SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Consent Statement
[_] Confidential, for Use of the Commission only (as permitted by rule
14a-6(e)(2))
[_] Definitive Consent Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to sec. 240.14a-11(c) or Rule 14a-12
ATLANTIC COAST AIRLINES HOLDINGS, INC.
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(Name of Registrant as Specified in Its Charter)
MESA AIR GROUP, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY; SUBJECT TO COMPLETION
December 2, 2003
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CONSENT STATEMENT
OF
MESA AIR GROUP, INC.
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To the Stockholders of Atlantic Coast Airlines Holdings, Inc.:
This Consent Statement and the enclosed WHITE consent card are from Mesa Air
Group, Inc. ("Mesa," "we" or "us"), for the solicitation by Mesa of written
consents from you, the holders of shares of common stock of Atlantic Coast
Airlines Holdings, Inc. ("Atlantic Coast"), to take the following actions
without a stockholders' meeting, as authorized by Delaware law:
(1) Remove each member of Atlantic Coast's board and any person
(other than those elected by this consent) elected or appointed to the
Atlantic Coast board pursuant to a vacancy caused by the removal or
resignation of any of the directors from the Atlantic Coast board or any
newly-created directorships;
(2) Elect the nominees described in this Consent Statement to serve
as directors of Atlantic Coast (or, if any such nominee is unable to serve
as a director of Atlantic Coast, any other person designated as a nominee
by the remaining nominee or nominees); and
(3) Repeal each provision of the Atlantic Coast by-laws or
amendments, if any, adopted after August 14, 1998 (the last date the
by-laws were filed with the Securities and Exchange Commission ("SEC"))
and before the effectiveness of these three proposals.
This Consent Statement and the enclosed WHITE consent card are first being
furnished to Atlantic Coast's stockholders on or about [ ], 2003.
Mesa Exchange Offer/Merger Proposal
On October 6, 2003, Mesa advised the Atlantic Coast board of our intention
to enter into a business combination with Atlantic Coast (the "Mesa proposal").
This business combination would have taken the form of either an exchange offer
or a merger agreement (the "Mesa exchange offer/merger proposal"), in each case
pursuant to which each Atlantic Coast share of common stock would be exchanged
for 0.90 of a share of Mesa common stock (subject to adjustment as set forth in
Annex IV) (the "Exchange Ratio") in a transaction expected to be tax-free to
Atlantic Coast stockholders. Based on the closing prices of shares of Mesa and
Atlantic Coast common stock on October 3, 2003, the last trading day before our
announcement of our intention to enter into a business combination with Atlantic
Coast, an offer to exchange 0.90 of a share of Mesa common stock for each share
of Atlantic Coast common stock represented a 25% premium over the price of
shares of Atlantic Coast's common stock. Furthermore, an offer to exchange 0.90
of a share of Mesa common stock for each share of Atlantic Coast common stock
represented a premium of 35.7% over the average closing price of Atlantic Coast
stock between July 28, 2003, the day Atlantic Coast announced its intention to
transform itself into a low-fare independent airline, and October 3, 2003.
Your board rejected the Mesa proposal. Atlantic Coast has also taken a
number of steps that Mesa believes are designed to hinder our efforts to proceed
with this consent solicitation and our ability to proceed with an exchange
offer, including inappropriately setting a record date for this consent
solicitation and filing a lawsuit to enjoin Mesa from making an exchange offer.
See "Background of this Consent Solicitation" beginning on page [ ].
Furthermore, on November 18, 2003, Atlantic Coast announced that it had
entered into a binding memorandum of understanding with Airbus for a firm order
of ten new A319 aircraft; five new A320 aircraft; and leasing commitments from
operating lessors for ten additional A319 aircraft, as part of their plan to
operate as a low-fare independent airline (the "Airbus MOU"). On November 19,
2003, Mesa announced that, notwithstanding this action by Atlantic Coast, we are
moving forward expeditiously with our consent solicitation to replace Atlantic
Coast's board. We also intend to proceed with making an exchange offer, subject
to considering the impact of these developments on the value of Atlantic Coast
and consequently, on our exchange offer.
MESA BELIEVES THAT CONSENTING TO EACH OF THE PROPOSALS WILL GIVE THE
STOCKHOLDERS OF ATLANTIC COAST THE OPPORTUNITY TO ELECT A BOARD THAT WILL
CONSIDER RETURNING ATLANTIC COAST TO ITS HISTORIC BUSINESS STRATEGY OF OPERATING
PURSUANT TO REVENUE GUARANTEE CODE SHARE AGREEMENTS WITH MAJOR AIRLINES SERVING
HUB NETWORKS.
MESA RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS
Approval of each of the proposals ("proposals") requires the affirmative
consent of a majority of the outstanding shares of Atlantic Coast common stock.
Both proposals 1 and 2 must be approved for either of them to be effective.
Proposals 1 and 2 may be adopted and become effective independent of proposal 3,
and proposal 3 may be adopted and become effective independent of proposals 1
and 2. The purpose of the proposals is to elect the nominees to the Atlantic
Coast board. The nominees, if elected to the Atlantic Coast board, are expected
to act in the best interest of Atlantic Coast stockholders. The nominees are
independent persons who are not affiliated with Mesa and who believe that, to
the extent taking such action is consistent with their fiduciary duties: (i)
Atlantic Coast should be returned to its historic business strategy of operating
pursuant to revenue guarantee code share agreements with major airlines serving
hub networks; (ii) Atlantic Coast should consider, and if appropriate, negotiate
a business combination transaction with Mesa or any other party; and (iii) if
appropriate, any impediments to the ability of Atlantic Coast stockholders to
consider any business combination transaction with Mesa or any other party
should be removed.
WHY DO YOU NEED TO CONSENT TO THESE PROPOSALS?
Mesa believes that the current Atlantic Coast business strategy to operate
as an independent low-fare airline hurts the value of Atlantic Coast. The
current directors have recently determined to abandon Atlantic Coast's
profitable strategy of operating as a regional airline pursuant to revenue
guarantee code share agreements with major airlines serving hub networks.
According to airline industry analysts, Atlantic Coast's strategy has never been
successfully implemented by a domestic air carrier operating primarily with
regional jets. The value of Atlantic Coast common stock dropped 33.8% between
July 25, 2003, the last trading day prior to Atlantic Coast's announcement of
its intention to become an independent low-fare airline, and July 29, 2003, the
day after such announcement. The value of Atlantic Coast common stock dropped
15% between July 25, 2003 and October 3, 2003, the last full trading day prior
to our announcement of our intention to acquire Atlantic Coast. The value of
Mesa common stock increased 27.6% between July 25, 2003 and October 3, 2003. You
are urged to obtain current market quotations for Mesa and Atlantic Coast common
stock.
If elected to the Atlantic Coast board, we believe that the nominees will,
to the extent taking such action is consistent with their fiduciary duties:
1. Return Atlantic Coast to its historic business strategy of operating
pursuant to revenue guarantee code share agreements with major airlines
serving hub networks. In that regard, they intend to:
o review the Airbus MOU to determine if it can be rescinded or
terminated and the consequences thereof;
o consider an agreement with United Air Lines, Inc. ("United
Airlines") on terms substantially comparable with the non-binding
memorandum of understanding Mesa entered into with United Airlines
on November 12, 2003 (the "United MOU") and described under "Mesa
Strategic Plans" beginning on page [ ]; and
o attempt to solidify a code share relationship with Delta Air Lines,
Inc. ("Delta Air Lines") on commercially reasonable terms
satisfactory to all parties.
2. Consider and, if appropriate, negotiate a business combination transaction
with Mesa or any other party. In that regard, they intend to:
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o attempt to minimize any damages arising from the entering into
and/or termination of the Airbus MOU;
o allow Mesa to proceed with an exchange offer (which we have
indicated we are still committed to making); and
o if Mesa has not already commenced an exchange offer, promptly enter
into discussions with Mesa with respect to a business combination
transaction.
3. Remove impediments to the consideration by Atlantic Coast stockholders of
any appropriate business combination transaction, including either an
exchange offer or a merger with Mesa or any other party, if appropriate,
by:
o considering, to the extent that it is in the best interest of the
Atlantic Coast stockholders, taking action to remove the impediments
to the consummation of an exchange offer or a merger proposal from
Mesa and any alternative proposals arising pursuant to that certain
Rights Agreement, dated as of January 27, 1999, between Atlantic
Coast and Continental Stock Transfer & Trust Company, referred to
herein as the "poison pill"; and
o considering taking action to exempt an exchange offer or a merger
proposal from Mesa, or any other alternative transaction that they
believe to be in your best interest, from the restrictions of
Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law").
ACT NOW TO PROTECT YOUR INVESTMENT AND YOUR RIGHT TO DECIDE THE BUSINESS
STRATEGY EMPLOYED BY ATLANTIC COAST
As of October 10, 2003, Mesa was the beneficial owner of 1,603,529 shares
of Atlantic Coast common stock, representing approximately 3.5% of the
outstanding shares as of November 1, 2003. According to Atlantic Coast's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, as of
November 1, 2003, there were 45,333,310 shares of Atlantic Coast common stock
outstanding. On December [ ], 2003, Mesa, in its capacity as a record holder of
Atlantic Coast common stock, requested that the Atlantic Coast board fix a
proper record date. If the Atlantic Coast board does not set a new record date
in accordance with our request, the actual record date will not be determined
until the Delaware Lawsuit (as defined below) has been resolved. We intend to
notify you by press release as promptly as possible of the actual record date
when determined.
YOUR CONSENT IS IMPORTANT! TO CONSENT TO OUR PROPOSALS PLEASE DO THE
FOLLOWING:
o PROMPTLY SIGN AND RETURN THE ENCLOSED WHITE CONSENT CARD
o DO NOT RETURN ANY CARD SENT TO YOU BY ATLANTIC COAST MANAGEMENT
If your shares of Atlantic Coast common stock are held in your own name,
please sign, DATE and mail the enclosed WHITE consent card today in the
postage-paid envelope provided or mail the completed card to MacKenzie Partners,
Inc. ("MacKenzie") at the address below.
If your shares of Atlantic Coast common stock are held in "Street-Name,"
only your bank or broker can execute a consent on your behalf, but only upon
receipt of your specific instructions. To ensure that your consent is effective,
please contact the persons responsible for your account and instruct them to
execute the WHITE consent card on your behalf. Mesa urges you to confirm in
writing your instructions to the person responsible for your account and provide
a copy of those instructions to Mesa in care of MacKenzie at the address set
forth below so that Mesa will be aware of all instructions given and can attempt
to ensure that such instructions are followed.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE IN EXECUTING OR
DELIVERING YOUR CONSENT, PLEASE WRITE TO OR CALL:
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MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
(212) 929-5500
Call Toll-Free: (800) 322-2885
IF YOU DO NOTHING, THE EFFECT WILL BE A VOTE AGAINST THE PROPOSALS. THE
AFFIRMATIVE VOTE OF A MAJORITY OF ALL OUTSTANDING SHARES IS NEEDED IN ORDER TO
REMOVE AND REPLACE THE CURRENT DIRECTORS OF ATLANTIC COAST.
QUESTIONS AND ANSWERS ABOUT THIS CONSENT SOLICITATION
Q: WHO IS MAKING THE SOLICITATION?
A: Mesa. Mesa is a holding company whose principal subsidiaries operate as
regional air carriers providing scheduled passenger and airfreight
service. Mesa currently operates 151 aircraft with 982 daily system
departures to 155 cities in 39 states, the District of Columbia, Canada,
Mexico and the Bahamas. Mesa operates in the West and Midwest as America
West Express; in the Midwest and East as US Airways Express; in Denver and
the West as United Express; in Denver as Frontier JetExpress until
December 31, 2003; in Kansas City with Midwest Express and in New Mexico
and Texas as Mesa Airlines. As of October 10, 2003, Mesa was the
beneficial owner of 1,603,529 shares of Atlantic Coast common stock,
representing approximately 3.5% of the outstanding shares as of November
1, 2003.
Q: WHAT ARE WE ASKING YOU TO CONSENT TO?
A: You are being asked to consent to three proposals in order to replace
Atlantic Coast's current directors with independent persons who are not
affiliated with Mesa and who have indicated they will act in your best
interest.
Q: WHY ARE WE SOLICITING YOUR CONSENT?
A: We are soliciting your consent because we believe that the current members
of the Atlantic Coast board have embarked on a misguided strategy that has
contributed to a steep decline in the value of Atlantic Coast's common
stock and therefore have failed to act in your best interest. Mesa
believes this is the case based on the following:
o Atlantic Coast has announced its intention to transform itself from
a regional airline operating pursuant to revenue guarantee code
share relationships with major airlines serving hub networks to an
independent low-fare airline. According to airline industry
analysts, (i) this strategy has never been successfully implemented
by a domestic air carrier which operates primarily with regional
jets and (ii) Atlantic Coast faces significant challenges in
establishing reservations, sales and marketing functions and in
generating sufficient revenue while operating regional jets with
limited passenger capacity.
o We believe Atlantic Coast's announced strategy to operate as an
independent low-fare airline has contributed to a loss of value of
33.8% between July 25, 2003, the last trading day prior to Atlantic
Coast's announcement of its intention to become an independent
low-fare airline and July 29, 2003, the day after such announcement.
Furthermore, the value of Atlantic Coast common stock dropped 15%
between July 25, 2003 and October 3, 2003, the last full trading day
prior to our announcement of our intention to acquire Atlantic
Coast. During the period from July 25, 2003 through October 3, 2003,
the value of Mesa's common stock increased 27.6%. You are urged to
obtain current market quotations for Mesa and Atlantic Coast common
stock.
o The current Atlantic Coast board rejected the Mesa proposal even
though Mesa stated in correspondence with the Chief Executive
Officer and directors of Atlantic Coast that Mesa was
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interested in a business combination with Atlantic Coast that would
provide a significant premium to you and that Mesa was willing to
negotiate the terms and structure of any such business combination
with the Atlantic Coast board.
o Atlantic Coast announced it entered into the Airbus MOU, creating
further impediments to your ability to make your own decision
regarding the future of Atlantic Coast's business, an exchange offer
or merger proposal by Mesa and any other business combination
transaction.
Q: WHO ARE THE NOMINEES?
A: The nominees are Nathaniel A. Davis, Andre V. Duggin, Theodore F. Kahan,
James R. Link, David T. McLaughlin, Peter F. Nostrand and Archille R.
Paquette. The nominees are independent persons who are not affiliated with
Mesa. The principal occupation and business experience of each nominee is
set forth in this Consent Statement under the section entitled "Additional
Information Regarding our Proposals" beginning on page [ ], which we urge
you to read. We believe you are entitled and it is in your best interest
to give the nominees a chance to review the current strategy embarked on
by the current Atlantic Coast board and an opportunity to maximize
stockholder value.
Q: WHY SHOULD ATLANTIC COAST COMBINE WITH MESA?
A: If the current board of directors are replaced as a result of this Consent
Statement, the new board will consider, if appropriate, an exchange offer
or merger proposal from Mesa. We believe that an exchange offer or merger
proposal made by Mesa should be attractive to Atlantic Coast stockholders
for the following reasons:
o according to airline industry analysts, the outlook of Atlantic
Coast on a stand-alone basis is not favorable due to the strategic
decision by Atlantic Coast's current directors to abandon its
profitable strategy of operating as a regional airline pursuant to
revenue guarantee code share relationships with major airlines
serving hub networks and transform itself into an independent
low-fare airline;
o if we successfully complete the offer, you will hold shares in a
larger combined company:
o which we believe will have greater access to capital to pursue
strategic growth opportunities than would Atlantic Coast on a
stand-alone basis;
o which we believe will become the leading regional airline in
the United States; and
o which we believe will create an enhanced capital structure and
a more liquid market for its shares than Atlantic Coast on a
stand-alone basis; and
o you will have the opportunity to continue to participate in Atlantic
Coast's growth through your ownership of shares of Mesa common
stock. Moreover, we expect that Mesa will be better positioned than
Atlantic Coast on a stand-alone basis to develop and exploit
Atlantic Coast's assets and partnerships.
These benefits can be realized only upon the consummation of an exchange
offer or merger transaction with Mesa. We cannot give any assurance that
these benefits will be achieved or realized in the near term, or at all.
We recommend that you approve the 3 proposals contained in this Consent
Statement so that the nominees can be seated as directors of Atlantic
Coast and consider an exchange offer or merger proposal from Mesa and any
alternative transaction that may be in your best interest. Mesa is
considering the effects of the Airbus MOU on the value of Atlantic Coast,
but continues to be committed to making an exchange offer. For a
description of certain terms of our exchange offer, a discussion of the
Exchange Ratio as a result of the Airbus MOU and other information related
to the exchange offer, see Annex IV.
Q: WHO CAN CONSENT TO THIS MATTER?
A: If you owned shares of Atlantic Coast common stock on the record date, you
have the right to consent to the proposals.
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Section 2.8 of the Atlantic Coast by-laws and Section 213 of the Delaware
General Corporation Law ("DGCL") provide that any stockholder seeking to
have the stockholders of Atlantic Coast authorize or take action by
written consent is required to request that the Atlantic Coast board fix a
record date. The Atlantic Coast board is required to promptly, but in all
events within 10 days after the date on which the request is received,
adopt a resolution fixing the record date for the solicitation (which may
not be more than 10 days after the date of the resolution). If the
Atlantic Coast board does not fix a record date within 10 days after the
receipt of the request, the record date for the solicitation will be the
date on which the first signed consent is delivered to Atlantic Coast.
The Atlantic Coast board announced that it set October 23, 2003, as the
record date for the solicitation made hereby and that it had received the
first written consent in connection with the solicitation made hereby.
This announcement was made not withstanding the fact that Mesa had not
requested that a record date be set. On October 29, 2003, Mesa filed a
lawsuit in the Court of Chancery of the State of Delaware (the "Delaware
Lawsuit") seeking to require the Atlantic Coast board to comply with the
proper procedures under Delaware law and the Atlantic Coast by-laws with
respect to (i) fixing a record date for this consent solicitation and (ii)
commencing the 60-day solicitation period. The Delaware Lawsuit alleges
that the action taken by the Atlantic Coast board to set a record date of
October 23, 2003, manipulates the proxy solicitation process and impedes
your ability to exercise your voting rights and may impede your right to
receive superior value for your shares. On November 25, 2003, Atlantic
Coast announced that the consent it received on October 23, 2003 had been
revoked and that therefore the 60-day consent solicitation period has not
yet commenced.
On December [ ], 2003, Mesa, in its capacity as a record holder of
Atlantic Coast common stock, requested that the Atlantic Coast board fix a
proper record date. If the Atlantic Coast board does not set a new record
date in accordance with our request, the actual record date will not be
determined until the Delaware Lawsuit has been resolved. We intend to
notify you by press release as promptly as possible of the actual record
date when determined.
If the Delaware Lawsuit is unsuccessful, the record date for the consent
solicitation hereby will be October 23, 2003.
Q: WHEN IS THE DEADLINE FOR SUBMITTING CONSENTS?
A: Section 228 of the DGCL requires that, in order for the proposals to be
adopted, Atlantic Coast must receive written consents signed by a
sufficient number of stockholders to adopt the proposals within 60 days of
the date of the earliest dated consent being delivered to Atlantic Coast.
Although Mesa had not yet commenced this consent solicitation, on October
23, 2003, Atlantic Coast announced that it had received the first signed
consent. As described above, Mesa has filed the Delaware Lawsuit to (i)
require that Atlantic Coast set a proper record date and (ii) establish
the appropriate date for commencement of the 60-day solicitation period.
On November 25, 2003, Atlantic Coast announced that the consent it
received on October 23, 2003 had been revoked and that therefore the
60-day consent solicitation period has not yet commenced. On [ ], 2003, we
delivered a signed consent to Atlantic Coast. Accordingly, consents cannot
be submitted later than [ ], 2004. However, because the proposals will
become effective upon our delivery to Atlantic Coast of valid and
unrevoked consent cards totaling more than 50% of the outstanding shares
of common stock as of the record date, and because this may occur before
the expiration of the 60-day period, WE URGE YOU TO ACT PROMPTLY to assure
that your vote will count.
Q: HOW MANY SHARES MUST BE VOTED IN FAVOR OF THE PROPOSALS TO EFFECT THEM?
A: We must receive the consents of a majority of Atlantic Coast's outstanding
shares of common stock for the proposals to be adopted. As of November 1,
2003, Atlantic Coast had 45,333,310 shares of common stock outstanding.
Therefore, based on available information, we estimate that the consent of
at least 22,666,656 shares is necessary to effect the proposals.
Abstentions, failures to consent and broker non-votes will have the same
effect as withholding consent. Mesa owns beneficially 1,603,529 shares of
Atlantic Coast common stock, which it intends to vote in favor of the
proposals. Consequently, at least 21,063,127 additional shares will need
to consent to the proposals in order for them to be adopted.
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Q: WILL PROPOSAL 1 BE EFFECTIVE IF PROPOSAL 2 IS NOT ALSO ADOPTED?
A: No. In order for either proposal 1 or proposal 2 to be effective, both
must be adopted by the Atlantic Coast stockholders. In other words, a vote
to remove the present board will not be effective unless the nominees also
are elected. Proposals 1 and 2 may be adopted and become effective
independent of proposal 3, and proposal 3 may be adopted and become
effective independent of proposals 1 and 2.
Q: WHAT SHOULD YOU DO TO CONSENT?
A: Sign, DATE and return the enclosed WHITE consent card TODAY to MacKenzie
in the envelope provided. In order for your consent to be valid, it must
be dated.
Q: IF YOU CONSENT TO THE PROPOSALS, ARE YOU ACCEPTING EITHER AN EXCHANGE
OFFER OR A MERGER PROPOSAL?
A: No. If the proposals are adopted, the nominees will consider, in their
independent judgment and good faith, taking action to provide you with the
opportunity to make your own decision regarding any exchange offers or
merger proposals from Mesa (which we have indicated we are still committed
to making) and any alternative proposals.
Q: HOW DOES SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW AFFECT MESA'S
ABILITY TO CONSUMMATE AN EXCHANGE OFFER OR MERGER TRANSACTION?
A: Atlantic Coast is subject to the Delaware anti-takeover law, which
provides that certain business combinations, including the transactions
contemplated by an exchange offer or merger proposal by Mesa, between a
Delaware corporation whose stock is traded on the Nasdaq Stock Market,
Inc. (the "NASDAQ"), such as Atlantic Coast, and an interested stockholder
(generally defined as a stockholder who beneficially owns 15% or more of a
Delaware corporation's voting stock) are prohibited for a three-year
period following the date that such stockholder became an interested
stockholder, unless certain exceptions apply.
If elected to the Atlantic Coast board, we believe that the nominees will
consider taking board action to exempt an exchange offer or merger
proposal from Mesa, or any other proposed transaction that they believe to
be in your best interest, from the restrictions of the Delaware
anti-takeover law.
Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE CONSUMMATION OF AN
EXCHANGE OFFER FROM MESA?
A: If Mesa commences an exchange offer with respect to Atlantic Coast, such
transaction will be conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration date that
number of shares of Atlantic Coast common stock so that, after the
completion of the exchange offer, Mesa owns a majority of the then
outstanding shares of Atlantic Coast common stock on a fully-diluted
basis; (ii) the registration statement pursuant to which Mesa will offer
its common stock to Atlantic Coast stockholders being declared effective
by the SEC; (iii) the shares of Mesa common stock to be issued in an
exchange offer by Mesa being approved for listing on the NASDAQ; (iv) the
expiration or termination of any waiting periods under the
Hart-Scott-Rodino Improvements Act of 1976 and any other applicable laws
and regulations; (v) the approval of an amendment to Mesa's articles of
incorporation to increase its authorized share capital and the approval of
the issuance of shares of Mesa common stock pursuant to the exchange offer
by the stockholders of Mesa; (vi) Atlantic Coast's board of directors
redeeming the poison pill or our being satisfied, in our sole discretion,
that the poison pill has been invalidated or amended so as not to be
applicable to the exchange offer or subsequent merger; (vii) the absence
of any event that would be expected to have an adverse effect on Atlantic
Coast such that, regardless of the circumstances, in our good faith
judgment, it would be inadvisable to proceed with the exchange offer;
(viii) Mesa being satisfied, in its sole discretion, that, after the
consummation of an exchange offer, the provisions of the Delaware
anti-takeover law would not prohibit for any period of time, or impose any
voting requirements in excess of majority stockholder approval with
respect to, a subsequent business combination; (ix) Mesa having entered
into an agreement with United Airlines regarding Atlantic Coast's code
share agreement substantially consistent with the terms of the United MOU;
(x) Delta Air Lines not having terminated, or
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notified Atlantic Coast or Mesa that it intends to terminate, its code
share agreement with Atlantic Coast (other than for performance) and/or
having entered into a new code share agreement with Atlantic Coast on
commercially reasonable terms acceptable to the parties and (xi) the
absence of legal or other impediments to the consummation of the exchange
offer or subsequent merger.
Q: WHO SHOULD YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?
A: Please call MacKenzie toll free at (800) 322-2885.
REASONS FOR THE SOLICITATION OF CONSENTS
Mesa is soliciting your consent to the proposals because we believe that
the current members of the Atlantic Coast board have embarked on a misguided
strategy that has contributed to a steep decline in the value of Atlantic
Coast's common stock and therefore have failed to act in your best interest.
Mesa believes this is the case based on the following:
o Atlantic Coast has announced its intention to transform itself from
a regional airline operating pursuant to revenue guarantee code
share relationships with major airlines serving hub networks to an
independent low-fare airline. According to airline industry
analysts, (i) this strategy has never been successfully implemented
by a domestic air carrier which operates primarily with regional
jets and (ii) Atlantic Coast faces significant challenges in
establishing reservations, sales and marketing functions and in
generating sufficient revenue while operating regional jets with
limited passenger capacity.
o We believe Atlantic Coast's announced strategy to operate as an
independent low-fare airline has contributed to a loss of value of
33.8% between July 25, 2003, the last trading day prior to Atlantic
Coast's announcement of its intention to become an independent
low-fare airline and July 29, 2003, the day after such announcement.
Furthermore, the value of Atlantic Coast common stock dropped 15%
between July 25, 2003 and October 3, 2003, the last full trading day
prior to our announcement of our intention to acquire Atlantic
Coast. During the period from July 25, 2003 through October 3, 2003,
the value of Mesa's common stock increased 27.6%. You are urged to
obtain current market quotations for Mesa and Atlantic Coast common
stock.
o The current Atlantic Coast board rejected the Mesa proposal even
though Mesa stated in correspondence with the Chief Executive
Officer and directors of Atlantic Coast that Mesa was interested in
a business combination with Atlantic Coast that would provide a
significant premium to you and that Mesa was willing to negotiate
the terms and structure of any such business combination with the
Atlantic Coast board.
o Atlantic Coast announced it entered into the Airbus MOU, creating
further impediments to your ability to make your own decision
regarding the future of Atlantic Coast's business, an exchange offer
or merger proposal by Mesa and any other business combination
transaction.
Therefore, we believe that all the current directors should be removed and
replaced with a board that will consider returning Atlantic Coast to its
historic business strategy of operating pursuant to revenue guarantee code share
agreements with major airlines serving hub networks. Mesa believes that the
adoption of the proposals will accomplish this goal.
BACKGROUND OF THIS CONSENT SOLICITATION
A number of developments and opportunities have led to our decision to
undertake this consent solicitation at the present time. We believe that the
removal of the current Atlantic Coast board of directors and the election of the
nominees as directors of Atlantic Coast will be beneficial to the stockholders
of Atlantic Coast. By consenting to the 3 proposals contained in this Consent
Statement, Atlantic Coast stockholders will be electing directors who will
consider returning Atlantic Coast to its historically profitable business
strategy of operating as a regional airline pursuant to revenue guarantee code
share agreements with major airlines serving hub networks, as well as the
removal of any impediments to the consideration of a business combination
transaction with Mesa or other strategic partners. We believe that if the
nominees enter into a business combination transaction with Mesa, Atlantic Coast
-8-
stockholders would receive a premium for their shares and would hold shares of a
combined company that would have:
o a potential to realize synergies, cost savings and risk diversification
opportunities;
o a potential for increased operational efficiency and flexibility; and
o a potential to provide lower costs to strategic partners.
The combined company is expected to increase its profitability through
operating and scale synergies, including the consolidation of certain corporate,
administrative and support functions. Cost savings will reflect the realization
of cost reduction opportunities and efficiencies through the ability to
consolidate separate stand-alone operations into a single entity. While we
expect that there will be cost savings and synergies as a result of a business
combination transaction with Atlantic Coast, we cannot at this time estimate
such amounts or can give any assurance that such cost savings and synergies will
be realized.
The combined company is expected to benefit from the scale of a larger
organization. Scale offers potential benefits in many areas, including:
o greater financial strength;
o an increased presence in major markets;
o decreased maintenance costs per aircraft;
o an enhanced ability to finance aircraft deliveries;
o an increased ability to attract airline partners; and
o an enhanced ability to attract and retain strong management.
We believe the increased scale of the combined company, and the benefits
in the areas mentioned above, could result in greater efficiency and an enhanced
potential for revenue growth. The combined company is expected to have
partnerships with five airlines, which results in decreased risk and increased
revenue opportunities for the combined company. If the combined company achieves
greater efficiency and lower costs through the realization of the factors
described above, the combined entity will have the potential to provide lower
costs to its strategic partners. In addition, the United MOU gives both Mesa and
Atlantic Coast the ability to increase revenue through the substitution of 30
RJ70s with increased seating capacity for RJ50s and the delivery of additional
regional jets. While we expect that we will be able to realize enhanced
revenues, no assurance can be given that we will actually be able to do so.
These benefits cannot be realized unless a Mesa/Atlantic Coast business
combination transaction is consummated. We cannot give any assurance that these
benefits will be achieved or realized in the near term, or at all.
Immediately following Atlantic Coast's announcement of a change in
business strategy, to establish an independent low-fare airline on July 28,
2003, Mesa contacted Richard Surratt, Atlantic Coast's Chief Financial Officer
expressing our interest in acquiring any RJs that would become surplus to
Atlantic Coast's needs as a result of their change in strategy. Mesa was
informed by Atlantic Coast that their RJs were "part & parcel" of their new
strategy and therefore they had no surplus RJs. Atlantic Coast, however, did
mention that it has some surplus turboprops but thought that they would not be
of any interest to Mesa.
Again on August 5, 2003, through a financial intermediary, Mesa approached
Atlantic Coast to explore the idea of Mesa purchasing Atlantic Coast's
operations with respect to United Airlines (aircraft, gates and other support
materials). Once again, Atlantic Coast informed Mesa that Atlantic Coast had no
interest in parting with any portion of its fleet or gates.
-9-
Our board of directors determined at a telephonic meeting held on October
3, 2003 that it was in the best interest of Mesa and its stockholders to proceed
with the Mesa exchange offer/merger proposal. The board authorized us to propose
the business combination through an offer in which Atlantic Coast's common
stockholders would be offered 0.90 of a share of Mesa common stock for each
share of Atlantic Coast common stock they own. The exchange for Mesa common
stock was expected to be tax-free to Atlantic Coast stockholders.
In announcing the Mesa proposal, our board believed that greater value
could be achieved for both Mesa and Atlantic Coast stockholders by combining
Mesa's financial strength, management experience and business strategy with
Atlantic Coast's attractive assets and operations. In the Mesa board's judgment,
with our larger asset base, earnings potential and cash flow, the combined
company would have more efficient access to capital and improved operations to
execute its strategic plans.
On October 6, 2003, Jonathan G. Ornstein, Mesa's Chief Executive Officer,
delivered a letter to Atlantic Coast's Chief Executive Officer, Kerry B. Skeen,
and Atlantic Coast's board of directors, outlining our intention to enter into a
business combination transaction with Atlantic Coast and indicating that we were
prepared to be flexible on deal terms and structure. Simultaneously, we issued a
press release disclosing to the public the Mesa proposal and its material terms.
The following is the text of Mr. Ornstein's letter to Mr. Skeen and the Atlantic
Coast board of directors:
--------------------------------------------------------------------------------
October 6, 2003
Mr. Kerry B. Skeen
Chairman and Chief Executive Officer
Atlantic Coast Airlines Holdings, Inc.
45200 Business Court
Dulles, Virginia 20166
Dear Kerry,
I tried to reach you this morning to tell you first hand about our
intentions. Mesa Air Group, Inc. ("Mesa Air") believes that a combination
with Atlantic Coast Airlines Holdings, Inc. ("ACA" or the "Company") is
compelling and in the best interests of both companies, our respective
shareholders, employees and customers. While we have reviewed only publicly
available data to this point, we are prepared to move forward promptly with
a business combination between the two companies.
Accordingly, Mesa Air is seeking to enter into an agreement with
ACA to acquire all the outstanding stock of ACA in a tax-free transaction
whereby Mesa Air would issue 0.9 of a share of its common stock for each ACA
share. Based on our closing share price of $12.55 and based on ACA's closing
share price of $9.02 on October 3, 2003, our offer represents a premium to
your shareholders of 25% over the current value of their shares. This price
also represents a premium of 35% over the average closing price of ACA since
late July, and we believe shares in the combined company will provide
exceptional future value to the ACA shareholders.
There are clear strategic benefits. A combination would form the
basis to leverage each company's assets, franchise, partners and management
expertise to better position the combined company in today's competitive
marketplace. It is clear that such a transaction would enable us to service
the needs of our airline partners more efficiently and profitably. If we can
realize only a small portion of the potential strategic benefits, we believe
our combined earnings could improve by over 25%. Furthermore, our focus will
remain in the business of providing cost effective regional feed for our
airline partners.
Our proposal will be subject to only customary conditions,
including among others, obtaining necessary regulatory approvals, the
redemption of the ACA Right's Plan in accordance with its terms, the
completion of satisfactory due diligence, negotiation of definitive
agreements and necessary shareholder approvals.
--------------------------------------------------------------------------------
-10-
--------------------------------------------------------------------------------
Although we are offering a full and fair price to ACA shareholders,
we may have flexibility on deal terms and structure if you are willing to
work with us towards consummating a transaction. In connection with our
proposal, we have retained Cadwalader, Wickersham & Taft LLP as counsel and
Merrill Lynch & Co. as financial advisor.
In light of the compelling benefits to our respective shareholders
and the materiality of this proposal, we are publicly releasing the text of
this letter. Our strong preference would be to work with you to reach a
mutually acceptable transaction. I would be happy to meet with you or to
meet with your Board at its convenience to discuss in greater detail our
thoughts with respect to a possible business combination and the future role
that you and your management team would have in the combined entity. I look
forward to hearing from you or one of your representatives as soon as
possible.
Sincerely,
/s/ Jonathan G. Ornstein
Jonathan G. Ornstein
Chairman of the Board & Chief
Executive Officer
cc: Board of Directors, ACA
--------------------------------------------------------------------------------
On October 6, 2003, Atlantic Coast issued a press release confirming that
it had received the letter from Mr. Ornstein containing the Mesa proposal. The
press release claimed that Atlantic Coast's board of directors was considering
the Mesa proposal, and indicated that Atlantic Coast was continuing with the
implementation of its plans to operate as an independent low-fare airline.
On October 14, 2003, Mr. Ornstein wrote a second letter to the Atlantic
Coast board of directors expressing our disappointment and asking your board to
remove the poison pill so we could make a proposal directly to you. A copy of
Mr. Ornstein's letter dated October 14, 2003, is set forth below.
--------------------------------------------------------------------------------
October 14, 2003
Board of Directors
Atlantic Coast Airlines Holdings, Inc.
45200 Business Court
Dulles, Virginia, 20166
Ladies and Gentlemen:
We are very disappointed that we have not received a response from Mr.
Skeen or the Board of Directors of Atlantic Coast Airlines Holdings, Inc.
("ACA") to our letter of October 6, 2003 outlining an acquisition proposal for
ACA. Specifically, we proposed that Mesa Air Group, Inc. ("Mesa") acquire all of
the outstanding stock of ACA in a tax-free transaction whereby Mesa would issue
0.9 of a share of its common stock for each ACA share of common stock. We now
feel compelled to direct this proposal to the ACA board of directors.
We have made a full and fair proposal to merge with ACA based on a proven
strategy of long-term profitability. Our focused business model, based on
revenue-guarantee codeshare relationships with major airlines serving hub
networks, applied to an enlarged asset base and a broader portfolio of client
partnerships, will offer more balanced revenue distribution and strong
synergies. As the leading operator in the regional aviation sector, we would
have greater access to capital to fund our combined growth. Employees of both
companies would have a stronger, more secure employer and greater advancement
opportunities; our major airline customers would benefit from our ability to
provide lower cost services; our shareholders an enhanced capital structure.
Consequently, we believe that both Mesa and ACA shareholders, who would receive
shares of Mesa common stock in the transaction, will benefit from our successful
execution of the merger.
--------------------------------------------------------------------------------
-11-
--------------------------------------------------------------------------------
We and our advisors are prepared to send you a merger agreement and
promptly sit down to discuss all aspects of our current thinking on the terms
and structure of the transaction. We are committed to working with you to
negotiate a definitive agreement and to complete this transaction as soon as
practicable thereafter.
Although it is our desire to enter into direct discussions about this
transaction with you, because Mr. Skeen has not responded to my letter, we are
now taking steps to give ACA shareholders the opportunity to replace existing
directors with those who are committed to fairly considering our offer or any
similarly attractive alternative that they believe is in the best interests of
ACA shareholders. As you know, ACA currently has in place a "poison pill" which
effectively prevents us from consummating an exchange offer directly with your
shareholders. We therefore urge you to remove the "poison pill" and allow your
shareholders the opportunity to voice their opinion on this transaction.
Because we have not yet received a response to our proposal, we are filing
with the Securities and Exchange Commission the necessary documents to commence
a shareholder consent solicitation to replace ACA's current Board of Directors
with independent directors who we believe will give fair consideration to our
attractive proposal. We also intend to file with the SEC an offer to exchange
Mesa shares directly with ACA shareholders.
Sincerely,
/s/ Jonathan G. Ornstein
Jonathan G. Ornstein
Chairman of the Board & Chief Executive
Officer
--------------------------------------------------------------------------------
On October 14, 2003, Atlantic Coast issued a press release advising you to
take no action in response to our announcement of our intent to commence the
Mesa exchange offer/merger proposal. The press release claimed that Atlantic
Coast's board of directors would consider the Mesa exchange offer/merger
proposal.
On October 23, 2003, Atlantic Coast (i) issued a press release announcing
that its board of directors had decided to reject our offer and reaffirmed its
strategy to establish a new, independent low-fare airline, (ii) filed with the
SEC a preliminary proxy statement urging you to reject the proposals set forth
in this Consent Statement and (iii) issued a press release announcing that it
has set October 23, 2003 as the record date for the solicitation made hereby and
that it had received the first written consent in connection with the
solicitation made hereby.
On October 24, 2003, Mesa issued a press release in response to the
Atlantic Coast announcement that its board of directors had rejected our
acquisition proposal, reaffirming our commitment to the validity, prudence and
sufficiency of our acquisition proposal, as well as acknowledging our
disappointment in the management and board of directors of Atlantic Coast.
On October 28, 2003, Atlantic Coast filed a complaint against Mesa in the
United States District Court for the District of Columbia (the "DC Lawsuit")
alleging that Mesa has made materially false and misleading statements and
omissions in violation of the federal securities laws in connection with its
proposed consent solicitation and potential exchange offer. Atlantic Coast's
complaint alleges, among other things, that (i) Mesa failed to disclose United
Airlines as a participant in its consent solicitation and proposed transaction;
(ii) Mesa's bid to acquire all of Atlantic Coast's outstanding stock is
motivated by its desire to use Atlantic Coast's cash on hand to resolve Mesa's
difficulties in obtaining financing for additional aircraft purchases; (iii)
Mesa Chief Executive Officer Jonathan Ornstein and other Mesa insiders sold a
substantial number of Mesa shares in September 2003, shortly before Mesa
announced its takeover bid of Atlantic Coast; (iv) other stock transactions
produced short-swing profits subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which requires a corporate insider
to disgorge any profit from such transactions; (v) Mesa's directors, who have
determined that an acquisition of Atlantic Coast would be in Mesa's best
interest and are proposing a transaction in which the stockholders of Atlantic
Coast would receive shares of Mesa common stock, are not sufficiently
independent and have engaged in
-12-
self-dealing; and (vi) several of Mesa's nominees to Atlantic Coast's board of
directors are subject to conflicts of interest that would impair their ability
to fulfill their fiduciary obligations to Atlantic Coast.
Atlantic Coast in its complaint seeks to (i) obtain a declaration that
Mesa's Consent Statement as well as our other statements in conjunction with our
proposed consent solicitation violate Section 14(a) of the Exchange Act and SEC
Rule 14a-9; (ii) obtain a declaration that Mesa's Consent Statement as well as
our other statements in conjunction with our proposed consent solicitation and
exchange offer violate Section 14(e) of the Exchange Act; (iii) require Mesa to
correct our alleged material misstatements and omissions; (iv) enjoin Mesa from
disseminating our Consent Statements and from making material misstatements or
omissions; and (v) enjoin Mesa from making a proxy consent solicitation and/or
tender offer to Atlantic Coast's stockholders. We believe the Atlantic Coast
lawsuit is without merit, and we intend to contest the allegations set forth in
Atlantic Coast's complaint.
On October 29, 2003, Mesa filed the Delaware Lawsuit seeking to require
the Atlantic Coast board to comply with the proper procedures under Delaware law
and the Atlantic Coast by-laws with respect to (i) fixing a record date for this
consent solicitation and (ii) commencing the 60-day solicitation period. The
Delaware Lawsuit alleges that the action taken by the Atlantic Coast board to
set a record date of October 23, 2003 impedes your ability to exercise your
voting rights and may impede your right to receive superior value for your
shares.
On October 31, 2003, Mesa asked Atlantic Coast for its stockholder list
and security position listing in order to communicate with stockholders and to
distribute this Consent Statement to the Atlantic Coast stockholders.
On November 13, 2003, Mr. Ornstein wrote another letter to the Atlantic
Coast board of directors asking your board to not take any action that would
make it more difficult or expensive for you to consider an exchange offer or
merger proposal by Mesa. A copy of Mr. Ornstein's letter, which we released
publicly, dated November 13, 2003, is set forth below.
-13-
--------------------------------------------------------------------------------
November 13, 2003
Board of Directors
Atlantic Coast Airlines Holdings, Inc.
45200 Business Court
Dulles, Virginia, 20166
Ladies and Gentlemen:
As you are aware, we announced yesterday that we have entered into a
memorandum of understanding (MOU) with United Air Lines, Inc. ("United
Airlines") which provides that Mesa Air will provide or cause Atlantic Coast
Airlines Holdings, Inc. ("ACA") to provide for the operation of regional jet and
turboprop aircraft in code-share service under the United Express mark in the
event that Mesa Air is successful in its acquisition of ACA. If Mesa Air's
nominees are elected pursuant to our consent solicitation, they will have the
right to consider the proposal set forth in the above mentioned MOU.
Your stockholders are in a truly unique position today. Very rarely are
the stockholders of a publicly held corporation offered such a stark and
contrasting choice of strategic courses. One vision, as articulated by your
management, is to sever the historically stable and profitable relationship with
UAL enjoyed by ACA as an alliance partner and pursue the course of a "startup",
low cost air carrier with all risks attendant thereto. Your management's actions
ignore, in our opinion, conclusions of leading Wall Street financial analysts
who consider the financial projections to be questionable. Another vision,
represented by Mesa's proposal, is to return ACA to what it has done best:
provide high quality regional air service to major airlines under long-term
revenue guaranty agreements. From our vantage point, the choice is
straightforward and simple.
We believe that your stockholders are entitled to decide the future of a
company in this situation. Accordingly, in our opinion, any action taken by you
to impede the ability of your stockholders to make this fundamental choice or to
receive a premium for their shares may cause irreparable damage to ACA and
stockholder value.
In that regard, both as a significant shareholder and potential bidder for
ACA, we are very concerned that in light of your recent announcements you may
choose to impede your stockholders ability to continue as a regional carrier by
committing to the purchase of inappropriate aircraft. We believe that entering
into an aircraft purchase commitment or taking other action that would preclude
your stockholders from fairly considering the exchange offer/merger proposal we
have previously communicated to you would constitute an impermissible "shark
repellant" and would be inconsistent with your fiduciary duties under Delaware
law. We believe that by entering into any binding aircraft purchase agreement
with penalty clauses or non-refundable deposits the ACA board would be wasting
valuable corporate assets and would be acting contrary to the best interests of
its stockholders solely for the purpose of entrenching yourselves and
management. I am sure you have heard and will continue to hear from your
shareholders on this issue.
We urge you to not take any action that would make it more difficult or
expensive for stockholders to consider our proposal and receive the premium that
would result. We will take such action as is necessary to protect ACA
stockholder value and insure that you comply with your fiduciary duty to the ACA
stockholder, including us.
Sincerely,
/s/ Jonathan G. Ornstein
------------------------
Jonathan G. Ornstein
Chairman of the Board & Chief Executive
Officer
--------------------------------------------------------------------------------
-14-
On November 13, 2003, Atlantic Coast issued a press release which included
a letter to the Mesa board of directors in response to the above letter Mesa
sent to Atlantic Coast's board of directors. Atlantic Coast's letter to Mesa
stated that it takes its fiduciary duties to its stockholders seriously. The
letter further stated that the Atlantic Coast board of directors has previously
reviewed and rejected an agreement with United Airlines for the following
reasons: (i) greater risk over the life of the contract, particularly with
respect to costs that would be required to be borne by Atlantic Coast but that
would be solely within United Airlines' control; (ii) margins based on operating
performance standards that could be reset by United Airlines in its discretion;
and (iii) no assurance that the terms of the non-binding agreement would not be
renegotiated by United Airlines when and if it finalizes its reorganization plan
and actually emerges from bankruptcy.
On November 17, 2003, Mr. Ornstein wrote a letter to the Atlantic Coast
board of directors in response to Atlantic Coast's letter dated November 13,
2003. A copy of Mr. Ornstein's letter is set forth below.
--------------------------------------------------------------------------------
November 17, 2003
Board of Directors
Atlantic Coast Airlines Holdings, Inc.
45200 Business Court
Dulles, Virginia, 20166
Ladies and Gentlemen:
I am in receipt of your letter dated November 13, 2003.
Firstly, let me say that we are delighted with the results of the
non-binding memorandum of understanding (MOU) that we have recently negotiated
with United Airlines (UAL). The concerns raised in your above-mentioned letter
with respect to certain contract terms previously offered by UAL to Atlantic
Coast Airlines Holdings, Inc. ("ACA"), while interesting, are not particularly
relevant to the Mesa-negotiated version of the MOU. Simply stated, your concerns
are either unfounded or have been addressed satisfactorily.
Finally, contrary to your management's self-serving and incorrect
conclusion that we are working with UAL to try to "squash" your efforts to
establish a low-fare airline at Dulles International Airport, please be assured
that the MOU was negotiated with UAL on an arms length basis with the view to
effecting the acquisition of ACA. The terms of the MOU are in our view in the
best interests of the stockholders of ACA and the combined company in the event
a business combination transaction between ACA and Mesa is consummated.
Sincerely,
/s/ Jonathan G. Ornstein
------------------------
Jonathan G. Ornstein
Chairman of the Board & Chief Executive
Officer
--------------------------------------------------------------------------------
On November 18, 2003, Atlantic Coast issued a press release announcing
that it had entered into the Airbus MOU. Atlantic Coast took such actions
despite being informed in our letter of November 13, 2003 of our belief that by
entering into binding aircraft purchases which contain penalty clauses or
non-refundable deposits, the Atlantic Coast board would be acting contrary to
the best interests of its stockholders.
On November 19, 2003, Mesa issued a press release denouncing the recent
aircraft order by Atlantic Coast. Mesa also announced we are moving forward with
our consent solicitation to replace the current board of Atlantic
-15-
Coast with the nominees. Mesa also intends to proceed with making our exchange
offer, subject to considering the impact of these developments on the value of
Atlantic Coast and consequently, our exchange offer.
On November 25, 2003, Atlantic Coast announced that the consent it
received on October 23, 2003 had been revoked and that therefore the 60-day
consent solicitation period has not yet commenced.
On November 26, 2003, Atlantic Coast amended its complaint in the DC
Lawsuit. The amended complaint, in addition to the allegations contained in its
initial complaint filed on October 28, 2003, claims that (i) United Airlines and
Mesa acted in concert and conspired in violation of Section 1 of the Sherman
Antitrust Act and (ii) Mesa's attempt to acquire Atlantic Coast is in violation
of Section 7 of the Clayton Act. Atlantic Coast simultaneously filed a motion
for a preliminary injunction that would, among other things, prohibit Mesa from
commencing our consent solicitation and from taking any other action to attempt
to acquire control of Atlantic Coast or its board of directors. We believe the
DC Lawsuit is without merit, and we intend to contest the allegations set forth
in Atlantic Coast's amended complaint.
MESA AIR GROUP, INC.
Mesa is a holding company whose principal subsidiaries operate as regional
air carriers providing scheduled passenger and airfreight service. Mesa serves
155 cities in 39 states, the District of Columbia, Canada, and Mexico. Mesa
operates a fleet of 151 aircraft and has approximately 982 daily system
departures. Mesa operates in the West and Midwest as America West Express; the
Midwest and East as US Airways Express; in Denver and the West as United
Express; in Denver as Frontier JetExpress until December 31, 2003; in Kansas
City with Midwest Express and in New Mexico and Texas as Mesa Airlines. Mesa,
which was founded in New Mexico in 1982, has approximately 3,600 employees. Mesa
is a member of the Regional Airline Association and Regional Aviation Partners.
Mesa is a Nevada corporation with its principal executive offices located
at 410 North 44th Street, Suite 700, Phoenix, Arizona 85008.
We intend to file a registration statement on Form S-4 (the "Offer to
Purchase") to register the shares of common stock of Mesa to be exchanged for
shares of Atlantic Coast common stock in our exchange offer and preliminary
proxy materials with the SEC so as to obtain necessary approval for the issuance
of the shares of Mesa common stock to the stockholders of Atlantic Coast when
the Mesa exchange offer is consummated. For a description of certain terms of
our exchange offer, a discussion of the Exchange Ratio as a result of the Airbus
MOU and other information related to the exchange offer, see Annex IV. This
summary highlights selected information from our exchange offer and may not
contain all the information that is important to you.
Complete information about our exchange offer will be contained in the
Offer to Purchase, which will be available upon request from the Information
Agent for our exchange offer, MacKenzie, and in the Tender Offer Statement on
Schedule TO, which we intend to file with the SEC. The Tender Offer Statement on
Schedule TO and any amendments thereto, including exhibits, will be available
for inspection and copies will be obtainable in the manner set forth under
"Where you can find more information."
THIS CONSENT STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR
AN OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE ONLY BY MEANS OF THE
OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL THAT WILL BE DELIVERED
TO YOU SEPARATELY AND WILL BE AVAILABLE FROM THE INFORMATION AGENT FOR OUR
EXCHANGE OFFER, MACKENZIE.
MESA STRATEGIC PLANS
If the nominees are elected to the Atlantic Coast board of directors, they
will consider entering into a business combination transaction with Mesa if such
a transaction is in the best interest of Atlantic Coast stockholders. If there
is ultimately a business combination, the combined company will manage its
business (including the code sharing agreements) in the best interest of its
combined stockholders. Prior to any business
-16-
combination transaction, the relationships of Mesa and Atlantic Coast with their
respective code share partners will continue to be managed separately.
While both Mesa and Atlantic Coast are party to code share agreements with
United Airlines, the companies currently serve divergent geographical markets
pursuant to these agreements. Mesa is party to a code share agreement with
United Airlines with respect to United Airlines' hub in Denver, Colorado.
Atlantic Coast is party to a code share agreement with United Airlines with
respect to United Airlines' hub in Dulles, Virginia. While Mesa and Atlantic
Coast may operate flights to the same destination pursuant to our respective
code share agreements, those flights originate from different hubs. Mesa and
Atlantic Coast generally do not compete for passengers because of the different
hubs served pursuant to our respective code share agreements.
If Mesa is successful in acquiring Atlantic Coast, Mesa will take
immediate steps to refocus Atlantic Coast's business model to one based on
revenue guarantee code share relationships with major airlines serving hub
networks. We believe that by bringing these two companies together, and
maintaining the successful revenue guarantee code share business model, we will
create the leading regional airline in the United States. In our view, this
business model, applied to an enlarged asset base and a broader portfolio of
client partnerships, will offer more balanced revenue distribution and strong
synergies. As the leading operator in the regional aviation sector, we would
have a stronger balance sheet and greater access to capital to fund our combined
growth. Employees of both companies would have a stronger, more secure employer
and greater advancement opportunities; our major airline customers would benefit
from our ability to provide cost efficient services; our stockholders would
benefit from an enhanced capital structure and greater growth prospects.
Consequently, we believe the forgoing factors will enhance the company's
profitability and stockholder value, both in the short and long term. However,
these benefits cannot be realized unless a Mesa/Atlantic Coast business
combination transaction is consummated. We cannot give any assurance that these
benefits and/or savings will be achieved or realized in the near term, or at
all.
We are engaged in preliminary discussions with Delta Air Lines regarding
the terms of a potential code share agreement in the event that Mesa is
successful in acquiring Atlantic Coast.
Delta Air Lines has informed Atlantic Coast that if it operates aircraft
with more than 70 seats, Delta Air Lines may seek alternatives to the services
provided by Atlantic Coast. Delta Air Lines has the right under its code share
agreement with Atlantic Coast to terminate the agreement at any time without
cause by providing 180 days notice to Atlantic Coast, in which case Atlantic
Coast has the right to require Delta Air Lines to purchase and assume the lease
on all or some of the aircraft used in the code share agreement. Atlantic
Coast's binding memorandum of understanding with Airbus for A319 and A320
aircraft, which seat 132 passengers and 156 passengers, respectively, could
cause Delta Air Lines to terminate its code share agreement with Atlantic Coast
and could complicate Mesa's efforts to reach a code share agreement with Delta
Air Lines with respect to the operation of Atlantic Coast aircraft in the event
that our exchange offer is successfully consummated.
On November 12, 2003, Mesa entered into the United MOU in which Mesa will
provide or would cause Atlantic Coast to provide for the operation of regional
jet and turboprop aircraft in code share and pro-rate service under the United
Express mark in the event that our exchange offer is successfully consummated or
if the Mesa nominees are elected to the Atlantic Coast board of directors
pursuant to this consent solicitation and enter into a definitive code share
agreement with United Airlines on terms substantially similar to those contained
in the United MOU. The United MOU contemplates: (i) the use of 87 RJ50s for
terms expiring as late as December 31, 2015; (ii) the use of 12 Contract J41
Turboprops and the right to fly up to 16 Pro-Rate Turboprops, all 28 aircraft
for a term through the expiration of their respective leases; and (iii) a
conversion option pursuant to which 30 of the 87 RJ50s may be substituted for
RJ70s. The United MOU also ensures cost reimbursement for any contractual
commitments with respect to outsourced maintenance, pilots, flight attendants,
line mechanics and dispatchers, as well as Atlantic Coast receiving profit
margins with respect to all contract aircraft except Pro-Rate J41 Turboprops.
The profit margins to be received by Atlantic Coast are based on performance
criteria and will be adjusted to margins that, although a reduction from
Atlantic Coast current margins, are no less favorable than the profit margins to
be received by any other regional carrier pursuant to recently negotiated code
share agreements with United Airlines.
In addition, Mesa negotiated the following modifications to its current
code share relationship with United Airlines: (i) an extended term with respect
to 15 Short-term RJ50s for up to 2 years at Mesa's discretion; (ii) the delivery
of both 10 Replacement RJ70s in lieu of 10 Long-term RJ50s, as well as the last
5 RJ70s under its current agreement, for a term expiring 10 years after the date
of delivery, but no later than 2018; and (iii) a right to fly up to
-17-
20 Beech 1900 Pro-Rate Turboprops in mutually agreeable markets at mutually
agreeable pro-rate terms. Furthermore, in the event that a Mesa/Atlantic Coast
business combination is successfully consummated or if the Mesa nominees are
elected to the Atlantic Coast board of directors pursuant to this consent
solicitation and enter into a definitive code share agreement with United
Airlines on terms substantially similar to those contained in the United MOU,
the adjusted margins will also apply to all Mesa aircraft that fly code share
services for United Airlines. The revised margins are an improvement in the
current Mesa relationship with United Airlines.
In addition, the United MOU contemplates (i) the delivery of up to 10
Growth RJ70s after October 2006 with a term expiring on December 31, 2016; and
(ii) a right of first refusal on an Additional 10 Growth RJ70s. The allocation
between Mesa and/or Atlantic Coast of such aircraft will be determined by the
parties and set forth in a definitive agreement.
The nominees have indicated that if elected to the Atlantic Coast board,
they will consider entering into a definitive code share agreement with United
Airlines on terms substantially similar to those contained in the United MOU.
ADDITIONAL INFORMATION REGARDING THE PROPOSALS
Proposal 1: Removal of Directors
Atlantic Coast stockholders are being asked to adopt a proposal to remove
the current directors of Atlantic Coast: Kerry B. Skeen, Thomas J. Moore, C.
Edward Acker, Robert E. Buchanan, Susan MacGregor Coughlin, Caroline Devine,
Daniel L. McGinnis, James C. Miller III, and William Anthony Rice and any
director elected or appointed to the Atlantic Coast board pursuant to a vacancy
caused by the removal or resignation of any of the directors from the Atlantic
Coast board or any newly-created directorships prior to the effective time of
this stockholder action. As explained in this Consent Statement, Mesa strongly
believes that the current directors are not acting, and will not act, in the
best interest of the Atlantic Coast stockholders and should, therefore, be
removed.
Proposal 1 will not become effective unless proposal 2 is adopted and
becomes effective. However, proposal 1 may be adopted and become effective
independent of proposal 3.
WE ARE SEEKING YOUR CONSENT TO REMOVE THE CURRENT DIRECTORS OF ATLANTIC
COAST WITHOUT CAUSE NOTWITHSTANDING SECTION 3.11 OF THE ATLANTIC COAST BY-LAWS,
WHICH PROVIDES THAT DIRECTORS MAY BE REMOVED ONLY FOR CAUSE. SECTION 141(k) OF
THE DGCL PROVIDES THAT DIRECTORS MAY BE REMOVED WITH OR WITHOUT CAUSE BY A
MAJORITY OF THE STOCKHOLDERS. WE HAVE BEEN ADVISED BY COUNSEL THAT SECTION 3.11
OF THE ATLANTIC COAST BY-LAWS CONFLICTS WITH SECTION 141(k) OF THE DGCL AND IS
THEREFORE INVALID. THE DELAWARE LAWSUIT SEEKS TO DECLARE SECTION 3.11 OF THE
ATLANTIC COAST BY-LAWS INVALID.
Mesa urges Atlantic Coast stockholders to consent to the removal of all of
Atlantic Coast's directors.
Proposal 2: Election of Nominees
Atlantic Coast stockholders are being asked to elect as directors of
Atlantic Coast each of the seven nominees named below, each of whom has
consented to being named in this Consent Statement and our other solicitation
materials and to serve as a director, if elected, until the next annual meeting
of stockholders or until his successor has been elected and qualified. The
Atlantic Coast by-laws provide that a single class of directors will be elected
at the annual meeting and hold office until the following annual meeting or
until his successor is elected and qualified. If elected, the nominees would
serve together as a single class of directors in accordance with these by-law
provisions.
Mesa's primary purpose in seeking to elect the nominees to Atlantic
Coast's board is to enhance the value of Atlantic Coast for the benefit of all
stockholders. If elected, the nominees would be responsible for managing the
business and affairs of Atlantic Coast and would consider any and all feasible
alternatives to Atlantic Coast's current business operations and practices. Each
director of Atlantic Coast has an obligation under Delaware law to discharge
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his duties as a director in good faith, in a manner he reasonably believes to be
in the best interest of Atlantic Coast and with such care, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use under
similar circumstances.
Although Mesa has no reason to believe that any of the nominees may be
unable or unwilling to serve as directors, if any of the nominees is unable to
serve as a director of Atlantic Coast due to death, disability or otherwise, the
remaining nominee or nominees may designate another person or persons to replace
the nominee or nominees unable to serve.
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The name, age, present principal occupation and business address and
employment history of each of the nominees for at least the past five years are
as follows:
---------------------------------------------- ---------- --------------------------------------------------------------------------
Present Principal Occupation and Five Year Employment
Name Age History
---------------------------------------------- ---------- --------------------------------------------------------------------------
Nathaniel A. Davis 49 President, Chief Operating Officer, XO Communications, Inc. from 2000
through June 2003. Prior to June 2003, Mr. Davis also served as a director
of XO Communications, Inc. From 1998 to 2000, Mr. Davis served as Vice
President of Technical Services for Nextel Communications, Inc. Mr. Davis
is currently a director of XM Satellite Radio Holdings, Inc.
---------------------------------------------- ---------- --------------------------------------------------------------------------
Andre V. Duggin 58 Chairman of the Board of Directors and Chief Executive Officer of
A.V. Consultants, Inc. A.V. Consultants, Inc., 1982 through the present.
985 Old Eagle School Road
Suite 504
Wayne, PA 19355
---------------------------------------------- ---------- --------------------------------------------------------------------------
Theodore F. Kahan 42 Senior Managing Director, El Camino Capital Group, 2003. Mr. Kahan served
El Camino Capital Group as Executive Vice President, Real Estate Investment, Davis Companies,
130 S. El Monte Dr. 2000-2003. Mr. Kahan also served as General Counsel and a member of the
Beverly Hills, CA 90212 executive management committee of American Golf Corp. from 1995-2000.
---------------------------------------------- ---------- --------------------------------------------------------------------------
James R. Link 58 Consultant, JLink Associates, a financial/marketing consulting firm, from
2931 N. Governeour Street, Bldg C, 2002 through the present. Mr. Link has also served as Chief Executive
Apt. 103 Officer of PAC/AV from 2002 through the present and as Chief Executive
Wichita, KS 67226 Officer of TRW Investments, a venture capital firm, from 2002 through the
present. Mr. Link served as Chief Executive Officer of Impulse Airlines in
2001. From 1998 through 2001, Mr. Link served as Vice President, Worldwide
Sales, of Raytheon Aircraft.
---------------------------------------------- ---------- --------------------------------------------------------------------------
David T. McLaughlin 71 Chairman of the Board of Directors, Orion Safety Products, 1988-2001 and
Chief Executive Officer, 2001. Mr. McLaughlin served as President of
Dartmouth College from 1981 through 1987. Mr. McLaughlin currently serves
on the Board of Directors of Viacom, Inc., Orion Safety Products, and
Infinity Broadcasting. Mr. McLaughlin is Chairman of the American Red
Cross.
---------------------------------------------- ---------- --------------------------------------------------------------------------
Peter F. Nostrand 56 Chairman of the Board of Directors, President and Chief Executive Officer,
Suntrust Banks, Inc. SunTrust Banks, Inc., Greater Washington (successor to Crestar Bank
303 Peachtree St., N.E. Greater Washington) from 1995 through the present. Mr. Nostrand served as
Atlanta, Georgia 30308 President of Crestar Bank Washington, D.C. and Crestar Bank MD (both
merged into Crestar's Virginia Bank) from 1991 through 1996. From 1988
through 1995, Mr. Nostrand served as Senior Executive Vice President of
Crestar Bank.
---------------------------------------------- ---------- --------------------------------------------------------------------------
Archille R. Paquette 60 Mr. Paquette has been retired since 1999. Prior to his retirement, Mr.
Paquette served in various positions at Air Midwest, Inc., joining Air
Midwest, Inc. in 1977 and
---------------------------------------------- ---------- --------------------------------------------------------------------------
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---------------------------------------------- ---------- --------------------------------------------------------------------------
Present Principal Occupation and Five Year Employment
Name Age History
---------------------------------------------- ---------- --------------------------------------------------------------------------
serving as President and Chief Operating Officer from 1993 through 1999.
Air Midwest, Inc. is a subsidiary of Mesa. Mr. Paquette served as an
officer in the US Army from 1965-1975.
---------------------------------------------- ---------- --------------------------------------------------------------------------
The following table sets forth all purchases and sales during the past two
years of Mesa common stock deemed to be beneficially owned by the nominees. All
transactions were effected in open market transactions. To the best of our
knowledge, none of the nominees beneficially owns any common stock of Atlantic
Coast.
Transaction Number of
Name Date Shares Purchase/Sale
James R. Link 5/19/03 200 Purchase
James R. Link 6/24/03 800 Purchase
James R. Link 7/22/03 1,000 Purchase
James R. Link 9/2/03 1,000 Purchase
James R. Link 9/19/03 1,500 Sale
James R. Link 9/29/03 1,500 Sale
Archille R. Paquette(1) 3/8/02 2,100 Sale
Archille R. Paquette(1) 3/18/02 7,900 Sale
Archille R. Paquette(1) 3/28/02 10,000 Sale
Archille R. Paquette(1) 4/12/02 10,000 Sale
Archille R. Paquette(1) 4/16/02 5,000 Sale
(1) Cashless exercise of stock option and simultaneous sale.
Except as discussed below, none of the nominees has been involved in any
legal proceedings which must be disclosed as material for purposes of an
evaluation of the integrity or ability of any person nominated to become a
director under the federal securities laws.
Name Legal Proceedings
--------------------------- ---------------------------------------------------
Nathaniel A. Davis In January 2002, shareholder lawsuits were
filed against the executive officers and board of
directors of XO Communications, Inc., including Mr.
Davis, alleging breaches of fiduciary duty in
connection with his position as President and Chief
Operating Officer of XO Communications, Inc. These
cases were dismissed in June 2002. XO
Communications, Inc. was the subject of an
insolvency proceeding in the United States
Bankruptcy Court for the Southern District of New
York in 2002 and 2003 while Mr. Davis was an
executive officer.
---------------------------------------------------
This information has been furnished to Mesa by the respective nominees.
Each of the nominees has consented to being named herein to serve as a nominee
and as a director, if elected. None of the nominees nor any of their current
employers is an affiliate of Mesa and, if elected, none of the nominees would
represent Mesa on the Atlantic Coast board.
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Mesa has agreed to indemnify and hold harmless, to the fullest extent
permitted by law, each of the nominees against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with his position as a nominee. Mesa will also pay out-of-pocket expenses of the
nominees incurred in their capacity as such. It is expected that each nominee,
if elected and seated on the Atlantic Coast Board, will thereafter be reimbursed
by Atlantic Coast, based on its current fee structure, for his reasonable
out-of-pocket expenses incurred in the performance of his service as director.
Such directors will also be entitled to indemnification by Atlantic Coast in
accordance with its certificate of incorporation and by-laws.
Proposal 2 will not become effective unless proposal 1 is adopted and
becomes effective. However, proposal 2 may be adopted and become effective
independent of proposal 3.
In accordance with applicable regulations of the SEC, the WHITE consent
card delivered with this Consent Statement provides each stockholder of Atlantic
Coast with the opportunity to designate the names of any of the nominees whom he
or she does not desire to elect to the Atlantic Coast board. Mesa urges Atlantic
Coast stockholders to vote for all of the nominees on the WHITE consent card
delivered with this Consent Statement.
Proposal 3: Repeal of Each Provision of the Atlantic Coast By-laws or
Amendments, if any, Adopted After August 14, 1998 (the last date the
by-laws were filed with the SEC) Prior to the Effective Time of this
Stockholder Action
Stockholders are being asked to adopt a proposal which would repeal any
amendment to the Atlantic Coast by-laws adopted by the current Atlantic Coast
board after August 14, 1998 and before the effectiveness of the proposals and
the seating of the nominees. This proposal is designed to prevent the current
Atlantic Coast directors from taking actions to amend the Atlantic Coast by-laws
to attempt to nullify or delay the actions taken by the stockholders under these
proposals or to create new obstacles to the ability of the stockholders to
freely elect a board of directors that act in their best interest. Based on
publicly available information, the most recent version of the Atlantic Coast
by-laws were adopted on July 22, 1998, and no alterations after that date have
been publicly disclosed. The approval of this proposal could result in the
repeal of by-laws which may be in the best interests of stockholders, although
we believe that such a possibility is unlikely in view of the failure of the
current board to disclose any such by-law amendments. If the current board
adopts any material amendments to the by-laws that would be subject to repeal
under this proposal and such amendments are made available to us or the general
public, we will provide you with additional materials regarding such amendments.
Proposal 3 may be adopted and become effective independent of proposals 1 and 2.
Mesa urges Atlantic Coast stockholders to repeal any amendment to the
Atlantic Coast by-laws adopted by the current Atlantic Coast board after August
14, 1998 and before the effectiveness of the proposals and the seating of the
nominees.
VOTING SECURITIES
According to Atlantic Coast's certificate of incorporation, the shares of
Atlantic Coast common stock constitute the only class of outstanding voting
securities of Atlantic Coast. Accordingly, only holders of Atlantic Coast common
stock are entitled to execute consents. Atlantic Coast stated in its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2003, that as of
November 1, 2003, there were 45,333,310 shares of Atlantic Coast common stock
outstanding. Each share of Atlantic Coast common stock is entitled to one vote.
Stockholders of Atlantic Coast do not have cumulative voting rights. On December
[ ], 2003, Mesa, in its capacity as a record holder of Atlantic Coast common
stock, requested that the Atlantic Coast board fix a proper record date. If the
Atlantic Coast board does not set a new record date in accordance with our
request, the actual record date will not be determined until the Delaware
Lawsuit has been resolved. We intend to notify you by press release as promptly
as possible of the actual record date when determined.
The following table sets forth the interests of Mesa in the shares of
Atlantic Coast, as of October 10, 2003.
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Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner Ownership Class
--------------------------------------------------- --------------- ------------
Mesa Air Group, Inc................................ 1,603,529 3.5%*
401 North 44th Street, Suite 700
Phoenix, Arizona 85008
*Based on the number of shares of Atlantic Coast common stock outstanding on
November 1, 2003.
-------
The following table sets forth all purchases and sales by Mesa of Atlantic Coast
common stock during the past two years. All transactions were effected in open
market transactions.
Date of Transaction Amount of Securities Transaction Type Price Per Share
------------------- -------------------- ---------------- ---------------
11/20/01 1,000 Sale $19.18
11/21/01 6,000 Purchase $22.56
11/21/01 1,000 Sale $20.23
11/23/01 100 Sale $21.34
11/23/01 900 Sale $21.33
11/26/01 300 Sale $21.52
11/26/01 400 Sale $21.48
11/26/01 1,300 Sale $21.48
12/10/01 100 Sale $22.68
12/10/01 900 Sale $22.63
01/07/02 50 Put $20.00
01/15/02 5,000 Sale $25.66
02/01/02 200 Sale $28.88
02/04/02 100 Sale $29.24
02/04/02 1,900 Sale $29.29
02/05/02 50 Put $22.50
02/06/02 600 Purchase $26.46
02/06/02 400 Purchase $26.47
02/07/02 900 Purchase $25.44
02/07/02 100 Purchase $25.49
02/07/02 25 Put $25.00
02/07/02 25 Put $25.00
02/07/02 25 Put $25.00
02/07/02 25 Put $25.00
02/28/02 3,000 Sale $28.79
03/08/02 25 Put $25.00
03/08/02 25 Put $25.00
03/08/02 10 Put $22.50
03/08/02 10 Put $25.00
03/12/02 2,000 Purchase $27.51
03/12/02 900 Purchase $27.42
03/12/02 300 Purchase $27.49
03/12/02 100 Purchase $27.47
03/12/02 100 Purchase $27.45
03/18/02 1,000 Purchase $25.96
03/18/02 900 Purchase $25.95
03/18/02 100 Purchase $25.95
03/22/02 2,000 Purchase $25.67
03/25/02 2,200 Purchase $24.69
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Date of Transaction Amount of Securities Transaction Type Price Per Share
------------------- -------------------- ---------------- ---------------
03/26/02 2,000 Purchase $24.15
03/27/02 2,100 Purchase $24.13
03/28/02 5,000 Purchase $23.74
04/02/02 40 Put $22.50
04/02/02 15 Put $25.00
04/04/02 5,500 Purchase $22.83
02/04/03 10,000 Purchase $8.66
04/07/03 2,000 Sale $7.30
04/30/03 8,000 Sale $8.21
08/04/03 20,000 Purchase $7.33
08/05/03 42,200 Purchase $7.33
08/06/03 75,092 Purchase $7.54
08/07/03 68,994 Purchase $7.41
08/08/03 2,300 Purchase $7.50
08/08/03 1,386 Sale $8.04
08/08/03 17,200 Sale $8.01
08/11/03 5,000 Sale $8.35
08/12/03 10,000 Sale $8.44
08/13/03 3,000 Purchase $8.20
08/14/03 185,000 Purchase $7.95
08/14/03 5,000 Purchase $8.01
08/14/03 4,500 Purchase $7.89
08/21/03 62,000 Purchase $8.16
08/21/03 22,656 Purchase $8.16
08/22/03 168,000 Purchase $8.12
08/25/03 40,000 Purchase $7.62
08/25/03 100,600 Purchase $7.81
08/26/03 2,500 Purchase $7.80
08/26/03 4,000 Purchase $7.85
08/27/03 92,500 Purchase $7.95
08/27/03 35,800 Purchase $7.88
08/28/03 61,577 Purchase $7.88
08/29/03 37,500 Purchase $8.03
08/29/03 7,000 Purchase $7.97
09/02/03 117,500 Purchase $8.11
09/02/03 9,100 Purchase $8.21
09/03/03 30,000 Sale $8.71
09/04/03 20,000 Sale $8.60
09/04/03 4,500 Sale $8.69
09/05/03 30,000 Sale $8.77
09/08/03 221,000 Purchase $8.48
09/09/03 3,500 Purchase $8.31
09/09/03 42,700 Purchase $8.37
09/10/03 5,000 Purchase $8.41
09/10/03 9,278 Purchase $8.41
09/11/03 35,000 Sale $8.84
09/12/03 20,000 Purchase $8.99
09/12/03 5,000 Sale $9.10
09/17/03 5,000 Sale $9.21
09/17/03 15,000 Sale $9.12
09/17/03 45,000 Sale $9.06
09/18/03 20,000 Sale $9.19
09/18/03 25,000 Sale $9.16
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Date of Transaction Amount of Securities Transaction Type Price Per Share
------------------- -------------------- ---------------- ---------------
09/19/03 5,000 Sale $9.08
09/19/03 5,000 Sale $9.16
09/23/03 17,000 Sale $9.13
09/24/03 70,000 Sale $9.25
09/25/03 7,500 Purchase $8.55
09/25/03 7,500 Purchase $8.55
09/25/03 4,014 Purchase $8.54
09/26/03 6,500 Purchase $8.28
09/26/03 78,500 Purchase $8.30
09/26/03 40,200 Purchase $8.34
09/26/03 5,000 Purchase $8.28
09/29/03 45,000 Sale $8.52
09/30/03 5,000 Sale $8.47
10/02/03 25,000 Sale $8.74
10/03/03 304,000 Purchase $9.05
10/03/03 10,000 Sale $9.20
10/03/03 12,100 Purchase $9.09
10/03/03 3,500 Purchase $9.07
10/03/03 3,500 Sale $12.08
10/03/03 20,000 Sale $9.08
10/06/03 140,000 Purchase $9.45
WHERE YOU CAN FIND MORE INFORMATION
Mesa and Atlantic Coast file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information Mesa and Atlantic Coast files at the
SEC's public reference room located 450 Fifth Street, N.W., Washington D.C.
20549 and at the SEC's other public reference rooms located in New York, New
York and Chicago, Illinois. Please call the SEC at l-800-SEC-0330 for further
information on the public reference rooms. The respective SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at http://www.sec.gov.
You can also get more information by visiting Mesa's web site at
http://www.mesa-air.com and Atlantic Coast's web site at
http://www.atlanticcoast.com. Web site materials are not part of this Consent
Statement.
Mesa intends to file a Registration Statement on Form S-4 to register with
the SEC the Mesa common stock to be issued to Atlantic Coast common stockholders
if our exchange offer is consummated and a Tender Offer Statement on Schedule
TO. The Form S-4 and Schedule TO will be available to Atlantic Coast
stockholders at the SEC's public reference rooms, from commercial document
retrieval services and at the web site maintained by the SEC at
http://www.sec.gov.
The SEC allows Mesa to "incorporate by reference" information into this
Consent Statement, which means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Consent
Statement, except for any information superseded by information in, or
incorporated by reference in, this Consent Statement. This Consent Statement
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about Mesa and
its finances.
MESA SEC FILINGS (FILE NO. 000-15495)
Annual Report on Form 10-K For the fiscal year ended September
30, 2002, updated by financial
information included in the
Current Report on Form 8-K dated
June 10, 2003.
-25-
Quarterly Reports on Form 10-Q For the fiscal quarters ended
December 31, 2002, March 31,
2003, and June 30, 2003.
Current Reports on Form 8-K Filed on May 1, 2003, June 10,
2003, June 10, 2003, June 12,
2003, July 30, 2003, October 17,
2003, November 13, 2003, and
November 26, 2003, respectively.
Definitive Proxy Statement on Schedule Filed on January 10, 2003.
14A for the 2003 Annual Meeting of
Stockholders
ATLANTIC COAST SEC FILINGS (FILE NO. 000-21976)
Annual Report on Form 10-K, as amended For the fiscal year ended December
31, 2002.
Quarterly Reports on Form 10-Q For the fiscal quarters ended March
31, 2003, June 30, 2003 and
September 30, 2003.
Current Reports on Form 8-K Filed on January 27, 2003, January
29, 2003, January 31, 2003,
February 10, 2003, February 27,
2003, April 15, 2003, April 23,
2003, May 15, 2003, May 23, 2003,
May 28, 2003, June 24, 2003, July
2, 2003, July 21, 2003, July 28,
2003, July 30, 2003, August 22,
2003, October 6, 2003, October
22, 2003, November 10, 2003,
November 19, 2003 and November
21, 2003, respectively.
Definitive Proxy Statement on Schedule
14A for the 2003 Annual Meeting of
Stockholders Filed on April 30, 2003.
All documents filed by Mesa and Atlantic Coast pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act with the SEC from the date of this
consent solicitation to the date that shares of Atlantic Coast common stock are
accepted for exchange pursuant to our exchange offer or the date that our offer
is terminated are also deemed to be incorporated by reference into this Consent
Statement.
All information contained in, or incorporated by reference into, this
Consent Statement relating to Mesa was provided by Mesa. While Mesa has included
or incorporated by reference in this Consent Statement information concerning
Atlantic Coast known to Mesa based on publicly available information (primarily
filings by Atlantic Coast with the SEC), Mesa is not affiliated with Atlantic
Coast, and Atlantic Coast has not permitted Mesa to have access to its books and
records. Therefore, non-public information concerning Atlantic Coast was not
available to Mesa for the purpose of preparing this Consent Statement. Although
Mesa has no knowledge that would indicate that statements relating to Atlantic
Coast contained or incorporated by reference in this consent solicitation are
inaccurate or incomplete, Mesa was not involved in the preparation of those
statements and cannot verify them.
Documents incorporated by reference are available from us without charge
upon written or oral request of Atlantic Coast stockholders to the Information
Agent for the proposed transaction, MacKenzie Partners, Inc., 105 Madison
Avenue, New York, NY 10016, call collect at (212) 929-5405 or toll-free at (800)
322-2885. Exhibits to these documents will only be furnished if they are
specifically incorporated by reference in this document. If you request any
incorporated documents from us, we will mail them to you by first class mail, or
another equally prompt means, within one business day after we receive your
request.
Certain information about the employees and representatives of Mesa who
may assist Mesa in soliciting consents is set forth in the attached Annex II.
Annex III sets forth certain information relating to the ownership of Atlantic
Coast common stock by certain of Mesa's employees and representatives, and about
any transactions between any of them and Atlantic Coast.
-26-
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure in this Consent Statement contains some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use words such
as "anticipate," "estimate," "expect," "intend," "believe," and other words and
terms of similar meaning in connection with any discussion of future operating
or financial performance.
Any and all of our forward-looking statements in this Consent Statement
can be affected by inaccurate assumptions we might make or by known or unknown
risks and uncertainties. Consequently, no forward-looking statement can be
guaranteed. Because these statements are subject to risks and uncertainties,
actual results may differ materially from those expected or implied by the
forward-looking statements. We caution you not to place undue reliance on the
statements, which speak only as of the date of this Consent Statement.
From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our reports to the SEC in, among other places, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
periodic reports filed with the SEC.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral forward-looking
statements that Mesa or persons acting on its behalf may issue. Mesa undertakes
no obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events.
SOLICITATION
Solicitation of consents may be made by the directors, officers, investor
relations personnel and other employees of Mesa, its subsidiaries and their
affiliates and by the nominees. Consents will be solicited by mail,
advertisement, telephone or telecopier and in person. No such persons will
receive additional compensation for such solicitation.
In addition, Mesa has retained MacKenzie to assist in the solicitation,
for which services MacKenzie will be paid customary fees. MacKenzie will be
reimbursed for its reasonable out-of-pocket expenses. Mesa has also agreed to
indemnify MacKenzie against certain liabilities and expenses, including certain
liabilities and expenses under the federal securities laws. It is anticipated
that 45 persons will be employed by MacKenzie to solicit stockholders.
Banks, brokers, custodians, nominees and fiduciaries will be requested to
forward solicitation material to the beneficial owners of shares of Atlantic
Coast common stock. Mesa will reimburse banks, brokers, custodians, nominees and
fiduciaries for their reasonable expenses for sending solicitation material to
the beneficial owners.
Merrill Lynch & Co. ("Merrill Lynch") is acting as financial advisor for
Mesa in connection with the proposed acquisition of Atlantic Coast. In
connection with its engagement, Mesa has agreed to pay Merrill Lynch customary
fees for its services. Mesa has also agreed to reimburse Merrill Lynch for its
reasonable expenses, including the reasonable fees and expenses of its legal
counsel, resulting from or arising out of their engagements, and to indemnify
Merrill Lynch and certain related persons against certain liabilities and
expenses, including liabilities and expenses under the federal securities laws
arising out of their respective engagements. In addition, Merrill Lynch has, in
the past, provided financial services to Mesa, for which services it has
received customary compensation.
Certain employees of Merrill Lynch may also assist Mesa in the
solicitation of consents, including by communicating in person, by telephone or
otherwise, with a limited number of institutions, brokers or other persons who
are stockholders of Atlantic Coast. Merrill Lynch does not believe that any of
its directors, officers, employees
-27-
or affiliates are a "participant" as defined in Schedule 14A promulgated under
the Securities Exchange Act of 1934 by the SEC, or that Schedule 14A requires
the disclosure of certain information concerning Merrill Lynch. Merrill Lynch
will not receive any additional fee for or in connection with such solicitation
activities by its representatives apart from the fees it is otherwise entitled
to receive as described above.
Certain information about the directors and executive officers of Mesa who
are not nominees and certain representatives of Mesa who will assist MacKenzie
in soliciting consents is contained in Annex II. Annex III sets forth certain
information relating to the ownership of shares of Atlantic Coast common stock
by Mesa's directors, officers, employees and representatives who may participate
in the solicitation, and about any transactions between any of them and Atlantic
Coast.
The cost of the solicitation of consents to the proposals will be borne by
Mesa. Mesa may seek reimbursement of the costs of this solicitation from
Atlantic Coast. If such reimbursement is sought, the question of whether such
reimbursement will be made may be submitted to Atlantic Coast's stockholders.
Costs related to the solicitation of consents to the proposals include
expenditures for attorneys, accountants, financial advisors, consent solicitors,
public relations advisors, printing, advertising, postage, litigation and
related expenses and filing fees and are expected to aggregate approximately $[
] million, of which $[ ] million has been spent to date. The portion of such
costs allocable solely to the solicitation of consents to the proposals is not
readily determinable.
Atlantic Coast has accused United Airlines of being a participant in
Mesa's consent solicitation and has asserted that the non-binding United MOU
which is described more fully in the "Mesa Strategic Plans" section is evidence
of collusion between Mesa and United Airlines. It is clear that the non-binding
United MOU will provide the benefits to Mesa, United Airlines and Atlantic Coast
described in our discussion of the United MOU if it is ultimately committed to a
binding agreement and Mesa's consent solicitation is successful. However, United
Airlines is free to negotiate and enter into any agreement with any other
regional airline (including Atlantic Coast) to service the Dulles area and Mesa
has no commitment that United Airlines will not do so. United Airlines has
provided no financial or other support to Mesa in connection with our consent
solicitation other than the negotiation of the United MOU. United Airlines owns
no shares of Atlantic Coast common stock and no employees of United will solicit
any consents from Atlantic Coast stockholders on behalf of Mesa or otherwise.
United Airlines has categorically denied that they participated in the consent
process.
CONSENT PROCEDURE
Section 228 of the DGCL provides that, absent a contrary provision in
Atlantic Coast's certificate of incorporation, any action that may be taken at a
meeting of the stockholders may be taken by the written consent of at least the
minimum number of votes that would be necessary to take such action at a meeting
in which all shares entitled to vote were present and voting. Atlantic Coast's
certificate of incorporation contains no contrary provision.
The proposals will become effective upon delivery to Atlantic Coast of
signed, dated and unrevoked consents consenting to such proposals, of a majority
of the shares of Atlantic Coast common stock then outstanding. Consents may be
executed by the holders of record of common stock as of the record date, or by
their duly authorized proxy. Section 228(c) of the DGCL provides that no written
consent will be effective unless delivered to Atlantic Coast within 60 days of
the date of the earliest dated consent delivered to Atlantic Coast in the manner
provided by Delaware law. On October 23, 2003, Atlantic Coast announced that it
had set a record date and received a written consent thereby starting the 60-day
solicitation period, which actions are being challenged as being improper in the
Delaware Lawsuit filed by Mesa on October 29, 2003. On November 25, 2003,
Atlantic Coast announced that the consent it received on October 23, 2003 had
been revoked and that therefore the 60-day consent solicitation period has not
yet commenced. On [ ], 2003, we delivered a signed consent to Atlantic Coast.
Accordingly, consents cannot be submitted later than [ ], 2004. However, because
the proposals will become effective upon our delivery to Atlantic Coast of valid
and unrevoked consent cards totaling more than 50% of the outstanding shares of
common stock as of the record date, and because this may occur before the
expiration of the 60-day period, WE URGE YOU TO ACT PROMPTLY to assure that your
vote will count. Both proposals 1 and 2 must be approved by the holders of
record, as of the close of business on the record date, of a majority of the
shares of Atlantic Coast common stock then outstanding for either proposal to be
effective.
-28-
Any failure to execute and return a consent, and all abstentions and
broker non-votes, will have the same effect as voting against the proposals.
EFFECTIVENESS AND REVOCATION OF CONSENTS
An executed consent card may be revoked by signing, dating and delivering
a written revocation at any time prior to the date that Atlantic Coast has
received the required number of properly completed, unrevoked consents to
authorize the proposed actions. The delivery of a subsequently dated consent
card that is properly completed and signed will constitute a revocation of any
earlier consent card delivered by such holder. The revocation may be delivered
either to Mesa, in care of MacKenzie, or to an address provided by Atlantic
Coast. Although a revocation is effective if delivered to Atlantic Coast, Mesa
requests that either the original or photostatic copies of all revocations of
consents be mailed or delivered to Mesa in care of MacKenzie at the address set
forth above, so that Mesa will be aware of all revocations and can more
accurately determine if and when unrevoked consents to the actions described in
this Consent Statement have been received from the holders of record of a
majority of outstanding shares of Atlantic Coast common stock.
SPECIAL INSTRUCTIONS
If you were a record holder of shares of Atlantic Coast common stock as of
the close of business on the record date, you may elect to consent to, withhold
consent to or abstain with respect to each proposal by marking the "CONSENT,"
"DOES NOT CONSENT" or "ABSTAIN" box, as applicable, underneath each such
proposal on the accompanying WHITE consent card and signing, dating and
returning it promptly in the enclosed postage-paid envelope or by mailing the
consent card to MacKenzie at the address stated below.
If the stockholder signing, dating and returning the WHITE consent card
has failed to check a box marked "CONSENT," "DOES NOT CONSENT" or "ABSTAIN" for
any of the proposals, such stockholder will be deemed to have consented to each
such proposal, except that such stockholder will not be deemed to have consented
to the removal of any current Atlantic Coast director or to the election of any
nominee whose name is written in on the consent card under the corresponding
proposal.
MESA RECOMMENDS THAT YOU CONSENT TO
EACH OF THE PROPOSALS.
YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED WHITE
CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
PROMPTLY OR MAIL THE CARD TO MACKENZIE AT THE ADDRESS STATED BELOW.
FAILURE TO RETURN YOUR CONSENT CARD WILL HAVE THE
SAME EFFECT AS VOTING AGAINST THE PROPOSALS.
If your shares of Atlantic Coast common stock are held in "Street-Name,"
only your bank or broker can execute a consent on your behalf, but only upon
receipt of your specific instructions. To ensure that your consent is effective,
please contact the persons responsible for your account and instruct them to
execute a WHITE consent card on your behalf. Mesa urges you to confirm in
writing your instructions to the person responsible for your account and provide
a copy of those instructions to Mesa in care of MacKenzie at the address set
forth below so that Mesa will be aware of all instructions given and can attempt
to ensure that such instructions are followed.
APPRAISAL RIGHTS
Holders of Atlantic Coast common stock do not have dissenters' appraisal
rights under Delaware law in connection with this Consent Statement or the
proposals contained herein.
If you have any questions or require any assistance in executing or
delivering your consent, please write to, or call:
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MacKenzie Partners, Inc.
105 Madison Avenue
New York, New York 10016
(212) 929-5500
Call Toll-Free: (800) 322-2885
Dated: [ ], 2003
-30-
ANNEX I
INFORMATION CONCERNING ATLANTIC COAST'S OFFICERS AND DIRECTORS
The following table sets forth certain information, as of October 15,
2003, based on information derived from Atlantic Coast's publicly filed reports
with the SEC as of November 3, 2003, concerning beneficial ownership of Atlantic
Coast's common stock by (i) each director of Atlantic Coast; (ii) each executive
officer of Atlantic Coast named in the preliminary proxy statement filed with
the SEC by Atlantic Coast on November 3, 2003; and (iii) all directors and
executive officers of Atlantic Coast as a group.
Amount and Nature of
Beneficial Ownership(1) Percent of Class
Name Shares Percent
---------------------------------------------------------------- ---------------------------- ----------------------
Kerry B. Skeen................................................ 702,346 1.5%
Thomas J. Moore............................................... 612,902 1.4%
C. Edward Acker............................................... 564,400 1.2%
Robert E. Buchanan............................................ 75,800 *
Susan MacGregor Coughlin...................................... 53,660 *
Caroline (Maury) Devine....................................... 12,500 *
Daniel L. McGinnis............................................ 24,000 *
James C. Miller III........................................... 80,000 *
William Anthony (Tony) Rice................................... -0- 0%
Richard J. Surratt............................................ 193,453 *
William Brown................................................. -0- 0%
Eric I. Nordling.............................................. 78,544 *
Richard J. Kennedy............................................ 92,797 *
David W. Asai................................................. 86,864 *
All directors and executive officers as a group (14 2,577,266 5.5%
persons)...................................................
------------------
* Less than one percent.
(1) Includes options and restricted stock that are exercisable on or within 60
days after October 15, 2003, as follows: Mr. Skeen, 588,253 shares; Mr.
Moore, 514,473 shares; Mr. Acker, 24,000 shares; Mr. Buchanan, 52,000
shares; Mrs. Coughlin, 52,000 shares; Ms. Devine, 12,000 shares; Mr.
McGinnis, 24,000 shares; Mr. Miller, 52,000 shares; Mr. Surratt, 184,760
shares; Mr. Nordling, 77,820 shares; Mr. Kennedy, 70,000 shares; Mr. Asai,
78,160 shares; and all directors and executive officers as a group,
1,729,466 shares.
I-1
ANNEX II
INFORMATION CONCERNING DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER
REPRESENTATIVES OF MESA
The following table sets forth the name and the present principal
occupation or employment, and the name and principal business address of any
corporation or other organization in which such employment is carried on, of the
directors, officers, employees and representatives of Mesa who may assist in
soliciting consents from Atlantic Coast's stockholders. Unless otherwise
indicated, each person listed below is employed by Mesa and the principal
business address of each person listed below is 410 North 44th Street, Suite
700, Phoenix, Arizona 85008.
Name and Principal Business Address Present Principal Occupation or Employment
------------------------------------------------------------ -------------------------------------------------------
Jonathan G. Ornstein Chairman and Chief Executive Officer
Michael J. Lotz President and Chief Operating Officer
George Murnane III Executive Vice President and Chief Financial
Officer
Jim Ratigan Managing Director, Mergers & Acquisitions, Merrill
Merrill Lynch & Co. Lynch & Co.
4 World Financial Center, North Tower
New York, NY 10080
George Ackert Director, Global Industries Investment Banking,
Merrill Lynch & Co. Merrill Lynch & Co.
4 World Financial Center, North Tower
New York, NY 10080
Merrill Lynch does not believe that any of its directors, officers, employees or
affiliates are a "participant" as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934 by the SEC, or that Schedule 14A requires the
disclosure of certain information concerning Merrill Lynch.
II-1
ANNEX III
CERTAIN TRANSACTIONS
AMONG MESA, ITS DIRECTORS, EMPLOYEES AND OTHER REPRESENTATIVES
AND ATLANTIC COAST
Except as disclosed in this Consent Statement, none of Mesa, its directors
or executive officers or the employees or other representatives of Mesa named in
Annex II owns any securities of Atlantic Coast or any parent or subsidiary of
Atlantic Coast, beneficially or of record nor is a party to any contract,
arrangement or understanding with any person for such securities.
Merrill Lynch, which is acting as financial advisor for Mesa in connection
with the proposed acquisition of Atlantic Coast, engages in a full range of
investment banking, securities trading, market-making and brokerage services for
institutional and individual clients. In the normal course of its business,
Merrill Lynch may trade securities of Atlantic Coast for its own account and the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
None of Mesa, its subsidiaries, their directors or executive officers, or
the employees or other representatives of Mesa named in Annex II, or, to their
best knowledge, their Associates has any arrangement or understanding with any
person as (1) to any future employment by Atlantic Coast or its affiliates or
(2) to future transactions to which Atlantic Coast or any of its affiliates will
or may be a party, nor any material interest, direct or indirect, in any
transaction that has occurred within the last two years in which Atlantic Coast
or any of its affiliates was or is a party and in which the amount involved
exceeds $60,000. Certain directors and executive officers of Mesa and/or its
respective associates may also be directors or officers of other companies and
organizations that have engaged in transactions with Atlantic Coast or its
subsidiaries in the ordinary course of business within the last two years, but
Mesa believes that the interest of such persons in such transactions is not
material.
III-1
ANNEX IV
This summary highlights selected information from our exchange offer and
may not contain all the information that is important to you. To understand our
exchange offer fully and for a more complete description of the legal terms of
our exchange offer, you should carefully read this document and the documents to
which we have referred you.
THE EXCHANGE OFFER AND PROPOSED MERGER
Introduction
Mesa beneficially owns 1,603,529 shares of Atlantic Coast common stock,
representing approximately 3.5% of the outstanding shares of Atlantic Coast's
common stock as of November 1, 2003.
Mesa intends to file a registration statement on Form S-4 to effectuate an
exchange offer for all of the outstanding shares of Atlantic Coast common stock
(the "Exchange Offer"). Under the terms of the Exchange Offer, Mesa will
exchange shares of newly issued Mesa common stock for each issued and
outstanding share of Atlantic Coast common stock upon the terms and conditions
set forth in the Offer to Purchase and the related letter of transmittal. The
following is a summary of the contemplated Exchange Offer:
o Atlantic Coast stockholders will receive 0.90 of a share of Mesa
common stock in exchange for each share of Atlantic Coast common
stock, subject to adjustment as described below.
o The amount of consideration paid to holders of Atlantic Coast common
stock will be reduced by an amount equal to the amount of any money
Atlantic Coast must pay as a penalty, damages, non-refundable
deposit or otherwise (the "Airbus Penalty Amount"), if any, to
terminate the Airbus MOU.
o The exact exchange ratio (the "Exchange Ratio") will be calculated
by subtracting from 0.90 the quotient obtained from (i) dividing the
Airbus Penalty Amount, if any, by the number of shares of Atlantic
Coast common stock outstanding, as reported by Atlantic Coast in its
last filing with the SEC prior to the date which is ten business
days before the expiration date of the Exchange Offer; and (ii) then
dividing the quotient obtained in (i) by the average of the closing
sale prices for a share of Mesa common stock on the NASDAQ as
reported in The Wall Street Journal over the ten consecutive trading
days ending ten business days prior to the expiration of the
Exchange Offer (the "Mesa Average Market Price").
o To the extent that the Airbus MOU is cancelled or terminated and
there is no Airbus Penalty Amount, the Exchange Ratio will be 0.90
and Atlantic Coast stockholders will receive 0.90 of a share of Mesa
common stock in exchange for each share of Atlantic Coast common
stock.
Mesa will not acquire any shares of Atlantic Coast in the Exchange Offer
unless Atlantic Coast stockholders have validly tendered and not properly
withdrawn prior to the expiration of the Exchange Offer a number of shares of
Atlantic Coast's common stock such that, after giving effect to the Exchange
Offer, Mesa owns at least a majority of the total number of outstanding shares
of Atlantic Coast on a fully diluted basis. We will not issue fractional shares
of Mesa common stock. Instead, any Atlantic Coast stockholder entitled to
receive a fractional share of Mesa common stock will receive cash in an amount
equal to the fraction, multiplied by the closing price of a share of Mesa common
stock on the NASDAQ on the last trading day before the time that the Exchange
Offer expires.
The purpose of the Exchange Offer is for Mesa to acquire at least a
majority of the outstanding common stock of Atlantic Coast (including the
associated preferred stock purchase rights) on a fully diluted basis. Mesa
intends, as soon as practicable following consummation of the Exchange Offer, to
propose, and seek to have Atlantic Coast enter into, a merger agreement or
similar business combination with a wholly owned subsidiary of Mesa, in which
each remaining share of Atlantic Coast common stock will be converted into the
right to receive shares of Mesa common stock at the same Exchange Ratio as used
in the Exchange Offer (the "Proposed Merger").
IV-1
The purpose of the Proposed Merger is to acquire all the Atlantic Coast common
stock not tendered and exchanged pursuant to the Exchange Offer.
IV-2
RISK FACTORS
In connection with the Exchange Offer, you should also carefully consider
the following factors:
Risks Related to the Exchange Offer and the Proposed Merger
To the extent there is an Airbus Penalty Amount, the Exchange Ratio will not be
known until ten business days prior to the expiration of the Exchange Offer.
The Exchange Ratio will be determined by subtracting from 0.90 the
quotient obtained from (i) dividing the Airbus Penalty Amount, if any, by the
number of shares of Atlantic Coast common stock outstanding, as reported by
Atlantic Coast in its last filing with the SEC prior to the date which is ten
business days before the expiration date of the Exchange Offer; and (ii) then
dividing the quotient obtained in (i) by the Mesa Average Market Price.
Accordingly, you will not know the Exchange Ratio until ten business days prior
to the expiration date of the Exchange Offer. Further, the market price of Mesa
common stock may change after the determination of the Exchange Ratio, and
therefore the Exchange Ratio may not reflect the actual market price for Mesa
common stock following the completion of the Exchange Offer. Additionally, the
market price of the Mesa common stock will likely be different on the date you
receive shares of Mesa common stock than it is today because of changes in the
business, operations or prospects of Mesa, market reactions to our Exchange
Offer, general market and economic conditions and other factors. You are urged
to obtain current market quotations for Mesa common stock and Atlantic Coast
common stock.
The trading price of Mesa's common stock may be affected by factors in addition
to those factors affecting the price of Atlantic Coast's common stock. The
price of Mesa's common stock could decline following the Exchange Offer.
If we successfully complete the Exchange Offer and any Proposed Merger,
holders of Atlantic Coast's common stock will become holders of Mesa's common
stock, the trading price of which may be affected by factors in addition to
those factors affecting the price of Atlantic Coast's common stock. The price of
Mesa's common stock may decrease after we accept shares of Atlantic Coast common
stock for exchange in the Exchange Offer and complete the Proposed Merger.
We have not negotiated the price or terms of the Exchange Offer or the Proposed
Merger with Atlantic Coast's board.
In evaluating this offer, you should be aware that we have not negotiated
the price or terms of this Exchange Offer or the Proposed Merger with Atlantic
Coast, its board of directors or any special committee of its board. Atlantic
Coast will be required, however, under the rules of the SEC, to either make a
recommendation, or state that it is neutral or is unable to take a position with
respect to the Exchange Offer, and file with the SEC a
solicitation/recommendation statement on Schedule 14D-9 describing its position,
if any, and certain related information, no later than ten business days from
the date the Exchange Offer is first published or sent or given to security
holders.
Resales of Mesa common stock following the Exchange Offer may cause the market
price of that stock to fall.
As of November 11, 2003, Mesa has 31,719,074 shares of common stock
outstanding, 4,953,815 shares subject to outstanding options and other rights to
purchase or acquire common stock and 10,011,204 shares of common
IV-3
stock reserved for issuance upon the conversion of Mesa's $252,000,000 of Senior
Convertible Notes due in 2023. Based upon the number of Atlantic Coast shares
outstanding as of November 1, 2003, Mesa expects that it will issue a maximum of
45,100,000 shares in connection with the Exchange Offer and the Proposed Merger.
The issuance of these new shares, the sale of additional shares of Mesa's common
stock that may become eligible for sale in the public market from time to time
upon exercise of options, and the conversion of the Mesa's Senior Convertible
Notes due in 2023 to common stock could have the effect of depressing the price
of Mesa's common stock.
The receipt of Mesa common stock could be taxable to Atlantic Coast stockholders
depending on facts surrounding the Exchange Offer and the Proposed Merger.
Mesa does not plan to request a ruling from the Internal Revenue Service
with regard to the tax consequences of the Exchange Offer and/or the Proposed
Merger. The Exchange Offer and the Proposed Merger are expected to qualify as a
reorganization within the meaning of Section 368(a) of the Code provided that
certain factual assumptions are satisfied, including the following (i) the
Exchange Offer and the Proposed Merger are consummated in the manner provided
herein, (ii) none of Mesa, Atlantic Coast or any related party acquires or
redeems, in connection with the Exchange Offer or the Proposed Merger, shares of
Mesa common stock issued to Atlantic Coast stockholders pursuant to the Exchange
Offer or the Proposed Merger, and (iii) Mesa continues a significant line of
Atlantic Coast's business or uses a significant portion of Atlantic Coast's
historic business assets in a business. If any of these factual assumptions are
not satisfied, an Atlantic Coast stockholder's exchange of Atlantic Coast shares
for Mesa common stock in the Exchange Offer or the Proposed Merger could be a
taxable transaction, depending on the surrounding facts. Atlantic Coast
stockholders are urged to consult their tax advisors concerning the United
States federal income and other tax consequences of participation in the
Exchange Offer and/or the Proposed Merger.
Mesa may not be able to effect the Proposed Merger.
It is our intention to promptly complete the Proposed Merger following the
completion of the Exchange Offer. However, if we successfully complete the
Exchange Offer but for any reason are not able to complete promptly the Proposed
Merger, shares of Atlantic Coast's common stock not tendered into the Exchange
Offer would remain outstanding until we are able to effect the Proposed Merger,
if ever. In these circumstances, the liquidity of and market for those remaining
publicly held shares of Atlantic Coast common stock could be adversely affected.
Atlantic Coast's common stock is currently listed on the NASDAQ. Depending upon
the number of shares of Atlantic Coast common stock exchanged in the Exchange
Offer, Atlantic Coast's common stock may no longer meet the requirements for
continued listing and may be delisted from the NASDAQ. It is possible that
Atlantic Coast's common stock would continue to trade in the over-the-counter
market and that price quotations would be reported by other sources. The extent
of the public market for Atlantic Coast's common stock and the availability of
these quotations would depend, however, upon the number of holders of Atlantic
Coast's common stock remaining at that time, the interests in maintaining a
market in Atlantic Coast's common stock on the part of securities firms, the
possible termination of registration of Atlantic Coast's common stock under the
Exchange Act, as described below, and other factors.
In addition, Atlantic Coast's registration under the Exchange Act could be
terminated upon application of Atlantic Coast to the SEC if the shares are no
longer listed on a securities exchange and there are fewer than 300 holders of
record of the Atlantic Coast common stock. The termination of the registration
of Atlantic Coast's common stock under the Exchange Act would substantially
reduce the information required to be furnished by Atlantic Coast to its
stockholders and to the SEC. It would also make certain of the provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings, the related requirement of an annual report to
stockholders, and the requirements of SEC Rule 13e-3 with respect to going
private transactions, no longer applicable.
Shares of Atlantic Coast's common stock are currently "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System.
This has the effect of allowing brokers to extend credit on shares of Atlantic
Coast's common stock as collateral. Depending on factors similar to those
described above regarding listing and market quotations, it is possible that
Atlantic Coast's common stock would no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations. If registration of
Atlantic
IV-4
Coast's common stock under the Exchange Act is terminated, Atlantic Coast's
common stock would no longer be "margin securities."
Successful integration of the Mesa and Atlantic Coast businesses is not assured.
Integrating and coordinating the operations and personnel of Mesa and
Atlantic Coast will involve complex technological, operational and
personnel-related challenges. This process will be time-consuming and expensive
and may disrupt the business of the companies. The difficulties, costs and
delays that could be encountered may include:
o unanticipated issues in integrating the companies' information,
communications and other systems;
o negative impact on employee morale and performance as a result of job
changes and reassignments;
o loss of customers and key personnel;
o difficulty finding, training and retaining employees;
o unanticipated incompatibility of systems, procedures and operating
methods;
o unanticipated costs in terminating or relocating facilities and
operations;
o unanticipated costs associated with the purchase of new aircraft; and
o the effect of complying with any government imposed organizational
conflict-of-interest rules.
Mesa may be unable to retain personnel who are key to Mesa's and Atlantic
Coast's businesses.
The success of Mesa's operations is dependent, among other things, on
Mesa's ability to attract and retain highly qualified professional personnel.
Competition for key personnel in the various localities and business segments in
which Mesa operates is intense. Mesa's ability to attract and retain key
personnel, in particular senior officers, is dependent on a number of factors,
including prevailing market conditions and compensation packages offered by
companies competing for the same talent, who may offer compensation packages
that include considerable equity based incentives through stock option or
similar programs. These same pressures and concerns also apply to Atlantic
Coast's business.
Mesa will incur significant transaction-related costs.
Mesa expects to incur costs associated with combining the operations of
the two companies and transaction fees and other costs related to the Exchange
Offer and the Proposed Merger. The majority of these costs will be recorded as a
component of the purchase price. This includes anticipated costs of
approximately $15 million for transaction related costs. These amounts are
preliminary estimates and subject to change. Additional unanticipated costs may
be incurred in the integration of the businesses of Mesa and Atlantic Coast.
Mesa expects that the elimination of duplicative costs, as well as the
realization of other efficiencies related to the integration of the businesses,
may offset incremental transaction related costs over time. However, we cannot
give any assurance that this net benefit will be achieved in the near term, or
at all.
Due to conflicting provisions in their respective collective bargaining
agreements, integrating the pilots of Mesa and Atlantic Coast may result in
unanticipated costs to the combined entity.
There are conflicting provisions in the collective bargaining agreements
between Atlantic Coast, Mesa and their respective pilots. Mesa's collective
bargaining agreement with its pilots provides that any Mesa subsidiary must be
operated under the terms of the Mesa contract and the Atlantic Coast pilot
agreement expressly requires any acquirer to operate Atlantic Coast under the
terms of the Atlantic Coast contract. The contracts differ on material terms,
including pay and restrictions on types of aircraft flown. Furthermore, the
Atlantic Coast pilot agreement provides for an increase in salary in the event
of a change in control of Atlantic Coast. Therefore, successfully integrating
both pilot groups could result in unanticipated costs to the combined entity.
IV-5
Risks Related To Our Business
Our business activities are subject to hazards and risks. The following is
a summary of the material risks relating to our business activities. Before
tendering your shares of Atlantic Coast common stock in the Exchange Offer, you
should carefully consider the material risks described below, as well as the
other information contained in this Consent Statement and the documents
incorporated by reference in this Consent Statement under the caption "Where You
Can Find More Information." If any of the events described below occur, our
business, financial condition and/or results of operations could be materially
harmed, and you could lose part or all of your investment.
The negative impact of the September 11, 2001, terrorist attacks and the
resulting government responses could be material to our financial condition,
results of operations and prospects.
The terrorist attacks of September 11, 2001, were highly publicized. The
impact that these events will continue to have on the airline industry in
general, and on us in particular, are not known at this time, but are expected
to include a substantial impact on our operations due to:
o A reduction in the demand for air travel in the near and mid-term until
public confidence in the air transportation system is restored;
o An increase in costs due to enhanced security measures and government
directives in response to the terrorist attacks;
o An increase in the cost of aviation insurance in general, and the cost and
availability of coverage for acts of war, terrorism, hijacking, sabotage
and similar acts of peril in particular; and
o An increase in airport rents and landing fees.
In addition, we expect that the general increase in hostilities relating
to reprisals against terrorist organizations and the continued threat of further
terrorist attacks will continue to negatively impact our revenues and costs in
the near and mid-term. The extent of the impact that the terrorist attacks and
their aftermath will have on our operations, and the sufficiency of our
financial resources to absorb this impact, will depend on a number of factors,
including:
o The adverse impact that terrorist attacks, and the resulting government
responses, will have on the travel industry and the economy in general;
o The potential increase in fuel costs and decrease in availability of fuel
if oil-producing countries are affected by the aftermath of the terrorist
attacks, including the government's responses, and our ability to manage
this risk in connection with that part of our operations where our fuel
costs are not reimbursed by our code share partners under the terms of our
code share agreements;
o Our ability to reduce our operating costs and conserve financial
resources, taking into account the cost increases (including significant
increases in the cost of aviation insurance) expected to result from the
aftermath of the terrorist attacks and the government's responses;
o Any resulting decline in the value of the aircraft in our fleet;
o Our ability to raise additional financing, if necessary, taking into
account our current leverage and the limitations imposed by the terms of
our existing indebtedness;
o The number of crew members who may be called for duty in the reserve
forces of the armed services and the resulting impact on our ability to
operate as planned; and
o The scope and nature of any future terrorist attacks.
We are dependent on our agreements with our code share partners.
IV-6
We depend on relationships created by our code share agreements. We derive
a significant portion of our consolidated passenger revenues from our
revenue-guarantee code share agreements with America West, US Airways and United
Airlines. We rely on our code share partners to provide numerous services such
as reservations, ticketing, route planning, and customer service and ground
handling at certain stations. Our code share partners have certain rights to
cancel the applicable code share agreement upon the occurrence of certain events
or the giving of appropriate notice, subject to certain conditions. Although no
notice has been given to date that any party intends to cancel these contracts,
there can be no assurance that they will not serve notice at a later date of
their intention to cancel, forcing us to stop selling those routes with the
applicable partner's code and potentially reducing our traffic and revenue. In
addition, our code share agreement with America West allows America West,
subject to certain restrictions, to reduce the number of aircraft covered by the
code share agreement, provided the requisite notice provisions are met. America
West has used this provision to reduce the number of aircraft covered by the
code share agreement and there can be no assurance that they will not continue
to further reduce the number of covered aircraft.
In addition, because a majority of our operating revenues are currently
generated under revenue-guarantee code share agreements, if any one of them is
terminated, our operating revenues and net income could be materially adversely
affected unless we are able to enter into satisfactory substitute arrangements
or, alternatively, fly under our own flight designator code, including obtaining
the airport facilities and gates necessary to do so. In 2002 and for the nine
months ended June 30, 2003, our America West code share agreement accounted for
40% and 45%, respectively, of our consolidated passenger revenues and our US
Airways code share agreement accounted for 55% and 50%, respectively, of our
consolidated passenger revenues. In addition, in July 2003, Mesa Airlines began
operating as United Express under a revenue-guarantee code share agreement with
United Airlines. Any material modification to, or termination of, our code share
agreements with any of these partners could have a material adverse effect on
our financial condition, the results of our operations and the price of our
common stock. Should any of our revenue-guarantee code share agreements be
terminated, we cannot assure you that we would be able to enter into substitute
code share arrangements, that any such arrangements would be as favorable to us
as the current code share agreements or that we could successfully fly under our
own flight designator code.
If Mesa's code share partners or other regional carriers experience events that
negatively impact their financial strength or operations, our operations also
may be negatively impacted.
Mesa is directly affected by the financial and operating strength of our
code share partners. Any events that negatively impact the financial strength of
our code share partners or have a long-term effect on the use of our code share
partners by airline travelers would likely have a material adverse effect on our
business, financial condition and results of operations. In the event of a
decrease in the financial or operational strength of any of our code share
partners, such partner may seek to reduce, or be unable to make, the payments
due to us under their code share agreement.
In addition, our code share partners may reduce utilization of our
aircraft. Although there are certain monthly guaranteed payment amounts, there
are no minimum levels of utilization specified in the code share agreements.
Further, it is possible that if any of our code share partners becomes bankrupt,
our code share agreement with such partners may not be assumed in bankruptcy and
would be terminated. Any such event could have an adverse effect on our
business, financial condition and results of operations. Additionally, United
Airlines is currently in bankruptcy, and any agreement between Mesa and United
Airlines must be approved by United Airlines' bankruptcy court. Until approval
is obtained, any agreement is nonbinding and subject to renegotiation if United
Airlines determines that it must seek further reductions in rates or other
changes to terms in order to emerge from bankruptcy. In addition, our code share
partner US Airways has not been profitable since it emerged from bankruptcy
earlier this year.
In addition, any negative events that occur to other regional carriers and
that affect public perception of such carriers generally could also have a
material adverse effect on our business, financial condition and results of
operations.
Our code share partners may expand their direct operation of regional jets thus
limiting the expansion of our relationships with them.
IV-7
Mesa depends on major airlines like US Airways, America West and United
Airlines electing to contract with us instead of purchasing and operating their
own regional jets. However, these major airlines possess the resources to
acquire and operate their own regional jets instead of entering into contracts
with us or other regional carriers. We have no guarantee that in the future our
code share partners will choose to enter into contracts with us instead of
purchasing their own regional jets or entering into relationships with competing
regional airlines. A decision by US Airways, America West, United Airlines or
any other code share partners to phase out our contract-based code share
relationships or to enter into similar agreements with one or more of our
competitors could have a material adverse effect on our business, financial
condition or results of operations. In addition to Mesa Airlines and Air
Midwest, Inc., a wholly-owned subsidiary of Mesa, US Airways has similar code
share agreements with TranStates Airlines, Chautauqua Airlines and Republic
Airlines. Mesa Airlines is currently America West's only code share partner. In
addition to Mesa and Atlantic Coast, United Airlines has similar code share
agreements with SkyWest, Air Wisconsin and TranStates.
If Mesa experiences a lack of labor availability or strikes, it could result in
a decrease of revenues due to the cancellation of flights.
The operation of our business is significantly dependent on the
availability of qualified employees; including, specifically, flight crews,
mechanics and avionics specialists. Historically, regional airlines have
experienced high pilot turnover from time to time as a result of major air
carriers hiring experienced commercial pilots away from regional carriers.
Further, the addition of aircraft, especially new aircraft types, can result in
pilots upgrading between aircraft types and becoming unavailable for duty during
the required extensive training periods. There can be no assurance that we will
be able to maintain an adequate supply of qualified personnel or that labor
expenses will not increase as a result of a shortage in supply of such workers.
At September 30, 2003, Mesa had approximately 3,600 employees, a
significant number of whom are members of various labor unions, including the
Air Line Pilots Association and the Association of Flight Attendants. Our
collective bargaining agreement with the Air Line Pilots Association expires in
August 2007 and our collective bargaining agreement with the Association of
Flight Attendants expires in June 2006. The inability to negotiate acceptable
contracts with existing unions as agreements expire or with new unions could
result in work stoppages by the affected workers, lost revenues resulting from
the cancellation of flights and increased operating costs as a result of higher
wages or benefits paid to union members. We cannot predict which, if any, other
employee groups may seek union representation or the outcome or the terms of any
future collective bargaining agreement and therefore the effect, if any, on our
financial condition and results of operations. If negotiations with unions over
collective bargaining agreements prove to be unsuccessful, following specified
"cooling off" periods, the unions may initiate a work action, including a
strike, which could have a material adverse effect on our business, financial
condition and results of operations.
Increases in our labor costs, which constitute a substantial portion of our
total operating costs, will cause our earnings to decrease.
Labor costs constitute a significant percentage of our total operating
costs, and we have experienced pressure to increase wages and benefits for our
employees. Under our code share agreements, our reimbursement rates contemplate
labor costs that increase on a set schedule generally tied to an increase in the
consumer price index or the actual increase in the contract. We are responsible
for our labor costs, and we may not be entitled to receive increased payments
for our flights if our labor costs increase above the assumed costs included in
the reimbursement rates. As a result, a significant increase in our labor costs
above the levels assumed in our reimbursement rates could result in a material
reduction in our earnings.
If new airline regulations are passed or are imposed upon our operations, we may
incur increased operating costs and a decrease in earnings.
Laws and regulations, such as those described below, have been proposed
from time to time that could significantly increase the cost of our operations
by imposing additional requirements or restrictions on our operations. Mesa
cannot predict what laws and regulations will be adopted or what changes to air
transportation agreements will be effected, if any, or how they will affect us,
and there can be no assurance that laws or regulations currently proposed or
enacted in the future will not increase our operating expenses and therefore
adversely affect our financial condition and results of operations.
IV-8
As an interstate air carrier, Mesa is subject to the economic
jurisdiction, regulation and continuing air carrier fitness requirements of the
Department of Transportation, which include required levels of financial,
managerial and regulatory fitness. The Department of Transportation is
authorized to establish consumer protection regulations to prevent unfair
methods of competition and deceptive practices, to prohibit certain pricing
practices, to inspect a carrier's books, properties and records, to mandate
conditions of carriage and to suspend an air carrier's fitness to operate. The
DOT also has the power to bring proceedings for the enforcement of air carrier
economic regulations, including the assessment of civil penalties, and to seek
criminal sanctions.
Mesa is also subject to the jurisdiction of the FAA with respect to our
aircraft maintenance and operations, including equipment, ground facilities,
dispatch, communication, training, weather observation, flight personnel and
other matters affecting air safety. To ensure compliance with its regulations,
the FAA requires airlines to obtain an operating certificate, which is subject
to suspension or revocation for cause, and provides for regular inspections.
Mesa incurs substantial costs in maintaining our current certifications
and otherwise complying with the laws, rules and regulations to which we are
subject. We cannot predict whether we will be able to comply with all present
and future laws, rules, regulations and certification requirements or that the
cost of continued compliance will not significantly increase our costs of doing
business.
The FAA has the authority to issue mandatory orders relating to, among
other things, the grounding of aircraft, inspection of aircraft, installation of
new safety-related items and removal and replacement of aircraft parts that have
failed or may fail in the future. A decision by the FAA to ground, or require
time-consuming inspections of, or maintenance on, all or any of our turboprops
or regional jets, for any reason, could negatively impact our results of
operations.
In addition to state and federal regulation, airports and municipalities
enact rules and regulations that affect our operations. From time to time,
various airports throughout the country have considered limiting the use of
smaller aircraft, such as Embraer or Canadair regional jets, at such airports.
The imposition of any limits on the use of our regional jets at any airport at
which we operate could interfere with our obligations under our code share
agreements and severely interrupt our business operations.
Fluctuations in fuel costs could adversely affect our operating expenses and
results.
The price and supply of jet fuel is unpredictable and fluctuates based on
events outside our control, including geopolitical developments, regional
production patterns and environmental concerns. Although approximately 89% of
our fuel costs for the fiscal quarter ended September 30, 2003, were reimbursed
by our code share partners, price escalations or reductions in the supply of jet
fuel will increase our operating expenses and, to the extent such fuel costs are
not reimbursed by our code share partners, could cause our operating results and
net income to decline.
If additional security and safety measures regulations are adopted, we may incur
increased operating costs and a decrease in earnings.
Congress recently adopted increased safety and security measures designed
to increase airline passenger security and protect against terrorist acts. Such
measures have resulted in additional operating costs to the airline industry.
The Aviation Safety Commission's report recommends the adoption of further
measures aimed at improving the safety and security of air travel. We cannot
forecast what additional security and safety requirements may be imposed on our
operations in the future or the costs or revenue impact that would be associated
with complying with such requirements, although such costs and revenue impact
could be significant. To the extent that the costs of complying with any
additional safety and security measures are not reimbursed by our code share
partners, our operating results and net income could be adversely affected.
If our operating costs increase as our aircraft fleet ages and we are unable to
pass along such costs, our earnings will decrease.
As aircraft age, the cost of maintaining such aircraft typically
increases. Although Mesa tries to insulate itself from the effects of such aging
by entering into long-term maintenance agreements with third-party maintenance
providers, there can be no assurance that Mesa's cost of maintenance, including
costs to comply with
IV-9
aging aircraft requirements, will not materially increase in the future. Any
material increase in such costs could have a material adverse effect on our
business, financial condition and results of operations. Because many aircraft
components are required to be replaced after specified numbers of flight hours
or take-off and landing cycles, and because new aviation technology may be
required to be retrofitted, the cost to maintain aging aircraft will generally
exceed the cost to maintain newer aircraft.
The average age of our regional jet fleet is 2.7 years and we believe
that, based on the percentage of scheduled flights completed, our aircraft are
mechanically reliable. However, there can be no assurance that such aircraft
will continue to be sufficiently reliable over longer periods of time.
Furthermore, any perception by our major partners that our aircraft are less
than completely reliable could have a material adverse effect on our business,
financial condition and results of operations.
We depend on Bombardier and Embraer to supply us with the aircraft we need to
expand.
As of November 1, 2003, we are obligated under our code share agreements
to place an additional 55 regional jets in service over the next 18 months. The
remaining five regional jets are scheduled to be placed into service in fiscal
year 2005. We currently have firm orders with Bombardier for an additional 18
regional jets and Embraer for four regional jets. We also have options to
acquire an additional 80 Bombardier regional jets that are exercisable through
2008 and 45 Embraer regional jets exercisable through 2009. We are currently
negotiating with Bombardier and Embraer for the remaining aircraft to be
delivered under our code share agreement. We are also seeking available aircraft
in the used market.
We are dependent on Bombardier and Embraer as manufacturers of these jets
and certain factors may limit or preclude our ability to obtain these regional
jets, including:
o The manufacturers could refuse, or may not be financially able, to perform
their obligations under the applicable purchase agreement for the delivery
of the regional jets; and
o a fire, strike or other event could occur that affects the manufacturers'
ability to completely or timely fulfill their contractual obligations.
Any disruption or change in the delivery schedule of these regional jets
would affect our overall operations and our ability to fulfill our obligations
under our code share agreements.
Our operations could be materially adversely affected by the failure or
inability of the manufacturer or any key component manufacturers to provide
sufficient parts or related support services on a timely basis or by an
interruption of fleet service as a result of unscheduled or unanticipated
maintenance requirements for our aircraft.
Our fleet expansion program will require a significant increase in our leverage
and the financing we require may not be available on favorable terms or at
all.
The airline business is very capital intensive and, as a result, many
airline companies are highly leveraged. During the fiscal years ended September
30, 2001, 2002 and 2003, our debt service payments, including our line of
credit, totaled $23.7 million, $36.7 million and $20.6 million, respectively,
and our lease payments totaled $87.4 million, $109.1 million and $131.2,
respectively. We have significant lease obligations with respect to our aircraft
and ground facilities, which aggregated approximately $2.0 billion at September
30, 2003. As of November 24, 2003, we have taken delivery of 23 Bombardier
CRJ-700s and CRJ-900s. Our current growth strategy involves the acquisition of
60 more regional jets between fiscal years 2003 and 2005. We have permanently
financed 11 of the 23 Bombardier CRJ-700 and CRJ-900 aircraft already delivered.
The other twelve aircraft are the subject of interim financing. In addition, we
have commitments in place from Bombardier to provide the permanent debt
financing on leveraged leases of 20 aircraft and other commitments for debt and
equity for leveraged leases on the final four Embraer deliveries. After that,
there is no assurance that we will be able to obtain permanent financing on the
interim financed aircraft or that we will be able to obtain financing for future
aircraft deliveries. The failure to obtain financing for these aircraft could
have a negative impact on our ability to execute our fleet expansion program. If
we are able to obtain financing for these aircraft, it will significantly
increase our mandatory lease and debt service payments.
IV-10
We are working with Bombardier and our financing sources and are
evaluating a number of financing proposals and alternatives to ensure our
aircraft deliveries will continue as scheduled. Although we have no firm
commitments at this time, Bombardier has not given us any indication that they
will not continue to deliver aircraft on interim financing as we continue to
evaluate our financing proposals and alternatives.
There can be no assurance that our operations will generate sufficient
cash flow to make such payments or that we will be able to obtain financing to
acquire the additional aircraft necessary for our expansion. If we default under
our loan or lease agreements, the lender/lessor has available extensive
remedies, including, without limitation, repossession of the respective aircraft
and, in the case of large creditors, the effective ability to exert control over
how we allocate a significant portion of our revenues. Even if we are able to
timely service our debt, the size of our long-term debt and lease obligations
could negatively affect our financial condition, results of operations and the
price of our common stock in many ways, including:
o increasing the cost, or limiting the availability of, additional financing
for working capital, acquisitions or other purposes;
o limiting the ways in which we can use our cash flow, much of which may
have to be used to satisfy debt and lease obligations; and
o adversely affecting our ability to respond to changing business or
economic conditions or continue our growth strategy.
If we need funds and cannot raise them on acceptable terms, we may be
unable to realize our current plans or take advantage of unanticipated
opportunities and could be required to slow our growth.
Reduced utilization levels of our aircraft under the fixed-fee agreements would
adversely impact our revenues and earnings.
Even though our revenue-guarantee agreements require a fixed amount per
month to compensate us for our fixed costs, if our aircraft are underutilized
(including taking into account the stage length and frequency of our scheduled
flights) we will lose the opportunity to receive a margin on the variable costs
of flights that would have been flown if our aircraft were more fully utilized.
If we incur problems with any of our third party service providers, our
operations could be adversely affected by a resulting decline in revenue or
negative public perception about our services.
Our reliance upon others to provide essential services on behalf of our
operations may result in the relative inability to control the efficiency and
timeliness of contract services. We have entered into agreements with
contractors to provide various facilities and services required for our
operations, including aircraft maintenance, ground facilities, baggage handling
and personnel training. It is likely that similar agreements will be entered
into in any new markets we decide to serve. All of these agreements are subject
to termination after notice. Any material problems with the efficiency and
timeliness of contract services could have a material adverse effect on our
business, financial condition and results of operations.
If we become involved in any material litigation or any existing litigation is
concluded in a manner adverse to us, our earnings may decline.
We are, from time to time, subject to various legal proceedings and
claims, either asserted or unasserted. Any such claims, whether with or without
merit, could be time-consuming and expensive to defend and could divert
management's attention and resources. There can be no assurance regarding the
outcome of current or future litigation.
We are at risk of losses and adverse publicity stemming from any accident
involving any of our aircraft.
If one of our aircraft were to crash or be involved in an accident, we
could be exposed to significant tort liability. In this regard, in January,
2003, US Airways Flight 5481, operated by our subsidiary Air Midwest, crashed
shortly after takeoff from Charlotte Douglas International Airport en route to
Greenville/Spartanburg, South
IV-11
Carolina. In February, 2003, a small single-engine plane managed by our wholly
owned subsidiary, MPD, Inc. as part of a pilot training program operated in
conjunction with Arizona State University, crashed after take-off in Sedona,
Arizona.
The estates of the passengers from Flight 5481, the Sedona crash or the
passengers, or their estates, of any other future aircraft accident may seek to
recover damages for death or injury. Although we believe our present insurance
coverage is sufficient to cover any claims arising from the crash of Flight 5481
and the Sedona crash, there can be no assurance that the insurance we carry to
cover damages arising from any future accidents will be adequate. Accidents
could also result in unforeseen mechanical and maintenance costs. In addition,
any accident involving an aircraft that we operate could create a public
perception that our aircraft are not safe, which could result in air travelers
being reluctant to fly on our aircraft. To the extent a decrease is associated
with our operations not covered by our code share agreements, such a decrease
could have a material adverse affect on our business, financial condition or
results of operations.
We are also subject to ongoing investigations by the FAA and the National
Transportation Safety Board with respect to the events surrounding the crash of
Flight 5481. Although Air Midwest has received no adverse notice to date from
either the FAA or NTSB with respect to the findings from their respective
investigations, the FAA has the authority to impose civil penalties against Air
Midwest should they conclude such penalties are warranted. The imposition of
substantial civil penalties, with respect to Flight 5481 or any other aircraft
accident, would have a material adverse impact our earnings.
Mesa's business would be harmed if we lose the services of our key personnel.
Our success depends to a large extent on the continued service of our
executive management team. We have employment agreements with certain executive
officers, but it is possible that members of executive management may leave us.
Departures by our executive officers could have a negative impact on our
business, as we may not be able to find suitable management personnel to replace
departing executives on a timely basis. We do not maintain key-man life
insurance on any of our executive officers.
We may experience difficulty finding, training and retaining employees.
Our business is labor-intensive. We require large numbers of pilots,
flight attendants, maintenance technicians and other personnel and we anticipate
that our expansion plans will require us to recruit, train and retain a
significant number of new employees over the next several years.
The airline industry has from time to time experienced a shortage of
qualified personnel, specifically pilots and maintenance technicians. In
addition, as is common with most of our competitors, we have faced considerable
turnover of our employees. Although our employee turnover has decreased
significantly since September 11, 2001, our pilots, flight attendants and
maintenance technicians often leave to work for larger airlines, which generally
offer higher salaries and better benefit programs than regional airlines are
financially able to offer. Should the turnover of employees, particularly pilots
and maintenance technicians, sharply increase, the result will be significantly
higher training costs than otherwise would be necessary. We cannot assure you
that we will be able to recruit, train and retain the qualified employees that
we need to carry out our expansion plans or replace departing employees. If we
are unable to hire and retain qualified employees at a reasonable cost, we may
be unable to complete our expansion plans, which could have a material adverse
affect our financial condition, results of operations and the price of our
common stock.
Risks Related to Atlantic Coast's Business
A change in control of Atlantic Coast could result in the termination of
Atlantic Coast's code share agreements.
Substantially all of Atlantic Coast's revenue is derived from contracts
with its code share partners. The majority of the Atlantic Coast's flights are
operated under the United Express or Delta Connection flight designator code.
The agreements between Atlantic Coast and both United Airlines and Delta Air
Lines provide that United Airlines and Delta Air Lines have the ability to
terminate their existing contracts upon a change in control of Atlantic Coast.
Mesa has entered into the United MOU in which Mesa will provide or would cause
Atlantic Coast
IV-12
to provide for the operation of regional jet and turboprop aircraft in code
share and pro-rate service under the United Express mark in the event that Mesa
is successful in its acquisition of Atlantic Coast. While Mesa expects that new
agreements with Delta Air Lines and United Airlines will be successfully
negotiated, it is possible that either United Airlines, Delta Air Lines or both
may choose to end their relationship with Atlantic Coast upon the change of
control, resulting in a decline in value to the stock of the combined company.
See "Mesa Strategic Plans" beginning on page [ ], for further information.
Atlantic Coast relies on third-party financing to pay for jets that it has
contractually committed to purchase, and these financing agreements may be
terminated upon a change in control.
Atlantic Coast has entered into financing agreements in order to pay for
aircrafts it has committed to purchase. At least one of these agreements
provides that upon a change of control of Atlantic Coast, the financial
institution has the right to terminate the agreement and declare all amounts due
under the agreement plus interest thereon immediately due and payable. If
Atlantic Coast's financing agreements were terminated due to a change in
control, the combined company may need to obtain alternative sources of
financing. There is no guarantee that the combined company would be able to
obtain such financing on commercially reasonable terms. The inability to obtain
financing may have an adverse impact on the business, financial condition and
results of operations of the combined company.
CONDITIONS
The Exchange Offer is subject to a number of conditions, which, if not
satisfied or, where permissible, waived before or as of the scheduled expiration
of the Exchange Offer, may lead Mesa to choose to extend the expiration of the
offer or terminate the Exchange Offer. The Exchange Offer is conditioned upon,
among other things:
o there being, prior to the expiration of the Exchange Offer, validly
tendered and not properly withdrawn, a number of shares of Atlantic
Coast's common stock such that, after giving effect to the Exchange Offer,
Mesa owns at least a majority of the total number of outstanding shares of
Atlantic Coast common stock on a fully diluted basis (as though all
options or other securities convertible into or exercisable or exchanged
for Atlantic Coast had been so converted, exercised or exchanged);
o the registration statement filed by Mesa with respect to the Exchange
Offer and the Proposed Merger having been declared effective by the SEC;
o the Mesa common stock issuable in the Exchange Offer and the Proposed
Merger must have been approved for listing on the NASDAQ, subject to
official notice of issuance;
o the expiration or termination of any waiting periods under the
Hart-Scott-Rodino Improvements Act of 1976 and any other applicable laws
and regulations;
o the approval of an amendment to Mesa's articles of incorporation to
increase its authorized share capital and the approval of the issuance of
shares of Mesa common stock pursuant to the Exchange Offer by the
stockholders of Mesa;
o Mesa being satisfied, in its sole discretion, that the poison pill, has
been redeemed or invalidated or is otherwise inapplicable to the Exchange
Offer and the Proposed Merger;
o no condition arising that would be expected to have a material adverse
effect on Atlantic Coast; wherein it would be, in our good faith and
judgment, inadvisable for us to proceed with the Exchange Offer;
o Mesa being satisfied, in its sole discretion, that, after consummation of
the Exchange Offer, the provisions of Section 203 of the DGCL would not
prohibit for any period of time, or impose any voting requirement in
excess of majority stockholder approval with respect to, the Proposed
Merger or any other business combination with Mesa or any affiliate of
Mesa;
o Mesa having entered into an agreement with United Airlines regarding
Atlantic Coast's code share agreement substantially consistent with the
terms of the United MOU;
o Delta Air Lines not having terminated, or notified Atlantic Coast or Mesa
that it intends to terminate, its code share agreement with Atlantic Coast
(other than for performance) and/or having entered into a new code share
agreement with Atlantic Coast on commercially reasonable terms acceptable
to the parties; and
IV-13
o there not being any legal impediments to the consummation of the Exchange
Offer or the Proposed Merger.
REGULATORY APPROVALS
The Exchange Offer and Proposed Merger are subject to the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any
other applicable similar laws or regulations, as well as all applicable federal
securities laws. Mesa intends to take all actions necessary to comply with the
regulatory requirements to which the Exchange Offer and Proposed Merger are
subject.
Other than clearance under the antitrust laws applicable to the Exchange
Offer and Proposed Merger, and the SEC declaring the effectiveness of the
registration statement of which this offer is a part, Mesa is not aware of any
license or regulatory permit material to the business of Atlantic Coast and its
subsidiaries, on a consolidated basis, that may be materially adversely affected
by the acquisition of Atlantic Coast's common stock, or any filing or approval
that would be required for the acquisition of Atlantic Coast's common stock.
Mesa is unaware of any requirement for the filing of information with, or the
obtaining of the approval of, governmental authorities in any non-U.S.
jurisdiction that is applicable to the Exchange Offer or the Proposed Merger.
APPRAISAL RIGHTS
Atlantic Coast stockholders would not have any appraisal rights in
connection with the Exchange Offer. Atlantic Coast stockholders may have
appraisal rights in the Proposed Merger. If as a result of the Exchange Offer,
Mesa owns at least 90% of the outstanding shares of Atlantic Common Stock,
holders of Atlantic Coast common stock who (a) do not tender their shares into
the Exchange Offer and hold common stock at the time Mesa effects the Proposed
Merger as a "short-form" merger, (b) do not wish to accept the consideration
provided for in that "short-form" merger, and (c) comply with the procedures
provided for in Section 262 of the DGCL, will be entitled to have their shares
of Atlantic Coast common stock appraised by the Delaware Court of Chancery and
to receive a payment in cash of the "fair value" of those shares as determined
by the court.
If, as a result of the Exchange Offer, Mesa owns less than 90% of the
outstanding shares of Atlantic Common Stock and effects a "long-form" merger
under Delaware law, holders of Atlantic Coast common stock will be entitled to
appraisal rights in the merger if (i) Atlantic Coast common stock is no longer
listed on the NASDAQ or another national securities exchange and (ii) Atlantic
Coast common stock is held by less than 2000 holders of record.
ACCOUNTING TREATMENT
Mesa's acquisition of Atlantic Coast's common stock would be accounted for
under the purchase method of accounting in accordance with United States
accounting principles generally accepted in the U.S., which means that Atlantic
Coast's results of operations would be included with Mesa's from the closing
date and its consolidated assets and liabilities will be recorded at their fair
value at the same date.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Cadwalader, Wickersham & Taft LLP, counsel to Mesa, the
exchange of Atlantic Coast shares for Mesa shares pursuant to the Exchange Offer
and the Proposed Merger will be treated as a reorganization within the meaning
of Section 368(a) of the Code, provided that certain factual assumptions are
satisfied. Among such factual assumptions are the following: (i) the Exchange
Offer and the Proposed Merger are consummated in the manner provided herein,
(ii) none of Mesa, Atlantic Coast or any related party acquires or redeems, in
connection with the Exchange Offer or the Proposed Merger, shares of Mesa common
stock issued to Atlantic Coast stockholders pursuant to the Exchange Offer or
the Proposed Merger and (iii) Mesa continues a significant line of Atlantic
Coast's business or uses a significant portion of Atlantic Coast's historic
business assets in a business.
Assuming that the Exchange Offer and the Proposed Merger qualify as a
reorganization within the meaning of Section 368(a) of the Code, the Exchange
Offer and Proposed Merger would likely be tax-free to Atlantic Coast
stockholders.
IV-14
COMPARISON OF RIGHTS OF HOLDERS OF ATLANTIC COAST COMMON STOCK AND
HOLDERS OF MESA COMMON STOCK
Upon completion of the Exchange Offer and the Proposed Merger, Atlantic
Coast stockholders will become stockholders of Mesa, rather than stockholders of
Atlantic Coast. Since Mesa is a Nevada corporation, the rights of stockholders
of Mesa are governed by the applicable laws of the State of Nevada, including
the Nevada General Corporation Law, and by Mesa's charter and by-laws. Since
Atlantic Coast is a Delaware corporation, the rights of stockholders of Atlantic
Coast are governed by the applicable laws of the State of Delaware, including
the Delaware General Corporation Law, and by Atlantic Coast's charter and
by-laws. The following summary highlights material differences between the
current rights of holders of Mesa's common stock and holders of Atlantic Coast's
common stock under the Delaware General Corporation Law and the Nevada General
Corporation Law and their companies respective charters and by-laws. This
summary is not a complete discussion of the charters and by-laws of Mesa and
Atlantic Coast or the stockholders' rights plan of Atlantic Coast and is
qualified in its entirety by reference to the specific provisions of these
documents, which we incorporate by reference into this Consent Statement. Copies
of each company's certificate of incorporation and by-laws and Atlantic Coast's
stockholders' rights plan have been filed with the SEC. See "Where You Can Find
More Information" on page [ ].
Atlantic Coast Mesa
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Authorized Capital Stock
--------------------------------------------------------------------------------
Atlantic Coast's certificate of Under Mesa's articles of
incorporation authorizes Atlantic incorporation, Mesa's authorized
Coast to issue 130,000,000 shares of capital stock consists of 75,000,000
voting common stock, 6,000,000 shares of Mesa common stock, no par
shares of Class A non-voting common value, and 2,000,000 shares of
stock, and 5,000,000 shares of preferred stock, without par value.
preferred stock.
Atlantic Coast's board of directors Mesa's board of directors has the
has the authority, without any authority, without further action by
further vote or action by the the stockholders, to issue up to
stockholders, to provide for the 2,000,000 shares of preferred stock,
issuance of preferred stock in one no par value per share, in one or more
or more series and to fix the classes or series and to fix the
rights, preferences, privileges, powers, preferences, privileges,
qualifications, limitations and rights and qualifications, limitations
restrictions thereof, including, or restrictions thereof and the number
without limitation, dividend rights, of shares constituting any series or
dividend rates, conversion rights, the designation of the series.
voting rights, terms of redemption
or repurchase, redemption or
repurchase prices, limitations or
restrictions thereon, liquidation
preferences and the number of shares
constituting any series or the
designation of such series.
As of November 1, 2003, there were As of November 11, 2003, there were
45,333,310 shares of common stock, 31,719,074 shares of common stock and
no shares of Class A non-voting no shares of preferred stock issued.
common stock and no shares of
preferred stock outstanding.
IV-15
Atlantic Coast Mesa
---------------------------------------- --------------------------------------
Voting Rights
--------------------------------------------------------------------------------
Each share of Atlantic Coast's Each outstanding share of common stock
common stock entitles its holder to entitles its holder to one vote on
one vote on all matters on which each matter submitted to a vote at a
stockholders are entitled to vote. meeting of stockholders.
Except as required by law the Class
A non-voting common stock does not
have voting rights except in the
case of a merger, consolidation,
sale of substantially all assets, or
recapitalization or reorganization
where the consideration received on
a per share basis would differ from
that received by the common stock
and except for amendments or waivers
of Article IV (Capital Structure) of
the Atlantic Coast certificate of
incorporation.
Notice of Stockholder Proposals
--------------------------------------------------------------------------------
Notice of stockholder proposals at The Mesa articles of incorporation and
the annual meeting must be either by-laws do not specify advance notice
(1) specified in the notice of requirements for the submission of
meeting given by or at the direction stockholder proposals by Mesa
of the board of directors; (2) stockholders. However, Mesa
otherwise properly brought before stockholders must comply with all
the annual meeting by or at the applicable requirements of the
direction of the president, the Exchange Act, and all rules and
chairman of the board or by vote of regulations promulgated thereunder.
a majority of the full board of
directors; or, (3) otherwise brought
before the annual meeting by any
stockholder who is a stockholder of
record on the date of the giving of
the notice pursuant to Section 2.11
of the by-laws who is entitled to
vote at the meeting and who complied
with notice procedures set forth in
the by-laws.
Number of Directors
--------------------------------------------------------------------------------
Atlantic Coast's by-laws provide The Mesa by-laws provide that the
that the number of Atlantic Coast number of directors shall be fixed by
directors shall be fixed by a resolution of the board but shall be
resolution of the entire board of no less than seven. The Mesa's board
directors. Atlantic Coast's board of is currently composed of nine members.
directors is currently composed of
nine members.
Classified Board
--------------------------------------------------------------------------------
The Atlantic Coast directors are not Mesa's by-laws provide that the board
divided into classes, and are may, by a board resolution, classify
elected annually. the board into three classes of
directors if the total number of
directors reaches nine or more. To
date, Mesa has not determined to
classify its board.
Removal of Directors
--------------------------------------------------------------------------------
The Atlantic Coast by-laws provide The Mesa by-laws provide that any
that a director may be removed only director or the entire board of
for cause by the holders of a directors may be removed, with or
majority
IV-16
Atlantic Coast Mesa
---------------------------------------- --------------------------------------
of shares entitled to vote at any without cause, by a vote of not less
special meeting of stockholders than two-thirds of the shares entitled
called for that purpose. to vote at a stockholder meeting
expressly called for removal of
directors.
Mesa's counsel has advised us that
this by-law is invalid, and that
under Delaware law the directors of
Atlantic Coast may be removed with
or without cause.
Filling of Board Vacancies
--------------------------------------------------------------------------------
The Atlantic Coast by-laws provide The Mesa articles of incorporation
that any vacancy occurring on the provide for the Mesa by-laws to govern
board of directors and any newly the filling of vacancies. The Mesa
created directorship may be filled by-laws provide that any vacancy shall
by the affirmative vote of the be filled by a majority vote of the
majority of the remaining members of remaining directors, though not less
the board or by a plurality of the than a quorum, or by a sole remaining
votes cast at meeting of director.
stockholders.
Nomination of Directors
--------------------------------------------------------------------------------
Nominations to the board of Neither the Mesa articles of
directors may occur at the annual incorporation nor the Mesa by-laws
stockholders meeting provided that contain any provisions regarding
the nomination was either (1) advance notice of nominations of
specified in the notice of meeting persons for election to the Mesa
given by or at the direction of the board.
board of directors; (2) otherwise
properly brought before the annual
meeting by or at the direction of
the President, the Chairman of the
Board or by vote of a majority of
the full board of directors; or, (3)
otherwise brought before the annual
meeting by any stockholder of the
Corporation who is a stockholder of
record on the date of the giving of
the notice pursuant to Section 2.11
of the by-laws who is entitled to
vote at the meeting and who complied
with notice procedures set forth in
the by-laws.
Nominations of person for election
to the board of directors may be
made at a special meeting of
stockholders at which directors are
to be elected pursuant to the
Corporation's notice of meeting (1)
by or at the direction of the board
of directors or (2) by any
stockholder of the Corporation who
is a stockholder of record at the
time of giving the notice required
by the by-laws as delivered to the
Secretary at the principal executive
offices of Atlantic Coast not
earlier than the 120th day prior to
such special meeting and not later
than the close of business on the
later of the 90th day prior to such
special meeting or the 10th day
following the day on which public
announcement is first made of the
date of the special meeting and of
the nominees proposed by the board
of directors to be elected at such
meeting.
IV-17
Atlantic Coast Mesa
---------------------------------------- --------------------------------------
Other Matters
--------------------------------------------------------------------------------
Calling Special Meetings of Stockholders
--------------------------------------------------------------------------------
Special meeting of stockholders for The Mesa by-laws provide that special
any purpose or purposes may be meetings of stockholders may be called
called at any time by the Chairman by the Chairman of the Board, and the
of the board of directors, by a Chairman of the Board or the Secretary
majority of the full board of shall, on written request of two
directors, or by a committee of the members of the board of directors or
board of directors which has been of stockholders owning not less than
duly designated by a majority of the 50% of the outstanding voting shares
full board of directors and whose of the corporation, call a special
powers and authority, as expressly meeting.
provided in a resolution by a
majority of the full board of
directors, include the power to call
such meetings, but such special
meeting may not be called by any
other person or persons.
Stockholder Action By Written Consent
--------------------------------------------------------------------------------
Any action required or permitted to Mesa's articles of incorporation and
be taken at any annual or special by-laws are silent as to stockholder
meeting of the stockholders may be action by written consent. Therefore,
taken without a meeting, without according to Section 78.320 of the
prior notice and without a vote, if Nevada General Corporation Law, any
a consent in writing, setting forth action required or permitted to be
the action so taken, shall be signed taken at a meeting of stockholders may
by the holders of outstanding stock be taken without a meeting if, before
having not less than the minimum or after the action, a written consent
number of votes that would be thereto is signed by stockholders
necessary to authorize or take such holding at least a majority of the
action at a meeting at which all voting power, except that if a
shares entitled to vote thereon were different proportion of voting power
present and voted. Prompt notice of is required for such an action at a
the taking of the corporate action meeting, then that proportion of
without a meeting by less than written consents is required.
unanimous written consent shall be
given to those stockholders who have
not consented in writing.
Business Combinations
--------------------------------------------------------------------------------
Under the DGCL, a majority of the Under the Nevada General Corporation
outstanding shares is generally Law, a majority of the outstanding
needed to adopt a plan of merger or shares is generally needed to adopt a
consolidation. Section 203 of the plan of merger or consolidation.
DGCL prohibits a Delaware Pursuant to Nevada law, Mesa has
corporation which has a class of elected in its articles of
stock which is listed on a national incorporation to be exempted from
stock exchange or which has 2,000 or Sections 78.411 to 78.444 of the
more stockholders of record from Nevada General Corporation Law,
engaging in a business combination inclusive, which restrict the ability
with an interested stockholder of a resident domestic corporation to
(generally, the beneficial owner of engage in any combination with an
15% or more of the corporation's interested stockholder for three years
outstanding voting stock) for three after the interested stockholder's
years following the time the date of acquiring the shares that
stockholder became an interested cause such stockholder to become an
stockholder, unless, prior to that interested stockholder unless the
time, the corporation's board of combination or the purchase of shares
directors approved either the by the interested stockholder on the
business combination or the interested stockholder's date of
transaction that resulted in the acquiring the shares that cause such
stockholder becoming an interested stockholder to become an interested
stockholder, or if at least stockholder is approved by the board
two-thirds of the outstanding shares of directors of the resident domestic
not owned by that interested corporation before that date. If the
stockholder approve the business combination was not previously
combination, or if, upon becoming an
interested stockholder, that
stockholder owned at least 85% of
the
IV-18
Atlantic Coast Mesa
---------------------------------------- --------------------------------------
outstanding shares (excluding those approved, the interested stockholder
held by officers, who are also may effect a combination after the
directors and some employee stock three-year period only if such
plans). stockholder receives approval from a
majority of the disinterested shares
or the offer meets various fair price
criteria. For purposes of the
foregoing provision, "resident
domestic corporation" means a Nevada
corporation that has 200 or more
stockholders and "interested
stockholder" means any person, other
than the resident domestic corporation
or its subsidiaries, who is (1) the
beneficial owner, directly or
indirectly, of ten percent or more of
the voting power of the outstanding
voting shares of the resident domestic
corporation; or, (2) an affiliate or
associate of the resident domestic
corporation and at any time within
three years immediately before the
date in question was the beneficial
owner, directly or indirectly, of ten
percent or more of the voting power of
the outstanding shares of the
corporation.
Stockholders' Rights Plan
--------------------------------------------------------------------------------
Atlantic Coast has entered into a Mesa has not adopted a stockholders'
Rights Agreement, dated January 27, rights plan.
1999, between Atlantic Coast and
Continental Stock Transfer & Trust
Company, as rights agent, pursuant
to which Atlantic Coast has issued
rights exercisable upon the
occurrence of certain events, to
purchase its Series B Junior
Participating Preferred Stock.
Amendment of Organizational Documents
--------------------------------------------------------------------------------
Certificate of Incorporation
--------------------------------------------------------------------------------
The corporation reserves the right Under the Nevada General Corporation
to amend, alter, change, or repeal Law, unless the articles of
any provision contained in the incorporation or by-laws provide
certificate of incorporation in the otherwise, amendments to the articles
manner prescribed by the laws of the of incorporation generally require the
State of Delaware. approval of the holders of a majority
of the outstanding stock entitled to
vote thereon, and if such amendments
would increase or decrease the number
of authorized shares of any class or
series, the holders of the outstanding
shares of a class shall be entitled to
vote as a class to approve the
amendment. Mesa's articles of
incorporation or by-laws do not
contain any provisions modifying the
statute.
IV-19
Atlantic Coast Mesa
---------------------------------------- --------------------------------------
By-laws
--------------------------------------------------------------------------------
The Atlantic Coast by-laws may be The Mesa by-laws may be altered,
altered or repealed, and new by-laws amended or new by-laws may be adopted
made, by the board of directors, but by a vote of the majority of the board
the stockholders may make additional of directors.
by-laws and may alter and repeal any
by-laws whether adopted by them or
otherwise.
--------------------------------------------------------------------------------
IV-20
FINANCIAL INFORMATION
SELECTED HISTORICAL FINANCIAL DATA OF MESA AND ATLANTIC COAST
We are providing the following selected financial information to assist
you in analyzing the financial aspects of the Exchange Offer and the Proposed
Merger. We derived the financial information presented for Mesa for the
nine-month periods ended June 30, 2003, and 2002 from Mesa's Quarterly Reports
on Form 10-Q for the quarterly periods ended June 30, 2003, and 2002,
respectively. We derived the financial information presented for Mesa for each
of the five years for the period ended September 30, 2002 from Mesa's Annual
Report on Form 10-K for each of those years.
Mesa has a fiscal year end of September 30 and Atlantic Coast has a
calendar year end of December 31. Because Mesa and Atlantic Coast use different
accounting periods, their financial statements may not be comparable. This may
be further impacted by the seasonal fluctuations experienced by the airline
industry. We derived the financial information presented for Atlantic Coast for
the nine-month periods ended, September 30, 2003, and 2002 from Atlantic Coast's
Quarterly Reports on Form 10-Q for the quarterly periods ended September 30,
2003, and 2002, respectively. We derived the financial information presented for
Atlantic Coast for each of the five years for the period ended December 31, 2002
from Atlantic Coast's Annual Report on Form 10-K for each of those years.
You should read the financial information with respect to Mesa and
Atlantic Coast in conjunction with the historical consolidated financial
statements and related notes contained in the annual, quarterly and other
reports filed by Mesa and Atlantic Coast with the SEC, which we have
incorporated by reference into this Consent Statement. See "Where You Can Find
More Information," on page [ ].
IV-21
Mesa Selected Historical Consolidated Financial Data
As of and for the
Nine Months
Ended June 30, As of and for the Year Ended September 30,
----------------- -----------------------------------------------------
2003(6) 2002 2002(1) 2001(2) 2000(3) 1999(4) 1998(5)
--------- ------ --------- -------- --------- --------- ---------
(dollars in millions, except per share amounts)
--------------------------------------------------------------------------
Consolidated Income Statement Data:
Total operating revenues .............................. $424 $365 $497 $523 $472 $405 $495
Income (loss) from
continuing operations
before minority interest,
interest expense and
income taxes ...................................... 32 23 (8) (58) 43 6 33
Net income (loss) ..................................... 17 12 (9) (48) 59 (13) (50)
Income (loss) per common share - basic ................ $0.55 $0.35 $(0.28) $(1.50) $1.78 $(0.40) $(1.50)
Income (loss) per common share - diluted .............. $0.54 $0.34 $(0.28) $(1.50) $1.77 $(0.40) $(1.50)
Consolidated Balance Sheet Data:
Total assets .......................................... $451 $399 $352 $424 $387 $404 $484
Short-term debt (including current maturities) ........ 11 53 19 53 45 121 36
Long-term debt ........................................ 200 112 110 118 136 114 245
Shareholders' equity .................................. $105 $115 $89 $103 $145 $96 $109
-----------------------
(1) Net loss in fiscal 2002 includes the effect of impairment and
restructuring charges of $26.7 million (pretax).
(2) Net loss in fiscal 2001 includes the effect of impairment and
restructuring charges of $80.9 million (pretax).
(3) Net earnings in fiscal 2000 include the cumulative effect of the
accounting change from the accrual method to the direct expense
method for maintenance costs of $18.1 million (pretax) and the
benefit of reversing a valuation allowance for deferred tax assets
of $21.9 million.
(4) Includes Mesa as of and for the twelve months ended September 30,
1999 and CCAir as of and for the twelve months ended September 30,
1999. Net loss in fiscal 1999 includes the effect of impairment and
restructuring charges of $28.9 million (pretax) and the reversal of
a previous charge for the cancellation of the UAL code share
agreement of $14.0 million (pretax).
(5) Includes Mesa as of and for the twelve months ended September 30,
1998 and CCAir as of and for the twelve months ended December 31,
1998.
(6) Net income in the nine months ended June 30, 2003 includes the
effect of impairment and restructuring charges of $1.1 million
(pretax) and the reversal of CCAir impairment and restructuring
charges of $12.0 million (pretax) due to the dissolution of CCAir in
the second quarter of fiscal 2003, and the Company's determination,
after consultation with counsel, that the Company is not liable for
such obligations of CCAir.
Atlantic Coast Selected Historical Consolidated Financial Data
As of and for the
Nine Months Ended
September 30, As of and for the Year Ended December 31,
----------------- ---------------------------------------------------------
2003 2002 2002(1),(3) 2001(1),(3) 2000(1) 1999(4) 1998(2)
-------- -------- ------------ ----------- ------- ------- -------
(dollars in millions, except per share amounts)
-----------------------------------------------------------------------------
Consolidated Income Statement Data:
Total operating revenues .................. $652 $556 $761 $583 $453 $347 $290
Income from continuing
operations before interest
expense and income taxes ............... 122 70 69 62 29 53 56
Net income ................................ 69 40 39 34 15 28 30
Income per common share - basic (5)... $1.53 $0.89 $0.87 $0.79 $0.38 $0.75 $0.84
Income per common share - diluted (5) ..... $1.52 $0.87 $0.85 $0.76 $0.36 $0.66 $0.71
Consolidated Balance Sheet Data:
Total assets .............................. $726 $539 $575 $452 $383 $294 $228
Short-term debt (including current
maturities) ............................... 9 6 6 6 6 6 5
Long-term debt ............................ 108 56 54 61 67 93 65
Shareholders' equity ...................... $345 $270 $275 $221 $168 $126 $110
------------
(1) In 2002, Atlantic Coast recorded an operating charge of $24,539,000
($14,822,000 net of income tax benefits) for the non-discounted
value of future lease and other costs associated with the early
retirement of 18 J-41 turboprop aircraft. In the second quarter of
2002, Atlantic Coast revised the retirement schedule for its leased
J-41s. Included in the operating charge for 2002 was a credit of
$4,763,000 ($2,877,000 net of income tax benefits) to reverse a
portion of the operating charge
IV-22
booked in 2001. In addition, in 2002 Atlantic Coast reversed the
remaining portion of the original 2000 operating charge of $208,000.
In 2001, Atlantic Coast recorded an operating charge of $23,537,000
($14,005,000) net of income tax benefits) for the non-discounted
value of future lease and other costs associated with the early
retirement of nine J-41 turboprop aircraft. In 2000, Atlantic Coast
recorded an operating charge of $28,996,000 ($17,398,000 net income
tax benefits) for the present value of 28 J-32 turboprop aircraft.
Upon completion of the J-32 retirement plan in 2001, Atlantic Coast
reversed $500,000 of the original 2000 operating charge in 2001.
(2) In connection with the induced conversion of a portion of the 7%
Convertible Subordinated Notes, Atlantic Coast recorded a non-cash,
non-operating charge of approximately $1.4 million in 1998.
(3) In 2002 and 2001, Atlantic Coast recognized $0.9 million and $9.7
million respectively as non-operating income for funds received
under the Air Transportation Safety and System Stabilization Act,
signed into law by President Bush on September 22, 2001.
(4) In 1999, Atlantic Coast recorded a charge of $888,000 for the
cumulative effect, net of income taxes, of a change in accounting
for pre-operating costs in connection with the implementation of
Statement of Position 98-5.
(5) All per share calculations have been restated to reflect the 2-for-1
Common Stock splits effected as dividends distributed on May 15,
1998 and February 23, 2001.
Comparative Per Share Data
In the following table, we present historical per share data for Mesa and
Atlantic Coast, combined pro forma per share data for Mesa as of and for the
nine months ended June 30, 2003 and as of the year ended September 30, 2002 and
equivalent pro forma per share data for Atlantic Coast, as of and for the nine
months ended September 30, 2003 and as of and for the year ended December 31,
2002. We present the pro forma per share data for comparative purposes only. The
data does not purport to be indicative of (1) the results of operations or
financial position which would have been achieved if the Exchange Offer and the
Proposed Merger had been completed at the beginning of the period or as of the
date indicated, or (2) the results of operations or financial position which may
be achieved in the future. The pro forma per share data does not reflect any
payment that may be required to be made in connection with the exercise of
appraisal rights by Atlantic Coast stockholders under Delaware law in connection
with the Proposed Merger.
Atlantic Coast Combined Mesa
Mesa Historical Historical per Pro Forma Pro Forma per
per Share Data Share Data Adjustments(1) Share Data(1)
--------------- -------------- -------------- -------------
Nine Months Ended
---------------------------
September 30, December 31,
2002 2002
------------- ------------
Earnings from continuing operations
per share of common stock:
Basic............................ $0.55 $1.53 $(0.89) $1.19
Diluted.......................... $0.54 $1.52 $(0.87) $1.19
Book value per share of common stock:
Basic............................ $3.31 $7.63 $(2.41) $8.53
Diluted.......................... $3.30 $7.61 $(2.41) $8.50
Year Ended
---------------------------
September 30, December 31,
2002 2002
------------- ------------
Earnings from continuing operations
per share of common stock:
Basic............................ $(0.28) $0.87 $(0.18) $0.41
Diluted.......................... $(0.28) $0.85 $(0.17) $0.40
Book value per share of common stock:
Basic............................ $2.72 $6.11 $(0.63) $8.20
Diluted.......................... $2.72 $5.98 $(0.60) $8.10
------------
(1) Please read "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS," below.
IV-23
Comparative Per Share Market Data
In the following table we present:
o the prices per share of Mesa's common stock and Atlantic Coast's common
stock as reported on the NASDAQ, as of the close of trading on October 3,
2003, the last trading date prior to the public announcement of Mesa's
proposal to acquire Atlantic Coast, and
o the equivalent price per share of Atlantic Coast's common stock, based on
the Exchange Ratio of 0.90 (assuming there is no Airbus Penalty Amount).
Atlantic Atlantic
Mesa Coast Coast
Historical Historical Equivalent(1)
---------- ---------- -------------
As of closing on October 3, 2003
Price per share of common stock...... $12.55 $9.02 $11.30
------------
(1) We calculated the Atlantic Coast equivalent data by multiplying the
applicable Mesa closing price by the Exchange Ratio in the Exchange Offer
and the Proposed Merger of 0.90 of a share of Mesa common stock for each
share of Atlantic Coast's common stock. The Exchange Ratio of 0.90 assumes
there is no Airbus Penalty Amount.
On [ ], the last trading date prior to the printing of this consent
solicitation for which this information was practicably available, the closing
prices per share of Mesa common stock and Atlantic Coast common stock, as
reported on the NASDAQ, were $[ ] and $[ ], respectively.
The market prices of shares of Mesa common stock and Atlantic Coast common
stock are subject to fluctuation. The actual value of the shares of Mesa common
stock that Atlantic Coast stockholders will receive in the Exchange Offer will
likely differ from the value illustrated.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Mesa
Mesa's common stock is listed on the NASDAQ under the symbol "MESA." In
the following table, we present the high and low sales prices per share of Mesa
common stock, as reported on the NASDAQ, for the quarterly fiscal periods
presented below. Mesa's fiscal year end is September 30. Mesa has not paid
dividends since its formation.
Mesa Common Stock
--------------------------
High Low
-------- --------
Fiscal 2001:
First Quarter......................... $ 7.00 $ 4.72
Second Quarter........................ 11.56 7.19
Third Quarter......................... 13.30 8.50
Fourth Quarter........................ 15.49 3.26
Fiscal 2002:
First Quarter......................... 7.89 2.80
Second Quarter........................ 11.43 7.51
Third Quarter......................... 11.74 7.05
Fourth Quarter........................ 10.49 3.62
Fiscal 2003:
First Quarter......................... 7.09 2.71
Second Quarter........................ 4.97 3.00
Third Quarter......................... 7.96 4.50
Four Quarter.......................... 13.20 8.42
Fiscal 2004:
First Quarter (through
November 25, 2003..................... $12.55 $10.17
IV-24
The closing sale price for the shares of Mesa's common stock on October 3,
2003, the last full trading date prior to Mesa's announcement of our intention
to acquire Atlantic Coast, was $12.55. The closing sale price on [ ], the last
trading date prior to the printing of this consent solicitation for which this
information was practicably available, was $[ ]. You are urged to obtain current
market quotations.
As of November 11, 2003, there were 31,719,074 shares of Mesa common stock
outstanding and 1,218 holders of record of Mesa's common stock.
Atlantic Coast
Atlantic Coast's common stock is listed on the NASDAQ under the symbol
"ACAI." The following table sets forth the high and low sales prices per share
of Atlantic Coast's common stock, as reported on the NASDAQ, for the quarterly
calendar periods presented below. Atlantic Coast operates on a calendar year
reporting basis. Atlantic Coast has not paid dividends since its formation.
Mesa Common Stock
-----------------------
High Low
------ -------
2001:
First Quarter........................ $23.50 $18.25
Second Quarter....................... 29.99 20.75
Third Quarter........................ 29.16 10.03
Fourth Quarter....................... 24.94 13.61
2002:
First Quarter........................ 29.21 23.05
Second Quarter....................... 24.31 19.57
Third Quarter........................ 19.61 8.69
Fourth Quarter....................... 17.03 8.30
2003:
First Quarter........................ 14.54 5.50
Second Quarter....................... 13.31 6.38
Third Quarter........................ 11.16 7.02
Fourth Quarter (through November 25, $12.68 $ 8.54
2003)..............................
The closing sale price for the shares of Atlantic Coast's common stock on
October 3, 2003, the last full trading date prior to the Mesa's announcement of
our intention to acquire Atlantic Coast, was $9.02. The closing sale price on [
], the last trading date prior to the printing of this consent solicitation for
which this information was practicably available, was $[ ]. You are urged to
obtain current market quotations.
As of November 1, 2003, there were 45,333,310 shares of Atlantic Coast
common stock outstanding, based on publicly available information set forth in
Atlantic Coast's Quarterly Report on Form 10-Q for the quarter ended September
30, 2003. As of March 3, 2003, there were 176 holders of record of Atlantic
Coast's common stock, based on publicly available information set forth in
Atlantic Coast's Annual Report on Form 10-K for the year ending December 31,
2002.
IV-25
MESA AND ATLANTIC COAST UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
and explanatory notes have been prepared to give effect to the Exchange Offer
and Proposed Merger. The transaction will be accounted for as a purchase
business combination.
Under the terms of the Exchange Offer, Mesa will exchange shares of newly
issued Mesa common stock for each issued and outstanding share of Atlantic Coast
common stock, upon the terms and conditions set forth in the Offer to Purchase
and the related letter of transmittal. Each share of Atlantic Coast common stock
may be exchanged for a number of shares of Mesa common stock equal to the
Exchange Ratio.
Mesa will determine the exact Exchange Ratio by subtracting from 0.9 the
quotient obtained from (i) dividing the Airbus Penalty Amount, if any, by the
number of shares of Atlantic Coast common stock outstanding, as reported by
Atlantic Coast in its last filing with the SEC prior to the date which is ten
business days before the expiration date of the Exchange Offer; and (ii) then
dividing the quotient obtained in (i) by the Mesa Average Market Price.
In accordance with Article 11 of Regulation S-X under the Securities Act
of 1933, an unaudited pro forma condensed combined balance sheet as of June 30,
2003 and unaudited pro forma condensed combined statements of operations for the
nine months ended June 30, 2003 and the year ended September 30, 2002 have been
prepared to reflect the Exchange Offer and Proposed Merger. The following
unaudited pro forma condensed combined financial statements have been prepared
based upon historical financial statements of Mesa and Atlantic Coast. Mesa's
fiscal year end is September 30. Atlantic Coast operates on a calendar year
reporting basis. The unaudited pro forma condensed combined financial statements
should be read in conjunction with:
o Mesa's historical audited consolidated financial statements for the year
ended September 30, 2002 and its unaudited condensed consolidated
financial statements as of and for the nine months ended June 30, 2003;
and
o Atlantic Coast's historical audited consolidated financial statements for
the year ended December 31, 2002 and its unaudited condensed consolidated
financial statements as of and for the six months ended June 30, 2003.
The unaudited pro forma condensed combined balance sheet was prepared by
combining Mesa's historical unaudited consolidated balance sheet as of June 30,
2003 and Atlantic Coast's historical unaudited consolidated balance sheet as of
June 30, 2003, adjusted to reflect the Exchange Offer and Proposed Merger, and
assumes the merger occurred at June 30, 2003.
The unaudited pro forma condensed combined statements of operations were
prepared using the historical consolidated statements of operations for both
Mesa and Atlantic Coast assuming the Exchange Offer and Proposed Merger had
occurred on October 1, 2001. The unaudited pro forma condensed combined
statement of operations for the nine months ended June 30, 2003 was prepared by
combining the historical unaudited consolidated statement of operations of Mesa
for the nine-month period ended June 30, 2003 and the historical unaudited
consolidated statement of income of Atlantic Coast for the nine months ended
June 30, 2003. The unaudited pro forma condensed combined statement of
operations for the year ended September 30, 2002 was prepared by combining the
historical audited consolidated statement of operations of Mesa for the year
ended September 30, 2002 and the historical audited consolidated statement of
income of Atlantic Coast for the year ended December 31, 2002. The unaudited pro
forma condensed combined statements of operations give effect to the impact of
purchase accounting adjustments.
The unaudited pro forma condensed combined financial statements are
prepared for illustrative purposes only, and are not necessarily indicative of
the operating results or financial position that would have occurred if the
merger transaction described above had been consummated at the beginning of the
periods or the dates indicated, nor are they necessarily indicative of any
future operating results or financial position. The unaudited pro forma
IV-26
condensed combined financial statements do not include any adjustments related
to any restructuring charges, profit improvements, potential cost savings or
one-time charges which may result from the Exchange Offer and Proposed Merger or
the result of final valuations of tangible and intangible assets and
liabilities.
Because of the proximity of this consent solicitation to the date of the
announcement of our Exchange Offer and Proposed Merger, the process of valuing
Atlantic Coast's tangible and intangible assets and liabilities as well as
evaluating accounting policies for conformity is still in the very preliminary
stages. Material revisions to our current estimates could be necessary as the
valuation process and accounting policy review are finalized. Following closing
of the Exchange Offer and Proposed Merger, we will finalize the process of
determining the fair value at the date of acquisition of the tangible and
intangible assets and liabilities of Atlantic Coast. As a result of this
process, we anticipate that a portion of the amount classified as goodwill in
the unaudited pro forma condensed combined financial statements, which in
accordance with Statement of Financial Accounting Standards No. 142, will not be
amortized, but rather will be reclassified to the tangible and identified
intangible assets and liabilities acquired, based on their estimated fair values
at the date of acquisition.
The Exchange Offer and Proposed Merger have not been consummated as of the
preparation of these unaudited pro forma condensed combined financial
statements.
IV-27
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2003 (1)
(in thousands)
Atlantic Pro Forma Pro Forma
Assets Mesa Coast (8) Adjustments Combined
------------------------------ -------- --------- ----------- -----------
Current assets:
Cash and cash equivalents $109,570 $13,925 $(15,000)(3) $108,495
Marketable securities 3,989 211,720 215,709
Restricted cash 40,019 - 40,019
Receivables, primarily
traffic - net 23,818 26,082 49,900
Expendable parts and
supplies 21,753 17,210 38,963
Aircraft and parts held 14,203 - 14,203
for sale
Prepaid expenses and
other current assets 26,339 89,130 115,469
Deferred income taxes 14,069 12,001 26,070
-------- -------- ----------- ----------
Total current assets 253,760 370,068 (15,000) 608,828
Restricted Cash 14,816 14,816
Property, plant and
equipment, net 137,904 287,922 425,826
Goodwill and intangibles,
net - 1,730 186,512(2) 186,512
(1,730)(2)
Lease and equipment
deposits 26,594 44,210 70,804
Deferred income taxes 20,721 - 20,721
Other assets 11,746 7,129 (2,958)(2) 15,917
-------- -------- ----------- ----------
Total assets $450,725 $725,875 $166,824 $1,343,424
======== ======== =========== ==========
Liabilities and
Stockholders' Equity
Current liabilities:
Current portion of
long-term debt $10,647 $8,582 $19,229
Accounts payable 27,723 20,029 47,752
Air traffic liability 3,896 2,568 6,464
Accrued compensation 3,963 32,173 36,136
Other accrued expenses 36,808 55,355 92,163
-------- -------- ----------- ----------
Total current liabilities 83,037 118,707 201,744
Long-term debt 199,929 107,710 307,639
Deferred credits 59,768 102,022 161,790
Deferred tax liability - 40,206 40,206
Other noncurrent
liabilities 3,009 11,788 14,797
-------- -------- ----------- ----------
Total liabilities 345,743 380,433 726,176
-------- -------- ----------- ----------
Minority interest 437 437
-------- -------- ----------- ----------
Stockholders' equity:
Common stock 112,813 1,008 512,266 (2) 625,079
(1,008)(6)
Additional paid-in capital - 116,511 (116,511)(6) -
Accumulated other
comprehensive income 24 15 (15)(6) 24
Retained Earnings
(accumulated deficit) (8,292) 227,908 (227,908)(6) (8,292)
-------- -------- ----------- ----------
Total stockholders' equity 104,545 345,442 166,824 616,811
-------- -------- ----------- ----------
Total liabilities and
stockholders' equity $450,725 $725,875 $166,824 $1,343,424
======== ======== =========== ==========
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
IV-28
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Nine Months Ended June 30, 2003 (1)
(in thousands, except per share data)
Atlantic Pro Forma Pro Forma
Mesa Coast(5) Adjustments(7) Combined
---------- ---------- -------------- ---------
Total operating revenues $424,481 $652,375 $1,076,856
Operating expenses:
Flight Operations 157,203 257,524 414,727
Fuel 80,045 107,428 187,473
Maintenance 84,423 62,967 147,390
Aircraft and traffic
servicing 37,981 37,803 75,784
Promotion and sales 6,154 17,949 24,103
General and administrative 28,355 63,960 92,315
Depreciation and
amortization 8,026 20,899 - (2) 28,925
Impairment and
restructuring charges (10,957) (34,586) (45,543)
------- ------- ---------- -------
Total operating expenses 391,230 533,944 925,174
------- ------- ---------- -------
Operating income 33,251 118,431 151,682
Merger-related costs
Other (income) expense - net 5,240 1,377 6,617
------- ------- ---------- -------
Income before income taxes
and minority interest 28,011 117,054 145,065
Income taxes (benefit) 10,728 47,992 58,720
Minority interests (5) - (5)
------- ------- ---------- -------
Net income $17,278 $69,062 $86,340
======= ======= ========== =======
Net income per common share
- basic $0.55 $1.53 $1.19
======= ======= =======
Net income per common share
- diluted $0.54 $1.52 $1.19
======= ======= =======
Weighted average shares used
to calculate earnings per
common share amounts:
Basic 31,557 45,269 (4,527)(4) 72,299
======= ======= ========== =======
Diluted 31,720 45,365 (4,536)(4) 72,549
======= ======= ========== =======
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
IV-29
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
==============================================================================
For the Year Ended September 30, 2002 (1)
(in thousands, except per share data)
Atlantic Pro Forma Pro Forma
Mesa Coast(5) Adjustments(7) Combined
-------- --------- -------------- ----------
Total operating revenues $496,783 $760,524 $1,257,307
Operating expenses:
Flight Operations 184,301 315,409 499,710
Fuel 78,200 115,801 194,001
Maintenance 100,037 72,233 172,270
Aircraft and traffic
servicing 46,057 43,805 89,862
Promotion and sales 12,547 19,994 32,541
General and administrative 44,256 85,163 129,419
Depreciation and
amortization 10,932 21,155 - (2) 32,087
Impairment and
restructuring charges 26,675 24,331 51,006
-------- --------- -------------- ----------
Total operating expenses 503,005 697,891 1,200,896
-------- --------- -------------- ----------
Operating income (loss) (6,222) 62,633 56,411
Merger-related costs
Other (income) expense - net 7,302 (1,792) 5,510
-------- --------- -------------- ----------
Income (loss) before income
taxes and minority
interest (13,524) 64,425 50,901
Income taxes (benefit) (3,632) 25,139 21,507
Minority interests 583 583
-------- --------- -------------- ----------
Net income (loss) $(9,309) $39,286 $29,977
======== ========= ==========
Net income (loss) per
common share - basic $(0.28) $0.87 $0.41
======== ========= ==========
Net income per common share
- diluted $(0.28) $0.85 $0.40
======== ========= ==========
Weighted average shares used
to calculate earnings per
common share amounts:
Basic 32,803 45,047 (4,505)(4) 73,345
======== ========= ============== ==========
Diluted 32,803 46,019 (4,602)(4) 74,220
See Accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements, which are an integral part of these statements.
IV-30
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On October 6, 2003, Mesa proposed to acquire all of the outstanding shares
of common stock of Atlantic Coast that Mesa does not already own. Mesa
beneficially owns 1,603,529 shares of Atlantic Coast common stock, representing
approximately 3.5% of the outstanding shares of Atlantic Coast's common stock as
of November 1, 2003.
Under the terms of the Exchange Offer, Mesa will exchange shares of newly
issued Mesa common stock for each issued and outstanding share of Atlantic Coast
common stock, upon the terms and conditions set forth in the Offer to Purchase
and the related letter of transmittal. Each share of Atlantic Coast common stock
may be exchanged for a number of shares of Mesa common stock equal to the
Exchange Ratio.
Mesa will determine the exact Exchange Ratio by subtracting from 0.9 the
quotient obtained from (i) dividing the Airbus Penalty Amount, if any, by the
number of shares of Atlantic Coast common stock outstanding, as reported by
Atlantic Coast in its last filing with the SEC prior to the date which is ten
business days before the expiration date of the Exchange Offer; and (ii) then
dividing the quotient obtained in (i) by the Mesa Average Market Price.
Mesa will not acquire any shares of Atlantic Coast in the Exchange Offer
unless Atlantic Coast stockholders (other than Mesa and its subsidiaries) have
validly tendered and not properly withdrawn prior to the expiration of the
Exchange Offer a number of shares of Atlantic Coast's common stock such that,
giving effect to the Exchange Offer, Mesa owns at least a majority of the total
number of outstanding shares of Atlantic Coast on a fully diluted basis (as
though all options or other securities convertible into or exercisable or
exchanged for Atlantic Coast common stock had been so converted, exercised or
exchanged).
(1) The acquisition of Atlantic Coast by Mesa will be accounted for as a
purchase business combination. Mesa has a September 30 year end,
while Atlantic Coast has a December 31 year end. For the purpose of
these unaudited condensed combined statements of operations, Mesa's
results of operations for the nine months ended June 30, 2003 are
combined with Atlantic Coast's results of operations for the nine
months ended September 30, 2003 and Mesa's year ended September 30,
2002 is combined with Atlantic Coast's results of operations for the
year ended December 31, 2002. Mesa's balance sheet as of June 30,
2003 is combined with Atlantic Coast's balance sheet as of September
30, 2003.
(2) Because of the proximity of this consent solicitation to the date of
the announcement of our Exchange Offer and Proposed Merger, the
process of valuing Atlantic Coast's tangible and intangible assets
and liabilities as well as evaluating accounting policies for
conformity is still in the very preliminary stages. Material
revisions to our current estimates could be necessary as the
valuation process and accounting policy review are finalized. These
unaudited condensed combined pro forma financial statements are not
necessarily indicative of the operating results or financial
position that would have occurred had the Exchange Offer and
Proposed Merger been consummated at the dates indicated, nor
necessarily indicative of future operating results.
The purchase price is estimated as follows (in thousands, except per
share data):
Common stock (40.8 million Mesa shares at $12.55 per
share $512,266***
Acquisition and change of control costs 15,000
--------------
Total purchase price to be allocated 527,266
Net tangible assets acquired at fair value 340,754*
--------------
Costs in excess of net tangible assets of the acquired
company (Goodwill) $186,512**
==============
* Net tangible assets acquired at fair value is comprised of the
following (in thousands):
Atlantic Coast historical net tangible assets at $343,712
September 30, 2003
Write-off debt origination costs 2,958
--------------
Net tangible assets acquired at fair value $340,754
==============
IV-31
** Goodwill reflects the preliminary estimated adjustment for the
costs in excess of net tangible assets of Atlantic Coast at
estimated fair value. Subsequent to closing of the Proposed
Merger, we will be completing a study to determine the
allocation of the total purchase price to the various tangible
and intangible assets acquired and the liabilities assumed in
order to allocate the purchase price. Management believes, on
a preliminary basis, there may be intangible assets that will
be assigned a fair value in the purchase price allocation. The
sensitivity of the valuations regarding the above can be
significant. Accordingly, as we conclude our evaluation of the
assets acquired and liabilities assumed upon closing the
Proposed Merger, allocation of the purchase price among the
tangible and intangible assets will be subject to change. Any
such change may also impact results of operations. For
example, if 50% of the excess were allocated to tangible
assets with a 10-year life, amortization expense would be $7.0
million and $9.3 million for the nine months ended September
30, 2003 and the year ended September 30, 2002, respectively.
Additionally, a deferred tax liability may also be recorded.
*** Due to the nature of the Proposed Merger, a measurement date
has not been met and will not occur until sufficient shares
have been tendered to make the offer binding. Therefore, the
following assumptions were used in computing the purchase
price.
(1) The number of Mesa shares was based upon the number of Atlantic
Coast shares outstanding on November 1, 2003 per the Atlantic Coast
September 30, 2003 Form 10-Q multiplied by 0.90 (the Exchange Ratio
assuming there is no Airbus Penalty Amount).
(2) The Mesa stock price of $12.55 represents the closing stock price
for Mesa the day before Mesa announced its intention to acquire
Atlantic Coast. If the number of Atlantic Coast shares were to
increase or decrease by 10% or the stock price of Mesa were to
increase or decrease by 10%, the purchase price would fluctuate by
approximately $51.2 million.
(3) Represents the direct costs associated with completing the Exchange
Offer and Proposed Merger.
(4) Reflects the impact of redeeming each Atlantic Coast share as of
November 1, 2003 for 0.90 of a share of Mesa (the Exchange Ratio
assuming there is no Airbus Penalty Amount).
(5) Atlantic Coast reports operating expenses inconsistent with the
captions of Mesa. Therefore, the following captions of Atlantic
Coast's statements of operations are presented under the following
captions of Mesa's statements of operations:
Atlantic Coast Caption Corresponding Mesa Caption
--------------------------- --------------------------------
Salaries and related costs Flight operations
Aircraft fuel Fuel
Aircraft maintenance and Maintenance
materials
Aircraft rentals Flight operations
Traffic commissions Promotion and sales
Facility rents and Aircraft and traffic
landing fees servicing
Depreciation and Depreciation and
amortization amortization
Other General and administrative
(6) Represents the elimination of Atlantic Coast's historical
stockholders' equity.
(7) On June 11, 2003, Mesa issued senior convertible notes due 2023. The
notes may be converted into common stock under certain circumstances
that are effective September 30, 2003. Therefore, the impact of any
conversion would be dilutive to earnings per share.
(8) Accrued expenses for Atlantic Coast were allocated to accrued
compensation and air traffic liability using a pro rata rate derived
from the amounts included in the Notes to Atlantic Coast's December
31, 2002 financial statements.
IV-32
APPENDIX 1
[WHITE CONSENT CARD] [FORM OF CONSENT CARD]
PRELIMINARY COPY-- SUBJECT TO COMPLETION
SOLICITATION ON BEHALF OF MESA AIR GROUP, INC.
Unless otherwise indicated below, the undersigned, a stockholder of record of
Atlantic Coast Airlines Holdings, Inc. ("Atlantic Coast") hereby consents,
pursuant to Section 228 of the Delaware General Corporation Law and Section 2.10
of the Atlantic Coast by-laws for all shares of common stock of Atlantic Coast
held by the undersigned, to the taking of the following actions without a
meeting of the stockholders of Atlantic Coast:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
------------------------------------------------------------------------------
--FOLD AND DETACH HERE--
Appendix 1-1
DOES NOT
CONSENT CONSENT ABSTAIN
1. Remove Kerry B. Skeen, Thomas J.
Moore, C. Edward Acker, Robert E.
Buchanan, Susan MacGregor
Coughlin, Caroline Devine, Daniel
L. McGinnis, James C. Miller III,
and William Anthony Rice and any
director elected or appointed to [ ] [ ] [ ]
the Atlantic Coast board pursuant
to a vacancy caused by the
removal or resignation of any of
the directors from the Atlantic
Coast board or any newly-created
directorships prior to the
effective time of this
stockholder action.
INSTRUCTION: TO CONSENT, NOT CONSENT OR ABSTAIN FROM CONSENTING TO THE REMOVAL
OF ALL THE PERSONS NAMED IN PROPOSAL #1, CHECK THE APPROPRIATE BOX ABOVE. IF YOU
WISH TO CONSENT TO THE REMOVAL OF CERTAIN OF THE PERSONS NAMED IN PROPOSAL #1,
BUT NOT ALL OF THEM, CHECK THE "CONSENT" BOX ABOVE AND WRITE THE NAME OF EACH
SUCH PERSON YOU DO NOT WISH REMOVED IN THE SPACE PROVIDED BELOW:
--------------------------------------------------------------------------------
2. Elect Nathaniel A. Davis, Andre [ ] [ ] [ ]
V. Duggin, Theodore F. Kahan,
James R. Link, David T.
McLaughlin, Peter F. Nostrand,
and Archille R. Paquette to serve
as directors of Atlantic Coast
(or, if any such nominee is
unable to serve as a director of
Atlantic Coast due to death,
disability or otherwise, any
other person designated as a
nominee by the remaining nominee
or nominees).
INSTRUCTION: TO CONSENT, NOT CONSENT OR ABSTAIN FROM CONSENTING TO THE ELECTION
OF ALL THE PERSONS NAMED IN PROPOSAL #2, CHECK THE APPROPRIATE BOX ABOVE. IF YOU
WISH TO CONSENT TO THE ELECTION OF CERTAIN OF THE PERSONS NAMED IN PROPOSAL #2,
BUT NOT ALL OF THEM, CHECK THE "CONSENT" BOX ABOVE AND WRITE THE NAME OF EACH
SUCH PERSON YOU DO NOT WISH ELECTED IN THE SPACE PROVIDED BELOW.
--------------------------------------------------------------------------------
3. Repeal each provision of the
Atlantic Coast by-laws adopted
after August 14, 1998 and prior [ ] [ ] [ ]
to the effective time of the
stockholder action contemplated
hereby.
Appendix 1-2
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS
DIRECTED. IF NO BOX IS MARKED FOR ANY PROPOSAL, THE
UNDERSIGNED WILL BE DEEMED TO CONSENT TO SUCH
PROPOSAL, EXCEPT THAT THE UNDERSIGNED WILL NOT BE
DEEMED TO CONSENT TO THE REMOVAL OF ANY CURRENT
DIRECTOR OR TO THE ELECTION OF ANY NOMINEE WHOSE
NAME IS WRITTEN-IN IN THE SPACE PROVIDED.
IN ORDER FOR YOUR CONSENT TO BE VALID, IT MUST BE
DATED. PLEASE MARK, SIGN, DATE AND MAIL YOUR
CONSENT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. THE PROVISIONS OF THE CONSENT STATEMENT
DATED [ ], 2003 OF MESA AIR GROUP, INC., ARE
INCORPORATED BY REFERENCE. IN THE ABSENCE OF
DISSENT OR ABSTENTION BEING INDICATED ABOVE, THE
UNDERSIGNED HEREBY CONSENTS TO EACH ACTION LISTED
ABOVE.
Both proposals 1 and 2 must be approved by the
holders of record, as of the close of business on
the record date, of a majority of the shares of
Atlantic Coast common stock then outstanding for
either of them to be effective. Proposals 1 and 2
may be adopted and become effective independent of
proposal 3 and proposal 3 may be adopted and become
effective independent of proposals 1 and 2.
Signature(s)_________________________ Dated___________
Please sign exactly as the name appears on the stock certificate or on the
attached label. If shares are held by joint tenants, both should sign. In case
of joint owners, each joint owner must sign. When signing as attorney, executor,
administrator, trustee, guardian, corporate officer, etc., please give full
title.
------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
Appendix 1-3