the Transaction, the Board and the Transaction Affiliates noted that the effect of this Transaction on their liquidity is mitigated by the limited liquidity they currently experience and that the shares will likely be quoted on the “pink sheets.” | ||
– | FUTURE COST SAVINGS. The Board and the Transaction Affiliates considered that both affiliated and unaffiliated stockholders remaining after the Transaction will benefit from the reduction of direct and indirect costs borne by Mercury to maintain its status as an SEC reporting company. Such a reduction will include, but not be limited to, the elimination of increased costs to comply with the additional requirements of SEC reporting companies imposed by Section 404 of the Sarbanes-Oxley Act. For a full discussion of the cost savings, see “Benefits of the Transaction — Benefits and Cost Savings of Termination as an SEC Reporting Company” on page 22. | ||
– | INTERESTS OF THE UNAFFILIATED STOCKHOLDERS WHO WILL REMAIN. The Board and the Transaction Affiliates considered the fairness of the Transaction to the unaffiliated common and preferred stockholders who will remain stockholders of Mercury after the Transaction. The Board and the Transaction Affiliates reasoned that that such stockholders would benefit from the cost savings associated with the elimination of expenses attributable to remaining an SEC reporting company and the time and attention currently required of management to fulfill such requirements. | ||
– | NO FIRM OFFERS. The Board of Directors and the Transaction Affiliates considered that, other than with respect to the sale of Mercury’s FBOs to Allied Capital on April 12, 2004, Mercury did not receive any firm offers, during the past two years, by any unaffiliated persons, for (i) the merger or consolidation of Mercury with or into another company, (ii) the sale or other transfer of all or any substantial part of the assets of Mercury; or (iii) a purchase of Mercury’s securities that would enable the holder to exercise control of Mercury. |
– | UNAFFILIATED REPRESENTATIVES; NON-EMPLOYEE SPECIAL COMMITTEE. No unaffiliated representative was retained to act solely on behalf of the unaffiliated stockholders in the Transaction to negotiate the terms or prepare a report on behalf of the unaffiliated stockholders. The Board determined that an unaffiliated stockholder representative was not necessary to ensure the procedural and substantive fairness of the Transaction because it believed there was sufficient representation in the decision-making at the Special Committee and Board levels to protect the interests of unaffiliated stockholders. The Board also noted that the proposed Transaction would increase ownership in Mercury by the officers and directors as a group of less than three percent. In addition, the Board believed that the expense of separate representatives and advisors would have been cost prohibitive. With respect to unaffiliated stockholders’ access to Mercury’s corporate files, the Board determined that this proxy statement, together with Mercury’s other filings with the SEC, provide adequate information for unaffiliated stockholders to make an informed decision with respect to the Transaction. | ||
– | APPROVAL OF MAJORITY OF UNAFFILIATED HOLDERS IS NOT REQUIRED. The Transaction is not structured so that approval of at least a majority of unaffiliated stockholders is required. The Board determined that any such requirement would prevent affiliated stockholders from participating in considering the proposed Transaction. As affiliated stockholders beneficially own approximately 42.8% of Mercury as of March 1, 2005, and the Transaction will not result in any change in control of Mercury, the Board did not believe the participation of affiliated stockholders in voting upon the Transaction was unfair to non-affiliated stockholders. |
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– | the Special Committee was established with sole power to make the decision to recommend the Transaction, and the Special Committee’s membership consisted entirely of independent directors; | ||
– | the Special Committee retained its own independent legal counsel; | ||
– | the Transaction is being effected in accordance with the applicable requirements of Delaware law; | ||
– | the Transaction is being submitted to a vote of Mercury stockholders and is subject to approval of a majority of the outstanding shares of common and preferred stock; | ||
– | stockholders can increase, divide or otherwise adjust their existing holdings, prior to the effective date of the Transaction, so as either to retain some or all of their shares or to be cashed-out with respect to some or all of their shares; and | ||
– | stockholders who are cashed-out would likely have the option to repurchase shares of Mercury in the over-the-counter markets with the cash obtained in the Transaction. |
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– | each executive officer and each member of the Board of Directors, except Kent Rosenthal, holds shares or vested options in excess of 501 shares and will, therefore, retain shares of common stock or options to purchase common stock after the Transaction; and | ||
– | as a result of the Transaction, the stockholders who own of record on the record date, more shares than 501 shares, including Mercury’s executive officers and directors, will increase their percentage ownership interest in Mercury as a result of the Transaction. For example, assuming the Transaction is implemented and based on information and estimates of record ownership and shares outstanding and other ownership information and assumptions as of May 1, 2005 Mercury’s officers and directors, including the Transaction Affiliates, who currently own 42.8% of Mercury’s common and preferred stock (including options currently exercisable) will increase their percentage ownership in Mercury from 42.8% to 45.1%. |
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1. | reviewed the draft proxy statement and related documents outlining the Transaction; | ||
2. | analyzed certain publicly available information that Imperial Capital believes to be relevant to its analysis, including the Company’s annual report on Form 10-K for the fiscal year ended (“FYE”) June 30, 2004 and the Company’s quarterly reports on Form 10-Q for the quarters ended September 30, 2004 and December 31, 2004; | ||
3. | reviewed certain information including financial forecasts relating to the business, earnings and cash flow of the Company, furnished to Imperial Capital by senior management of Mercury; | ||
4. | reviewed the Company’s projections for FYE June 30, 2004 through 2008 furnished to Imperial Capital by senior management of Mercury; | ||
5. | reviewed certain publicly available business and financial information relating to Mercury that Imperial Capital deemed to be relevant; | ||
6. | conducted discussions with members of senior management of Mercury concerning the matters described in clauses (1) through (5) above, as well as the prospects and strategic objectives of Mercury; | ||
7. | reviewed public information with respect to certain other companies with financial profiles which Imperial Capital deemed to be relevant. |
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Average | Average | |||||||
Price | Volume | |||||||
Previous 10 Trading Days | $ | 3.56 | 19,830 | |||||
Previous 30 Trading Days | $ | 3.58 | 9,093 | |||||
Previous 60 Trading Days | $ | 3.81 | 9,350 | |||||
Previous 90 Trading Days | $ | 3.91 | 18,089 | |||||
52-Week High | $ | 8.45 | (a) | 226,300 | ||||
52-Week Low | $ | 3.08 | (b) | 0 |
(a) | Occurred on November 5, 2004, the day the special dividend was paid. | |
(b) | Occurred on November 8, 2004, the first trading day after the special dividend was paid. |
• | Air T, Inc. (NasdaqSC: AIRT) | ||
• | AirNet Systems, Inc. (NYSE: ANS) | ||
• | AutoInfo (OTCBB: AUTO) | ||
• | Streicher Mobile Fueling, Inc. (NASDAQ: FUEL) | ||
• | World Fuel Services Corp. (NYSE: INT) |
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Transaction Details | Transaction Multiples | |||||||||||||||||||||||
Date | Enterprise | Target | Target | EV/ | EV/ | |||||||||||||||||||
Acquiror | Target | Announced | Value | Revenue | EBITDA | Revenues | EBITDA | |||||||||||||||||
Express One | Central Florida Air | |||||||||||||||||||||||
International, Inc. | Maintenance | 07/21/04 | NA | NA | NA | NM | NM | |||||||||||||||||
Alimentation Couche-Tard, Inc. | Circle K Corporation | 10/06/03 | 811.7 | 3,900.0 | NA | 0.2 | NM | |||||||||||||||||
The Pantry, Inc. | Golden Gallon, Inc. | 08/25/03 | 187.0 | 387.0 | NA | 0.5 | NM | |||||||||||||||||
Transforce Income Fund | Canadian Freightways Limited | 08/15/03 | 60.7 | 150.7 | NA | 0.4 | NM | |||||||||||||||||
The Carlyle Group | Air Cargo, Inc. Williams Lynxs Alaska | 08/11/03 | NA | NA | NA | NM | NM | |||||||||||||||||
Chevy Chase Trust Co. | CargPort | 05/31/03 | NA | NA | NA | NM | NM | |||||||||||||||||
DHL Worldwide Express | Airborne, Inc. | 03/25/03 | 1,410.0 | 3,343.7 | 253.1 | 0.4 | 5.6 | |||||||||||||||||
Management of Landair Corp. | Landair Corp. | 10/11/02 | 101.7 | 102.9 | 19.5 | 1.0 | 5.2 | |||||||||||||||||
United Defense Industries, Inc. | United States Marine Repair, Inc. | 05/28/02 | 417.6 | 431.8 | 45.4 | 1.0 | 9.2 | |||||||||||||||||
Pacific CMA, Inc. | Airgate International Corp. | 03/19/02 | 3.4 | 29.1 | 0.6 | 0.1 | 5.6 | |||||||||||||||||
Union Pacific Corp. | Motor Cargo Industries | 11/15/01 | 96.9 | 130.9 | 17.2 | 0.7 | 5.6 | |||||||||||||||||
Vinci SA | Worldwide Flight Services, Inc. | 09/10/01 | 285.0 | 348.0 | NA | 0.8 | NM | |||||||||||||||||
Avfuel Corporation | Texaco General Aviation Business | 09/07/01 | NA | NA | NA | NM | NM | |||||||||||||||||
BBA Group / Signature | Aircraft Services International | 07/11/01 | 137.9 | 162.0 | NA | 0.9 | NM | |||||||||||||||||
United Parcel Service | Fritz Companies, Inc. | 01/10/01 | 495.8 | 621.8 | 54.4 | 0.8 | 9.1 | |||||||||||||||||
World Fuel Services Corp. | Page Avjet Fuel Co LLC | 01/03/01 | NA | NA | NA | NM | NM | |||||||||||||||||
EGL, Inc. | Circle Int’l Group, Inc. | 07/03/00 | 518.1 | 832.3 | 49.2 | 0.6 | 10.5 | |||||||||||||||||
High | 10x | 10.5x | ||||||||||||||||||||||
Median | 0.7 | 5.6 | ||||||||||||||||||||||
Mean | 0.6 | 7.3 | ||||||||||||||||||||||
Low | 0.1 | 5.2 |
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– | REDUCTION IN THE NUMBER OF STOCKHOLDERS AND THE NUMBER OF OUTSTANDING SHARES. Mercury believes that the Transaction will reduce the number of record common stockholders from approximately 331 to approximately 33. In calculating this number, Mercury assumes that, in addition to the approximately 30,202 common shares held by stockholders of record with fewer than 501 shares in their account, beneficial owners of approximately 162,411 additional shares also will receive cash for their shares in the Transaction. Accordingly the number of outstanding shares of common stock will decrease from 3,056,355 shares, as of June 30, 2005, to approximately 2,863,742 shares. In addition, Mercury believes that the number of beneficial owners of its common stock will decrease from approximately 2,039 to approximately 561 as a result of the Transaction. | ||
– | DECREASE IN BOOK VALUE PER SHARE. As a result of the approximately 192,613 pre-split shares of common stock expected to be cashed-out at $4.00 per share for a total cost (including expenses on an after tax basis) of $1,092,000: |
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• | aggregate stockholders’ equity of Mercury as of March 31, 2005, will be reduced from approximately $13,869,000 on a historical basis to approximately $12,786,000 on a pro forma basis; and | ||
• | the book value per share of common stock as of March 31, 2005, will be reduced from $4.54 per share on a historical basis to approximately $4.46 per share on a pro forma basis. |
– | TERMINATION OF EXCHANGE ACT REGISTRATION. Mercury’s common stock is currently registered under the Exchange Act. Mercury plans to file a Form 15 with the SEC following the Transaction to terminate this registration if its common stock is no longer held by 300 or more stockholders of record. Termination of registration of Mercury’s common stock under the Exchange Act would substantially reduce the information Mercury is required to furnish to its stockholders and to the SEC. It would also make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, Section 16(a) reporting for officers, directors, and 10% stockholders, proxy statement disclosure in connection with stockholder meetings, and the related requirement of an annual report to stockholders, no longer applicable. Mercury intends to apply for such termination as soon as practicable following the Transaction. However, Mercury currently intends to provide reports as to its financial condition and results of operation which Mercury expects may be accessed atwww.pinksheets.com. | ||
– | EFFECT ON MARKET FOR COMMON STOCK. Mercury’s common stock is currently listed on the American Stock Exchange. Mercury expects that after the Transaction, its common stock will be delisted from the American Stock Exchange. This delisting could further reduce the liquidity of the common stock. Any trading in Mercury’s common stock after the Transaction and deregistration of the common stock will only occur in the over-the-counter market or in privately negotiated sales, and Mercury’s common stock will likely only be quoted in the “pink sheets.” | ||
– | FINANCIAL EFFECTS OF THE TRANSACTION. Mercury expects that it will use approximately $1,271,000 of cash, or $1,092,000 net of taxes, to complete the Transaction, including Transaction costs, and that this use of cash will not have any materially adverse effect on Mercury’s liquidity, results of operation, or cash flow. Because Mercury does not know the exact amount of shares that will be cashed-out, it can only estimate the total amount to be paid to stockholders in the Transaction. Mercury has sufficient cash and short term cash equivalents, or credit availability, to fund the Transaction. See also “ Source of Funds and Financing of the Transaction.” | ||
– | EFFECTS ON THE BUSINESS OF MERCURY. Mercury expects its business and operations to continue as they are currently being conducted and, except as disclosed in this proxy statement, the Transaction is not expected to have any effect upon the conduct of such business. |
• | receive $4.00 in cash, without interest, per share; | ||
• | no longer have any equity interest in Mercury and, therefore, will not participate in its future potential earnings or growth, if any; and |
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• | be required to pay federal and, if applicable, state and local income taxes on the cash amount received in the Transaction or recognize loss for tax purposes depending upon the adjusted tax basis of their stock. |
– | REMAINING AFFILIATED STOCKHOLDERS. Potential effects on affiliated stockholders who remain as stockholders after the Transaction include: |
• | Reduced Reporting Requirements for Officers and Directors. The directors and executive officers will no longer be subject to the reporting and short-swing profit provisions under the Exchange Act with respect to changes in their beneficial ownership of Mercury common stock. | ||
• | Tender Offer Transactions No Longer Regulated. After a 90 day waiting period, tender offer transactions by issuers and affiliates will no longer be regulated. | ||
• | Decreased Book Value Per Share. The book value per share of common stock as of March 31, 2005, will be decreased from $4.54 per share on a historical basis to approximately $4.46 per share on a pro forma basis. | ||
• | Decreased Liquidity. The liquidity of the shares of common stock held by stockholders may be further reduced by the Transaction due to the expected termination of the registration of the common stock under the Exchange Act and the delisting of the common stock from the American Stock Exchange. Any trading in Mercury’s common stock after the Transaction will only occur in the over-the-counter markets and in privately negotiated sales, and Mercury’s common stock will likely only be quoted in the “pink sheets.” There can be no assurance of any market for Mercury stock after the Transaction. |
Net Income and Net | Net Income and | |||||||||||||||
Book Value and | Income Per Share | Net Income Per | ||||||||||||||
Percentage | Book Value Per | for the Nine Months | Share for the | |||||||||||||
Ownership of | Share as of | Ended | Fiscal Year Ended | |||||||||||||
Mercury (1) | March 31, 2005 (2) | March 31, 2005 (2) | June 30, 2004 (2) | |||||||||||||
(all dollar amounts are in thousands, except per share amounts) | ||||||||||||||||
$ | 12,786,000 | $ | (2,073,000 | ) | $ | (5,154,000 | ) | |||||||||
Historical Totals for Mercury | $ | 4.46 | $ | (0.77 | ) | $ | (1.80 | ) | ||||||||
Interest of the Transaction Affiliates | $ | 4,820,322 | $ | (782,000 | ) | $ | (1,943,058 | ) | ||||||||
Prior to the Transaction: | 37.7 | % | $ | 1.68 | $ | (0.29 | ) | $ | (0.67 | ) | ||||||
Interest of Transaction Affiliates | $ | 5,088,828 | $ | (825,000 | ) | $ | (2,051,292 | ) | ||||||||
After the Transaction: | 39.8 | % | $ | 1.76 | $ | (0.31 | ) | $ | (0.72 | ) |
(1) | The percentage ownership of Mercury shown for the Transaction Affiliates represents their beneficial ownership of Total Voting Power as set forth in the table under “Security Ownership of Certain Beneficial Owners” beginning on page 58. No shares held by the Transaction Affiliates will be cashed out in the Transaction, except for 382 shares owned by Mr. Czyzyk’s wife as custodian for their children. | |
(2) | Book value is based on the pro forma balance sheet as of March 31, 2005, as if the Transaction had occurred on March 31, 2005, and net income information is based on the pro forma income statement for the fiscal period, as if the Transaction had occurred at the beginning of the respective fiscal periods presented. See “Financial Information—Pro Forma Consolidated Financial Statements (unaudited)” beginning on page 55. | |
See “—Interests of Mercury’s Directors and Executive Officers in the Transaction” beginning on page 34. |
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– | CASHED-OUT UNAFFILIATED STOCKHOLDERS. Unaffiliated Stockholders owning fewer than 501 common shares immediately prior to the effective time of the Transaction will: |
• | receive $4.00 in cash, without interest, per share; | ||
• | no longer have any equity interest in Mercury and, therefore, will not participate in its future potential earnings or growth, if any; and | ||
• | be required to pay federal and, if applicable, state and local income taxes on the cash amount received in the Transaction or recognize loss for tax purposes depending upon the adjusted tax basis of their stock. |
– | REMAINING UNAFFILIATED STOCKHOLDERS. Potential effects on unaffiliated Mercury stockholders who remain as stockholders after the Transaction include: |
• | Decreased Access to Information. If the Transaction is effected, Mercury intends to terminate the registration of its common stock under the Exchange Act. As a result, Mercury will no longer be subject to the periodic reporting requirements and the proxy rules of the Exchange Act, although Mercury currently intends to continue to provide reports as to its financial condition and results of operation which Mercury expects may be accessed at www.pinksheets.com. Further, executive officers, directors and other affiliates, along with persons acquiring 5% of Mercury’s common stock, would no longer be subject to many of the reporting requirements and restrictions of the Exchange Act, including, without limitation, the reporting and short-swing profit provisions of Section 16 of the Exchange Act. | ||
• | No Regulation of Tender Offer Transactions. Tender offers for the beneficial ownership of more than 5% of Mercury’s common stock, and tender offer transactions by issuers and affiliates, will no longer be regulated. | ||
• | Decreased Liquidity. The liquidity of the shares of common stock held by stockholders may be further reduced by the Transaction due to the expected termination of the registration of the common stock under the Exchange Act and the delisting of the common stock from the American Stock Exchange. Any trading in Mercury’s common stock after the Transaction will only occur in the over-the-counter markets and in privately negotiated sales, and Mercury common stock will likely only be quoted in the “pink sheets.” There can be no assurance of any market for Mercury stock after the Transaction. | ||
• | Decreased Book Value Per Share. The book value per share of common stock as of March 31, 2005, will be decreased from $4.54 per share on a historical basis to approximately $4.46 per share on a pro forma basis. |
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– | Mercury has available funds necessary to pay for the fractional shares and costs resulting from the Transaction; | ||
– | Mercury has sufficient cash reserves to continue to operate its business; | ||
– | no event has occurred or is likely to arise that might have a materially adverse effect on Mercury; and | ||
– | the Transaction will reduce the number of common stockholders below 300. |
Legal fees and expenses | $ | 200,000 | ||
Postage and printing | $ | 75,000 | ||
Miscellaneous Costs (1) | $ | 14,000 | ||
Special Committee fees and expenses: | ||||
Legal fees and expenses | $ | 81,000 | ||
Financial advisor and fairness opinion fees and expenses | $ | 90,000 | ||
Special Committee fees and expenses | $ | 25,000 | ||
Board fees and expenses | $ | 10,000 | ||
Filing fees | $ | 5,000 | ||
Total (before taxes) | $ | 500,000 | ||
Total (after taxes) | $ | 322,000 | ||
(1) | Includes proxy solicitation fees not to exceed $10,000, plus out-of-pocket expenses. |
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– | a citizen or resident of the United States; | ||
– | a corporation or an entity taxable as a corporation created or organized under U.S. law (federal or state); | ||
– | an estate the income of which is subject to federal income taxation regardless of its sources; | ||
– | a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or | ||
– | any other person whose worldwide income and gain is otherwise subject to federal income taxation on a net basis. |
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– | is not essentially equivalent to a dividend with respect to you as determined under Section 302(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”); | ||
– | is a substantially disproportionate redemption of stock with respect to you as determined under Section 302(b)(2) of the Code; or | ||
– | results in the complete termination of your interest in Mercury under Section 302(b)(3) of the Code (which would be possible if you ceased to own any shares directly and if the only shares attributed to you were from a family member and you properly waive family attribution). |
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HYPOTHETICAL SCENARIO | RESULT | |
Mr. Smith is a registered stockholder who holds 50 shares of Mercury’s common stock of record in his name at the effective time of the Transaction. Mr. Smith holds no other shares. | Instead of receiving fractional shares of common stock immediately after the reverse stock split, Mr. Smith will receive cash in the amount of $4.00 for each of the 50 shares of Mercury’s common stock held prior to the reverse stock split. (Note: If Mr. Smith wants to continue to invest in Mercury, he can buy at least 451 more shares of Mercury’s common stock (with such shares held of record in his name so that it is readily apparent that he owns more than 500 shares). Mr. Smith would have to act far enough in advance of the effective time of the Transaction so that the purchase is completed and registered on the books of Mercury before the effective time.) | |
HYPOTHETICAL SCENARIO | RESULT | |
Ms. Jones holds 100 shares of Mercury’s common stock in a brokerage account at the effective time of the Transaction. Ms. Jones holds no other shares. | Mercury intends to treat stockholders holding common stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their own names. Nominees will be instructed to effect the Transaction for their beneficial holders. Nominees may have different procedures, however, and stockholders holding common stock in street name should contact their nominees. Ms. Jones will receive cash in the amount of $4.00 for each of the 100 shares of Mercury’s common stock held prior to the reverse stock split. | |
HYPOTHETICAL SCENARIO | RESULT | |
Mr. Williams holds 475 shares of Mercury’s common stock of record in his name and 75 shares in a brokerage account at the effective time of the Transaction. Mr. Williams holds no other shares. | Mercury will presume that all of the shares are held by a holder of fewer than 501 shares and Mr. Williams will receive cash in the amount of $4.00 for each of the 550 shares of Mercury’s common stock held prior to the reverse stock split. (Note: If Mr. Williams wants to continue to hold Mercury’s shares, he can transfer at least 26 shares out of his brokerage account so that they are also held of record in his name. Mr. Williams would have to act far enough in advance of the effective time of the Transaction so that the purchase is complete and registered on the books of Mercury before the effective time.) | |
HYPOTHETICAL SCENARIO | RESULT | |
Ms. Washington holds 1,000 shares of Mercury’s common stock either in her name or in a brokerage account at the effective time of the Transaction. Ms. Washington holds no other shares. | Ms. Washington will hold 1,000 shares of Mercury’s common stock after the Transaction. |
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As of and for the | ||||||||
As of and for the | Year Ended | |||||||
Months Ended | June 30, 2004 | |||||||
March 31, 2005 | (pro forma amounts | |||||||
(Shares in thousands except per share amounts) | (unaudited) | are unaudited) | ||||||
Mercury — Historical | ||||||||
Net income per common share from continuing operations: | ||||||||
Basic | $ | (0.71 | ) | $ | (1.67 | ) | ||
Diluted | $ | (0.71 | ) | $ | (1.67 | ) | ||
Book value per common share (1) | $ | 4.54 | $ | 10.79 | ||||
Net tangle book value per share | $ | 3.05 | $ | 9.25 | ||||
Ratio of earnings to fixed charges | $ | 0.81 | $ | 1.00 | ||||
Dividends per common share | $ | 5.70 | $ | 0.00 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 2,900,631 | 3,059,200 | ||||||
Diluted | 2,900,631 | 3,059,200 | ||||||
Mercury—Pro Forma | ||||||||
Net income per common share from continuing operations (2): | ||||||||
Basic | $ | (0.77 | ) | $ | (1.80 | ) | ||
Diluted | $ | (0.77 | ) | $ | (1.80 | ) | ||
Book value per common share (3) | $ | 4.46 | $ | 11.16 | ||||
Net tangible book value per share | $ | 2.88 | $ | 9.50 | ||||
Dividends per common share | $ | 5.70 | $ | 0.00 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 2,708,018 | 2,866,587 | ||||||
Diluted | 2,708,018 | 2,866,587 |
(1) | Historical book value per share of common stock is computed by dividing stockholders’ equity by the number of basic common shares outstanding at the end of the period. | |
(2) | Basic and diluted pro forma net income per share amounts are computed by dividing pro forma net income by the historical weighted average number of basic shares and diluted shares outstanding for the period, minus the shares of common stock assumed to be cashed out in the Transaction. | |
(3) | Pro forma book value per share of common stock is computed by dividing pro forma stockholders’ equity by the number of basic common shares outstanding at the end of the respective periods, minus the number of shares of common stock assumed to be cashed out in the Transaction. |
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HIGH | LOW | |||||||
Calendar 2005 | ||||||||
Third quarter (through August 1, 2005) | $ | 3.89 | $ | 3.41 | ||||
Second quarter | 3.99 | 3.32 | ||||||
First quarter | 4.80 | 3.25 | ||||||
Calendar 2004 | ||||||||
Fourth quarter (November 6, 2004 through December 31, 2004) | $ | 5.80 | $ | 3.08 | ||||
Fourth quarter (through November 5, 2004) | 8.45 | 5.02 | ||||||
Third quarter | 5.56 | 4.95 | ||||||
Second quarter | 7.19 | 4.58 | ||||||
First quarter | 7.19 | 5.00 | ||||||
Calendar 2003 | ||||||||
Fourth quarter | $ | 6.85 | $ | 4.49 | ||||
Third quarter | 7.30 | 6.20 | ||||||
Second quarter | 7.16 | 3.20 | ||||||
First quarter | 3.70 | 3.20 |
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NUMBER OF | AVERAGE | AVERAGE | ||||||||||
SHARES | PRICES PAID | PRICES PAID | ||||||||||
CALENDAR PERIOD | PURCHASED | (ACTUAL) | (ADJUSTED) | |||||||||
2005 — Third Quarter (1) | ||||||||||||
2005 — Second Quarter | 0 | n.a. | n.a. | |||||||||
2005 — First Quarter | 3,750 | (2) | 4.90. | 4.90 | (3) | |||||||
2004 — Fourth Quarter | 8,750 | (2) | $ | 4.90 | $ | 4.90 | (3) | |||||
2004 — Third Quarter | 153,000 | (4) | $ | 6.01 | $ | 0.31 | (5) | |||||
2004 — Second Quarter | 14,500 | $ | 6.17 | $ | 0.47 | (5) | ||||||
2004 — First Quarter | 0 | n.a. | n.a. | |||||||||
2003 — Fourth Quarter | 343,600 | (6) | $ | 10.44 | (7) | $ | 4.74 | |||||
2003 — Third Quarter | 0 | n.a. | n.a. | |||||||||
2003 — Second Quarter | 0 | n.a. | n.a. | |||||||||
2003 — First Quarter | 0 | n.a. | n.a. |
(1) | Through August 1, 2005. | |
(2) | Purchased by Mercury from former executive officers upon their termination of employment. | |
(3) | Purchased subsequent to November 5, 2004, and therefore not adjusted. | |
(4) | Mercury purchased 150,000 shares on July 16, 2004, pursuant to a settlement agreement with David H. Murdock and related parties (collectively “Murdock”). The shares were purchased at $6.00 per share. In connection with the settlement agreement, Mercury and Murdock agreed to enter into a certain mutual release of claims, and Mercury agreed to pay to Murdock $525,000 representing all costs, fees and expenses incurred by Murdock in connection with the settlement agreement and due diligence investigation of Mercury’s business and in consideration for Murdock’s execution of a mutual release of claims. Mercury also purchased 3,000 shares during the quarter at $6.55 per share from a former executive officer upon his termination of employment. | |
(5) | Adjusted to account for a $5.70 per share cash dividend paid to stockholders as of November 5, 2004. | |
(6) | Represents number of shares purchased by Mercury from J O Hambro and certain of its affiliates and private clients (“Hambro”) on December 15, 2003 pursuant to a settlement agreement with Hambro. | |
(7) | Represents principal amount of three promissory notes issued to Hambro pursuant to the settlement agreement for an aggregate principal amount of $3,586,000, divided by the number of shares purchased by Mercury from Hambro. The $3,586,000 includes consideration paid by Mercury for the shares purchased and also for the following: (i) Mercury’s agreement not to institute certain litigation against Hambro, (ii) Mercury’s agreement to dismiss the litigation against Hambro, (iii) the release of certain claims by Hambro, and (iv) reimbursement of Hambro for certain costs, fees and expenses. The per share amount in the table assumes the payment was exclusively in consideration for the Mercury shares. |
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NUMBER OF | AVERAGE | |||||||
SHARES | PRICE PAID | |||||||
CALENDAR PERIOD | PURCHASED | (ACTUAL) | ||||||
2005 – Third Quarter (1) | 0 | n.a. | ||||||
2005 — Second Quarter | 0 | n.a. | ||||||
2005 — First Quarter | 0 | n.a. | ||||||
2004 — Fourth Quarter | 419,807 | (2) | $ | 3.15 | (3) | |||
2004 — Third Quarter | 0 | n.a. | ||||||
2004 — Second Quarter | 0 | n.a. | ||||||
2004 — First Quarter | 0 | n.a. | ||||||
2003 — Fourth Quarter | 0 | n.a. | ||||||
2003 — Third Quarter | 0 | n.a. | ||||||
2003 — Second Quarter | 0 | n.a. | ||||||
2003 — First Quarter | 0 | n.a. |
(1) | Through August 1, 2005. | |
(2) | Consists of the following purchases by CK Partners: (i) 192,400 shares purchased on November 23, 2004, at $3.20 per share; and (ii) 226,407 shares purchased on November 30, 2004 at $3.10 per share, and a purchase of 1,000 shares on December 2, 2004 at $5.87 per share, by Mr. Feracota. | |
(3) | Shares acquired subsequent to the special dividend of $5.70 per share which was paid to stockholders on November 5, 2004, and therefore not adjusted. |
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1. | The proposal to amend the Certificate of Incorporation to effect the Reverse Stock Split is subject to the approval of the affirmative vote of holders of a majority of the outstanding shares of our common stock and preferred stock, counted as a single class. | ||
2. | The proposal to amend the Certificate of Incorporation to effect the Forward Stock Split is subject to the approval of the affirmative vote of holders of a majority of the outstanding shares of our common stock and preferred stock, counted as a single class. | ||
3. | Approval of granting the board of directors with discretionary authority to adjourn the Annual Meeting requires the affirmative vote of a majority of the shares of common and preferred stock voting as a single class. |
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– | stockholders holding fewer than 501 shares of Mercury common stock immediately prior to the effective time, whether record shares (as defined below) or street shares (as defined below), will receive cash equal to $4.00 per share, without interest, and such shares will be cancelled; | ||
– | all outstanding shares of Mercury common stock other than those described above will remain outstanding with all rights, privileges, and powers existing immediately before the Transaction; |
– | the term “record shares” means shares of Mercury stock, other than street shares, and any record share shall be deemed to be held by the registered holder thereof as reflected on the books of Mercury; and | ||
– | the term “street shares” means shares of Mercury stock held of record in street name, and any street share shall be deemed to be held by the beneficial owner thereof as reflected on the books of the nominee holder thereof. |
– | make such inquiries, whether of any stockholder(s) or otherwise, as it may deem appropriate for purposes of effecting the Transaction; and | ||
– | resolve and determine, in its sole discretion, all ambiguities, questions of fact and interpretive and other matters relating to such provisions, including, without limitation, any questions as to the number of shares held by any holder immediately prior to the effective time. All such determinations by Mercury shall be final and binding on all parties, and no person or entity shall have any recourse against Mercury or any other person or entity with respect thereto. |
– | presume that any shares of Mercury common stock held in a discrete account (whether record or beneficial) are held by a person distinct from any other person, notwithstanding that the registered or beneficial holder of a separate discrete account has the same or a similar name as the holder of a separate discrete account; and | ||
– | aggregate the shares held (whether of record or beneficially) by any person or persons that Mercury determines to constitute a single holder for purposes of determining the number of shares held by such holder. |
– | In any case where the records of security holders have not been maintained in accordance with accepted practice, any additional person who would be identified as such an owner on such records if they had been maintained in accordance with accepted practice shall be included as a holder of record. |
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– | Securities identified as held of record by a corporation, a partnership, a trust (whether or not the trustees are named), or other organization shall be included as so held by one person. | ||
– | Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate, or account shall be included as held of record by one person. | ||
– | Securities held by two or more persons as co-owners shall be included as held by one person. | ||
– | Securities registered in substantially similar names where the issuer has reason to believe because of the address or other indications that such names represent the same person, may be included as held of record by one person. |
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As of and for the Nine Months | As of and for the | |||||||||||||||||||
Ended March 31 | Fiscal Year Ended June 30 | |||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 | ||||||||||||||||
(Dollars in thousands, except for per share data) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working Capital | 22,092 | 23,386 | 33,874 | 12,004 | (19,224 | ) | ||||||||||||||
Total assets | 93,302 | 144,411 | 105,957 | 132,955 | 136,214 | |||||||||||||||
Long-term debt (net of current portion) | 20,716 | 56,569 | 17,790 | 48,946 | 17,516 | |||||||||||||||
Mandatorily Redeemable Preferred Stock | 478 | 509 | 518 | 481 | — | |||||||||||||||
Stockholders ‘ equity | 13,869 | 27,505 | 31,895 | 32,430 | 34,420 | |||||||||||||||
Book value per common share | 4.54 | 9.31 | 10.79 | 9.85 | 10.52 | |||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Net sales and revenues | 437,282 | 274,990 | 385,461 | 337,248 | 288,925 | |||||||||||||||
Gross margin | 13,341 | 10,071 | 13,026 | 13,109 | 14,268 | |||||||||||||||
Income (loss) from continuing operations (1) | (2,019 | ) | (2,595 | ) | (5,083 | ) | (2,983 | ) | (2,420 | ) | ||||||||||
Income (loss) from discontinued operations (2) | — | (1,043 | ) | (1,803 | ) | 185 | 6,937 | |||||||||||||
Gain on sale of discontinued operations (3) | 22 | — | 7,501 | |||||||||||||||||
Net income (loss) | (1,997 | ) | (3,638 | ) | 615 | (2,798 | ) | 4,517 | ||||||||||||
Diluted earnings (loss) per share: (4) From continuing operations, net of taxes | (0.71 | ) | (0.84 | ) | (1.67 | ) | (0.92 | ) | (0.74 | ) | ||||||||||
From discontinued operations, net of taxes | — | (0.34 | ) | (0.59 | ) | 0.06 | 2.12 | |||||||||||||
From sale of discontinued operations, net of taxes | 0.01 | 2.45 | ||||||||||||||||||
Net income (loss) per share | (0.70 | ) | (1.18 | ) | 0.19 | (0.86 | ) | 1.38 | ||||||||||||
(1) | The loss from continuing operations in FY 2004 includes $1,680 for severance payments to the retiring chairman of the board, $311 for increased audit frees due to the re-audit of the Company’s financial statements for fiscal 2002 and 2001, $1,799 for the Hambro Settlement and $525 associated with the Murdock Settlement. | |
(2) | The income (loss) from the discontinued operation for all years relates to the operations of Mercury Air Centers and the sale of that separate business segment in FY 2004. | |
(3) | The income from gain on sale of discontinued operation relates to the sale of Air Centers. | |
(4) | Earnings (loss) per share have been adjusted retroactively to reflect the effect of the one-for-two stock split that was effective June 18, 2003. |
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Pro Forma Consolidated Balance Sheet
For the Nine Months Ended March 31, 2005
As if the Transaction Occurred March 31, 2005
(Dollars in thousands)
(Unaudited)
Historical | Adjustments | Pro Forma | ||||||||||
Assets | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 275 | $ | — | $ | 275 | ||||||
Trade accounts receivable | 59,757 | — | 59,757 | |||||||||
Inventories | 3,330 | — | 3,330 | |||||||||
Prepaid expenses and other current assets | 4,579 | — | 4,579 | |||||||||
Deferred income tax | 1,451 | — | 1,451 | |||||||||
TOTAL CURRENT ASSETS | 69,392 | — | 69,392 | |||||||||
PROPERTY, EQUIPMENT AND LEASEHOLDS | 7,461 | — | 7,461 | |||||||||
NOTES RECEIVABLE | 1,300 | — | 1,300 | |||||||||
DEFERRED INCOME TAX | 611 | — | 611 | |||||||||
GOODWILL | 4,411 | — | 4,411 | |||||||||
OTHER INTANGIBLE ASSETS, NET | 550 | — | 550 | |||||||||
RESTRICTED CASH | 8,450 | — | 8,450 | |||||||||
OTHER ASSETS, NET | 1,127 | — | 1,127 | |||||||||
TOTAL ASSETS | $ | 93,302 | $ | 0 | $ | 93,302 | ||||||
LIABILITIES, | ||||||||||||
MANDATORILY REDEEMABLE PREFERRED STOCK AND | ||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Accounts Payable | 37,204 | — | 37,204 | |||||||||
Accrued Expenses and Other Current Liabilities | 8,918 | — | 8,918 | |||||||||
Current Portion of LTD | 1,178 | — | 1,178 | |||||||||
TOTAL CURRENT LIABILITIES | 47,300 | — | 47,300 | |||||||||
LONG-TERM DEBT | 20,716 | 1,083 | (1) | 21,799 | ||||||||
DEFERRED GAIN | 9,474 | — | 9,474 | |||||||||
OTHER LONG-TERM LIABILITIES | 837 | — | 837 | |||||||||
DEFERRED RENT | 628 | 628 | ||||||||||
TOTAL LIABILITIES | 78,955 | 1,083 | 80,038 | |||||||||
MANDATORILY REDEEMABLE PREFERRED STOCK: | ||||||||||||
Series A — $0.01 par value; 1,000,000 shares authorized; 462,627 shares outstanding at December 31, 2004 | 478 | — | 478 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Common Stock — $0.01 par value; authorized 18,000,000 shares; 3,056,355 shares outstanding at December 31 | 31 | (2 | )(2) | 29 | ||||||||
Additional Paid-in-Capital | 21,443 | (769 | ) | 20,674 | ||||||||
Retained Earnings (Accumulate deficit) | (4,822 | ) | (313 | )(3) | (5,135 | ) | ||||||
Accumulated Other Comprehensive Income (Loss) | 176 | — | 176 | |||||||||
Treasury Stock | (61 | ) | — | (61 | ) | |||||||
Notes Receivable from Officers | (2,898 | ) | — | (2,898 | ) | |||||||
TOTAL STOCKHOLDERS ‘ EQUITY | 13,869 | (1,083 | ) | 12,786 | ||||||||
TOTAL LIABILITIES, MANDATORILY | ||||||||||||
REDEEMBABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | $ | 93,302 | $ | 0 | $ | 93,302 | ||||||
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Pro Forma Consolidated Statement of Operations
For the Nine Months Ended March 31, 2005
As if the Transaction Occurred July 1, 2004
(Dollars in thousands)
(Unaudited)
Historical | Adjustments | Pro Forma | ||||||||||||||
Operating data | ||||||||||||||||
Sales and revenues | 437,282 | — | 437,282 | 279023 | ||||||||||||
Costs and expenses | 423,941 | — | 423,941 | 269575 | ||||||||||||
Gross margin | 13,341 | — | 13,341 | 9448 | ||||||||||||
Expenses: | ||||||||||||||||
Selling, general and administrative | 11,736 | — | 11,736 | 7028 | ||||||||||||
Provision for bad debts | 1,514 | — | 1,514 | 364 | ||||||||||||
Depreciation and amortization | 1,855 | — | 1,855 | 1254 | ||||||||||||
Interest and other (income) expense, net | 971 | 41 | (4) | 1,012 | 975 | |||||||||||
Total Expenses | 16,076 | 41 | 16,117 | 9621 | ||||||||||||
Income (loss) from continuing operations before income taxes | (2,735 | ) | (41 | ) | (2,776 | ) | -173 | |||||||||
Income tax (benefit) expense | (716 | ) | (16 | )(5) | (732 | ) | -25 | |||||||||
Net income (loss) from continuing operations | (2,019 | ) | (25 | ) | (2,044 | ) | -148 | |||||||||
Accrued preferred stock dividends | 29 | 29 | 20 | |||||||||||||
Net Income (loss) applicable to common stockholders | (2,048 | ) | (25 | ) | (2,073 | ) | -168 | |||||||||
Net income (loss) per share from continuing operations | ||||||||||||||||
Basic | (0.71 | ) | (0.77 | ) | -0.05832 | |||||||||||
Diluted | (0.71 | ) | (0.77 | ) | -0.05832 | |||||||||||
Number of Shares | ||||||||||||||||
Basic | 2,900,631 | (192,613 | )(6) | 2,708,018 | 2880900 | |||||||||||
Diluted | 2,900,631 | (192,613 | )(6) | 2,708,018 | 2880900 |
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Pro Forma Consolidated Statement of Operations
For the Year Ended June 30, 2004
As if the Transaction Occurred July 1, 2003
(Dollars in thousands)
(Unaudited)
Historical | Adjustments | Pro Forma | ||||||||||
Operating data | ||||||||||||
Sales and revenues | 385,461 | 385,461 | ||||||||||
Costs and expenses | 372,435 | 372,435 | ||||||||||
Gross margin | 13,026 | — | 13,026 | |||||||||
Expenses: | ||||||||||||
Selling, general and administrative | 12,885 | — | 12,885 | |||||||||
Provision for bad debts | 506 | 506 | ||||||||||
Depreciation and amortization | 2,828 | 2,828 | ||||||||||
Settlement costs | 2,414 | 2,414 | ||||||||||
Interest and other (income) expense, net | 654 | 55 | (7) | 709 | ||||||||
Total Expenses | 19,287 | 55 | 19,342 | |||||||||
Income (loss) from continuing operations before income taxes | (6,261 | ) | (55 | ) | (6,316 | ) | ||||||
Income tax (benefit) expense | (1,178 | ) | (21 | )(5) | (1,199 | ) | ||||||
Net income (loss) from continuing operations | (5,083 | ) | (34 | ) | (5,117 | ) | ||||||
Accrued preferred stock dividends | 37 | — | 37 | |||||||||
Net Income (loss) applicable to common stockholders | (5,120 | ) | (34 | ) | (5,154 | ) | ||||||
Net income (loss) per share from continuing operations | ||||||||||||
Basic | (1.67 | ) | (1.80 | ) | ||||||||
Diluted | (1.67 | ) | (1.80 | ) | ||||||||
Number of Shares | ||||||||||||
Basic | 3,059,200 | (192,613 | )(6) | 2,866,587 | ||||||||
Diluted | 3,059,200 | (192,613 | )(6) | 2,866,587 |
(1) | Represents funds borrowed under the Company’s senior credit facility to effect the Transaction. | |
(2) | Represents payments in respect of fractional shares that are estimated to be approximately $771. $0.01 per share, or $2, was allocated to Common Stock; $3.99 per share, or $769 was allocated to Additional Paid-in-Capital. | |
(3) | Retained earnings are reduced for the expenses related to the Transaction of $313, net of tax. | |
(4) | Increased interest costs at an assumed interest rate of 5.0% on the approximately $1,075 of revolving line of credit funds used to effect the Transaction. A 1/8% change in the assumed rate would result in a change in interest expense of approximately $1 per annum. | |
(5) | Taxes are based upon Mercury Air Group’s estimated annual combined statutory federal and state income tax rate of 39%. | |
(6) | Pro forma basic and diluted weighted outstanding shares are adjusted based on the assumed redemption of 192,613 pre-split shares. | |
(7) | Increased interest costs at an assumed interest rate of 5.0% on the approximately $1,075 of revolving line of credit funds used to effect the Transaction. A 1/8% change in the assumed rate would result in a change in interest expense of approximately $1 per annum. | |
(8) | Retained earnings are reduced for the expenses related to the Transaction of $339, net of tax. |
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Name | Age | Positions | ||||
Joseph A. Czyzyk | 58 | President, Chief Executive Officer and Chairman | ||||
Frederick H. Kopko, Jr. | 50 | Director | ||||
Gary J. Feracota | 45 | Director | ||||
Michael J. Janowiak | 42 | Director | ||||
Angelo Pusateri | 65 | Director |
Name | Age | Positions | ||||
Kent Rosenthal | 46 | Chief Financial Officer Executive Vice President and President of Maytag | ||||
William L. Silva | 55 | Aircraft Corporation (“Maytag”) | ||||
Wayne J. Lovett | 57 | Executive Vice President, Secretary and General Counsel |
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Total Voting | ||||||||||||||||||||||||||||
Total Voting Power (3) | Power After | |||||||||||||||||||||||||||
Common Stock | Preferred Stock (2) | Before Transaction | Transaction | |||||||||||||||||||||||||
Name and Address (4) | Shares | Percent | Shares | Percent | Shares | Percent | ||||||||||||||||||||||
Joseph A. Czyzyk | 1,403,698 | (5) | 43.1 | % | 0 | 0 | 1,403,698 | 37.7 | % | 39.8 | % | |||||||||||||||||
William L. Silva | 88,187 | (6) | 2.9 | % | 0 | 0 | 88,187 | 2.5 | % | 2.6 | % | |||||||||||||||||
Wayne J. Lovett | 31,148 | (7) | 1.0 | % | 25,820 | 5.6 | % | 56,968 | 1.6 | % | 1.7 | % | ||||||||||||||||
Kent D. Rosenthal (8) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Frederick H. Kopko, Jr. | 1,403,698 | (9) | 43.1 | % | 0 | 0 | 1,403,698 | 37.7 | % | 39.8 | % | |||||||||||||||||
20 N. Wacker Drive | ||||||||||||||||||||||||||||
Suite 2520 Chicago, IL 60606 Gary Feracota | 33,500 | (10) | 1.1 | % | 0 | 0 | 33,500 | * | 1.0 | % | ||||||||||||||||||
904 Williams St. River Forest, IL 60305 Sergei Kouzmine (11) | 31,000 | (12) | 1.0 | % | 0 | 0 | 31,000 | * | * | |||||||||||||||||||
45 Williamsburg Rd. Evanston, IL 60203 Michael H. Janowiak | 22,500 | (13) | * | 0 | 0 | 22,500 | * | * | ||||||||||||||||||||
6540 West Joliet Road #38 Countryside, IL 60525 | ||||||||||||||||||||||||||||
Angelo Pusateri | 16.375 | (14) | * | 0 | 0 | 16,375 | * | * | ||||||||||||||||||||
17 Cary Road New Hyde |
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Total Voting | ||||||||||||||||||||||||||||
Total Voting Power (3) | Power After | |||||||||||||||||||||||||||
Common Stock | Preferred Stock (2) | Before Transaction | Transaction | |||||||||||||||||||||||||
Name and Address (4) | Shares | Percent | Shares | Percent | Shares | Percent | ||||||||||||||||||||||
Park, NY 11040 | ||||||||||||||||||||||||||||
CK Partners | 1,403,698 | (15) | 43.1 | % | 0 | 0 | 1,403,698 | 37.7 | % | 39.8 | % | |||||||||||||||||
Dimensional Fund | 174,101 | (16) | 5.7 | % | 0 | 0 | 174,101 | 4.9 | % | 5.2 | % | |||||||||||||||||
Advisors, Inc. | ||||||||||||||||||||||||||||
1299 Ocean Avenue 11th Floor Santa Monica, CA 90401 | ||||||||||||||||||||||||||||
Beti Ward | 28,711 | (17) | * | 250,000 | (18) | 54.0 | % | 278,711 | 7.9 | % | 8.4 | % | ||||||||||||||||
6644 Vista Del Mar Playa Del Rey, CA 90293 | ||||||||||||||||||||||||||||
Jeff Stallones | 8,250 | (19) | * | 160,987 | 34.8 | % | 169,237 | 4.8 | % | 5.1 | % | |||||||||||||||||
3808 World Houston Parkway, Suite B Houston, TX 77032 All directors and executive officers as a group (11 persons) | 1,595,408 | (20) | 48.5 | % | 25,820 | 11.2 | % | 1,621,228 | 42.8 | % | 45.1 | % |
* | Less than one percent | |
(1) | The percentage of shares beneficially owned is based on 3,056,355 shares of common stock and 462,627 shares of preferred stock outstanding as of June 30, 2005. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The stock ownership information includes current shareholdings and shares with respect to which the named individual has the right to acquire beneficial ownership under options exercisable within 60 days, as of June 30, 2005, but does not assume conversion of any preferred shares. See footnote (3). Shares acquired pursuant to exercise of options are deemed outstanding for the purpose of computing the percentage of outstanding shares owned by that person. These shares are not deemed outstanding, however, for the purposes of computing the percentage ownership of any other person. | |
(2) | Preferred stock has one vote per share, and is convertible into shares of common stock at a rate of .13333 per share of preferred stock. The amounts in the table assume that no preferred shares are converted. | |
(3) | Assumes that no preferred shares are converted. As a consequence of the voting rights of the preferred stock, conversion would be dilutive as to voting power. See footnote (2). | |
(4) | Unless otherwise indicated in the table, the address for each of the individuals named in the table is 5456 McConnell Avenue, Los Angeles, California 90066. | |
(5) | Consists of (i) 1,194,885 shares beneficially owned by CK Partners, (ii) 76,127 shares issuable upon exercise of options owned by Mr. Frederick H. Kopko, Jr., (iii) 5,172 shares held jointly with the wife of Mr. Czyzyk, 383 shares held by Mr. Czyzyk as custodian for his children, and 2,131 shares held by Mr. Czyzyk’s wife as custodian for their children and (iv) 125,000 shares issuable upon exercise of options owned by Mr. Czyzyk. On July 27, 2000, Philip J. Fagan, M.D., Frederick H. Kopko, Jr. and Joseph A. Czyzyk formed CK Partners f/k/a CFK Partners f/k/a FK Partners, an Illinois general partnership (CK Partners). On July 30, 2004, Dr. Philip J. Fagan withdrew from the partnership and transferred and conveyed to CK Partners all of his right, title and interest in and to all of the shares held by CK Partners. CK Partners holds all shares beneficially owned by the Partners. Pursuant to Section 7 of the Partnership Agreement of CK Partners, the Partners have agreed that such shares shall be voted for Mr. Czyzyk and Mr. Kopko, or as designated by Mr. Czyzyk and Mr. Kopko, respectively. On December 3, 2004, CK Partners, Messrs. Kopko and Czyzyk filed Amendment No. 2 to Form 13D, with the Securities and Exchange Commission with respect to the common shares owned by them. Reference is made to that Form 13D for a complete description of the terms and conditions, including voting terms and conditions, on which such shares are being held. | |
(6) | Includes 5,000 shares issuable upon exercise of options exercisable within 60 days from the date hereof. | |
(7) | Includes 15,000 shares issuable upon exercise of options exercisable within 60 days from the date hereof and 200 shares held by Mr. Lovett and his wife. Does not include common shares that may be acquired upon conversion of preferred shares. See footnote (1). | |
(8) | Appointed as Chief Financial Officer on December 9, 2004. |
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(9) | Consists of (i) 1,194,885 shares beneficially owned by CK Partners, (ii) 76,127 shares issuable upon exercise of options owned by Mr. Frederick H. Kopko, Jr., (iii) 5,172 shares held jointly with the wife of Mr. Czyzyk, 383 shares held by Mr. Czyzyk as custodian for his children, and 2,131 shares held by Mr. Czyzyk’s wife as custodian for their children and (iv) 125,000 shares issuable upon exercise of options owned by Mr. Czyzyk. On July 27, 2000, Philip J. Fagan, M.D., Frederick H. Kopko, Jr. and Joseph A. Czyzyk formed CK Partners f/k/a CFK Partners f/k/a FK Partners, an Illinois general partnership (CK Partners). On July 30, 2004, Dr. Philip J. Fagan withdrew from the partnership and transferred and conveyed to CK Partners all of his right, title and interest in and to all of the shares held by CK Partners. CK Partners holds all common shares beneficially owned by the Partners. Pursuant to Section 7 of the Partnership Agreement of CK Partners, the Partners have agreed that such shares shall be voted for Mr. Czyzyk and Mr. Kopko, or as designated by Mr. Czyzyk and Mr. Kopko, respectively. On December 3, 2004, CK Partners, Messrs. Kopko and Czyzyk filed Amendment No. 2 to Form 13D, with the Securities and Exchange Commission with respect to the common shares owned by them. Reference is made to that Form 13D for a complete description of the terms and conditions, including voting terms and conditions, on which such shares are being held. | |
(10) | Includes 7,501 shares issuable upon exercise of options exercisable within 60 days from the date hereof. | |
(11) | Did not stand for re-election in February 2005. | |
(12) | Includes 30,000 shares issuable upon exercise of options exercisable within 60 days from the date hereof. | |
(13) | Consists of 22,500 shares issuable upon exercise of options exercisable within 60 days from the date hereof. | |
(14) | Includes 15,000 shares issuable upon exercise of options exercisable within 60 days from the date hereof. | |
(15) | Consists of (i) 1,194,885 shares beneficially owned by CK Partners, (ii) 76,127 shares issuable upon exercise of options owned by Mr. Frederick H. Kopko, Jr., (iii) 5,172 shares held jointly with the wife of Mr. Czyzyk, 383 shares held by Mr. Czyzyk as custodian for his children, and 2,131 shares held by Mr. Czyzyk’s wife as custodian for their children and (iv) 125,000 shares issuable upon exercise of options owned by Mr. Czyzyk. On July 27, 2000, Philip J. Fagan, M.D., Frederick H. Kopko, Jr. and Joseph A. Czyzyk formed CK Partners f/k/a CFK Partners f/k/a FK Partners, an Illinois general partnership (CK Partners). On July 30, 2004, Dr. Philip J. Fagan withdrew from the partnership and transferred and conveyed to CK Partners all of his right, title and interest in and to all of the shares held by CK Partners. CK Partners holds all shares beneficially owned by the Partners. Pursuant to Section 7 of the Partnership Agreement of CK Partners, the Partners have agreed that such shares shall be voted for Mr. Czyzyk and Mr. Kopko, or as designated by Mr. Czyzyk and Mr. Kopko, respectively. On December 3, 2004, CK Partners, Messrs. Kopko and Czyzyk filed Amendment No. 2 to Form 13D, with the Securities and Exchange Commission with respect to the common shares owned by them. Reference is made to that Form 13D for a complete description of the terms and conditions, including voting terms and conditions, on which such shares are being held. | |
(16) | Based on publicly available information reported on February 9, 2005, Dimensional Fund Advisors, Inc. (“Dimensional”) is a beneficial owner of 174,101 shares as a result of acting as an investment advisor to various investment companies (the “Funds”). In addition, Dimensional has sole power to dispose of 174,101 shares owned by the Funds. | |
(17) | Included 15,461 shares, held by Pacific Aviation Logistics, a company owned by Beti Ward, and 11,000 shares held in the name of a trust of which she is trustee. Does not include common shares that may be acquired upon conversion of preferred shares. See footnote (1). | |
(18) | Includes 50,000 shares of preferred stock held by Pacific Air Cargo, a company owned by Beti Ward. | |
(19) | Includes 6,250 shares issuable upon exercise of options exercisable within 60 days from the date hereof. Does not include common shares that may be acquired upon conversion of preferred shares. See footnote (1). | |
(20) | Includes 266,128 shares issuable upon exercise of options exercisable within 60 days from the date hereof. Assuming no options are exercised, the directors and executive officers as a group would beneficially own 38.5% of the outstanding common and preferred stock, voting as a single class. |
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– | Mercury’s Annual Report on Form 10-K for the year ended June 30, 2004. | |
– | Mercury’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005. |
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND PRESIDENT
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APPENDIX A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MERCURY AIR GROUP, INC.
Mercury Air Group, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Mercury Air Group, Inc. resolutions were duly adopted setting forth proposed amendments to the Restated Certificate of Incorporation of said corporation, declaring said amendments to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, That the Restated Certificate of Incorporation of this corporation be amended and restated in its entirety so that, as amended and restated said Restated Certificate of Incorporation shall be and read as follows:
ARTICLE I
NAME
The name of the corporation is Mercury Air Group, Inc. (the “CORPORATION”).
ARTICLE II
PURPOSE
The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE III
SHARES
(a) The aggregate number of shares which the Corporation has authority to issue is eighteen million (18,000,000) shares of common stock, $.01 par value per share, and three million (3,000,000) shares of preferred stock, $.01 par value per share.
(b) The Board of Directors is expressly authorized to provide for the issuance of all or any shares of preferred stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the General Corporation Law of Delaware. Such authorization shall include, without limitation, the authority to provide that any such class or series may be: (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.
(c) Without regard to any other provision of this Amended and Restated Certificate of Incorporation, each one (1) share of Common Stock, issued and outstanding, immediately prior to the time this Amended and Restated Certificate of Incorporation becomes effective (the “Effective Date”) shall be and is hereby automatically reclassified and changed (without any further act) into one-five hundredth and first (1/501) of a fully-paid and nonassessable share of Common Stock, without increasing or decreasing the amount of stated capital or paid-in surplus of the Corporation, provided that no fractional shares shall be issued to
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any holder of fewer than 501 shares of Common Stock immediately prior to the Effective Date, and that instead of issuing fractional shares, the Corporation shall pay cash as of the Effective Date.
(d) After giving effect to paragraph (c) of this Article Fourth of this Amended and Restated Certificate of Incorporation, each one (1) share of Common Stock, issued and outstanding (and including each fractional share in excess of one (1) share held by any stockholder) immediately following the Effective Date shall be and are hereby automatically reclassified and changed (without any further act) into five hundred (501) fully-paid and nonassessable shares of Common Stock (or, with respect to such fractional shares and interests, such lesser number of shares and fractional shares or interests as may be applicable based upon such 501-1 ratio), without increasing or decreasing the amount of stated capital or paid-in surplus of the Corporation, provided that no fractional shares shall be issued.
ARTICLE IV
DENIAL OF PREEMPTIVE RIGHTS
Except as may be set forth in a written agreement executed by an authorized representative of the Corporation, no stockholder of the Corporation or other person shall have any preemptive right to purchase or subscribe to any shares of any class or any notes, debentures, options, warrants or other securities, now or hereafter authorized.
ARTICLE V
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the Corporation is 1209 Orange Street, Wilmington, Delaware 19801 and the name of its initial registered agent at such address is The Corporation Trust Company.
ARTICLE VI
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
To the greatest extent permitted by applicable law, no director (including any advisory director) of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, the foregoing shall not limit the liability of a director (including any advisory director) (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware General Corporation Law, or (iv) for any Transaction from which the director derived an improper personal benefit.
ARTICLE VII
INDEMNITY
SECTION 7.1 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
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the Corporation) 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, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on such person’s behalf in connection with such action, suit or proceeding and any appeal therefrom, 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 such person’s 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 meet the standards of conduct set forth in this Section 7.1.
SECTION 7.2 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, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by such person or on such person’s behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, 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 in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for gross 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 such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.3 Notwithstanding the other provisions of this Article VII, to the extent that a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 7.1 and 7.2, or in the defense of any claim, issue or matter therein, such person shall be indemnified against all costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by such person or on such person’s behalf in connection therewith.
SECTION 7.4 Any indemnification under Sections 7.1 and 7.2 (unless ordered by a court) shall be paid by the Corporation unless a determination is made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion,
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or (iii) by the stockholders, that indemnification of the Director, officer, employee or agent is not proper in the circumstances because such person has not met the applicable standards of conduct set forth in Sections 7.1 and 7.2.
SECTION 7.5 Costs, charges and expenses (including attorneys, fees) incurred by a person referred to in Sections 7.1 and 7.2 in defending a civil or criminal action, suit or proceeding (including investigations by any government agency and all costs, charges and expenses incurred in preparing for any threatened action, suit or proceeding) shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by a Director or officer in such person’s capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such person while a Director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the Director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such Director or officer is not entitled to be indemnified by the Corporation as authorized in this Article VII. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient’s financial ability to make repayment. The repayment of such charges and expenses incurred by other employees and agents of the Corporation which are paid by the Corporation in advance of the final disposition of such action, suit or proceeding as permitted by this Section 7.5 may be required upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and subject to the approval of such Director, officer, employee or agent of the Corporation, authorize the Corporation’s counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.
SECTION 7.6 Any indemnification under Sections 7.1, 7.2 or 7.3 or advance of costs, charges and expenses under Section 7.5 shall be made promptly, and in any event within 30 days, upon the written request of the Director, officer, employee or agent directed to the Secretary of the Corporation. The right to indemnification or advances as granted by this Article VII shall be enforceable by the Director, officer, employee or agent in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within 30 days. Such person’s costs and expenses incurred in connection with successfully establishing such person’s right to indemnification or advances, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 7.5 where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Sections 7.1 or 7.2, but the burden of proving that such standard of conduct has not been met shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 7.1 and 7.2, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met
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such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
SECTION 7.7 The indemnification provided by this Article VII shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any law (common or statutory), 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 office or while employed by or acting as agent for the Corporation, 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 estate, heirs, executors and administrators of such person. All rights to indemnification under this Article VII shall be deemed to be a contract between the Corporation and each Director, officer, employee or agent of the Corporation who serves or served in such capacity at any time while this Article VII is in effect. No amendment or repeal of this Article VII or of any relevant provisions of the Delaware General Corporation Law or any other applicable laws shall adversely affect or deny to any Director, officer, employee or agent any rights to indemnification which such person may have, or change or release any obligations of the Corporation, under this Article VII with respect to any costs, charges, expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement which arise out of an action, suit or proceeding based in whole or substantial part on any act or failure to act, actual or alleged, which takes place before or while this Article VII is in effect. The provisions of this Section 7.7 shall apply to any such action, suit or proceeding whenever commenced, including any such action, suit or proceeding commenced after any amendment or repeal of this Article VII.
SECTION 7.8 For purposes of this Article VII:
(i) | “THE CORPORATION” shall include 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, and 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 VII 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; | |||
(ii) | “OTHER ENTERPRISES” shall include employee benefit plans, including, but not limited to, any employee benefit plan of the Corporation; | |||
(iii) | “SERVING AT THE REQUEST OF THE CORPORATION” shall include any service which imposes duties on, or involves services by, a Director, officer, employee, or agent of the Corporation with respect to an employee benefit plan, its participants, or beneficiaries, including acting as a fiduciary thereof; |
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(iv) | “FINES” shall include any penalties and any excise or similar taxes assessed on a person with respect to an employee benefit plan; | |||
(v) | A person who acted in good faith and in a 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 Sections 7.1 and 7.2; and | |||
(vi) | Service as a partner, trustee or member of management or similar committee of a partnership or joint venture, or as a Director, officer, employee or agent of a corporation which is a partner, trustee or joint venturer, shall be considered service as a Director, officer, employee or agent of the partnership, joint venture, trust or other enterprise. |
SECTION 7.9 If this Article VII or any portion hereof shall be invalidated on any ground by a court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Article VII that shall not have been invalidated and to the full extent permitted by applicable law.
SECTION 7.10 The Corporation shall 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 or on such person’s behalf 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 such liability under the provisions of this Article VII, provided that such insurance is available on acceptable terms as determined by a vote of a majority of the entire Board of Directors.
ARTICLE VIII
BYLAWS
The Bylaws of the Corporation may be amended or repealed, or new Bylaws may be adopted, (i) by the Board of Directors of the Corporation at any duly held meeting or pursuant to a written consent in lieu of such meeting, or (ii) by the holders of a majority of the shares represented at any duly held meeting of stockholders, provided that notice of such proposed action shall have been contained in the notice of any such meeting, or pursuant to a written consent signed by the holders of a majority of the outstanding shares entitled to vote thereon.
ARTICLE IX
CERTIFICATE OF DESIGNATIONS
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The Certificate of Designations of Mercury Air Group, Inc. attached hereto as Annex A, is hereby incorporated in this Amended and Restated Certificate of Incorporation.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a special meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Mercury Air Group, Inc. has caused this certificate to be signed by Wayne J. Lovett, Executive Vice President and Secretary, this ___of ___, 2005.
By: | Wayne J. Lovett | |||||
Executive Vice President and Secretary |
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ANNEX A
CERTIFICATE OF DESIGNATIONS
OF
MERCURY AIR GROUP, INC.
The undersigned Joseph A. Czyzyk, President and Chief Executive Officer of Mercury Air Group, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies as follows:
Pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the said Corporation, and pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors, acting by unanimous consent on December 7, 2002, adopted the following resolutions creating a series of Preferred Stock designated as Series A 8% Cumulative Convertible Preferred Stock out of the class of 10,000,000 shares of preferred stock, par value $.01 per share:
RESOLVED, that pursuant to the authority vested in the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors does hereby provide for the issue of a series of preferred stock of the corporation and does hereby fix and herein state and express the designations, powers, preferences, and relative and other special rights and the qualifications, limitations and restrictions thereof as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as “Series A 8% Cumulative Convertible Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting Series A Preferred Stock shall be 1,000,000.
2. RANKING. As to the payment of dividends and distributions on liquidation, the Series A Preferred Stock ranks senior to all Junior Stock, junior to all Senior Stock, and on a parity with each other class or series of preferred stock which by its terms ranks on a parity with the Series A Preferred Stock. Subject to the terms of this Article First, the Corporation reserves the right to issue preferred stock which ranks senior to the Series A Preferred Stock as to the payment of dividends and the distribution of assets and on liquidation.
3. VOTING. In addition to any other voting rights provided by law, the Series A Preferred Stock shall have one vote per share on any actions to be taken by stockholders of the Corporation and shall vote with the Common Stock as a single class.
4. DIVIDENDS. The holders of the Series A Preferred Stock are entitled to the following dividends:
4A. PREFERENTIAL CASH DIVIDENDS. When and as declared by the Board of Directors and to the extent permitted by law, the Corporation shall pay preferential cumulative dividends to the holders of the shares of Series A Preferred Stock as provided in this
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SECTION 4A. Such dividends shall be paid in cash or in kind, at the election of the Corporation. Except as otherwise provided herein, dividends on each share of Series A Preferred Stock shall accrue on an annual basis at an annual rate of eight percent (8.0%) of the Stated Value, as defined in SECTION 11. Such dividends shall be fully cumulative and shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. All accrued and unpaid dividends shall be fully paid or declared with funds irrevocably set apart for payment before any dividend, distribution or payment (other than in capital stock or a right to acquire capital stock of the Corporation) can be made with respect to any Junior Stock, provided, however, that the Corporation may make payments (1) in kind, (2) in lieu of fractional shares, and (3) in satisfaction of dissenter’s rights. No accumulation of dividends on the Series A Preferred Stock shall bear interest.
Except as otherwise provided for herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to all outstanding shares of Series A Preferred Stock, such payment shall be distributed ratably among the holders of such shares based upon the number of shares of such series held by each such holder.
4B. RECORD DATE; PAYMENT DATE; PAYMENT DEFAULT. Dividends shall be payable to holders of record of the Series A Preferred Stock as of the close of business on June 30 and December 31 (or in each case the next succeeding business day) of each year, beginning June 30, 2003. Subject to the declaration thereof by the Board of Directors, payment of dividends shall be made within 45 days after the record date. A payment is “made” when a check is mailed. Dividends payable for less than a semi-annual period shall be computed on a pro rata basis for the number of days during such less than semi-annual period that the Series A Preferred Stock is outstanding.
5. LIQUIDATION. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each holder of shares of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, before any distribution or payment is made upon any Junior Stock, an amount equal to the Series A Liquidation Preference Payment, as defined in SECTION 11, plus, in the case of each share of Series A Preferred Stock, any accrued but unpaid dividends thereon. If upon such liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed among the holders of the Series A Preferred Stock shall be insufficient to permit payment to the holders of Series A Preferred Stock of the amount distributable as aforesaid, then, subject to the rights of any stock ranking senior to the Series A Preferred Stock, the entire assets of the Corporation to be so distributed shall be distributed ratably among the holders of Series A Preferred Stock in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series A Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. After the payment or the setting aside for such payment of the preferential amounts provided for in this SECTION 5, the holders of the Series A Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.
Written notice of such liquidation, dissolution, or winding up stating a payment date, the amount of the Series A Liquidation Preference Payment and the place where said Series A
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Liquidation Preference Payment shall be payable, shall be delivered not less than twenty (20) days prior to the payment date therein, to the holders of record of the Series A Preferred Stock, such notice to be addressed to each such holder at the address as shown by the record of the Corporation.
6. CONVERSIONS. The holders of shares of Series A Preferred Stock shall have the following conversion right:
6A. RIGHT TO CONVERT. Subject to the terms and conditions of this SECTION 6, at the option of the holder thereof, each share of Series A Preferred Stock (except that upon liquidation, dissolution, winding up of the Corporation, the right of conversion shall terminate at the close of business on the business day fixed for payment of the amount distributable on the Series A Preferred Stock) into such number of fully paid and nonassessable shares of Common Stock as is obtained by dividing the number of shares of Series A Preferred Stock to be converted by the conversion price of $7.50 per share or, in case an adjustment of such price has taken place pursuant to further provision of this SECTION 6, then by the conversion price as last adjusted and in effect at the date the share or shares of Series A Preferred Stock are surrendered for conversion (such conversion price of $7.50, or such conversion price as last adjusted, being referred to as the “Conversion Price”). Such rights of conversion shall be exercised by the holder of Series A Preferred Stock by giving written notice that the holder elects to convert the stated number of shares of Series A Preferred Stock into Common Stock and by the surrender of a certificate or certificates for the number of shares so to be converted to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of the Series A Preferred Stock) at any time during its normal business hours on the date set forth in such notice, together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued.
In case the Corporation shall at any time subdivide (by a stock split or a stock dividend payable in Series A Preferred Stock but excluding dividends in kind as set forth in SECTION 4A) its outstanding shares of Series A Preferred Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately increased, and, conversely, in case the outstanding shares of Series A Preferred Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately decreased, it being the intent that any such adjustment shall result in the same number of shares of Common Stock being issuable upon conversion of all the Series A Preferred Stock after such split, dividend or combination as immediately before such split, dividend or combination.
Cash dividends for less than a semi-annual period on Series A Preferred Stock which are converted prior to the date set for determining holders of record shall be paid on a pro rata basis for the number of days during such less than semi-annual period prior to conversion, and payment of such pro rata amount shall be made in accordance with the provisions of this Section 6A for the payment of cash dividends.
6B. ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED.
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Promptly upon the receipt of written notice referred to in SECTION 6A and surrender of the certificate or certificates for the share of shares of Series A Preferred Stock to be converted, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder, registered in such name or names as such holder may direct, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Preferred Stock. To the extent permitted by law, such conversion shall be deemed to have been effected and the Conversion Price shall be determined as of the close of business on the date on which such written notice shall have been received by the Corporation and the certificate or certificates for such share or shares shall have been surrendered as aforesaid, and at such time the rights of the holder of such share or shares of Series A Preferred Stock shall terminate including without limitation, the right to receive the Series A Liquidation Preference Payment, and the person or person in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become holder or holders of record of the shares of Common Stock represented thereby.
6C. DIVIDENDS; PARTIAL CONVERSION; FRACTIONAL SHARES. In case the number of shares of Series A Preferred Stock represented by the certificate or certificates surrendered pursuant to SECTION 6A exceeds the number of shares converted, the Corporation shall, upon such conversion, execute and deliver to the holder, at the expense of the Corporation, a new certificate or certificates for the number of shares of Series A Preferred Stock represented by the certificate or certificates surrendered which are not to be converted. If any fractional share of Common Stock would be delivered upon conversion, the Corporation, in lieu of delivering such fractional share, may pay to the holder surrendering the Series A Preferred Stock for conversion an amount in cash equal to the current market price of such fractional share of Common Stock as determined in good faith by the Board of Directors of the Corporation.
6D. ADJUSTMENT UPON SUBDIVISION OR COMBINATION OF COMMON STOCK. In case the Corporation shall at any time subdivide (by a stock split, stock dividend payable in Common Stock, or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.
6E. ADJUSTMENT UPON OTHER CORPORATE CHANGE. Upon the consummation of an Other Corporate Change, the terms of the Series A Preferred Stock shall be deemed modified, without payment of any additional consideration therefore, so as to provide that upon the conversion of the shares of Series A Preferred Stock following the consummation of such Other Corporate Change, the holder of such shares of Series A Preferred Stock shall have the right to acquire and receive (in lieu of or in addition to the shares of Common Stock acquirable and receivable prior to the Other Corporation Change) such shares of stock, securities or assets as such holder would have received if such holder had converted such shares of Series A Preferred Stock into Common Stock immediately prior to such Other Corporate Change, in each case giving effect to any adjustment of the Conversion Price made after the date of consummation of the Other Corporate Change. All other terms of the Series A Preferred Stock shall remain in full force and effect following an Other Corporate Change. The provisions of
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this SECTION 6E shall similarly apply to successive Other Corporate Changes. The Corporation shall require any third party involved in an Other Corporate Change, to agree to the application of this SECTION 6E.
6F. NOTICE OF ADJUSTMENT.
(a) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of shares of Series A Preferred Stock specifying the Conversion Price in effect thereafter.
(b) The Corporation shall give written notice to all holders of Series A Preferred Stock at least twenty (20) days prior to the date on which the Corporation closes its books or takes a record for determining rights to vote with respect to an Other Corporate Change, dissolution or liquidation. The Corporation shall also give written notice to the holders of Series A Preferred Stock at least twenty (20) days prior to the date on which any Other Corporate Change shall occur.
6G. STOCK TO BE RESERVED. The Corporation will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon conversion of Series A Preferred Stock as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Preferred Stock. The Corporation covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all liens. The Corporation will not take any action which results in any adjustment of any Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of the Series A Preferred Stock would exceed the total number of shares of Common Stock than authorized by the Certificate of Incorporation.
6H. NO REISSUANCE OF SERIES A PREFERRED STOCK. Shares of Series A Preferred Stock which are converted into shares of Common Stock as provided herein, shall be cancelled and shall not be reissued.
6I. ISSUE TAX. The issuance of certificates for shares of Common Stock upon conversion of Series A Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Preferred Stock being converted.
7. MANDATORY REDEMPTION.
7A. REDEMPTION AT THE COMPANY’S OPTION AFTER THREE YEARS. During the 30-day period immediately following the third anniversary of the closing of the sale of the Series A Preferred Stock (the “Closing”), and during the 30-day period immediately following the fourth, fifth and each subsequent anniversary of the Closing, the Corporation, at its sole discretion, may redeem all or any portion of the shares of Series A Preferred Stock outstanding at the Series A Redemption Price. If the Corporation redeems less
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than all the shares of Series A Preferred Stock outstanding, then the Board of Directors shall determine (i) the total number of shares to be redeemed and (ii) an equitable method, such as by lot or pro rata, by which shares are to be redeemed. Demand by the Corporation for redemption shall be made by the Corporation by giving written notice (the “Redemption Notice”) to each holder to Series A Preferred Stock to be redeemed, with such Redemption Notice to specify the Series A Redemption Price, the redemption date (which shall be no less than 30 days following the delivery of the Redemption Notice), the total number of shares of Series A Preferred Stock to be redeemed, and the place where the Series A Redemption Price shall be payable. If the Corporation redeems less than all the shares of Series A Preferred Stock held by any holder, the Redemption Notice shall also specify the number of shares the Corporation shall redeem from that holder. The Corporation shall thereafter be obligated to complete such redemption within sixty (60) days after the Corporation gives such notice. For purposes hereof the “Series A Redemption Price” of any Series A Preferred Stock means an amount equal to (a) $1.00 (such amount to be adjusted proportionately in the event the Series A Preferred Stock shall be subdivided by any means into a greater number or combined by any means into a lesser number, excluding dividends-in-kind pursuant to SECTION 4A) plus (b) all accrued but unpaid dividends on such Series A Preferred Stock through the applicable redemption date. Until the close of business on the day before the redemption date (and thereafter if the Corporation shall not tender the redemption price) the Series A Preferred Stock shall be entitled to all its rights and privileges of the Series A Preferred Stock, including the right to convert such stock into Common Stock pursuant to Section 6 hereby.
7B. MANDATORY REDEMPTION AT HOLDER’S OPTION AFTER THREE YEARS. During the 30-day period immediately following the third anniversary of the Closing, and during the 30-day period immediately following the fourth, fifth and each subsequent anniversary of the Closing, each holder of Series A Preferred Stock shall have the right to tender all or any portion of such holder’s shares to the Corporation for redemption at the Series A Redemption Price, as defined in Section 7A. The Corporation shall be obligated to complete such redemption within 60 days following tender.
7C. PAYMENT OF REDEMPTION. In the event of a redemption pursuant to Section 7A or 7B, the Corporation may, at its option, pay all or part of the Series A Redemption Price in shares of its Common Stock which have been registered with the Securities and Exchange Commission. In such event, the Common Stock shall be valued at the average closing price of the Common Stock for the 20 business days immediately preceding the date of redemption.
8. MISCELLANEOUS.
8A. REGISTRATION OF TRANSFER; SURRENDER AND REISSUE. The Corporation shall keep at its principal office, or at such other agency as the Corporation shall advise upon written notice to holders of the Series A Preferred Stock, a register of the registration of shares of Series A Preferred Stock. Upon the surrender of any certificate representing shares of Series A Preferred Stock at such place, the Corporation will, at the request of the holder of record of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of
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shares of Series A Preferred Stock represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares of Series A Preferred Stock as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate, and dividends will accrue on the shares of Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such shares of Series A Preferred Stock represented by the surrendered certificate.
8B. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series A Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity and/or bond reasonably satisfactory to the Corporation, or, in the case of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of Series A Preferred Stock represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends will accrue on the shares of Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.
9. AMENDMENT AND WAIVER. No amendment, modification or waiver will be binding or effective with respect to any provision of this Certificate of Designations without the prior written consent of the holder or holders of a majority of the Series A Preferred Stock outstanding at the time such action is taken, provided that no action shall discriminate against any holder of Series A Preferred Stock other than as a result of a difference in the amount of Series A Preferred Stock held by such holders.
10. NOTICES. Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by United States Mail, first class postage paid and will be deemed to have been given when so mailed (a) to the Corporation at its principal executive offices and (b) to any shareholder, at such holder’s address as it appears in the stock records of the Corporation pertaining to the Series A Preferred Stock.
11. DEFINITIONS.
As used in this Certificate of Designation:
“Board of Directors” means the Corporation’s Board of Directors.
“Common Stock” means the Common Stock, $0.01 par value per share, of the Corporation, as described in the Certificate of Incorporation of the Corporation.
“Junior Stock” means capital stock of the Corporation ranking junior in priority to the Series A Preferred Stock as to the payment of dividends, the distribution of assets and on liquidation. Common Stock is Junior Stock.
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“Other Corporate Change” means a capital reorganization or reclassification of the Corporation which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for shares of Common Stock.
“Senior Stock” means capital stock of the Corporation ranking senior in priority to the Series A Preferred Stock as to the payment of dividends, the distribution of assets and on liquidation. The Corporation currently has no outstanding Senior Stock.
“Series A Liquidation Preference Payment” means the amount of $1.00, as adjusted proportionately in the event the Series A Preferred Stock shall be subdivided by any means into a greater number or combined by any means into a lesser number, or a stock dividend is paid in Series A Preferred Stock on the Series A Preferred Stock, but excluding dividends-in-kind pursuant to SECTION 4A.
“Stated Value” means the amount of $1.00, as adjusted for stock splits of the Series A Preferred Stock, stock dividends on the Series A Preferred Stock paid in Series A Preferred Stock (excluding in-kind dividends pursuant to SECTION 4A), and stock combinations of the Series A Preferred Stock.
[SIGNATURE APPEARS ON FOLLOWING PAGE]
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In witness whereof, said Mercury Air Group, Inc., has caused this certificate to be signed by, its President, this ___day of December, 2002.
MERCURY AIR GROUP, INC. | ||||||||
By: | ||||||||
Joseph A. Czyzyk | ||||||||
President |
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310-246-3700 800-929-2299 FAX 310-246-3794
Board of Directors
Special Committee of the Board of Directors
5456 McConnell Avenue
Los Angeles, CA 90066
(i) | Reviewed the draft proxy statement and related documents outlining the Transaction; | ||
(ii) | Analyzed certain publicly available information that we believe to be relevant to our analysis, including the Company’s annual report on Form 10-K for the fiscal year ended (“FYE”) June 30, 2004 and the Company’s quarterly report on Form 10-Q for the quarters ended September 30, 2004 and December 31, 2004; | ||
(iii) | Reviewed certain information including financial forecasts relating to the business, earnings and cash flow of the Company, furnished to us by senior management of Mercury; | ||
(iv) | Reviewed the Company’s projections for FYE June 30, 2004 through 2008 furnished to us by senior management of Mercury; | ||
(v) | Reviewed certain publicly available business and financial information relating to Mercury that we deemed to be relevant; | ||
(vi) | Conducted discussions with members of senior management of Mercury concerning the matters described in clauses (i) through (vi) above, as well as the prospects and strategic objectives of Mercury; | ||
(vii) | Reviewed public information with respect to certain other companies with financial profiles which we deemed to be relevant; and |
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Board of Directors
Special Committee of the Board of Directors
March 21, 2005
(viii) | Conducted such other financial studies, analyses and investigation and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. |
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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Fiscal Year ended June 30, 2004 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 11-1800515 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) | |
5456 McConnell Avenue | ||
Los Angeles, California | 90066 | |
(Address of Principal Executive Offices) | (Zip Code) |
(310) 827-2737
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock — Par Value $.01 | American Stock Exchange Pacific Stock Exchange |
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F-1 | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
F-9 | ||||
EX-21.1 | ||||
EX-23.1 | ||||
EX-31.1 | ||||
EX-31.2 | ||||
EX-32.1 | ||||
EX-32.2 | ||||
EX-99.1 |
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Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(in thousands) | ||||||||||||
Revenue | $ | 322,631 | $ | 280,136 | $ | 232,573 | ||||||
Gallons Sold | 278,448 | 286,873 | 287,651 |
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LEASED | ||||||||||||
OR | ANNUAL | EXPIRATION | ACTIVITIES | FACILITY | ||||||||
LOCATION | OWNED | RENTAL | OF LEASE | AT FACILITY | DESCRIPTION | |||||||
CORPORATE HEADQUARTERS 5456 McConnell Avenue Los Angeles, CA(1) | Leased | $ | 440,000 | December 2021 | Executive and support personnel offices | 22,500 sq. ft. building and parking space | ||||||
MAYTAG OPERATIONS 6145 Lehman Drive Suite 300 Colorado Springs, CO(2) | Owned | N/A | N/A | Landlord, executive and support personnel offices | 8,000 sq. ft. of offices | |||||||
LOS ANGELES INT’L AIRPORT 6851 W. Imperial Highway, Los Angeles, CA | Leased | $ | 823,000 | December 2004 | Cargo hangar, with offices and executive offices rented to customers | 70,245 sq. ft. of offices and cargo warehouse facility on 5.4 acres | ||||||
600 Avion Drive Los Angeles, CA | Leased | $ | 3,006,000 | June 2006 | Cargo handling warehouse with offices | 206,120 sq. ft. of offices and cargo warehouse facility | ||||||
ATLANTA-HARTSFIELD Cargo Building “A” South Cargo Area | Leased | $ | 924,000 | January 2011 | Landlord, cargo handling warehouse with offices | 60,597 sq. ft. of cargo warehouse facility with 9,785 sq. ft. of office space on 2.4 acres of land | ||||||
LONG BEACH OPERATION 4100 Donald Douglas Drive Long Beach, CA | Leased | $ | 101,000 | August 2013 | Service and refueling of commercial and private aircraft | 5,100 sq. ft. of offices and hangar space | ||||||
LESTER B. PEARSON INT’L AIRPORT Vista Cargo Center 6500 Silver Dart, Toronto | Leased | $ | 858,000 | November 2010 | Cargo handling warehouse with offices | 5,670 sq. ft. office space and 50,342 sq. ft. of warehouse space | ||||||
DORVAL INT’L AIRPORT 800 Stuart Graham Blvd. South Dorval, Quebec | Leased | $ | 599,000 | November 2007 | Cargo handling warehouse with offices | 51,000 sq. ft. warehouse and 2,432 sq. ft. of office space | ||||||
MIRABEL INT’L AIRPORT 12005, Rue Cargo A-3, Suite 102 Mirabel, Quebec | Leased | $ | 21,000 | August 2005 | Cargo handling warehouse with offices | 1,200 sq. ft. warehouse and 570 sq. ft. of office space |
(1) | This property was sold to CFK Realty Partners, LLC (“CFK Realty”), a related party of the Company at the time of the sale, in January 2002, however, the related assets are still reported on the Company’s books since CFK Realty is deemed to be a special purpose entity (“SPE”) requiring the financial statements of CFK Realty to be consolidated with those of the Company. In July 2004, CFK Realty underwent a restructuring resulting in CFK Realty no longer being considered a related party of the Company. This restructuring did not impact the Company’s consolidated financial statements. | |
(2) | This property was purchased in May 1995 for $515 thousand and is subject to a first mortgage to U.S. Bank in the sum of $252 thousand at June 30, 2004, repayable with interest at 6.68% in equal monthly installments of approximately $3,024, the last payment due May 2010. |
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High | Low | |||||||
FISCAL 2004: | ||||||||
Quarter ended June 30, 2004 | $ | 7.19 | $ | 4.58 | ||||
Quarter ended March 31, 2004 | 7.19 | 5.00 | ||||||
Quarter ended December 31, 2003 | 6.85 | 4.49 | ||||||
Quarter ended September 30, 2003 | 7.30 | 6.20 | ||||||
FISCAL 2003: | ||||||||
Quarter ended June 30, 2003 | $ | 8.18 | $ | 5.70 | ||||
Quarter ended March 31, 2003 | 7.40 | 6.40 | ||||||
Quarter ended December 31, 2002 | 8.00 | 5.00 | ||||||
Quarter ended September 30, 2002 | 9.10 | 7.00 |
Number of securities to be | Weighted-average | Number of securities remaining | ||||||||||
issued upon exercise of | exercise price of | available for future issuance | ||||||||||
outstanding options, | outstanding options, | under equity compensation plans | ||||||||||
Plan Category | warrants and rights | warrants and rights | (excl. securities reflected in (a) or (b)) | |||||||||
Equity compensation plans approved by security holders | 551,473 | $ | 10.62 | 554,097 | ||||||||
Equity compensation plans not approved by security holders | 3,438 | $ | 14.36 | 0 | ||||||||
Total | 554,911 | $ | 10.63 | 554,097 | ||||||||
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(d) Maximum | ||||||||||||||||
Number (or | ||||||||||||||||
Approximate | ||||||||||||||||
(c) Total Number | Dollar Value) | |||||||||||||||
of Shares | of Shares | |||||||||||||||
(a) Total | (or Units) | (or Units) | ||||||||||||||
Number of | (b) Average | Purchased as | that May Yet Be | |||||||||||||
Shares | Price Paid | Part of Publicly | Purchased Under | |||||||||||||
(or Units) | per Share | Announced Plans | the Plans or | |||||||||||||
Period | Purchased | (or Unit) | or Programs | Programs | ||||||||||||
Month #1 | ||||||||||||||||
April 1, 2004 to April 30, 2004 | 14,500 | $ | 6.17 | N/A | N/A | |||||||||||
Month #2 | ||||||||||||||||
May 1, 2004 to May 31, 2004 | 0 | N/A | N/A | N/A | ||||||||||||
Month #3 | ||||||||||||||||
June 1, 2004 to June 30, 2004 | 0 | N/A | N/A | N/A | ||||||||||||
Total | 14,500 | $ | 6.17 | |||||||||||||
Year Ended June 30, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
INCOME STATEMENT DATA | ||||||||||||||||||||
Operating data Sales and revenues | $ | 385,461 | $ | 337,248 | $ | 288,925 | $ | 378,964 | $ | 260,667 | ||||||||||
Costs and expenses | 372,435 | 324,139 | 274,657 | 359,711 | 238,452 | |||||||||||||||
Gross margin | 13,026 | 13,109 | 14,268 | 19,253 | 22,215 | |||||||||||||||
Selling, general and administrative expenses | 12,885 | 10,818 | 11,771 | 7,929 | 7,223 | |||||||||||||||
Provision for bad debts | 506 | 1,192 | 1,170 | 3,665 | 5,348 | |||||||||||||||
Depreciation and amortization | 2,828 | 2,782 | 3,478 | 3,942 | 4,193 | |||||||||||||||
Settlement costs | 2,414 | |||||||||||||||||||
Interest expense | 972 | 997 | 1,097 | 1,455 | 628 | |||||||||||||||
Other (income) expense, net | (318 | ) | 97 | 987 | (48 | ) | (124 | ) | ||||||||||||
Write-off of deferred financing costs | 1,773 | |||||||||||||||||||
Income (loss) before income taxes | (6,261 | ) | (4,550 | ) | (4,235 | ) | 2,310 | 4,947 | ||||||||||||
Income tax provision (benefit) | (1,178 | ) | (1,567 | ) | (1,815 | ) | 901 | 2,292 | ||||||||||||
Income (loss) from continuing operations, net of taxes | (5,083 | ) | (2,983 | ) | (2,420 | ) | 1,409 | 2,655 | ||||||||||||
Income (loss) from discontinued operations, net of taxes | (1,803 | ) | 185 | 6,937 | 1,480 | (10 | ) | |||||||||||||
Gain (loss) on sale of discontinued operations, net of taxes | 7,501 | (477 | ) | |||||||||||||||||
Extraordinary item, net of taxes | (979 | ) | ||||||||||||||||||
Net income (loss) per share | $ | 615 | $ | (2,798 | ) | $ | 4,517 | $ | 2,412 | $ | 1,666 | |||||||||
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Year Ended June 30, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Income (loss) per share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
From continuing operations, net of taxes | $ | (1.67 | ) | $ | (0.92 | ) | $ | (0.74 | ) | $ | 0.44 | $ | 0.81 | |||||||
From discontinued operations, net of taxes | (0.59 | ) | 0.06 | 2.12 | 0.45 | |||||||||||||||
From gain (loss) on sale of discontinued operations, net of taxes | 2.45 | (0.15 | ) | |||||||||||||||||
Extraordinary item, net of taxes | (0.30 | ) | ||||||||||||||||||
Net income (loss) per share | $ | 0.19 | $ | (0.86 | ) | $ | 1.38 | $ | 0.74 | $ | 0.51 | |||||||||
Diluted: | ||||||||||||||||||||
From continuing operations, net of taxes | $ | (1.67 | ) | $ | (0.92 | ) | $ | (0.72 | ) | $ | 0.42 | $ | 0.76 | |||||||
From discontinued operations, net of taxes | (0.59 | ) | 0.06 | 2.07 | 0.44 | |||||||||||||||
From gain (loss) on sale of discontinued operations, net of taxes | 2.45 | (0.14 | ) | |||||||||||||||||
Extraordinary item, net of taxes | (0.26 | ) | ||||||||||||||||||
Net income (loss) per share | $ | 0.19 | $ | (0.86 | ) | $ | 1.35 | $ | 0.72 | $ | 0.50 | |||||||||
At June 30, | ||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
BALANCE SHEET DATA | ||||||||||||||||||||
Total assets | $ | 105,957 | $ | 132,955 | $ | 136,214 | $ | 152,488 | $ | 134,768 | ||||||||||
Short-term debt (including current portion of long-term debt) | 139 | 4,194 | 14,677 | 7,461 | 6,936 | |||||||||||||||
Long-term debt | 17,790 | 25,501 | 17,516 | 44,560 | 42,358 | |||||||||||||||
Subordinated debt — current | 23,179 | |||||||||||||||||||
Subordinated debt — long-term | 23,445 | 23,030 | 22,844 |
Year Ended June 30, | ||||||||||||||||||||||||
2004 | 2003 | 2002 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Total | Total | Total | ||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
MercFuel | $ | 322,631 | 83.7 | % | $ | 280,136 | 83.1 | % | $ | 232,573 | 80.5 | % | ||||||||||||
Air Cargo | 39,549 | 10.3 | 32,691 | 9.7 | 28,124 | 9.7 | ||||||||||||||||||
Maytag | 23,281 | 6.0 | 24,421 | 7.2 | 28,228 | 9.8 | ||||||||||||||||||
Total revenues | $ | 385,461 | 100 | % | $ | 337,248 | 100 | % | $ | 288,925 | 100 | % | ||||||||||||
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% of | % of | % of | ||||||||||||||||||||||
Unit | Unit | Unit | ||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||
Gross margin(1): | ||||||||||||||||||||||||
MercFuel | $ | 6,080 | 1.9 | % | $ | 5,926 | 2.1 | % | $ | 6,581 | 2.8 | % | ||||||||||||
Air Cargo | 1,800 | 4.6 | 2,585 | 8.0 | 898 | 3.2 | ||||||||||||||||||
Maytag | 5,146 | 22.1 | 4,598 | 18.8 | 6,789 | 24.1 | ||||||||||||||||||
Total gross margin | $ | 13,026 | 3.4 | % | $ | 13,109 | 3.9 | % | $ | 14,268 | 4.9 | % | ||||||||||||
Year Ended June 30, | ||||||||||||||||||||||||
2004 | 2003 | 2002 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Total | Total | Total | ||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 12,885 | 3.3 | % | $ | 10,818 | 3.2 | % | $ | 11,771 | 4.0 | % | ||||||||||||
Provision for bad debts | 506 | 0.1 | 1,192 | 0.4 | 1,170 | 0.4 | ||||||||||||||||||
Depreciation and amortization | 2,828 | 0.7 | 2,782 | 0.8 | 3,478 | 1.2 | ||||||||||||||||||
Interest expense and other | 654 | 0.2 | 1,094 | 0.3 | 2,084 | 0.7 | ||||||||||||||||||
Settlement costs | 2,414 | 0.6 | ||||||||||||||||||||||
Write off of deferred financing costs | 1,773 | 0.5 | ||||||||||||||||||||||
Loss from continuing operations before income taxes | (6,261 | ) | (1.6 | ) | (4,550 | ) | (1.3 | ) | (4,235 | ) | (1.4 | ) | ||||||||||||
Income tax benefit | (1,178 | ) | (0.3 | ) | (1,567 | ) | (0.4 | ) | (1,815 | ) | (0.6 | ) | ||||||||||||
Loss from continuing operations, net of taxes | (5,083 | ) | (1.3 | ) | (2,983 | ) | (0.9 | ) | (2,420 | ) | (0.8 | ) | ||||||||||||
Income (loss) from discontinued operations, net of taxes | (1,803 | ) | (0.5 | ) | 185 | 0.1 | 6,937 | 2.4 | ||||||||||||||||
Gain on sale of discontinued operations, net of taxes | 7,501 | 2.0 | ||||||||||||||||||||||
Net income (loss) | $ | 615 | 0.2 | % | $ | (2,798 | ) | (0.8 | )% | $ | 4,517 | 1.6 | % | |||||||||||
(1) | Gross margin as used here and throughout Management’s Discussion and Analysis includes certain selling, general and administrative costs which are charged directly to the operating units, but excludes depreciation and amortization expenses and selling, general and administrative expenses. |
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Fiscal 2004 | Fiscal 2003 | |||||||
(in thousands of dollars) | ||||||||
Income (loss) from: | ||||||||
Continuing operations, net of taxes | $ | (5,083 | ) | $ | (2,983 | ) | ||
Discontinued operations, net of taxes | (1,803 | ) | 185 | |||||
Sale of discontinued operations, net of taxes | 7,501 | |||||||
Net income (loss) per share | $ | 615 | $ | (2,798 | ) | |||
Income (loss) per common share basic and diluted: | ||||||||
Continuing operations, net of taxes | $ | (1.67 | ) | $ | (0.92 | ) | ||
Discontinued operations, net of taxes | (0.59 | ) | 0.06 | |||||
Sale of discontinued operations, net of taxes | 2.45 | |||||||
Net income (loss) per share | $ | 0.19 | $ | (0.86 | ) | |||
1) | $1,799 thousand net expense associated with the settlement agreement relating to litigation with J O Hambro (the “Hambro Settlement); | ||
2) | $615 thousand net expense associated with the settlement agreement with David H. Murdock and related parties (collectively “Murdock”): | ||
3) | $1,680 thousand expense for contractual termination benefits paid to the chairman of the board of directors upon his retirement as chairman and director. |
Fiscal 2004 | Fiscal 2003 | |||||||
Commercial Sales | ||||||||
Revenue ($000) | $ | 252,824 | $ | 233,425 | ||||
Volume (thousand gallons) | 239,244 | 258,455 | ||||||
Corporate Aviation/Fractional Jet | ||||||||
Revenue ($000) | $ | 69,808 | $ | 46,712 | ||||
Volume (thousand gallons) | 39,204 | 28,418 | ||||||
MercFuel Total | ||||||||
Revenue ($000) | $ | 322,631 | $ | 280,136 | ||||
Volume (thousand gallons) | 278,448 | 286,873 | ||||||
Gross margin ($000) | $ | 6,080 | $ | 5,926 |
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Fiscal 2004 | Fiscal 2003 | |||||||
Revenue ($000) | ||||||||
Cargo handling | $ | 25,833 | $ | 25,243 | ||||
Cargo logistics services | 8,867 | 3,658 | ||||||
Cargo general sales agent services | 4,849 | 3,790 | ||||||
Air Cargo total | $ | 39,549 | $ | 32,691 | ||||
Gross margin ($000) | ||||||||
Cargo handling | $ | 2,243 | $ | 2,748 | ||||
Cargo logistics services | 1,734 | 618 | ||||||
Cargo general sales agent services | (704 | ) | 756 | |||||
Cargo administrative | (1,473 | ) | (1,537 | ) | ||||
Air Cargo total | $ | 1,800 | $ | 2,585 |
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Fiscal 2004 | Fiscal 2003 | |||||||
Revenue ($000) | ||||||||
Refueling | $ | 8,439 | $ | 8,703 | ||||
Air Terminal | 7,675 | 8,199 | ||||||
BOS | 5,963 | 5,854 | ||||||
Weather Data | 1,165 | 1,615 | ||||||
Other | 39 | 50 | ||||||
Total Maytag | $ | 23,281 | $ | 24,421 |
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Thousands | ||||
For the Fiscal Year Ending June 30, | of dollars | |||
2005 | $ | 7,187 | ||
2006 | 6,581 | |||
2007 | 3,286 | |||
2008 | 2,668 | |||
2009 | 2,402 | |||
Thereafter | 5,376 | |||
Total minimum payments | $ | 27,500 | ||
Thousands | ||||
For the Fiscal Year Ending June 30, | of dollars | |||
2005 | $ | 139 | ||
2006 | 149 | |||
2007 | 160 | |||
2008 | 171 | |||
2009 | 183 | |||
Thereafter | 17,127 | |||
Total minimum payments | $ | 17,929 | ||
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Thousands | ||||
For the Fiscal Year Ending June 30, | of dollars | |||
2005 | $ | 639 | ||
Total minimum payments | $ | 639 | ||
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Expected Maturity Date | ||||||||||||||||||||||||||||||||
June-05 | June-06 | June-07 | June-08 | June-09 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
Fixed Rate Other Debt | $ | 139,000 | $ | 149,000 | $ | 160,000 | $ | 171,000 | $ | 183,000 | $ | 3,127,000 | $ | 3,929,000 | $ | 3,929,000 | ||||||||||||||||
Average Interest Rate | 6.93 | % | 6.93 | % | 6.94 | % | 6.95 | % | 6.95 | % | 7.17 | % | 7.12 | % | ||||||||||||||||||
Variable Rate Tax Exempt Bonds | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 14,000,000 | $ | 14,000,000 | $ | 14,000,000 | ||||||||||||||||
Average Interest Rate | n/a | n/a | n/a | n/a | n/a | n/a | 0.972 | % |
(1) | The interest rate on the variable rate tax exempt bonds is based upon a weekly remarketing of the bonds. |
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(a)(1)Financial Statements | ||||
Report of Independent Registered Public Accounting Firm | F-1 | |||
Consolidated Balance Sheets as of June 30, 2004 and 2003 | F-2 | |||
Consolidated Statements of Operations for each of the three years in the period ended June 30, 2004 | F-4 | |||
Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2004 | F-5 | |||
Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended June 30, 2004 | F-7 | |||
Notes to Consolidated Financial Statements | F-9 | |||
(a)(2)Supplemental Schedule for each of the three years in the period ended June 30, 2004: | ||||
Schedule II — Valuation and Qualifying Accounts | F-29 |
Exhibit | ||
No. | Description | |
2.1 | Stock Purchase Agreement Dated as of October 28, 2003. By and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc.(28) | |
2.2 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of December 10, 2003.(31) | |
2.3 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of January 14, 2004.(31) | |
2.4 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of February 13, 2004. (32) | |
2.5 | Settlement Statement dated as of April 12, 2004.(33) | |
2.6 | Closing Escrow Agreement dated as of April 5, 2004 among Allied and Wachovia Bank National, as escrow agent. (33) | |
3.1 | Certificate of Incorporation.(17) | |
3.2 | Amended and Restated Bylaws of Mercury Air Group, Inc. adopted December 7, 2002.(25) | |
3.3 | Certificate of Designations of Series A 8% Cumulative Convertible Preferred Stock.(27) | |
4.1 | Loan Agreement between California Economic Development Financing Authority and Mercury Air Group, Inc. relating to $19,000,000 California Economic Development Financing Authority Variable Rate Demand Airport Facilities Revenue Bonds, Series 1998 (Mercury Air Group, Inc. Project) dated as of April 1, 1998.(2) | |
4.2 | Securities Purchase Agreement dated September 10, 1999 by and among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(12) | |
4.3 | Amendment No. 1 dated as of September 30, 2000 by and between J.H. Whitney Mezzanine, L.P. and Mercury Air Group, Inc. to the Securities Agreement.(16) | |
4.4 | Waiver and Consent Agreement dated as of December 29, 2000 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(17) | |
4.5 | Waiver and Consent Agreement dated as of July 2, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(18) |
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Exhibit | ||
No. | Description | |
4.6 | Waiver Agreement dated as of September 25, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(18) | |
4.7 | Amendment No. 2 dated as of September 30, 2001 by and between J.H. Whitney Mezzanine Fund, L.P. and Mercury Air Group, Inc. to the Securities Purchase Agreement.(19) | |
4.8 | Waiver Agreement dated as of November 26, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(21) | |
4.9 | Waiver Agreement dated as of December 21, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(21) | |
4.10 | Waiver Agreement dated as of June 26, 2002 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(24) | |
4.11 | Amendment No. 3 to Securities Purchase Agreement by and between Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P. dated as of December 30, 2002.(26) | |
4.12 | Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Warrant dated September 10, 1999.(26) | |
4.13 | Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Senior Subordinated Promissory Note dated September 10, 1999.(26) | |
4.14 | Security Agreement by and between Mercury Air Group, Inc. and each of its subsidiaries hereto as Obligors and J.H. Whitney Mezzanine Fund, L.P. as the Lenders, dated as of December 30, 2002.(26) | |
4.15 | Subordination Agreement among J.H. Whitney Mezzanine Fund, L.P. Foothill Capital Corporation, as Agent and Mercury Air Group, Inc. and certain of its subsidiaries signatory thereto, dated as of December 30, 2002.(26) | |
4.16 | Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain subsidiaries signatory thereto, dated as of December 30, 2002.(26) | |
4.17 | First Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated March 12, 2003.(30) | |
4.18 | Second Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated March 31, 2003.(30) | |
4.19 | Third Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated July 16, 2003.(30) | |
4.20 | Fourth Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated August 1, 2003.(30) | |
4.21 | Amendment No. 4 to Securities Purchase Agreement by and between Mercury Air Group, Inc. and Allied Capital Corporation, as Assignee of J.H. Whitney Mezzanine Fund, L.P. dated as of October 28, 2003(28) | |
4.22 | Assignment of Note dated as of October 28, 2003 between Allied Capital Corporation and J.H. Whitney Mezzanine Fund, L.P.(28) | |
4.23 | Second Amended and Restated Allied Capital Corporation 12% Senior Subordinated Promissory Note dated September 10, 1999(28) | |
4.24 | Second Amended and Restated Allied Capital Corporation Warrant dated October 28, 2003(28) | |
4.25 | Securities Purchase Agreement dated as of October 28, 2003 by and among J.H. Whitney Mezzanine Fund, L.P. and J.H. Whitney Mezzanine Debt Fund, L.P., Allied Capital Corporation and Mercury Air Group, Inc.(28) | |
4.26 | Second Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Warrant dated October 28, 2003(28) | |
4.27 | Fifth Amendment to Security and Loan Agreement and Forbearance Agreement dated as of December 5, 2003 by and among Wells Fargo Foothill, Mercury Air Group, Inc. and certain of its subsidiaries.(31) | |
4.31 | Amendment letter to Forbearance Term and New Covenant Default dated as of February 16, 2004. (32) |
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Exhibit | ||
No. | Description | |
10.1 | Mercury Air Group, Inc.’s 1990 Long-Term Incentive Plan.(4)* | |
10.2 | Mercury Air Group, Inc.’s 1990 Directors Stock Option Plan.(1)* | |
10.3 | Memorandum Dated September 15, 1997 regarding Summary of Officer Life Insurance Policies with Benefits Payable to Officers or Their Designated Beneficiaries.(8)* | |
10.4 | Non-Qualified Stock Option Agreement dated March 21, 1996, by and between Frederick H. Kopko and Mercury Air Group, Inc.(6)* | |
10.5 | Mercury Air Group, Inc.’s 1998 Long-Term Incentive Plan.(10)* | |
10.6 | Mercury Air Group, Inc.’s 1998 Directors Stock Option Plan.(10)* | |
10.7 | Revolving Credit and Term Loan Agreement dated as of March 2, 1999 by and among Mercury Air Group, Inc., The Banks listed on Schedule 1 thereto, and The Fleet National Bank f/k/a BankBoston, N.A., as Agent.(11) | |
10.8 | First Amendment to Revolving Credit and Term Loan Agreement dated as of September 10, 1999.(14) | |
10.9 | Second Amendment to Revolving Credit and Term Loan Agreement dated as of March 31, 2000.(14) | |
10.10 | Third Amendment, Waiver and Consent to Revolving Credit and Term Loan Agreement dated as of August 11, 2000.(14) | |
10.11 | The Company’s 401(k) Plan consisting of CNA Trust Corporation. Regional Prototype Defined Contribution Plan and Trust and Adoption Agreement.(14)* | |
10.12 | Employment Agreement dated July 31, 2000 between the Company and Dr. Philip J. Fagan.(15)* | |
10.13 | Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of November 14, 2000.(16) | |
10.14 | Amendment No. 1 to Mercury Air Group, Inc. 1998 Long-Term Incentive Option Plan as of August 22, 2000.(16)* | |
10.15 | Amendment No. 1 to Mercury Air Group, Inc. 1998 Directors Stock Option Plan as of August 22, 2000.(16)* | |
10.16 | Limited Waiver letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 21, 2001.(18) | |
10.17 | Fifth Amendment to Revolving Credit and Term loan Agreement dated as of September 21, 2001.(18) | |
10.18 | Limited Consent letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 30, 2001.(19) | |
10.19 | Limited waiver and Consent to Revolving Credit and Term Loan Agreement dated as of December 31, 2001.(21) | |
10.20 | 2002 Management Stock Purchase Plan.(22) | |
10.21 | Amended and Restated Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Joseph A. Czyzyk.(22)* | |
10.22 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Wayne J. Lovett(22)* | |
10.23 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and John Enticknap (22)* | |
10.24 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Mark Coleman(22)* | |
10.25 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Steven S. Antonoff (22)* | |
10.26 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Robert Schlax(22)* | |
10.27 | Limited waiver and Consent to Revolving Credit and Term Loan Agreement dated as of June 27, 2002.(24) |
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Exhibit | ||
No. | Description | |
10.28 | Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury Air Group, Inc. dated December 15, 2001.(24) | |
10.29 | Amendment to Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury Air Group, Inc.(24) | |
10.30 | Promissory Note by CFK Partners, LLC in favor of Mercury Air Group, Inc.(24) | |
10.31 | Limited Waiver and Consent to Revolving Credit and Term Loan Agreement dated as June 27, 2002.(24) | |
10.32 | Amendment No. 1 to Amended and Restated Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Joseph A. Czyzyk.*(24) | |
10.33 | Lease dated December 31, 2001 by and between CFK Realty Partners, LLC. and Mercury Air Group, Inc.(30) | |
10.34 | Settlement Agreement dated December 12, 2003 by and among (i) J O Hambro Capital Management Group Limited, (ii) J O Hambro Capital Management Limited, (iii) American Opportunity Trust PLC, (iv) The Trident North Atlantic Fund, and (v) Mercury Air Group, Inc.(29) | |
10.35 | Settlement Agreement by and between: 1) David H. Murdock as trustee of the David H. Murdock Living Trust dated May 28, 1996, as amended, d/b/a Pacific Holding Company and using nominee PCS001 and 2) Mercury Air Group, Inc. dated July 16, 2004; (34) | |
10.36 | Loan Agreement dated as of July 29, 2004 by and among Bank of America N.A, Mercury Air Group, Inc. and certain subsidiaries. (35) | |
21.1 | Subsidiaries of Registrant. | |
23.1 | Consent of PricewaterhouseCoopers LLP with respect to incorporation of their report on the audited financial statements included in this Annual Report on Form 10-K in the Company’s Registration Statement on Form S-8 (Registration Statement No. 33-69414). | |
31.1 | Section 302 Certification of Chief Executive Officer | |
31.2 | Section 302 Certification of Chief Financial Officer | |
32.1 | Section 906 Certification of Chief Executive Officer | |
32.2 | Section 906 Certification of Chief Financial Officer | |
99.1 | Amended and Restated Partnership Agreement dated as of July 30, 2004 of CK Partners by and among Frederick H. Kopko, Jr. and Joseph A. Czyzyk. |
* | Denotes managements’ contract or compensation plan or arrangement. | |
(1) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 10, 1993 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(2) | All such documents were previously filed as Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and are incorporated herein by reference. | |
(3) | All such documents were previously filed as Exhibits to the Company’s Registration Statement No. 33-39044 on Form S-2 and are incorporated herein by reference. | |
(4) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 2, 1992 Annual Meeting of Stockholders. | |
(5) | All such documents were previously filed as Exhibits to the Company’s Registration Statement No. 33-65085 on Form S-1 and are incorporated herein by reference. | |
(6) | All such documents were previously filed as Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and are incorporated herein by reference. |
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(7) | All such documents were previously filed as Exhibits to the Company’s Report on Form 8-K filed September 13, 1996 and are incorporated herein by reference. | |
(8) | Such document was previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1997 and is incorporated herein by reference. | |
(9) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1998 and are incorporated herein by reference. | |
(10) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 3, 1998 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(11) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and are incorporated herein by reference. | |
(12) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1999 and are incorporated herein by reference. | |
(13) | Such document was previously filed as an Exhibit to the Company’s current Report on Form 8-K on August 11, 2000 and is incorporated herein by reference. | |
(14) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000 and is incorporated herein by reference. | |
(15) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and are incorporated herein by reference. | |
(16) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000 and are incorporated herein by reference. | |
(17) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and are incorporated herein by reference. | |
(18) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001 and are incorporated herein by reference. | |
(19) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and are incorporated herein by reference. | |
(20) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the November 7, 2001 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(21) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 and are incorporated herein by reference. | |
(22) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on June 5, 2002 and is incorporated herein by reference. | |
(23) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 11, 2002 and is incorporated herein by reference. | |
(24) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2002 and are incorporated herein by reference. | |
(25) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 7, 2002 and is incorporated herein by reference. | |
(26) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 30, 2002 and is incorporated herein by reference. | |
(27) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and are incorporated herein by reference. |
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(28) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on October 28, 2003 and is incorporated herein by reference. | |
(29) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 12, 2003 and is incorporated herein by reference. | |
(30) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2003 and are incorporated herein by reference. | |
(31) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2003 and are incorporated herein by reference. | |
(32) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and are incorporated herein by reference. | |
(33) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 22, 2004 and dated April 12, 2004 and is incorporated herein by reference. | |
(34) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 16, 2004 and is incorporated herein by reference. | |
(35) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 30, 2004 and is incorporated herein by reference. |
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MERCURY AIR GROUP, INC. | ||||
By: | /s/ JOSEPH CZYZYK | |||
Joseph Czyzyk | ||||
Acting Chairman of the Board | ||||
/s/ JOSEPH CZYZYK | Dated: September 28, 2004 | |
Acting Chairman of the Board and Chief | ||
Executive Officer | ||
/s/ ROBERT SCHLAX | Dated: September 28, 2004 | |
Chief Financial Officer | ||
Additional Directors: | ||
/s/ GARY J. FERACOTA | Dated: September 28, 2004 | |
Director | ||
/s/ FREDERICK H. KOPKO, JR. | Dated: September 28, 2004 | |
Director | ||
/s/ SERGEI KOUZMINE | Dated: September 28, 2004 | |
Director | ||
/s/ MICHAEL J. JANOWIAK | Dated: September 28, 2004 | |
Director | ||
/s/ ANGELO PUSATERI | Dated: September 28, 2004 | |
Director |
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September 21, 2004
F-1
Table of Contents
June 30, | June 30, | |||||||
2004 | 2003 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 4,690,000 | $ | 2,802,000 | ||||
Restricted cash | 15,414,000 | |||||||
Trade accounts receivable, net of allowance for doubtful accounts of $1,492,000 and $1,767,000 at June 30, 2004 and 2003, respectively | 50,974,000 | 46,753,000 | ||||||
Inventories | 1,165,000 | 4,422,000 | ||||||
Prepaid expenses and other current assets, net of allowance for doubtful notes of $239,000 at June 30, 2003 | 5,696,000 | 5,241,000 | ||||||
Deferred income taxes | 1,451,000 | 901,000 | ||||||
TOTAL CURRENT ASSETS | 79,390,000 | 60,119,000 | ||||||
PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization of $24,836,000 and $61,061,000 at June 30, 2004 and 2003, respectively | 10,349,000 | 58,844,000 | ||||||
NOTES RECEIVABLE, net of allowance for doubtful notes of $1,025,000 and $509,000 at June 30, 2004 and 2003, respectively | 521,000 | 1,815,000 | ||||||
DEFERRED INCOME TAXES | 611,000 | 2,284,000 | ||||||
GOODWILL | 4,389,000 | 4,389,000 | ||||||
OTHER INTANGIBLE ASSETS, NET | 700,000 | 1,033,000 | ||||||
RESTRICTED CASH | 8,989,000 | |||||||
OTHER ASSETS, NET | 1,008,000 | 4,471,000 | ||||||
TOTAL ASSETS | $ | 105,957,000 | $ | 132,955,000 | ||||
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 33,552,000 | $ | 34,677,000 | ||||
Accrued expenses and other current liabilities | 11,825,000 | 9,244,000 | ||||||
Current portion of long-term debt | 139,000 | 4,194,000 | ||||||
TOTAL CURRENT LIABILITIES | 45,516,000 | 48,115,000 | ||||||
LONG-TERM DEBT | 17,790,000 | 25,501,000 | ||||||
SENIOR SUBORDINATED NOTE | 23,445,000 | |||||||
DEFERRED GAIN | 8,130,000 | |||||||
OTHER LONG TERM LIABILITY | 669,000 | 918,000 | ||||||
DEFERRED RENT | 1,257,000 | 1,885,000 | ||||||
MINORITY INTEREST | 182,000 | 180,000 | ||||||
TOTAL LIABILITIES | 73,544,000 | 100,044,000 | ||||||
COMMITMENTS AND CONTINGENCIES (NOTE 17) | ||||||||
MANDATORILY REDEEMABLE PREFERRED STOCK, Series A — $0.01 par value; 1,000,000 shares authorized; 462,627 shares outstanding at June 30, 2004 and 2003 | 518,000 | 481,000 |
F-2
Table of Contents
June 30, | June 30, | |||||||
2004 | 2003 | |||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred Stock — $.01 par value; 2,000,000 shares authorized; no shares outstanding | ||||||||
Common Stock — $.01 par value; 18,000,000 shares authorized; 2,954,819 shares outstanding at June 30, 2004; 3,293,568 shares outstanding at June 30, 2003 | 30,000 | 33,000 | ||||||
Additional paid-in capital | 20,737,000 | 22,496,000 | ||||||
Retained earnings | 14,596,000 | 14,018,000 | ||||||
Accumulated other comprehensive income (loss) | (46,000 | ) | (86,000 | ) | ||||
Treasury stock, 22,000 shares at June 30, 2004 | (120,000 | ) | ||||||
Notes receivable from officers | (3,302,000 | ) | (4,031,000 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 31,895,000 | 32,430,000 | ||||||
TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY | $ | 105,957,000 | $ | 132,955,000 | ||||
F-3
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Sales and revenues: | ||||||||||||
Sales | $ | 322,631,000 | $ | 280,136,000 | $ | 232,573,000 | ||||||
Service revenues | 62,830,000 | 57,112,000 | 56,352,000 | |||||||||
Total sales and revenues | 385,461,000 | 337,248,000 | 288,925,000 | |||||||||
Costs and expenses: | ||||||||||||
Costs of sales | 311,728,000 | 269,238,000 | 221,668,000 | |||||||||
Operating expenses | 60,707,000 | 54,901,000 | 52,989,000 | |||||||||
Total costs and expenses | 372,435,000 | 324,139,000 | 274,657,000 | |||||||||
Gross margin (excluding depreciation and amortization) | 13,026,000 | 13,109,000 | 14,268,000 | |||||||||
Expenses (income): | ||||||||||||
Selling, general and administrative | 12,885,000 | 10,818,000 | 11,771,000 | |||||||||
Provision for bad debts | 506,000 | 1,192,000 | 1,170,000 | |||||||||
Depreciation and amortization | 2,828,000 | 2,782,000 | 3,478,000 | |||||||||
Interest expense | 972,000 | 997,000 | 1,097,000 | |||||||||
Settlement costs | 2,414,000 | |||||||||||
Interest income | (318,000 | ) | (99,000 | ) | (68,000 | ) | ||||||
Loss on sale of property | 70,000 | |||||||||||
Expenses of discontinued stock offering | 985,000 | |||||||||||
Write-off of deferred financing costs | 1,773,000 | |||||||||||
Write-down of investments | 196,000 | |||||||||||
Total expenses (income) | 19,287,000 | 17,659,000 | 18,503,000 | |||||||||
Loss from continuing operations before income tax benefit | (6,261,000 | ) | (4,550,000 | ) | (4,235,000 | ) | ||||||
Income tax benefit | (1,178,000 | ) | (1,567,000 | ) | (1,815,000 | ) | ||||||
Loss from continuing operations, net of taxes | (5,083,000 | ) | (2,983,000 | ) | (2,420,000 | ) | ||||||
Discontinued operations: | ||||||||||||
Income (loss) from discontinued operations, net of income tax provision (benefit) of $(1,157,000), $97,000 and $4,636,000 in 2004, 2003 and 2002, respectively | (1,803,000 | ) | 185,000 | 6,937,000 | ||||||||
Gain on sale of discontinued operations, net of income tax provision of $4,816,000 | 7,501,000 | |||||||||||
Net income (loss) | 615,000 | (2,798,000 | ) | 4,517,000 | ||||||||
Accrued preferred stock dividends | (37,000 | ) | (19,000 | ) | ||||||||
Net income (loss) applicable to common stockholders | $ | 578,000 | $ | (2,817,000 | ) | $ | 4,517,000 | |||||
Income (loss) per common share: | ||||||||||||
Basic: | ||||||||||||
From continuing operations, net of taxes | $ | (1.67 | ) | $ | (0.92 | ) | $ | (0.74 | ) | |||
From discontinued operations, net of taxes | (0.59 | ) | 0.06 | 2.12 | ||||||||
From sale of discontinued operations, net of taxes | 2.45 | |||||||||||
Net income (loss) per share | $ | 0.19 | $ | (0.86 | ) | $ | (1.38 | ) | ||||
Diluted: | ||||||||||||
From continuing operations, net of taxes | $ | (1.67 | ) | $ | (0.92 | ) | $ | (0.72 | ) | |||
From discontinued operations, net of taxes | (0.59 | ) | 0.06 | 2.07 | ||||||||
From sale of discontinued operations, net of taxes | 2.45 | |||||||||||
Net income (loss) per share | $ | 0.19 | $ | (0.86 | ) | $ | 1.35 | |||||
F-4
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income (loss) | $ | 615,000 | $ | (2,798,000 | ) | $ | 4,517,000 | |||||
Add: Loss from discontinued operations (RPA) | 170,000 | |||||||||||
Income (loss) from continuing operations | 615,000 | (2,798,000 | ) | 4,687,000 | ||||||||
Adjustments to derive cash flows from operating activities: | ||||||||||||
(Gain) loss on sale of facilities and properties | (12,285,000 | ) | 24,000 | (8,929,000 | ) | |||||||
Bad debt expense | 652,000 | 1,648,000 | 1,358,000 | |||||||||
Depreciation and amortization | 7,306,000 | 7,963,000 | 9,258,000 | |||||||||
Deferred income taxes | 1,223,000 | (2,052,000 | ) | (1,757,000 | ) | |||||||
Deferred rent | (877,000 | ) | (58,000 | ) | 589,000 | |||||||
Compensation expense related to remeasurement of stock options | 318,000 | 87,000 | ||||||||||
Expense related to discount of executive stock purchase | 792,000 | |||||||||||
Executive loan amortization | 549,000 | 404,000 | 34,000 | |||||||||
Amortization of senior subordinated note discount | 132,000 | 266,000 | 192,000 | |||||||||
Write off of deferred financing costs | 1,773,000 | |||||||||||
Write down of investments | 196,000 | |||||||||||
Amortization of deferred financing costs | 384,000 | 558,000 | ||||||||||
Executive compensation used to purchase preferred stock | 204,000 | |||||||||||
Executive compensation used to exercise stock options | 174,000 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Trade accounts receivable | (13,335,000 | ) | (831,000 | ) | 4,602,000 | |||||||
Inventories | 433,000 | (1,437,000 | ) | 1,084,000 | ||||||||
Prepaid expenses and other current assets | (1,305,000 | ) | (2,198,000 | ) | (160,000 | ) | ||||||
Accounts payable | 3,569,000 | (773,000 | ) | 3,685,000 | ||||||||
Accrued expenses and other current liabilities | 6,900,000 | 1,426,000 | (1,593,000 | ) | ||||||||
Net cash provided by (used in) operating activities | (6,039,000 | ) | 4,807,000 | 13,929,000 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Decrease (increase) in restricted cash | (24,403,000 | ) | 3,780,000 | (3,780,000 | ) | |||||||
Increase in other assets | (280,000 | ) | (1,080,000 | ) | (437,000 | ) | ||||||
Decrease (increase) in notes receivable | 1,413,000 | 343,000 | (78,000 | ) | ||||||||
Proceeds from sale of facilities and properties | 73,753,000 | 82,000 | 17,068,000 | |||||||||
Additions to property, equipment and leaseholds | (5,020,000 | ) | (4,065,000 | ) | (4,500,000 | ) | ||||||
Net cash provided by (used in) investing activities | 45,463,000 | (940,000 | ) | 8,273,000 | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net additions to (reduction of) debt instruments | 1,489,000 | (6,833,000 | ) | (19,828,000 | ) | |||||||
Early retirement of debt | (37,255,000 | ) | (13,285,000 | ) | ||||||||
Proceeds from refinancing | 16,923,000 | |||||||||||
Repurchase of stock for executive plan | (3,934,000 | ) | ||||||||||
Increase in deferred financing costs | (3,550,000 | ) | ||||||||||
Repurchase of common stock | (1,824,000 | ) | (370,000 | ) | (311,000 | ) | ||||||
Proceeds from issuance of preferred stock | 259,000 | |||||||||||
Proceeds from exercise of stock options | 14,000 | 72,000 | ||||||||||
Proceeds from issuance of common stock | 40,000 | |||||||||||
Net cash used in financing activities | (37,576,000 | ) | (6,784,000 | ) | (24,033,000 | ) | ||||||
Effect of exchange rate changes on cash | 40,000 | 154,000 | (88,000 | ) | ||||||||
F-5
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS | 1,888,000 | (2,763,000 | ) | (1,919,000 | ) | |||||||
Net cash provided by discontinued operations (RPA) | 3,598,000 | |||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 2,802,000 | 5,565,000 | 3,886,000 | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | 4,690,000 | $ | 2,802,000 | $ | 5,565,000 | |||||||
CASH PAID DURING THE YEAR FOR: | ||||||||||||
Interest | $ | 5,038,000 | $ | 5,383,000 | $ | 5,786,000 | ||||||
Income taxes | $ | 997,000 | $ | 5,176,000 | $ | 470,000 | ||||||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||
Adjustment of warrants on subordinated note | $ | 43,000 | ||||||||||
Note receivable due to sale of property | $ | 570,000 |
F-6
Table of Contents
Common Stock | Accumulated | |||||||||||||||||||||||||||||||
Additional | Notes | Other | ||||||||||||||||||||||||||||||
Number of | Paid-in | Retained | Receivable | Treasury | Comprehensive | |||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | From Officers | Stock | Income (Loss) | Total | |||||||||||||||||||||||||
Balances, June 30, 2001 | 3,288,340 | $ | 33,000 | $ | 21,475,000 | $ | 12,472,000 | $ | (533,000 | ) | $ | (228,000 | ) | $ | 33,219,000 | |||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | 4,517,000 | 4,517,000 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | (88,000 | ) | (88,000 | ) | ||||||||||||||||||||||||||||
Comprehensive income | 4,429,000 | |||||||||||||||||||||||||||||||
Common stock issued on exercise of options | 12,110 | 40,000 | 40,000 | |||||||||||||||||||||||||||||
Note receivable from sale of stock | (3,934,000 | ) | (3,934,000 | ) | ||||||||||||||||||||||||||||
Value of remeasured stock options | 110,000 | 110,000 | ||||||||||||||||||||||||||||||
Repurchase of common stock | (29,600 | ) | (194,000 | ) | (117,000 | ) | (311,000 | ) | ||||||||||||||||||||||||
Executive compensation related to 2002 Management Stock Purchase Plan | 792,000 | 792,000 | ||||||||||||||||||||||||||||||
Amortization of note from executive stock plan | 32,000 | 32,000 | ||||||||||||||||||||||||||||||
Revaluation of warrants issued in connection with Senior Subordinated Note | 43,000 | 43,000 | ||||||||||||||||||||||||||||||
Balances, June 30, 2002 | 3,270,850 | $ | 33,000 | $ | 22,266,000 | $ | 16,872,000 | $ | (4,435,000 | ) | $ | (316,000 | ) | $ | 34,420,000 | |||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net loss | (2,798,000 | ) | (2,798,000 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | 230,000 | 230,000 | ||||||||||||||||||||||||||||||
Comprehensive loss | (2,568,000 | ) | ||||||||||||||||||||||||||||||
Common stock issued on exercise of options | 73,568 | 1,000 | 245,000 | 246,000 | ||||||||||||||||||||||||||||
Remeasurement of stock options | 318,000 | 318,000 | ||||||||||||||||||||||||||||||
Amortization of note from executive stock plan | 404,000 | 404,000 | ||||||||||||||||||||||||||||||
Repurchase of common stock | (50,850 | ) | (1,000 | ) | (333,000 | ) | (37,000 | ) | (371,000 | ) | ||||||||||||||||||||||
Accrual of preferred stock dividends | (19,000 | ) | (19,000 | ) | ||||||||||||||||||||||||||||
F-7
Table of Contents
Common Stock | Accumulated | |||||||||||||||||||||||||||||||
Additional | Notes | Other | ||||||||||||||||||||||||||||||
Number of | Paid-in | Retained | Receivable | Treasury | Comprehensive | |||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | From Officers | Stock | Income (Loss) | Total | |||||||||||||||||||||||||
Balances, June 30, 2003 | 3,293,568 | $ | 33,000 | $ | 22,496,000 | $ | 14,018,000 | $ | (4,031,000 | ) | $ | (86,000 | ) | $ | 32,430,000 | |||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | 615,000 | 615,000 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 40,000 | 40,000 | ||||||||||||||||||||||||||||||
Comprehensive income | 655,000 | |||||||||||||||||||||||||||||||
Common stock issued on exercise of options | 4,851 | 13,000 | 13,000 | |||||||||||||||||||||||||||||
Tax benefit on options exercised | 26,000 | 26,000 | ||||||||||||||||||||||||||||||
Write off of officer notes receivable | (15,000 | ) | 340,000 | (120,000 | ) | 205,000 | ||||||||||||||||||||||||||
Amortization of note from executive stock plan | 389,000 | 389,000 | ||||||||||||||||||||||||||||||
Repurchase of common stock | (343,600 | ) | (3,000 | ) | (1,783,000 | ) | (1,786,000 | ) | ||||||||||||||||||||||||
Accrual of preferred stock dividends | (37,000 | ) | (37,000 | ) | ||||||||||||||||||||||||||||
Balances, June 30, 2004 | 2,954,819 | $ | 30,000 | $ | 20,737,000 | $ | 14,596,000 | $ | (3,302,000 | ) | $ | (120,000 | ) | $ | (46,000 | ) | $ | 31,895,000 | ||||||||||||||
F-8
Table of Contents
Principles of Consolidation
F-9
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Net income (loss), as reported | $ | 615,000 | $ | (2,798,000 | ) | $ | 4,517,000 | |||||
Add stock-based employee compensation expense included in net income (loss), net of tax | 237,000 | 473,000 | 561,000 | |||||||||
Less total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax | (85,000 | ) | (354,000 | ) | (1,193,000 | ) | ||||||
Pro forma net income (loss) | $ | 767,000 | $ | (2,679,000 | ) | $ | 3,885,000 | |||||
Basic net income (loss) per share — as reported | $ | 0.19 | $ | (0.86 | ) | $ | 1.38 | |||||
Basic net income (loss) per share — pro forma | 0.24 | (0.82 | ) | 1.18 | ||||||||
Diluted net income (loss) per share — as reported | 0.19 | (0.86 | ) | 1.35 | ||||||||
Diluted net income (loss) per share — pro forma | 0.24 | (0.82 | ) | 1.16 |
2004 | 2003 | 2002 | ||||||||||
Expected life | 5 years | 5 years | 5 years | |||||||||
Expected volatility | 42 | % | 43 | % | 45 | % | ||||||
Risk free interest rate | 3.93 | % | 0.97 | % | 1.90 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % |
F-10
Table of Contents
F-11
Table of Contents
F-12
Table of Contents
F-13
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Total sales and revenue | $ | 72,775,000 | $ | 96,249,000 | $ | 94,417,000 | ||||||
Gross margin | 7,375,000 | 12,854,000 | 13,545,000 | |||||||||
Income (loss) before income taxes | $ | (2,960,000 | ) | $ | 282,000 | $ | 11,573,000 | |||||
Income tax provision (benefit) | $ | (1,157,000 | ) | $ | 97,000 | $ | 4,636,000 | |||||
Net income (loss) | $ | (1,803,000 | ) | $ | 185,000 | $ | 6,937,000 | |||||
F-14
Table of Contents
June 30, | ||||||||
2004 | 2003 | |||||||
Land, buildings and leasehold improvements | $ | 17,842,000 | $ | 88,706,000 | ||||
Equipment, furniture and fixtures | 17,343,000 | 30,201,000 | ||||||
Construction in progress | 998,000 | |||||||
35,185,000 | 119,905,000 | |||||||
Less accumulated depreciation and amortization | (24,836,000 | ) | (61,061,000 | ) | ||||
$ | 10,349,000 | $ | 58,844,000 | |||||
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Net income (loss), as reported | $ | 615,000 | $ | (2,798,000 | ) | $ | 4,517,000 | |||||
Goodwill amortization net of tax | 248,000 | |||||||||||
Net income (loss), as adjusted | $ | 615,000 | $ | (2,798,000 | ) | $ | 4,765,000 | |||||
Diluted net income (loss) per share, as reported | $ | 0.19 | $ | (0.86 | ) | $ | 1.35 | |||||
Diluted net income (loss) per share, as adjusted | $ | 0.19 | $ | (0.86 | ) | $ | 1.42 |
F-15
Table of Contents
June 30, | ||||||||
2004 | 2003 | |||||||
Deferred loan fees, net | $ | 247,000 | $ | 3,339,000 | ||||
Capitalized acquisition costs | 321,000 | |||||||
Internally developed software | 453,000 | 603,000 | ||||||
Other | 308,000 | 208,000 | ||||||
$ | 1,008,000 | $ | 4,471,000 | |||||
June 30, | ||||||||
2004 | 2003 | |||||||
Salaries, wages, and benefits | $ | 3,819,000 | $ | 3,610,000 | ||||
Sales and fuel taxes | 1,988,000 | 2,086,000 | ||||||
Severance payment | 1,890,000 | |||||||
Legal accrual | 1,519,000 | 80,000 | ||||||
Insurance premiums | 789,000 | 361,000 | ||||||
Note premium | 1,724,000 | |||||||
Other | 1,820,000 | 1,383,000 | ||||||
$ | 11,825,000 | $ | 9,244,000 | |||||
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Current income tax provision (benefit) from continuing operations | ||||||||||||
Federal | $ | (1,087,000 | ) | $ | 157,000 | $ | 725,000 | |||||
State and other | 234,000 | 328,000 | 163,000 | |||||||||
Total current income tax provision (benefit) | (853,000 | ) | 485,000 | 888,000 | ||||||||
Deferred income tax provision (benefit) | ||||||||||||
Federal | (260,000 | ) | (1,594,000 | ) | (2,180,000 | ) | ||||||
State and other | (65,000 | ) | (458,000 | ) | (523,000 | ) | ||||||
Total deferred income tax benefit | $ | (325,000 | ) | $ | (2,052,000 | ) | $ | (2,703,000 | ) | |||
Total income tax benefit from continuing operations | (1,178,000 | ) | (1,567,000 | ) | (1,815,000 | ) | ||||||
Income tax provision on discontinued operations | 3,659,000 | 97,000 | 4,636,000 | |||||||||
Total income tax provision (benefit) | $ | 2,481,000 | $ | (1,470,000 | ) | $ | 2,821,000 | |||||
F-16
Table of Contents
Year Ended June 30, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Continuing operations: | ||||||||||||
Federal income tax (benefit) at statutory rate | $ | (2,129,000 | ) | $ | (1,547,000 | ) | $ | (1,440,000 | ) | |||
State income tax provision (benefit), net of federal benefit | 148,000 | (123,000 | ) | (118,000 | ) | |||||||
Nondeductible settlement costs | 821,000 | |||||||||||
Other, net | (18,000 | ) | 103,000 | (257,000 | ) | |||||||
Income tax benefit from continuing operations | (1,178,000 | ) | (1,567,000 | ) | (1,815,000 | ) | ||||||
Discontinued Operations: | ||||||||||||
Federal income tax at statutory rate | $ | 3,181,000 | $ | 95,000 | $ | 4,011,000 | ||||||
State income tax, net of federal benefit | 484,000 | 2,000 | 459,000 | |||||||||
Other, net | (6,000 | ) | 166,000 | |||||||||
Income tax provision on discontinued operations | 3,659,000 | 97,000 | 4,636,000 | |||||||||
Total income tax provision (benefit) | $ | 2,481,000 | $ | (1,470,000 | ) | $ | 2,821,000 | |||||
June 30, | ||||||||
2004 | 2003 | |||||||
Depreciation and amortization | $ | (983,000 | ) | $ | 645,000 | |||
Prepaid expenses | (593,000 | ) | (787,000 | ) | ||||
Executive note amortization | 769,000 | 483,000 | ||||||
State income taxes | 26,000 | 21,000 | ||||||
Allowance for doubtful accounts | 643,000 | 987,000 | ||||||
Deferred rent | 494,000 | 740,000 | ||||||
Installment sale deferral | 805,000 | 420,000 | ||||||
Accrued expenses | 978,000 | 992,000 | ||||||
Other | (77,000 | ) | (316,000 | ) | ||||
$ | 2,062,000 | $ | 3,185,000 | |||||
June 30, | ||||||||
2004 | 2003 | |||||||
Tax exempt bond pursuant to a loan agreement between the Company and the California Economic Development Financing Authority (“CEDFA”), with a redemption of $14.0 million at the end of the fifteenth year (2013). The loan carries a variable rate which is based on a weekly remarketing of the bonds. The rate at June 30, 2004 was 1.1% per annum. In addition, a letter of credit has been issued on behalf of the Company to guarantee the credit at an annual cost of approximately 3.1% of the principal | $ | 14,000,000 | $ | 14,000,000 | ||||
Notes payable to banks | 11,588,000 | |||||||
Note payable by CFK Realty to a bank in monthly installments of $25,779 per month including interest at 7.5% per annum collateralized by the Company’s corporate office, maturing in December 2011 (See Note 18) | 3,010,000 | 3,090,000 | ||||||
Note payable by MercMed to a bank in monthly installments of $5,778 per month including interest at 5.59% per annum, collateralized by an aircraft. The rate is fixed for 36 months through March 2006, at which time the rate is adjusted at three-year intervals, to the federal home loan bank rate plus 275 basis point (See Note 18) | 667,000 | 696,000 |
F-17
Table of Contents
June 30, | ||||||||
2004 | 2003 | |||||||
Mortgage payable to a financial institution in monthly principal installments of $3,024 at an interest rate of 6.68% per annum, collateralized by land and buildings, maturing in May 2010 | 252,000 | 267,000 | ||||||
Convertible subordinated debentures payable to seller of Excel Cargo in monthly installments of $13,810 including interest at 8.5% per annum, collateralized by property acquired, which matured in September 2003 | 54,000 | |||||||
17,929,000 | 29,695,000 | |||||||
Less current portion of long term debt | 139,000 | 4,194,000 | ||||||
$ | 17,790,000 | $ | 25,501,000 | |||||
2005 | $ | 139,000 | ||
2006 | 149,000 | |||
2007 | 160,000 | |||
2008 | 171,000 | |||
2009 | 183,000 | |||
Thereafter | 17,127,000 | |||
$ | 17,929,000 | |||
2003 | ||||
Senior Subordinated Note, before discount | $ | 24,000,000 | ||
Valuation of warrants credited to additional paid-in-capital | (1,427,000 | ) | ||
Accumulated amortization of warrants | 872,000 | |||
Senior Subordinated Note | $ | 23,445,000 | ||
F-18
Table of Contents
Weighted | Directors’ | Weighted | Weighted | 2002 | Weighted | |||||||||||||||||||||||||||
Long-Term | Average | Stock | Average | Special | Average | Management | Average | |||||||||||||||||||||||||
Incentive | Option | Option | Option | Option | Option | Stock | Option | |||||||||||||||||||||||||
Plans | Prices | Plans | Prices | Grants | Prices | Plan | Prices | |||||||||||||||||||||||||
Outstanding at June 30, 2001 | 224,265 | $ | 11.19 | 183,563 | $ | 9.65 | 3,438 | $ | 14.36 | |||||||||||||||||||||||
Granted | 250,000 | 10.9 | 5,000 | 13.22 | 68,448 | $ | 15.00 | |||||||||||||||||||||||||
Exercised | (12,225 | ) | 3.26 | |||||||||||||||||||||||||||||
Cancelled | (19,647 | ) | 15.88 | (7,555 | ) | 9.86 | ||||||||||||||||||||||||||
Outstanding at June 30, 2002 | 442,393 | 11.04 | 181,008 | 9.74 | 3,438 | 14.36 | 68,448 | 15.00 | ||||||||||||||||||||||||
Granted | 30,000 | 6.60 | ||||||||||||||||||||||||||||||
Exercised | (20,630 | ) | 2.81 | (52,941 | ) | 3.54 | ||||||||||||||||||||||||||
Cancelled | (49,599 | ) | 13.60 | (27,563 | ) | 12.96 | ||||||||||||||||||||||||||
Outstanding at June 30, 2003 | 402,164 | 10.81 | 100,504 | 12.13 | 3,438 | 14.36 | 68,448 | 15.00 | ||||||||||||||||||||||||
Granted | 75,000 | 6.19 | ||||||||||||||||||||||||||||||
Exercised | (4,851 | ) | 2.81 | |||||||||||||||||||||||||||||
Cancelled | (21,344 | ) | 7.70 | (27,500 | ) | 15.00 | ||||||||||||||||||||||||||
Outstanding at June 30, 2004 | 450,969 | $ | 10.28 | 100,504 | $ | 12.13 | 3,438 | $ | 14.36 | 40,948 | $ | 15.00 | ||||||||||||||||||||
F-19
Table of Contents
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Shares | Average | Average | Shares | Average | ||||||||||||||||
Outstanding at | Contractual | Exercise | Exercisable at | Exercise | ||||||||||||||||
Exercise Price Range | June 30, 2004 | Remaining Life | Price | June 30, 2004 | Price | |||||||||||||||
$ 2.806 — 6.600 | 112,563 | 9.23 | $ | 6.07 | 112,563 | $ | 6.07 | |||||||||||||
9.252 — 10.900 | 247,626 | 6.92 | 10.79 | 247,626 | 10.79 | |||||||||||||||
11.200 — 12.908 | 133,140 | 3.74 | 11.92 | 133,140 | 11.92 | |||||||||||||||
14.364 — 16.875 | 102,530 | 5.36 | 15.30 | 61,582 | 15.51 | |||||||||||||||
595,859 | 6.38 | $ | 10.93 | 554,911 | $ | 10.63 | ||||||||||||||
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
2005 | $ | 7,187,000 | ||
2006 | 6,581,000 | |||
2007 | 3,286,000 | |||
2008 | 2,668,000 | |||
2009 | 2,402,000 | |||
Thereafter | 5,376,000 | |||
Total minimum payments required | $ | 27,500,000 | ||
F-23
Table of Contents
F-24
Table of Contents
F-25
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
June 30, 2004 | June 30, 2003 | June 30, 2002 | ||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Weighted average number of common stock outstanding during the period | 3,059,200 | 3,059,200 | 3,263,000 | 3,263,000 | 3,282,500 | 3,282,500 | ||||||||||||||||||
Common stock equivalents resulting from the assumed exercise of stock options | 60,500 | |||||||||||||||||||||||
Common stock resulting from the assumed conversion of debentures | 12,000 | |||||||||||||||||||||||
Weighted average number of common and common equivalent shares outstanding during the period | 3,059,200 | 3,059,200 | 3,263,000 | 3,263,000 | 3,282,500 | 3,355,000 | ||||||||||||||||||
Loss from continuing operations, net of taxes | $ | (5,083,000 | ) | $ | (5,083,000 | ) | $ | (2,983,000 | ) | $ | (2,983,000 | ) | $ | (2,420,000 | ) | $ | (2,420,000 | ) | ||||||
Add: Interest expense, net of taxes, on convertible debentures | 15,000 | |||||||||||||||||||||||
Adjusted loss from continuing operations, net of taxes | $ | (5,083,000 | ) | $ | (5,083,000 | ) | $ | (2,983,000 | ) | $ | (2,983,000 | ) | $ | (2,420,000 | ) | $ | (2,405,000 | ) | ||||||
Preferred stock dividends | (37,000 | ) | (37,000 | ) | (19,000 | ) | (19,000 | ) | ||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Income (loss) from discontinued operations, net of taxes | (1,803,000 | ) | (1,803,000 | ) | 185,000 | 185,000 | 6,937,000 | 6,937,000 | ||||||||||||||||
Gain on sale of discontinued operations, net of taxes | 7,501,000 | 7,501,000 | ||||||||||||||||||||||
Adjusted net income (loss) applicable to common stockholders | $ | 578,000 | $ | 578,000 | $ | (2,817,000 | ) | $ | (2,817,000 | ) | $ | 4,517,000 | $ | 4,532,000 | ||||||||||
F-26
Table of Contents
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
June 30, 2004 | June 30, 2003 | June 30, 2002 | ||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||
Common stock and common stock equivalents | 3,059,200 | 3,059,200 | 3,263,000 | 3,263,000 | 3,282,500 | 3,355,000 | ||||||||||||||||||
Income (loss) per share: | ||||||||||||||||||||||||
From continuing operations, net of taxes | $ | (1.67 | ) | $ | (1.67 | ) | $ | (0.92 | ) | $ | (0.92 | ) | $ | (0.74 | ) | $ | (0.72 | ) | ||||||
From discontinued operations, net of taxes | (0.59 | ) | (0.59 | ) | 0.06 | 0.06 | 2.12 | 2.07 | ||||||||||||||||
From sale of discontinued operations, net of taxes | 2.45 | 2.45 | ||||||||||||||||||||||
Net income (loss) per share | $ | 0.19 | $ | 0.19 | $ | (0.86 | ) | $ | (0.86 | ) | $ | 1.38 | $ | 1.35 | ||||||||||
Corporate | ||||||||||||||||||||||||||||
or | Total Continuing | Discontinued | ||||||||||||||||||||||||||
MercFuel | Air Cargo | Maytag | Unallocated | Operations | Business | Total | ||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||
Revenues | $ | 322,631 | $ | 39,549 | $ | 23,281 | $ | 385,461 | $ | 385,461 | ||||||||||||||||||
Gross margin | 6,080 | 1,800 | 5,146 | 13,026 | 13,026 | |||||||||||||||||||||||
Depreciation and amortization | 469 | 1,725 | 414 | 220 | 2,828 | 4,478 | 7,306 | |||||||||||||||||||||
Capital expenditures | 662 | 63 | 172 | 287 | 1,184 | 3,836 | 5,020 | |||||||||||||||||||||
Goodwill | 1,252 | 3,137 | 4,389 | 4,389 | ||||||||||||||||||||||||
Total segment assets | 38,575 | 14,631 | 10,121 | 42,630 | 105,957 | 105,957 | ||||||||||||||||||||||
2003 | ||||||||||||||||||||||||||||
Revenues | $ | 280,136 | $ | 32,691 | $ | 24,421 | $ | 337,248 | $ | 337,248 | ||||||||||||||||||
Gross margin | 5,926 | 2,585 | 4,598 | 13,109 | 13,109 | |||||||||||||||||||||||
Depreciation and amortization | 318 | 1,887 | 349 | 228 | 2,782 | 5,181 | 7,963 | |||||||||||||||||||||
Capital expenditures | 7 | 60 | 4 | 319 | 390 | 3,675 | 4,065 | |||||||||||||||||||||
Goodwill | 1,252 | 3,137 | 4,389 | 4,389 | ||||||||||||||||||||||||
Total segment assets | 29,460 | 16,226 | 10,773 | 17,411 | 73,870 | 59,085 | 132,955 |
F-27
Table of Contents
September 30, | December 31, | March 31, | June 30, | |||||||||||||
2003 | 2003 | 2004 | 2004 | |||||||||||||
Sales and revenues | $ | 79,710,000 | $ | 91,499,000 | $ | 103,781,000 | $ | 110,471,000 | ||||||||
Gross margin | 3,511,000 | 3,828,000 | 2,732,000 | 2,955,000 | ||||||||||||
Income (loss) from continuing operations, net of taxes | 68,000 | (1,248,000 | ) | (1,168,000 | ) | (2,735,000 | ) | |||||||||
Gain on sale, net of taxes | 7,501,000 | |||||||||||||||
Loss from discontinued operations, net of taxes | (370,000 | ) | (269,000 | ) | (651,000 | ) | (513,000 | ) | ||||||||
Net income (loss) | (302,000 | ) | (1,517,000 | ) | (1,819,000 | ) | 4,253,000 | |||||||||
Income (loss) per share: | ||||||||||||||||
Basic: | ||||||||||||||||
From continuing operations, net of taxes | $ | 0.02 | $ | (0.39 | ) | $ | (0.41 | ) | $ | (0.95 | ) | |||||
From gain on sale, net of taxes | 2.59 | |||||||||||||||
From discontinued operations, net of taxes | (0.12 | ) | (0.09 | ) | (0.22 | ) | (0.18 | ) | ||||||||
Net income (loss) per share | $ | (0.10 | ) | $ | (0.48 | ) | $ | (0.63 | ) | $ | 1.46 | |||||
Diluted: | ||||||||||||||||
From continuing operations, net of taxes | $ | 0.02 | $ | (0.39 | ) | $ | (0.41 | ) | $ | (0.95 | ) | |||||
From gain on sale, net of taxes | 2.59 | |||||||||||||||
From discontinued operations, net of taxes | (0.12 | ) | (0.09 | ) | (0.22 | ) | (0.18 | ) | ||||||||
Net income (loss) per share | $ | (0.10 | ) | $ | (0.48 | ) | $ | (0.63 | ) | $ | 1.46 | |||||
�� |
September 30, | December 31, | March 31, | June 30, | |||||||||||||
2002 | 2002 | 2003 | 2003 | |||||||||||||
Sales and revenues | $ | 84,069,000 | $ | 90,509,000 | $ | 86,883,000 | $ | 75,787,000 | ||||||||
Gross margin | 2,977,000 | 3,947,000 | 3,249,000 | 2,936,000 | ||||||||||||
Loss from continuing operations, net of taxes | (957,000 | ) | (834,000 | ) | (510,000 | ) | (683,000 | ) | ||||||||
Income (loss) from discontinued operations, net of taxes | 368,000 | 238,000 | (588,000 | ) | 168,000 | |||||||||||
Net loss | (589,000 | ) | (596,000 | ) | (1,098,000 | ) | (515,000 | ) | ||||||||
Income (loss) per share: | ||||||||||||||||
Basic: | ||||||||||||||||
From continuing operations, net of taxes | $ | (0.30 | ) | $ | (0.25 | ) | $ | (0.15 | ) | $ | (0.22 | ) | ||||
From discontinued operations, net of taxes | 0.12 | 0.07 | (0.18 | ) | 0.05 | |||||||||||
Net loss per share | $ | (0.18 | ) | $ | (0.18 | ) | $ | (0.33 | ) | $ | (0.17 | ) | ||||
Diluted: | ||||||||||||||||
From continuing operations, net of taxes | $ | (0.30 | ) | $ | (0.25 | ) | $ | (0.15 | ) | $ | (0.22 | ) | ||||
From discontinued operations, net of taxes | 0.12 | 0.07 | (0.18 | ) | 0.05 | |||||||||||
Net loss per share | $ | (0.18 | ) | $ | (0.18 | ) | $ | (0.33 | ) | $ | (0.17 | ) | ||||
F-28
Table of Contents
Three Years Ended June 30, 2004
Balance at | Charged to Costs | Deductions | Balance at End | |||||||||||||
Classification | Beginning of Period | And Expenses | (a) | of Period | ||||||||||||
2004 | ||||||||||||||||
Allowance for doubtful accounts (b) | $ | 2,515,000 | $ | 652,000 | $ | (650,000 | ) | $ | 2,517,000 | |||||||
2003 | ||||||||||||||||
Allowance for doubtful accounts (b) | $ | 1,583,000 | $ | 1,648,000 | $ | (716,000 | ) | $ | 2,515,000 | |||||||
2002 | ||||||||||||||||
Allowance for doubtful accounts | $ | 1,653,000 | $ | 1,358,000 | $ | (1,428,000 | ) | $ | 1,583,000 | |||||||
(a) | The Deductions for fiscal 2004 includes $510,000 for the Air Centers on the FBO Sale Closing Date. The other Deductions represent the accounts receivable amounts written-off during the year. | |
(b) | Inclusive of allowance for trade accounts receivable and notes receivable. |
F-29
Table of Contents
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of | 11-1800515 (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
5456 McConnell Avenue | 90066 | |
Los Angeles, CA | (Zip Code) | |
(Address of principal executive offices) |
(310) 827-2737
Number of Shares Outstanding | ||
Title | as of May 25, 2005 | |
Common Stock, $0.01 Par Value | 3,056,355 |
Table of Contents
2
Table of Contents
March 31, | June 30, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 275 | $ | 4,690 | ||||
Restricted cash | 15,414 | |||||||
Trade accounts receivable, net of allowance for doubtful accounts of $2,808 and $1,556 at March 31, 2005 and June 30, 2004, respectively | 59,757 | 50,974 | ||||||
Inventories | 3,330 | 1,165 | ||||||
Prepaid expenses and other current assets | 4,579 | 5,696 | ||||||
Deferred income taxes | 1,451 | 1,451 | ||||||
TOTAL CURRENT ASSETS | 69,392 | 79,390 | ||||||
PROPERTY, EQUIPMENT AND LEASEHOLDS, net of accumulated depreciation and amortization of $25,531 and $24,836 at March 31, 2005 and June 30, 2004, respectively | 7,461 | 10,349 | ||||||
NOTES RECEIVABLE, net of allowance for doubtful accounts of $921 and $1,025 at March 31, 2005 and June 30, 2004, respectively | 1,300 | 521 | ||||||
DEFERRED INCOME TAXES | 611 | 611 | ||||||
GOODWILL | 4,411 | 4,389 | ||||||
OTHER INTANGIBLE ASSETS, NET | 550 | 700 | ||||||
RESTRICTED CASH | 8,450 | 8,989 | ||||||
OTHER ASSETS, NET | 1,127 | 1,008 | ||||||
TOTAL ASSETS | $ | 93,302 | $ | 105,957 | ||||
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 37,204 | $ | 33,552 | ||||
Accrued expenses and other current liabilities | 8,918 | 11,825 | ||||||
Current portion of long-term debt | 1,178 | 139 | ||||||
TOTAL CURRENT LIABILITIES | 47,300 | 45,516 | ||||||
LONG-TERM DEBT | 20,716 | 17,790 | ||||||
DEFERRED GAIN | 9,474 | 8,130 | ||||||
OTHER LONG-TERM LIABILITIES | 837 | 669 | ||||||
DEFERRED RENT | 628 | 1,257 | ||||||
MINORITY INTEREST | 182 | |||||||
TOTAL LIABILITIES | 78,955 | 73,544 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 4) | ||||||||
MANDATORILY REDEEMABLE PREFERRED STOCK: Series A — $0.01 par value; 1,000,000 shares authorized; 462,627 shares outstanding at March 31, 2005 and June 30, 2004, respectively | 478 | 518 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock — $0.01 par value; authorized 2,000,000 shares; no shares outstanding | ||||||||
Common stock — $0.01 par value; authorized 18,000,000 shares; 3,056,355 and 2,954,819 shares outstanding at March 31, 2005 and June 30, 2004, respectively | 31 | 30 | ||||||
Additional paid-in capital | 21,443 | 20,737 | ||||||
Retained earnings (accumulated deficit) | (4,822 | ) | 14,596 | |||||
Accumulated other comprehensive income (loss) | 176 | (46 | ) | |||||
Treasury stock, 12,500 and 24,500 shares at March 31, 2005 and June 30, 2004, respectively | (61 | ) | (120 | ) | ||||
Notes receivable from officers | (2,898 | ) | (3,302 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 13,869 | 31,895 | ||||||
TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | $ | 93,302 | $ | 105,957 | ||||
3
Table of Contents
Nine Months Ended | Three Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Sales and revenues: | ||||||||||||||||
Sales | $ | 388,998 | $ | 228,195 | $ | 142,903 | $ | 88,304 | ||||||||
Service revenues | 48,284 | 46,795 | 15,356 | 15,477 | ||||||||||||
Total sales and revenues | 437,282 | 274,990 | 158,259 | 103,781 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales | 378,566 | 219,871 | 139,176 | 85,572 | ||||||||||||
Operating expenses | 45,375 | 45,048 | 14,897 | 15,477 | ||||||||||||
Total costs and expenses | 423,941 | 264,919 | 154,073 | 101,049 | ||||||||||||
Gross margin (excluding depreciation and amortization) | 13,341 | 10,071 | 4,186 | 2,732 | ||||||||||||
Expenses (income): | ||||||||||||||||
Selling, general and administrative | 11,736 | 7,838 | 4,708 | 2,798 | ||||||||||||
Provision (recovery) for bad debts | 1,514 | 305 | 1,150 | 329 | ||||||||||||
Depreciation and amortization | 1,855 | 2,169 | 601 | 743 | ||||||||||||
Interest and other expense | 1,057 | 784 | 286 | 257 | ||||||||||||
Hambro settlement costs | 1,799 | |||||||||||||||
Interest and other income | (306 | ) | (272 | ) | (65 | ) | (31 | ) | ||||||||
Asset impairment loss | 626 | |||||||||||||||
Total expenses (income) | 16,482 | 12,623 | 6,680 | 4,096 | ||||||||||||
Loss from continuing operations before minority interest and income taxes | (3,141 | ) | (2,552 | ) | (2,494 | ) | (1,364 | ) | ||||||||
Minority interest | 406 | (68 | ) | |||||||||||||
Loss from continuing operations before income taxes | (2,735 | ) | (2,552 | ) | (2,562 | ) | (1,364 | ) | ||||||||
Income tax (benefit) expense | (716 | ) | 43 | (691 | ) | (196 | ) | |||||||||
Loss from continuing operations, net of taxes | (2,019 | ) | (2,595 | ) | (1,871 | ) | (1,168 | ) | ||||||||
Discontinued operations: | ||||||||||||||||
Loss from discontinued operation, net of income tax (benefit) of ($359) and ($108) for the nine months and three months ended March 31, 2005 and 2004, respectively | (1,043 | ) | (651 | ) | ||||||||||||
Gain on sale of discontinued operations, net of income tax provision of $14 | 22 | |||||||||||||||
Net loss | (1,997 | ) | (3,638 | ) | (1,871 | ) | (1,819 | ) | ||||||||
Accrued preferred stock dividends | 29 | 28 | 9 | 9 | ||||||||||||
Net loss applicable to common stockholders | $ | (2,026 | ) | $ | (3,666 | ) | $ | (1,880 | ) | $ | (1,828 | ) | ||||
Income (loss) per common share: | ||||||||||||||||
Basic: | ||||||||||||||||
From continuing operations, net of taxes | $ | (0.71 | ) | $ | (0.84 | ) | $ | (0.62 | ) | $ | (0.41 | ) | ||||
From discontinued operations, net of taxes | (0.34 | ) | (0.22 | ) | ||||||||||||
From sale of discontinued operations, net of taxes | 0.01 | |||||||||||||||
Net loss per share | $ | (0.70 | ) | $ | (1.18 | ) | $ | (0.62 | ) | $ | (0.63 | ) | ||||
Diluted: | ||||||||||||||||
From continuing operations, net of taxes | $ | (0.71 | ) | $ | (0.84 | ) | $ | (0.62 | ) | $ | (0.41 | ) | ||||
From discontinued operations, net of taxes | (0.34 | ) | (0.22 | ) | ||||||||||||
From sale of discontinued operations, net of taxes | 0.01 | |||||||||||||||
Net loss per share | $ | (0.70 | ) | $ | (1.18 | ) | $ | (0.62 | ) | $ | (0.63 | ) | ||||
4
Table of Contents
Nine Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (1,997 | ) | $ | (3,638 | ) | ||
Adjustments to derive cash flow from operating activities: | ||||||||
Provision for bad debts | 1,514 | 421 | ||||||
Depreciation and amortization | 1,855 | 6,405 | ||||||
Deferred income taxes | 350 | |||||||
Deferred rent | (304 | ) | (471 | ) | ||||
Executive loan amortization | 265 | 290 | ||||||
Minority interest | (182 | ) | 2 | |||||
Other non-cash items | 76 | |||||||
Asset impairment loss | 626 | |||||||
Hambro settlement costs | 1,799 | |||||||
Interest added to senior subordinated note | 120 | |||||||
Amortization of senior subordinated note discount | 132 | |||||||
Amortization of loan fees included in interest expense | 381 | |||||||
Loss on retirement of assets | 25 | |||||||
Write-down of note receivable from officer | 96 | 105 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade and other accounts receivable | (11,095 | ) | (12,622 | ) | ||||
Inventories | (2,165 | ) | 555 | |||||
Prepaid expenses and other current assets | 259 | (3,776 | ) | |||||
Accounts payable | 3,652 | 3,682 | ||||||
Accrued expenses and other current liabilities | (3,027 | ) | 6,567 | |||||
Net cash provided by (used in) operating activities | (10,427 | ) | 327 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Decrease in restricted cash | 16,032 | |||||||
Decrease (increase) in other assets | (232 | ) | (202 | ) | ||||
Decrease in notes receivable | 780 | 781 | ||||||
Proceeds from sale of property | 2 | 9 | ||||||
Additions to property, equipment and leaseholds | (1,517 | ) | (4,697 | ) | ||||
Net cash provided by (used in) investing activities | 15,065 | (4,109 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net addition (reduction) of debt instruments | 7,485 | 2,734 | ||||||
Repurchase of common stock | (848 | ) | ||||||
Payment of dividends | (17,491 | ) | ||||||
Proceeds from exercise of stock options and warrants | 1,687 | 14 | ||||||
Net cash provided by (used in) financing activities | (9,167 | ) | 2,748 | |||||
Effect of exchange rate changes | 114 | 54 | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (4,415 | ) | (980 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 4,690 | 2,802 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 275 | $ | 1,822 | ||||
CASH PAID DURING THE PERIOD FOR: | ||||||||
Interest | $ | 633 | $ | 5,398 | ||||
Income taxes | $ | 3,385 | $ | 884 |
5
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||
Notes | Other | |||||||||||||||||||||||||||||||
Common Stock | Additional | Receivable | Comprehensive | |||||||||||||||||||||||||||||
Number of | Paid-In | Retained | From | Treasury | Income | |||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Officers | Stock | (Loss) | Total | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Balances, June 30, 2004 | 2,954,819 | $ | 30 | $ | 20,737 | $ | 14,596 | $ | (3,302 | ) | $ | (120 | ) | $ | (46 | ) | $ | 31,895 | ||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||
Net loss | (1,997 | ) | (1,997 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustment | 222 | 222 | ||||||||||||||||||||||||||||||
Comprehensive loss | (1,775 | ) | ||||||||||||||||||||||||||||||
Cash dividend per common share of $5.70 (See Note 13) | (17,421 | ) | (17,421 | ) | ||||||||||||||||||||||||||||
Accrual of preferred stock dividends | (30 | ) | (30 | ) | ||||||||||||||||||||||||||||
Repurchase of common stock | (150,000 | ) | (2 | ) | (808 | ) | 265 | (545 | ) | |||||||||||||||||||||||
Repurchase of vested executive stock | (38 | ) | (38 | ) | ||||||||||||||||||||||||||||
Exercise of options/warrants | 279,036 | 3 | 1,684 | 1,687 | ||||||||||||||||||||||||||||
Write off officer note | 139 | (43 | ) | 96 | ||||||||||||||||||||||||||||
Retirement of repurchased executive stock | (27,500 | ) | (140 | ) | 140 | |||||||||||||||||||||||||||
Balances, March 31, 2005 | 3,056,355 | $ | 31 | $ | 21,443 | $ | (4,822 | ) | $ | (2,898 | ) | $ | (61 | ) | $ | 176 | $ | 13,869 | ||||||||||||||
6
Table of Contents
March 31, 2005
(Unaudited)
Business |
Risks and Uncertainties |
7
Table of Contents
Basis of Presentation |
Reclassifications |
New Accounting Pronouncements |
Nine Months Ended | Three Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Net loss, as reported | $ | (1,997 | ) | $ | (3,638 | ) | $ | (1,871 | ) | $ | (1,819 | ) | ||||
Add stock-based employee compensation expense included in net loss, net of tax | (68 | ) | 185 | (164 | ) | 62 | ||||||||||
Less total stock based employee compensation determined under the fair value based method for all awards, net of tax | 9 | (79 | ) | 20 | (20 | ) | ||||||||||
Pro forma net loss | $ | (2,056 | ) | $ | (3,532 | ) | $ | (2,015 | ) | $ | (1,777 | ) | ||||
Basic net loss per share — as reported | $ | (0.70 | ) | $ | (1.18 | ) | $ | (0.62 | ) | $ | (0.63 | ) | ||||
Basic net loss per share — pro forma | $ | (0.72 | ) | $ | (1.14 | ) | $ | (0.67 | ) | $ | (0.62 | ) | ||||
Diluted net loss per share — as reported | $ | (0.70 | ) | $ | (1.18 | ) | $ | (0.62 | ) | $ | (0.63 | ) | ||||
Diluted net loss per share — pro forma | $ | (0.72 | ) | $ | (1.14 | ) | $ | (0.67 | ) | $ | (0.62 | ) |
8
Table of Contents
9
Table of Contents
10
Table of Contents
11
Table of Contents
Nine Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||||||||
(In thousands, except number of shares and per share data) | ||||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding during the period | 2,900,631 | 2,900,631 | 3,113,858 | 3,113,858 | 3,028,063 | 3,028,063 | 2,895,472 | 2,895,472 | ||||||||||||||||||||||||
Loss from continuing operations, net of taxes | $ | (2,019 | ) | $ | (2,019 | ) | $ | (2,595 | ) | $ | (2,595 | ) | $ | (1,871 | ) | $ | (1,871 | ) | $ | (1,168 | ) | $ | (1,168 | ) | ||||||||
Preferred stock dividends | (29 | ) | (29 | ) | (28 | ) | (28 | ) | (9 | ) | (9 | ) | (9 | ) | (9 | ) | ||||||||||||||||
Loss from discontinued operations, net of taxes | (1,043 | ) | (1,043 | ) | (651 | ) | (651 | ) | ||||||||||||||||||||||||
Gain on sale of discontinued operations, net of taxes | 22 | 22 | ||||||||||||||||||||||||||||||
Adjusted net loss applicable to common stockholders | $ | (2,026 | ) | $ | (2,026 | ) | $ | (3,666 | ) | $ | (3,666 | ) | $ | (1,880 | ) | $ | (1,880 | ) | $ | (1,828 | ) | $ | (1,828 | ) | ||||||||
Income (loss) per share: | ||||||||||||||||||||||||||||||||
From continuing operations, net of taxes | $ | (0.71 | ) | $ | (0.71 | ) | $ | (0.84 | ) | $ | (0.84 | ) | $ | (0.62 | ) | $ | (0.62 | ) | $ | (0.41 | ) | $ | (0.41 | ) | ||||||||
From discontinued operations, net of taxes | (0.34 | ) | (0.34 | ) | (0.22 | ) | (0.22 | ) | ||||||||||||||||||||||||
From sale of discontinued operations, net of taxes | 0.01 | 0.01 | ||||||||||||||||||||||||||||||
Net loss per share | $ | (0.70 | ) | $ | (0.70 | ) | $ | (1.18 | ) | $ | (1.18 | ) | $ | (0.62 | ) | $ | (0.62 | ) | $ | (0.63 | ) | $ | (0.63 | ) | ||||||||
Total | ||||||||||||||||||||
Corporate | Continuing | |||||||||||||||||||
MercFuel | Air Cargo | Maytag | and Other | Operations | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Quarter Ended March 31, 2005 | ||||||||||||||||||||
Revenues | $ | 142,730 | $ | 10,000 | $ | 5,322 | $ | 207 | $ | 158,259 | ||||||||||
Gross margin | 2,410 | 589 | 1,303 | (116 | ) | 4,186 | ||||||||||||||
Depreciation and amortization | 130 | 383 | 52 | 36 | 601 | |||||||||||||||
Capital expenditures | 2 | 16 | 12 | 362 | 392 | |||||||||||||||
Goodwill | 1,274 | 3,137 | 4,411 | |||||||||||||||||
Segment assets | 53,297 | 11,575 | 8,912 | 19,518 | 93,302 | |||||||||||||||
Quarter Ended March 31, 2004 | ||||||||||||||||||||
Revenues | $ | 88,305 | $ | 9,729 | $ | 5,747 | $ | 103,781 | ||||||||||||
Gross margin | 1,506 | 60 | 1,166 | 2,732 | ||||||||||||||||
Depreciation and amortization | 118 | 484 | 89 | $ | 52 | 743 | ||||||||||||||
Capital expenditures | 6 | 9 | 37 | 7 | 59 | |||||||||||||||
Goodwill | 1,252 | 3,137 | 4,389 | |||||||||||||||||
Segment assets | 36,899 | 16,458 | 10,337 | 20,717 | 84,411 | |||||||||||||||
Nine Months Ended March 31, 2005 | ||||||||||||||||||||
Revenues | $ | 388,501 | $ | 32,578 | $ | 15,665 | $ | 538 | $ | 437,282 | ||||||||||
Gross margin | 6,601 | 3,348 | 3,832 | (440 | ) | 13,341 | ||||||||||||||
Depreciation and amortization | 388 | 1,163 | 186 | $ | 118 | 1,855 | ||||||||||||||
Capital expenditures | 979 | 96 | 13 | 429 | 1,517 | |||||||||||||||
Goodwill | 1,274 | 3,137 | 4,411 | |||||||||||||||||
Segment assets | 53,297 | 11,575 | 8,912 | 19,518 | 93,302 | |||||||||||||||
Nine Months Ended March 31, 2004 |
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Total | ||||||||||||||||||||
Corporate | Continuing | |||||||||||||||||||
MercFuel | Air Cargo | Maytag | and Other | Operations | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Revenues | $ | 228,195 | $ | 29,306 | $ | 17,489 | $ | 274,990 | ||||||||||||
Gross margin | 4,806 | 1,356 | 3,909 | 10,071 | ||||||||||||||||
Depreciation and amortization | 352 | 1,401 | 249 | $ | 167 | 2,169 | ||||||||||||||
Capital expenditures | 645 | 47 | 143 | 28 | 863 | |||||||||||||||
Goodwill | 1,252 | 3,137 | 4,389 | |||||||||||||||||
Segment assets | 36,899 | 16,458 | 10,337 | 20,717 | 84,411 |
Nine Months Ended | Three Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(In thousands) | ||||||||||||||||
Net loss | $ | (1,997 | ) | $ | (3,638 | ) | $ | (1,871 | ) | $ | (1,819 | ) | ||||
Foreign currency translation adjustment | 222 | 92 | (17 | ) | (56 | ) | ||||||||||
Comprehensive loss | $ | (1,775 | ) | $ | (3,546 | ) | $ | (1,888 | ) | $ | (1,875 | ) | ||||
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Nine Months Ended | Three Months Ended | |||||||
March 31, 2004 | ||||||||
(In thousands) | ||||||||
Total sales and revenue | $ | 69,687 | $ | 23,704 | ||||
Gross margin | $ | 8,392 | $ | 2,104 | ||||
Loss before income tax benefit | $ | (1,402 | ) | $ | (759 | ) | ||
Income tax expense (benefit) | (359 | ) | $ | (108 | ) | |||
Net loss | $ | (1,043 | ) | $ | (651 | ) | ||
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Nine Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
($ in thousands) | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||||||||||||||
% of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
MercFuel | $ | 388,501 | 88.8 | % | $ | 228,195 | 83.0 | % | $ | 142,730 | 90.2 | % | $ | 88,305 | 85.1 | % | ||||||||||||||||
Air Cargo | 32,578 | 7.5 | 29,306 | 10.6 | 10,000 | 6.3 | 9,729 | 9.4 | ||||||||||||||||||||||||
Maytag | 15,665 | 3.6 | 17,489 | 6.4 | 5,322 | 3.4 | 5,747 | 5.5 | ||||||||||||||||||||||||
Other | 538 | 0.1 | 207 | 0.1 | ||||||||||||||||||||||||||||
Total revenues | $ | 437,282 | 100.0 | % | $ | 274,990 | 100.0 | % | $ | 158,259 | 100.0 | % | $ | 103,781 | 100.0 | % | ||||||||||||||||
% of Unit | % of Unit | % of Unit | % of Unit | |||||||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||||||||
Gross margin(1): | ||||||||||||||||||||||||||||||||
MercFuel | $ | 6,601 | 1.7 | % | $ | 4,806 | 2.1 | % | $ | 2,410 | 1.7 | % | $ | 1,506 | 1.7 | % | ||||||||||||||||
Air Cargo | 3,348 | 10.3 | 1,356 | 4.6 | 589 | 5.9 | 60 | 0.6 | ||||||||||||||||||||||||
Maytag | 3,832 | 24.5 | 3,909 | 22.4 | 1,303 | 24.5 | 1,166 | 20.3 | ||||||||||||||||||||||||
Other | (440 | ) | (81.8 | ) | (116 | ) | (56.0 | ) | ||||||||||||||||||||||||
Total gross margin | $ | 13,341 | 3.1 | % | $ | 10,071 | 3.7 | % | $ | 4,186 | 2.6 | % | $ | 2,732 | 2.6 | % | ||||||||||||||||
Nine Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||||||||||
% of Total | % of Total | % of Total | % of Total | |||||||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||||||||
Expenses (Income): | ||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | $ | 11,736 | 2.7 | % | $ | 7,838 | 2.9 | % | $ | 4,708 | 3.0 | % | $ | 2,798 | 2.7 | % | ||||||||||||||||
Provision for bad debts | 1,514 | 0.4 | 305 | 0.1 | 1,150 | 0.7 | 329 | 0.3 | ||||||||||||||||||||||||
Depreciation and amortization | 1,855 | 0.4 | 2,169 | 0.8 | 601 | 0.4 | 743 | 0.7 | ||||||||||||||||||||||||
Interest expense and other | 751 | 0.2 | 512 | 0.2 | 221 | 0.1 | 226 | 0.2 | ||||||||||||||||||||||||
Hambro settlement costs | 1,799 | 0.6 | ||||||||||||||||||||||||||||||
Asset impairment loss | 626 | 0.1 | ||||||||||||||||||||||||||||||
Total expenses (income) | 16,482 | 3.8 | 12,623 | 4.6 | 6,680 | 4.2 | 4,096 | 3.9 | ||||||||||||||||||||||||
Loss from continuing operations before minority interest and income tax expense | (3,141 | ) | (0.7 | ) | (2,552 | ) | (0.9 | ) | (2,494 | ) | (1.6 | ) | (1,364 | ) | (1.3 | ) | ||||||||||||||||
Minority interest | 406 | (68 | ) | |||||||||||||||||||||||||||||
Loss from continuing operations before income tax benefit | (2,735 | ) | (0.7 | ) | (2,552 | ) | (0.9 | ) | (2,562 | ) | (1.6 | ) | (1,364 | ) | (1.3 | ) | ||||||||||||||||
Income tax benefit | (716 | ) | (0.2 | ) | 43 | (0.0 | ) | (691 | ) | (0.4 | ) | (196 | ) | (0.2 | ) | |||||||||||||||||
Loss from continuing operations | (2,019 | ) | (0.5 | ) | (2,595 | ) | (0.9 | ) | (1,871 | ) | (1.2 | ) | (1,168 | ) | (1.1 | ) | ||||||||||||||||
Loss from discontinued operations, net of taxes | (1,043 | ) | (0.4 | ) | (651 | ) | (0.7 | ) | ||||||||||||||||||||||||
Gain on sale of discontinued operations, net of taxes | 22 | |||||||||||||||||||||||||||||||
Net loss | $ | (1,997 | ) | (0.5 | )% | $ | (3,638 | ) | (1.3 | )% | $ | (1,871 | ) | (1.2 | )% | $ | (1,819 | ) | (1.8 | )% | ||||||||||||
(1) | Gross margin as used here and throughout Management’s Discussion includes certain selling, general and administrative costs which are charged directly to the operating units, but excludes depreciation and amortization expenses and selling, general and administrative expenses. |
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Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Commercial Sales | ||||||||
Revenue ($000) | $ | 106,143 | $ | 66,871 | ||||
Volume (thousand gallons) | 70,134 | 60,643 | ||||||
Corporate Aviation/Fractional Jet | ||||||||
Revenue ($000) | $ | 36,587 | $ | 21,434 | ||||
Volume (thousand gallons) | 14,488 | 11,750 | ||||||
MercFuel Total | ||||||||
Revenue ($000) | $ | 142,730 | $ | 88,305 | ||||
Volume (thousand gallons) | 84,622 | 72,393 | ||||||
Gross margin ($000) | $ | 2,410 | $ | 1,506 |
Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Revenue ($000) | ||||||||
Cargo handling | $ | 6,895 | $ | 6,124 | ||||
Cargo logistics services | 1,863 | 2,470 | ||||||
Cargo general sales agent services | 1,242 | 1,135 | ||||||
Air Cargo total | $ | 10,000 | $ | 9,729 | ||||
Gross margin ($000) | ||||||||
Cargo handling | $ | 522 | $ | 63 | ||||
Cargo logistics services | 464 | 489 | ||||||
Cargo general sales agent services | 39 | (73 | ) | |||||
Cargo administrative | (436 | ) | (419 | ) | ||||
Air Cargo total | $ | 589 | $ | 60 | ||||
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Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Revenue ($000) | ||||||||
Refueling | $ | 1,555 | $ | 2,056 | ||||
Air Terminal | 2,402 | 1,906 | ||||||
BOS | 1,066 | 1,495 | ||||||
Weather Data | 293 | 281 | ||||||
Other | 6 | 9 | ||||||
Total Maytag | $ | 5,322 | $ | 5,747 | ||||
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Nine Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Commercial Sales | ||||||||
Revenue ($000) | $ | 296,721 | $ | 179,427 | ||||
Volume (thousand gallons) | 202,486 | 178,971 | ||||||
Corporate Aviation/Fractional Jet | ||||||||
Revenue ($000) | $ | 91,780 | $ | 48,768 | ||||
Volume (thousand gallons) | �� | 38,715 | 28,536 | |||||
MercFuel Total | ||||||||
Revenue ($000) | $ | 388,501 | $ | 228,195 | ||||
Volume (thousand gallons) | 241,201 | 207,507 | ||||||
Gross margin ($000) | $ | 6,601 | $ | 4,806 |
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Nine Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Revenue ($000) | ||||||||
Cargo handling | $ | 21,711 | $ | 19,252 | ||||
Cargo logistics services | 7,210 | 6,631 | ||||||
Cargo general sales agent services | 3,657 | 3,423 | ||||||
Air Cargo total | $ | 32,578 | $ | 29,306 | ||||
Gross margin ($000) | ||||||||
Cargo handling | $ | 2,635 | $ | 1,526 | ||||
Cargo logistics services | 1,794 | 1,362 | ||||||
Cargo general sales agent services | 158 | (157 | ) | |||||
Cargo administrative | (1,239 | ) | (1,375 | ) | ||||
Air Cargo total | $ | 3,348 | $ | 1,356 | ||||
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Nine Months Ended | ||||||||
December 31, | ||||||||
2005 | 2004 | |||||||
Revenue ($000) | ||||||||
Refueling | $ | 5,033 | $ | 6,352 | ||||
Air Terminal | 6,177 | 5,773 | ||||||
BOS | 3,554 | 4,479 | ||||||
Weather Data | 881 | 855 | ||||||
Other | 20 | 30 | ||||||
Total Maytag | $ | 15,665 | $ | 17,489 | ||||
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(d) Maximum Number (or | ||||||||||||||||
(a) Total | (c) Total Number of | Approximate Dollar | ||||||||||||||
Number of | (b) Average | Shares (or Units) | Value) of Shares (or | |||||||||||||
Shares | Price | Purchased as Part of | Units) that May Yet | |||||||||||||
(or Units) | Paid per Share | Publicly Announced | be Purchased Under | |||||||||||||
Period | Purchased | (or Unit) | Plans or Programs | the Plans or Programs | ||||||||||||
Month #1 January 1, 2005 to January 31, 2005 | 3,750 | 4.90 | N/A | N/A | ||||||||||||
Month #2 February 1, 2005 to February 28, 2005 | 0 | N/A | N/A | N/A | ||||||||||||
Month #3 March 1, 2005 to March 31, 2005 | N/A | N/A | ||||||||||||||
Total | 3,750 | $ | 4.90 | |||||||||||||
Name | For | Withheld | ||||||
Joseph A. Czyzyk | 2,620,224 | 61,090 | ||||||
Frederick H. Kopko | 2,646,702 | 34,612 | ||||||
Gary J. Feracota | 2,646,951 | 34,363 | ||||||
Michael J. Janowiak | 2,651,143 | 30,171 | ||||||
Angelo Pusateri | 2,646,951 | 34,363 |
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Exhibit | ||
No. | Description | |
2.1 | Stock Purchase Agreement Dated as of October 28, 2003. By and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc.(28) | |
2.2 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of December 10, 2003.(31) | |
2.3 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of January 14, 2004.(31) | |
2.4 | Amendment to Stock Purchase Agreement by and Among Allied Capital Corporation, Mercury Air Centers, Inc. and Mercury Air Group, Inc. dated as of February 13, 2004. (32) | |
2.5 | Settlement Statement dated as of April 12, 2004.(33) | |
2.6 | Closing Escrow Agreement dated as of April 5, 2004 among Allied and Wachovia Bank National, as escrow agent. (33) | |
3.1 | Certificate of Incorporation.(17) | |
3.2 | Amended and Restated Bylaws of Mercury Air Group, Inc. adopted December 7, 2002.(25) | |
3.3 | Certificate of Designations of Series A 8% Cumulative Convertible Preferred Stock.(27) | |
4.1 | Loan Agreement between California Economic Development Financing Authority and Mercury Air Group, Inc. relating to $19,000,000 California Economic Development Financing Authority Variable Rate Demand Airport Facilities Revenue Bonds, Series 1998 (Mercury Air Group, Inc. Project) dated as of April 1, 1998.(2) | |
4.2 | Securities Purchase Agreement dated September 10, 1999 by and among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(12) | |
4.3 | Amendment No. 1 dated as of September 30, 2000 by and between J.H. Whitney Mezzanine, L.P. and Mercury Air Group, Inc. to the Securities Agreement.(16) | |
4.4 | Waiver and Consent Agreement dated as of December 29, 2000 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(17) | |
4.5 | Waiver and Consent Agreement dated as of July 2, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(18) | |
4.6 | Waiver Agreement dated as of September 25, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P.(18) | |
4.7 | Amendment No. 2 dated as of September 30, 2001 by and between J.H. Whitney Mezzanine Fund, L.P. and Mercury Air Group, Inc. to the Securities Purchase Agreement.(19) | |
4.8 | Waiver Agreement dated as of November 26, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(21) | |
4.9 | Waiver Agreement dated as of December 21, 2001 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(21) | |
4.10 | Waiver Agreement dated as of June 26, 2002 among Mercury Air Group, Inc. and J.H. Whitney Mezzanine, L.P.(24) | |
4.11 | Amendment No. 3 to Securities Purchase Agreement by and between Mercury Air Group, Inc. and J.H. Whitney Mezzanine Fund, L.P. dated as of December 30, 2002.(26) | |
4.12 | Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Warrant dated September 10, 1999.(26) |
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Exhibit | ||
No. | Description | |
4.13 | Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Senior Subordinated Promissory Note dated September 10, 1999.(26) | |
4.14 | Security Agreement by and between Mercury Air Group, Inc. and each of its subsidiaries hereto as Obligors and J.H. Whitney Mezzanine Fund, L.P. as the Lenders, dated as of December 30, 2002.(26) | |
4.15 | Subordination Agreement among J.H. Whitney Mezzanine Fund, L.P. Foothill Capital Corporation, as Agent and Mercury Air Group, Inc. and certain of its subsidiaries signatory thereto, dated as of December 30, 2002.(26) | |
4.16 | Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain subsidiaries signatory thereto, dated as of December 30, 2002.(26) | |
4.17 | First Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated March 12, 2003.(30) | |
4.18 | Second Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated March 31, 2003.(30) | |
4.19 | Third Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated July 16, 2003.(30) | |
4.20 | Fourth Amendment to Loan and Security Agreement by and among Foothill Capital Corporation and Mercury Air Group, Inc. and certain of its subsidiaries, dated August 1, 2003.(30) | |
4.21 | Amendment No. 4 to Securities Purchase Agreement by and between Mercury Air Group, Inc. and Allied Capital Corporation, as Assignee of J.H. Whitney Mezzanine Fund, L.P. dated as of October 28, 2003(28) | |
4.22 | Assignment of Note dated as of October 28, 2003 between Allied Capital Corporation and J.H. Whitney Mezzanine Fund, L.P.(28) | |
4.23 | Second Amended and Restated Allied Capital Corporation 12% Senior Subordinated Promissory Note dated September 10, 1999(28) | |
4.24 | Second Amended and Restated Allied Capital Corporation Warrant dated October 28, 2003(28) | |
4.25 | Securities Purchase Agreement dated as of October 28, 2003 by and among J.H. Whitney Mezzanine Fund, L.P. and J.H. Whitney Mezzanine Debt Fund, L.P., Allied Capital Corporation and Mercury Air Group, Inc.(28) | |
4.26 | Second Amended and Restated J.H. Whitney Mezzanine Fund, L.P. Warrant dated October 28, 2003(28) | |
4.27 | Fifth Amendment to Security and Loan Agreement and Forbearance Agreement dated as of December 5, 2003 by and among Wells Fargo Foothill, Mercury Air Group, Inc. and certain of its subsidiaries.(31) | |
4.28 | Amendment letter to Forbearance Term and New Covenant Default dated as of February 16, 2004. (32) | |
10.1 | Mercury Air Group, Inc.’s 1990 Long-Term Incentive Plan.(4)* | |
10.2 | Mercury Air Group, Inc.’s 1990 Directors Stock Option Plan.(1)* | |
10.3 | Memorandum Dated September 15, 1997 regarding Summary of Officer Life Insurance Policies with Benefits Payable to Officers or Their Designated Beneficiaries.(8)* | |
10.4 | Non-Qualified Stock Option Agreement dated March 21, 1996, by and between Frederick H. Kopko and Mercury Air Group, Inc.(6)* | |
10.5 | Mercury Air Group, Inc.’s 1998 Long-Term Incentive Plan.(10)* | |
10.6 | Mercury Air Group, Inc.’s 1998 Directors Stock Option Plan.(10)* | |
10.7 | Revolving Credit and Term Loan Agreement dated as of March 2, 1999 by and among Mercury Air Group, Inc., The Banks listed on Schedule 1 thereto, and The Fleet National Bank f/k/a BankBoston, N.A., as Agent.(11) |
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Exhibit | ||
No. | Description | |
10.8 | First Amendment to Revolving Credit and Term Loan Agreement dated as of September 10, 1999.(14) | |
10.9 | Second Amendment to Revolving Credit and Term Loan Agreement dated as of March 31, 2000.(14) | |
10.10 | Third Amendment, Waiver and Consent to Revolving Credit and Term Loan Agreement dated as of August 11, 2000.(14) | |
10.11 | The Company’s 401(k) Plan consisting of CNA Trust Corporation. Regional Prototype Defined Contribution Plan and Trust and Adoption Agreement.(14)* | |
10.12 | Employment Agreement dated July 31, 2000 between the Company and Dr. Philip J. Fagan.(15)* | |
10.13 | Fourth Amendment to Revolving Credit and Term Loan Agreement dated as of November 14, 2000.(16) | |
10.14 | Amendment No. 1 to Mercury Air Group, Inc. 1998 Long-Term Incentive Option Plan as of August 22, 2000.(16)* | |
10.15 | Amendment No. 1 to Mercury Air Group, Inc. 1998 Directors Stock Option Plan as of August 22, 2000.(16)* | |
10.16 | Limited Waiver letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 21, 2001.(18) | |
10.17 | Fifth Amendment to Revolving Credit and Term loan Agreement dated as of September 21, 2001.(18) | |
10.18 | Limited Consent letter Agreement to Revolving Credit and Term Loan Agreement dated as of September 30, 2001.(19) | |
10.19 | Limited waiver and Consent to Revolving Credit and Term Loan Agreement dated as of December 31, 2001.(21) | |
10.20 | 2002 Management Stock Purchase Plan.(22) | |
10.21 | Amended and Restated Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Joseph A. Czyzyk.(22)* | |
10.22 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Wayne J. Lovett.(22)* | |
10.23 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and John Enticknap. (22)* | |
10.24 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Mark Coleman.(22)* | |
10.25 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Steven S. Antonoff. (22)* | |
10.26 | Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Robert Schlax.(22)* | |
10.27 | Limited waiver and Consent to Revolving Credit and Term Loan Agreement dated as of June 27, 2002.(24) | |
10.28 | Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury Air Group, Inc. dated December 15, 2001.(24) | |
10.29 | Amendment to Sale-Leaseback agreement made by and between CFK Realty Partners, LLC and Mercury Air Group, Inc.(24) | |
10.30 | Promissory Note dated July 1, 2004 by CFK Realty Partners, LLC in favor of Mercury Air Group, Inc. (24) | |
10.31 | Limited Waiver and Consent to Revolving Credit and Term Loan Agreement dated as June 27, 2002.(24) | |
10.32 | Amendment No. 1 to Amended and Restated Employment Agreement dated May 22, 2002 between Mercury Air Group, Inc. and Joseph A. Czyzyk.*(24) | |
10.34 | Settlement Agreement dated December 12, 2003 by and among(i) J O Hambro Capital Management Group Limited, (ii) J O Hambro Capital Management Limited, (iii) American Opportunity Trust PLC, (iv) The Trident North Atlantic Fund, and(v) Mercury Air Group, Inc.(29) |
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Exhibit | ||
No. | Description | |
10.35 | Settlement Agreement by and between: 1) David H. Murdock as trustee of the David H. Murdock Living Trust dated May 28, 1996, as amended, d/b/a Pacific Holding Company and using nominee PCS001 and 2) Mercury Air Group, Inc. dated July 16, 2004.(34) | |
10.36 | Loan Agreement dated as of July 29, 2004 by and among Bank of America N.A., Mercury Air Group, Inc. and certain subsidiaries.(35) | |
10.37 | First Amendment to Loan Agreement by and among Bank of America, N.A., Mercury Air Group, Inc. and certain subsidiaries.(37) | |
10.38 | Letter of Credit and Reimbursement Agreement as of November 1, 2004 between Mercury Air Group, Inc. and Bank of America.(38) | |
10.39 | Amended and Restated Lease entered into as of November 10, 2004 and effective as of July 1, 2004 by and between CFK Realty Partners, LLC. and Mercury Air Group, Inc.(39) | |
10.40 | Amendment No. 2 to Amended and Restated Employment Agreement by and between Mercury Air Group, Inc. and Joseph A. Czyzyk.*(39) | |
10.41 | Agreement entered into on November 10, 2004 and effective on October 28, 2004 by and between Mercury Air Group, Inc. and Dr. Philip J. Fagan.(39) | |
10.42 | Severance Agreement and General and Special Release between Mercury Air Group, Inc., and Robert Schlax entered into on January 17, 2005.(40) | |
10.43 | Second Amendment to Loan Agreement dated January 31, 2005 by and among Bank of America, N.A., Mercury Air Group, Inc. and certain subsidiaries.(41) | |
10.44 | Third Amendment to Loan Agreement dated April 6, 2005 by and among Bank of America, N.A., Mercury Air Group, Inc. and certain subsidiaries.(42) | |
31.1 | Section 302 Certification of Chief Executive Officer | |
31.2 | Section 302 Certification of Chief Financial Officer | |
32.1 | Section 906 Certification of Chief Executive Officer | |
32.2 | Section 906 Certification of Chief Financial Officer | |
99.1 | Amended and Restated Partnership Agreement dated as of July 30, 2004 of CK Partners by and among Frederick H. Kopko, Jr. and Joseph A. Czyzyk.(36) |
* | Denotes managements’ contract or compensation plan or arrangement. | |
(1) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 10, 1993 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(2) | All such documents were previously filed as Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and are incorporated herein by reference. | |
(3) | All such documents were previously filed as Exhibits to the Company’s Registration Statement No. 33-39044 on Form S-2 and are incorporated herein by reference. | |
(4) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 2, 1992 Annual Meeting of Stockholders. | |
(5) | All such documents were previously filed as Exhibits to the Company’s Registration Statement No. 33-65085 on Form S-1 and are incorporated herein by reference. |
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(6) | All such documents were previously filed as Exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and are incorporated herein by reference. | |
(7) | All such documents were previously filed as Exhibits to the Company’s Report on Form 8-K filed September 13, 1996 and are incorporated herein by reference. | |
(8) | Such document was previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1997 and is incorporated herein by reference. | |
(9) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1998 and are incorporated herein by reference. | |
(10) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the December 3, 1998 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(11) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and are incorporated herein by reference. | |
(12) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 1999 and are incorporated herein by reference. | |
(13) | Such document was previously filed as an Exhibit to the Company’s current Report on Form 8-K on August 11, 2000 and is incorporated herein by reference. | |
(14) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2000 and is incorporated herein by reference. | |
(15) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 and are incorporated herein by reference. | |
(16) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000 and are incorporated herein by reference. | |
(17) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and are incorporated herein by reference. | |
(18) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2001 and are incorporated herein by reference. | |
(19) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 and are incorporated herein by reference. | |
(20) | Such document was previously filed as Appendix A to the Company’s Proxy Statement for the November 7, 2001 Annual Meeting of Stockholders and is incorporated herein by reference. | |
(21) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 and are incorporated herein by reference. | |
(22) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on June 5, 2002 and is incorporated herein by reference. | |
(23) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 11, 2002 and is incorporated herein by reference. | |
(24) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2002 and are incorporated herein by reference. |
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(25) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 7, 2002 and is incorporated herein by reference. | |
(26) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 30, 2002 and is incorporated herein by reference. | |
(27) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and are incorporated herein by reference. | |
(28) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on October 28, 2003 and is incorporated herein by reference. | |
(29) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on December 12, 2003 and is incorporated herein by reference. | |
(30) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2003 and are incorporated herein by reference. | |
(31) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2003 and are incorporated herein by reference. | |
(32) | All such documents were previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and are incorporated herein by reference. | |
(33) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K filed on April 22, 2004 and dated April 12, 2004 and is incorporated herein by reference. | |
(34) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 16, 2004 and is incorporated herein by reference. | |
(35) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on July 30, 2004 and is incorporated herein by reference. | |
(36) | All such documents were previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended June 30, 2004 and are incorporated herein by reference. | |
(37) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on October 27, 2004 and is incorporated herein by reference. | |
(38) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on November 1, 2004 and incorporated herein by reference. | |
(39) | Such document was previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 and are incorporated herein by reference. | |
(40) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on January 17, 2005 and incorporated herein by reference. | |
(41) | Such document was previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 and are incorporated herein by reference. | |
(42) | Such document was previously filed as an Exhibit to the Company’s Current Report on Form 8-K on April 8, 2005 and incorporated herein by reference. |
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MERCURY AIR GROUP, INC. | ||
Registrant | ||
/s/ JOSEPH CZYZYK | ||
Joseph Czyzyk | ||
Chief Executive Officer | ||
/s/ KENT ROSENTHAL | ||
Kent Rosenthal | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
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MERCURY AIR GROUP, INC.
The undersigned stockholder of Mercury Air Group, Inc., a Delaware corporation (the “Company”), acting under the Delaware General Corporation law, hereby constitutes and appoints Joseph A. Czyzyk and Wayne J. Lovett, and each of them the attorneys and proxies of the undersigned (“proxy representatives”), each with the power of substitution, to attend and act for the undersigned at the Special Meeting of Stockholders (the “Special Meeting”) of Mercury Air Group, Inc., a Delaware corporation (the “Company” or “Mercury”), will be held at The Ritz Carlton at 4375 Admiralty Way, Marina Del Rey, California, on the 16th day of September, 2005 at 8:00 a.m., and at any adjournments thereof, and in connection therewith to vote and represent all of the shares of Common Stock of the Company which the undersigned would be entitled to vote, as specified on the reverse side.
Said proxy representatives, and each of them, shall have all the powers which the undersigned would have if acting in person. The undersigned hereby revokes any other proxy to vote at the Meeting and hereby ratifies and confirms that said proxy representatives, and each of them, may lawfully do by virtue hereof. Said proxy representatives, without hereby limiting their general authority, are specifically authorized to vote in accordance with their best judgment with respect to such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof and with respect to the election of any person as a director if a bona fide nominee for that office is named in the Proxy Statement and such nominee is unable to serve or for good cause will not serve.
Important – Please sign on the Other Side
Admission Ticket
Mercury Air Group, Inc.
Special Meeting of Stockholders
September 16, 2005
8:00 a.m. Local Time
If you plan to attend the Special Meeting,
Please mark the box on the reverse side of the proxy card and
keep this portion as your admission ticket.
Table of Contents
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING PROPOSALS.
Please mark vote as indicated in this example | x |
1. | To consider and vote upon a proposal to amend the Company’s Certificate of Incorporation to effect a 1-for-501 reverse stock split of the Company’s common stock (the “Reverse Stock Split”). | FOR o | AGAINST o | ABSTAIN o | ||||
2. | To consider and vote upon a proposal to amend the Company’s Certificate of Incorporation to effect a 501-for-1 forward stock split of the Company’s common stock (the “Forward Stock Split”, and proposals 1 and 2 collectively referred to as the “Transaction”). | FOR o | AGAINST o | ABSTAIN o |
3. | To grant the Company’s Board of Directors discretionary authority to adjourn the Special Meeting if necessary to satisfy the conditions to completing the Transaction, including for the purpose of soliciting proxies to vote in favor of the Transaction. | FOR o | AGAINST o | ABSTAIN o | ||||
Please note that the amendment to the Certificate of Incorporation to effect the Forward Stock Split is conditioned upon stockholder approval of the amendment to the Certificate of Incorporation to effect the Reverse Stock Split, and that the amendment to the Certificate of Incorporation to effect the Reverse Stock Split is conditioned upon stockholder approval of the amendment to the Certificate of Incorporation to effect the Forward Stock Split. |
Please be sure to date and sign this proxy in the box below. | |||||||
Date: | , 2005 | ||||||
Signature | |||||||
Signature (if held jointly) | |||||||
Please sign exactly as your name or names appear hereon. For joint accounts, each owner should sign. When signing as executor, administrator, attorney, trustee, guardian or in another representative capacity, please give your full title. If a corporation or partnership, please sign in the name of the corporation or partnership by an authorized officer or person. | |||||||
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
your proxy card in the
envelope provided as soon
as possible.