Active Gear Historical Income Statement

Operating Results 2004 2005 2006

Revenue $ 450,174 $ 469,704 $ 470,286
Less Cost of Goods Sold $ 223,617 $ 231,583 $ 234,494
Gross Profit $ 226,557 $ 238,121 $ 235,792
Less Selling Expense $ 127,705 $ 130,242 $ 130,471
Less General and Administrative Expense $ 31,437 $ 33,938 $ 36,535
EBITDA $ 67,415 $ 73,941 $ 68,786
Less Depreciation and Amortization $ 7,049 $ 7,343 $ 8,366
EBIT $ 60,366 $ 66,598 $ 60,420
Less Net Interest Expense $ 5,092 $ 5,143 $ 5,098
Less Other Net $ 1,211 $ (752) $ 24
EBT $ 54,063 $ 62,207 $ 55,298
Less Taxes $ 19,192 $ 21,089 $ 19,349
Net Income $ 34,871 $ 41,118 $ 35,949
Margins
Revenue Growth 1.70% 4.34% 0.12%
Gross Profit Margin 50.33% 50.70% 50.14%
EBITDA Margin 14.98% 15.74% 14.63%
EBIT Margin 13.41% 14.18% 12.85%
EBT Margin 12.01% 13.24% 11.76%
Tax Rate 35.50% 33.90% 34.99%
Net Income Margin 7.75% 8.75% 7.64%
Income Statement
 Active Wear Historical Balance Sheet
2004 2005 2006
Assets
Cash and Accounts Receivables $ 92,753 $ 63,949 $ 54,509
Accounts Receivable $ 46,507 $ 50,649 $ 61,322
Inventory $ 38,493 $ 50,140 $ 56,030
Prepaid Expense $ 8,298 $ 10,051 $ 12,223
Deferred Taxes $ 8,681 $ 8,080 $ 6,519
Derivative Assets $ - $ 1,813 $ 53
Total Current Assets $ 194,732 $ 184,682 $ 190,656

Property Plant Equipment $ 23,694 $ 24,712 $ 28,392

Intangible Assets $ 6,414 $ 12,273 $ 14,360
Goodwill $ 4,249 $ 11,851 $ 11,915
Other Assets $ 2,982 $ 3,079 $ 3,249
Total Assets $ 232,071 $ 236,597 $ 248,572

Liabilities and Owners Equity

Accounts Payable $ 15,711 $ 29,188 $ 33,009
Accrued Expenses $ 37,211 $ 30,553 $ 36,718
Taxes Payable $ 10,421 $ 13,263 $ 10,162
Derivative Liabilities $ - $ - $ -
Other $ 4,514 $ - $ 878
Total Current Liabilities $ 67,857 $ 73,004 $ 80,767

Long-Term Debt $ 178,173 $ 150,240 $ 140,047

Deferred Compensation $ 3,763 $ 4,814 $ 3,919
Deferred Taxes $ 2,180 $ 323 $ -
Total Owners Equity $ (19,921) $ 8,216 $ 23,857

Total Liabilities and Owners Eq $ 232,052 $ 236,597 $ 248,590

cal Balance Sheet
 Selected Data on Publ

Equity MV Net Debt D/E Beta E LTM Rev

D&B Shoe $ 420,098 $ 125,442 29.90% 2.68 $ 2,545,058
Marina Wilderness $ 1,205,795 $ (91,559) -7.60% 1.94 $ 313,556
General Shoe Corp $ 533,463 $ 171,835 32.20% 1.92 $ 1,322,392
Kinseley Couler Products $ 165,560 $ 82,236 49.70% 1.12 $ 552,594
Victory Athletic $ 35,303,250 $ 7,653,207 21.70% 0.97 $ 15,403,547
Surfside Footwear $ 570,684 $ 195,540 34.30% 2.13 $ 1,241,529
Alpine Company $ 1,056,033 $ 300,550 28.50% 1.27 $ 1,614,648
Heartland Outdoor Footwear $ 1,454,875 $ (97,018) -6.70% 1.01 $ 1,176,144
Templeton Athletic $ 397,709 $ 169,579 42.60% 0.98 $ 516,182
Average 24.90%

Mercury 2006
EBITADA $ 51,805 Metric
EBIT $ 42,299
Net Income $ 25,999 P/E
EV/EBIT
EV/EBITDA
Mercury Valuation

Mercury
P/E
EV/EBIT
EV/EBITDA
Selected Data on Public Footwear Companies- March 15th, 2007

Net
Revenue CAGR- Income EBIT EBITDA P/E
LTM Earnings 2000-06 EBITMargin EBITDA Margin Margin Multiple Multiple Multiple
$ 67,679 6.60% 4.40% 6.10% 2.70% 5.5 3.9 6.8
$ 41,923 17.80% 22.1% 23.10% 13.4% 18 16.9 31.6
$ 64,567 11.20% 8.8% 11.50% 4.9% 6.8 5.1 9.1
$ 27,568 4.60% 6.9% 8.90% 5.0% 7.3 5.5 6.6
$ 1,433,760 7.90% 14.1% 16.00% 9.3% 22.1 19.2 27.1
$ 73,124 10.10% 9.3% 10.80% 5.9% 7.4 6.3 8.6
$ 112,015 6.20% 10.4% 12.20% 6.9% 9 7.6 10.4
$ 86,156 8.50% 10.8% 12.60% 7.3% 12 10.1 18.6
$ 79,170 14.40% 19.9% 20.20% 15.3% 6.2 6 5.5
9.70% 11.9% 13.50% 7.9% 10.5 9 13.8

Comparable Metrics

Low Average High

5.5 13.8 31.6

5.5 10.5 22.1
3.9 9 19.2
Mercury Valuation based on comparables

Low Average High Average

$ 142,995 $ 358,786 $ 821,568 $ 441,116
$ 232,645 $ 444,140 $ 934,808 $ 537,197
$ 202,040 $ 466,245 $ 994,656 $ 554,314
B/V
Multiple Beta Asset
0.9 2.27
6 2.03
1.6 1.61
0.7 0.86
6 0.86
1.4 1.77
2 1.08
3.1 1.05
1.2 0.78
2.5 1.37
 Mercury Historical Financial Statements
Operating Results
2004 2005 2006 2007
Net Revenue $ 340,578 $ 358,750 $ 431,121 $ 486,108
Less Cost of Goods Sold $ 198,115 $ 205,820 $ 239,383 $ 277,191
Gross Profit $ 142,463 $ 152,930 $ 191,738
Less Selling, General & Administrative $ 102,410 $ 113,892 $ 139,933 $ 152,758
EBITDA $ 40,053 $ 39,038 $ 51,805
Less Depreciation and Amortization $ 7,699 $ 8,001 $ 9,506 $ 8,891.20
EBIT $ 32,354 $ 31,037 $ 42,299 $ 47,268
Less Corporate Administrative Charge $ 275 $ 305 $ 366
EBT $ 32,079 $ 30,732 $ 41,933
Less Taxes $ 12,190 $ 11,689 $ 15,934
Net Income $ 19,889 $ 19,043 $ 25,999

Assets 2004 2005 2006

Cash and Cash Equivalents $ 12,203 $ 20,187 $ 10,676 $ 18,936
Accounts Receivables $ 29,115 $ 38,654 $ 45,910 $ 48,566
Inventory $ 53,552 $ 70,818 $ 73,149 $ 84,957
Prepaid Expenses $ 7,809 $ 15,810 $ 10,172
Total Current Assets $ 102,679 $ 145,469 $ 139,907

Property Plant and Equipment $ 33,090 $ 31,334 $ 32,618 $ 42,155

Trademarks and Other Intangibles $ 1,031 $ 35,740 $ 43,853
Goodwill $ 554 $ 34,605 $ 43,051
Other Assets $ 5,657 $ 11,884 $ 11,162
Total Assets $ 143,011 $ 259,032 $ 270,591

Liabilities and Owners Equity

Accounts Payable $ 12,838 $ 14,753 $ 16,981 $ 19,154
Accrued Expenses $ 13,040 $ 21,955 $ 18,810 $ 23,190
Total Current Liabilities $ 25,878 $ 36,708 $ 35,791

Deferred Taxes $ 1,635 $ 13,795 $ 11,654

Pension Obligations $ 8,131 $ 9,256 $ 9,080

Owners Equity $ 107,367 $ 199,274 $ 214,067

Total Liabilities &Owners Equity $ 143,011 $ 259,033 $ 270,592

Historical Information 2004 2005 2006 3 year average

Sales Growth 5.34% 20.17% 12.75%
Cost of Goods Sold 58.17% 57.37% 55.53% 57.02%
Selling, generala and administrative 30.07% 31.75% 32.46% 31.42%
Depreciation/NET ppe t-1 24.18% 30.34% 27.26%
Cash 3.58% 5.63% 2.48% 3.90%
Accounts receivable 8.55% 10.77% 10.65% 9.99%
Inventory 15.72% 19.74% 16.97% 17.48%
Property, plant E/sales 9.72% 8.73% 7.57% 8.67%
Accounts Payable/sales 3.77% 4.11% 3.94% 3.94%
accruals/sales 3.83% 6.12% 4.36% 4.77%
Tax Rate 40%
ry Historical Financial Statements

2008 2009 2010 2011

$ 548,108 $ 618,015 $ 696,839 $ 785,717
$ 312,544 $ 352,408 $ 397,355 $ 448,035

$ 172,242 $ 194,210 $ 218,980 $ 246,910

$ 11,490.89 $ 12,956.48 $ 14,608.99 $ 16,472.28

$ 51,831 $ 58,441 $ 65,895 $ 74,300

$ 21,351 $ 24,075 $ 27,145 $ 30,607

$ 54,760 $ 61,745 $ 69,620 $ 78,499
$ 95,793 $ 108,011 $ 121,787 $ 137,320

$ 47,532 $ 53,594 $ 60,430 $ 68,137

$ 21,597 $ 24,351 $ 27,457 $ 30,959

$ 26,148 $ 29,483 $ 33,243 $ 37,483
 Mercury Athletic Segment Data: 2004-2006

Fiscal Year 2006 Men's Athletic Men's Casual Women's Athletic Women's Casual
Revenue $ 219,093 $ 51,663 $ 123,563 $ 36,802
Operating Income $ 31,421 $ 8,242 $ 12,703 $ (843)
Total Assets $ 148,576 $ 28,457 $ 27,978 $ 34,701
EBIT Margin 14.34% 15.95% 10.28% -2.29%
Fiscal Year 2005
Revenue $ 151,900 $ 55,402 $ 108,097 $ 43,381
Operating Income $ 18,398 $ 9,077 $ 11,631 $ (1,013)
Total Assets $ 173,482 $ 30,842 $ 24,267 $ 12,197
EBIT Margin 12.11% 16.38% 10.76% -2.34%
Fiscal Year 2004
Revenue $ 131,636 $ 58,787 $ 95,897 $ 54,258
Operating Income 17,720 $ 9,196 $ 9,109 $ 462
Total Assets 39543 $ 34,966 $ 22,526 $ 15,056
EBIT Margin 13.46% 15.64% 9.50% 0.85%
ent Data: 2004-2006

Unallocated Corp Consolidated

$ - $ 431,121
$ (9,224) $ 42,299
$ 30,880 $ 270,592
-2.1 9.81%

$ - $ 358,780
$ (7,027) $ 31,066
$ 18,244 $ 259,032
-2.00% 8.66%

$ - $ 340,578
$ (4,134) $ 32,353
$ 30,919 $ 143,010
-1.20% 9.50%
 Mercury Athletic Footwear: Base Case Projected Segment Performance

Men's Athletic 2007 2008 2009 2010 2011

Revenue $ 251,957 $ 282,192 $ 310,411 $ 335,244 $ 352,006
Less Operating Expense 218435 244647 269112 290641 305173
Operating Income $ 33,522 $ 37,545 $ 41,299 $ 44,603 $ 46,833

Men's Casual
Revenue $ 52,179 $ 53,223 $ 54,287 $ 55,916 $ 57,594
Less Operating Expenses $ 43,834 $ 44,711 $ 45,605 $ 46,973 $ 48,382
Operating Income $ 8,345 $ 8,512 $ 8,682 $ 8,943 $ 9,212
Women's Athetic
Revenue $ 138,390 $ 153,613 $ 167,438 $ 179,159 $ 188,117
Less Operating Expenses $ 124,302 $ 137,976 $ 150,393 $ 160,921 $ 168,967
Operating Income $ 14,088 $ 15,637 $ 17,045 $ 18,238 $ 19,150

Women's Casual
Revenue 36802 0 0 0 0
Less Operating Expense 37265 0 0 0 0
Operating Income -463 0 0 0 0

Consolidated Revenue $ 479,328 $ 489,028 $ 532,136 $ 570,319 $ 597,717

Less Operating Expenses $ 423,836 $ 427,334 $ 465,110 $ 498,535 $ 522,522
Less Corporate Overhead 8487 8659 9422 10098 10583
Consolidated Operating Inc $ 47,005 $ 53,035 $ 57,604 $ 61,686 $ 64,612

Estimated Capital Expenditure 11983 12226 13303 14258 14943

Estimated Depreciation 9587 9781 10643 11406 11954
Selected Balance Sheet Accounts Projection of Selected Balance Sh
Assets 2007 2008 2009 2010
Cash Used in Operations $ 4,161 $ 4,195 $ 4,566 $ 4,894
Accounts Receivable $ 47,888 $ 48,857 $ 53,164 $ 56,978
Inventory $ 83,770 $ 85,465 $ 92,999 $ 99,672
Prepaid Expense $ 14,474 $ 14,767 $ 16,069 $ 17,222

Property Plant Equipment $ 35,015 $ 37,460 $ 40,120 $ 42,972

Trademarks and Other Intangibles $ 43,853 $ 43,853 $ 43,853 $ 43,853
Goodwill $ 43,051 $ 43,051 $ 43,051 $ 43,051
other Assets $ 11,162 $ 11,162 $ 11,162 $ 11,162

Liabilities
Accounts Payable $ 18,830 $ 18,985 $ 20,664 $ 22,149
Accrued Expenses $ 22,778 $ 22,966 $ 24,996 $ 26,792

Deferred Taxes $ 11,654 $ 11,654 $ 11,654 $ 11,654

Pension Obligations $ 9,080 $ 9,080 $ 9,080 $ 9,080
Projection of Selected Balance Sheet Accounts-2007-2011
2011
$ 5,130
$ 59,715
$ 104,460
$ 18,049

$ 45,961
$ 43,853
$ 43,051
$ 11,162

$ 23,214
$ 28,081

$ 11,654
$ 9,080
 Mercury Case-Assum
DCF Valuatio
Model

Valuation as is
using Historical
Assumtions Values Information
Valuation using
Sales Growth 12.75% case projections

Valuation
including
Cost of Goods Sold 57.02% synergies
Premium based
Selling, generala and administrativ 31.42% on historical

Premium based
on Case
Depreciation/NET ppe t-1 27.26% Projections
Cash 3.90%
Accounts receivable 9.99% Summary of Comparable Valu
Inventory 17.48%
Property, plant E/sales 8.67% P/E
Accounts Payable/sales 3.94% EV/EBIT
accruals/sales 4.77% EV/EBITDA
Tax Rate 40% Overall Average
Long-run growth 3%

Cost of Capital Estimation

Debt/Value 20%
Cost of Debt(Rd) 6%
Debt/Equity 0.25
10 yr treasury(Risk Free Rate) 4.73%
Risk Premium 5%
Ba(beta asset) 1.37
Be(beta Equity) 1.57
Required return on equity(Re) 12.60%
WACC 10.80%

Synergy Assumptions
Current Day Sales Inventory 63.79
Target Day Sales Inventory 42.1
 Mercury Case-Assumptions and Results Summary
DCF Valuation Summary
EV

$350,533

$338,263

$381,674

$31,141

$43,411

Summary of Comparable Valuation

$ 441,116
$ 537,197
$ 554,314
$ 510,876
 Valuation based on Historical Information
Actual Projected
2006 2007 2008 2009 2010 2011
EBIT b,m $ 51,831 $ 58,441 $ 65,895 $ 74,300
EBIT(1-T) $ 28,361 $ 31,098 $ 35,065 $ 39,537 $ 44,580
Op Cash Flows $ 37,252 $ 42,589 $ 48,021 $ 54,146 $ 61,052
CAPEX $ 9,537 $ 5,377 $ 6,062 $ 6,836 $ 7,707
WC $ 93,944 $ 110,116 $ 124,160 $ 139,996 $ 157,852 $ 177,985
Investment in WC $ 16,172 $ 14,045 $ 15,836 $ 17,856 $ 20,133
FCF $ 11,543 $ 23,168 $ 26,123 $ 29,455 $ 33,212
TV $ 438,545
Net FCF $ 11,543 $ 23,168 $ 26,123 $ 29,455 $ 471,757
Enterprise Value $350,533

Valuation Based on Case Projections

2006 2007 2008 2009 2010 2011
Revenues $ 479,328 $ 489,028 $ 532,136 $ 570,319 $ 597,717
EBIT $ 47,005 $ 53,035 $ 57,604 $ 61,686 $ 64,612
EBIT(1-T) $ 28,203 $ 31,821 $ 34,562 $ 37,012 $ 38,767
Op Cash Flows $ 37,790 $ 41,602 $ 45,205 $ 48,418 $ 50,721
CAPEX $ 11,983 $ 12,226 $ 13,303 $ 14,258 $ 14,943
WC $ 93,944 $ 94,211 $ 96,566 $ 105,069 $ 112,603 $ 118,010
Investment in WC $ 267 $ 2,355 $ 8,503$ 7,534 $ 5,407
FCF $ 25,540 $ 27,021 $ 23,399 $ 26,626 $ 30,371
TV $ 401,037
Net FCF $ 25,540 $ 27,021 $ 23,399 $ 26,626 $ 431,409
Enterprise Value $338,263

Valuation based on Case Projections Plus Synbergy

2006 2007 2008 2009 2010 2011
EBIT $ 47,005 $ 53,035 $ 57,604 $ 61,686 $ 64,612
EBIT(1-T) $ 28,203 $ 31,821 $ 34,562 $ 37,012 $ 38,767
Op Cash Flows $ 37,790 $ 41,602 $ 45,205 $ 48,418 $ 50,721
CAPEX $ 11,983 $ 12,226 $ 13,303 $ 14,258 $ 14,943

Invetory Projections $ 55,287 $ 56,406 $ 61,378 $ 65,782 $ 68,942

WC $ 93,944 $ 65,728 $ 67,507 $ 73,448 $ 78,713 $ 82,492
Investment in WC $ (28,216) $ 1,779 $ 5,941 $ 5,265 $ 3,779
FCF $ 54,023 $ 27,597 $ 25,961 $ 28,894 $ 31,999
TV $ 422,532
Net FCF $ 54,023 $ 27,597 $ 25,961 $ 28,894 $ 454,531
Enterprise Value $381,674