8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) May 22, 2002

MERCURY AIR GROUP, INC.

(Exact name of Registrant as specified in Charter)

DELAWARE	1-7134	11-1800515
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(I.R.S. Employer Identification No.)

5456 McConnell Avenue, Los Angeles, CA 90066
(Address of Principal Executive Offices/Zip Code)

Registrant’s telephone number, including area code: (310) 827-2737

Not Applicable
(Former Name or Former Address, if Changed Since
Last Report)

TABLE OF CONTENTS

	Item 5. Other Events and Regulation FD Disclosure.
	Item 7. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHBIIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7

INFORMATION TO BE INCLUDED IN THIS REPORT

Item 5.   Other Events and Regulation FD Disclosure.

          Based upon a recommendation of the Compensation Committee (the “Committee) of the Board of Directors and the unanimous approval of the independent and disinterested members of the Board of Directors (the “Board”), Mercury Air Group, Inc. (the “Company” or “Mercury”) authorized the Company to enter into employment agreements or amended employment agreements with six key executive officers for the purpose of setting forth the terms and conditions of employment and to provide long term incentives to such officers to induce their continued services consistent with past practice of Mercury. In connection with the Board’s approval, the Board considered independent third party surveys regarding executive compensation and other data relevant to the terms of the employment agreements, including past compensation programs of the Company.

          On May 22, 2002, Mercury entered into employment agreements with Wayne Lovett, Executive Vice President, General Counsel and Secretary of Mercury, Mark Coleman, Chief Operating Officer of Mercury Air Cargo, John Enticknap, Executive Vice President of Mercury and Vice President and Chief Operating Officer of Mercury Air Centers, Robert Schlax, Vice President of Finance of Mercury, and Steve Antonoff, Vice President of Human Resources of Mercury. Under the employment agreements, each of the five officers will be employed by the Company at their present positions for a three year period, subject to certain extension and termination provisions. The five officers will receive annual salaries of $179,000, $170,000, $181,500, $170,000, and $116,600 respectively. The Company also entered into an amended employment agreement with Joseph Czyzyk, the President and Chief Executive. The employment agreements are attached. The employment agreements also allow the officers to participate in the 2002 Management Stock Purchase Plan (the “Plan”). Under the Plan, each officer may purchase up to a set amount of stock from CFK Partners, that amount being 31,896, 25,000, 30,000, 25,000, 25,000 and 387,650 for Messrs. Lovett, Coleman, Enticknap, Schlax, Antonoff and Czyzyk respectively, at $7.50 per share. Pursuant to the terms and conditions set forth in the respective employment agreements, Mercury, in connection with such officers’ employment services, will provide advances to purchase the Mercury stock. The terms and conditions of employment and the compensation are more fully set forth in the employment agreements attached.

Item 7.   Financial Statements and Exhibits.

(a)	Financial statements of business acquired.
	Not applicable.
(b)	Pro Forma financial information.

2

	Not applicable.
(c)	Exhibits.
	The following exhibits are filed with this report.
	10.1	Employment Agreement, dated as of May 22, 2002, between the Registrant and Wayne Lovett.
	10.2	Employment Agreement, dated as of May 22, 2002, between the Registrant and Mark Coleman.
	10.3	Employment Agreement, dated as of May 22, 2002, between the Registrant and John Enticknap.
	10.4	Employment Agreement, dated as of May 22, 2002, between the Registrant and Robert Schlax.
	10.5	Employment Agreement, dated as of May 22, 2002, between the Registrant and Steve Antonoff.
	10.6	Amended and Restated Employment Agreement, dated as of May 22, 2002, between the Registrant and Joseph A. Czyzyk.
	10.7	Stock Purchase Agreement under the 2002 Management Stock Purchase Plan, dated as of May 22 2002.

3

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MERCURY AIR GROUP, INC.
Date: May 31, 2002	By:	/s/  Joseph A. Czyzyk Joseph A. Czyzyk President and Chief Executive Officer

4

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
10.1	Employment Agreement, dated as of May 22, 2002, between the Registrant and Wayne Lovett.
10.2	Employment Agreement, dated as of May 22, 2002, between the Registrant and Mark Coleman.
10.3	Employment Agreement, dated as of May 22, 2002, between the Registrant and John Enticknap.
10.4	Employment Agreement, dated as of May 22, 2002, between the Registrant and Robert Schlax.
10.5	Employment Agreement, dated as of May 22, 2002, between the Registrant and Steve Antonoff.
10.6	Amended and Restated Employment Agreement, dated as of May 22, 2002, between the Registrant and Joseph A. Czyzyk.
10.7	Stock Purchase Agreement under the 2002 Management Stock Purchase Plan, dated as of May 22, 2002.

5 EX-10.1 3 a82137exv10w1.txt EXHBIIT 10.1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), and Mr. Wayne J. Lovett, residing at 5908 Finecrest, Rancho Palos Verdes, California 90066 (hereinafter referred to as "Lovett"). W I T N E S S E T H: WHEREAS, Lovett has been employed as Executive Vice President, Corporate Secretary and General Counsel of Mercury since May 2001; and WHEREAS, Mercury's Board of Directors (the "Board of Directors") would like to continue Lovett's role as Executive Vice President, Corporate Secretary and General Counsel on the terms and conditions set forth in this Agreement; and WHEREAS, Lovett wishes to accept these positions on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: First: Employment (a) Employment. Mercury hereby confirms and agrees that Lovett will be appointed by the Board of Directors of Mercury to continue serving as an Executive Vice President, Corporate Secretary and General Counsel of Mercury. In his capacity as Executive Vice President, Corporate Secretary and General Counsel of Mercury, Lovett shall continue to report directly to Mercury's Chief Executive Officer. (b) Lovett's Acceptance. Lovett hereby accepts his appointments as Executive Vice President, Corporate Secretary and General Counsel of Mercury. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin on the date hereof and shall terminate three years thereafter. If Lovett is then employed by Mercury, on each successive anniversary date, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be one (1) year; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Lovett under this Agreement, Mercury shall pay Lovett a salary of $179,000 per year, payable in semi-monthly installments in accordance with Mercury's standard payroll practices. From time to time, the salary payable to Lovett may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Lovett's annual salary, as from time to time adjusted by the Compensation Committee, is hereinafter referred to as "Base Compensation". (b) Bonus Plans. The Board of Directors may, at its discretion, establish a bonus plan for Lovett. Fourth: Extent of Services Lovett shall devote his entire time, attention and energies to the business of Mercury (and its various subsidiaries) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Lovett from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Lovett in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Mercury, where Lovett's investment does not represent in excess of five percent (5%) of the outstanding equity of such company or entity. Fifth: Working Facilities Lovett shall be furnished with a private office and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Lovett shall be employed at the principal offices of Mercury located in Los Angeles, California and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Mercury and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non-technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Proprietary Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. 2 (b) Access to Proprietary Information. The parties acknowledge that Lovett has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to others. Except as directed by Mercury in writing or verbally, Lovett shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Mercury or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Lovett acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Lovett is authorized to incur reasonable expenses for promoting the business of Mercury, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors of Mercury's Chief Executive Officer, as from time to time adopted. Mercury will reimburse Lovett for all such reasonable expenses upon the presentation by Lovett, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Mercury to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participating in General Plans. Lovett shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Mercury shall from time-to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Lovett and his family under Mercury's medical insurance plans. Lovett shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Mercury to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Mercury from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Mercury to take special steps to insure the eligibility of Lovett or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. (b) Stock Options. Lovett shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Board of Directors. 3 (c) 2002 Management Stock Purchase Plan. (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan, Lovett may purchase from CFK Partners, an Illinois general partnership, up to 31,896 unregistered shares of the common stock of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase Price"), such purchase to be funded by Mercury. (ii) In the event Lovett voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or in the event Lovett's employment is terminated with or without "cause", as defined in Article 9 hereof (except pursuant to Article 11(a) of the Employment Agreement or as set forth below), or in the event Lovett dies or becomes disabled (hereinafter the "Date of Discharge"), Lovett or his estate shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that, in connection with Lovett's employment with Mercury, Lovett's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Lovett shall receive 10% of the original amount of stock purchased on the anniversary date of the Employment Agreement's execution and will be fully vested and eligible to vote those shares. Lovett shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Mercury shall be granted a secured interest as a creditor of Lovett in the event Lovett defaults in his obligation to Mercury as herein set forth and Mercury will designate an escrow to hold the shares underlying the remaining debt obligation. In the event Lovett terminates his employment pursuant to Article 11(a) of the Employment Agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his Employment Agreement, Lovett shall have no further obligation to repay Mercury all or any portion of the Purchase Price. While Lovett has any obligation to Mercury hereunder, Lovett shall be obligated to comply with directions of the Board of Directors of Mercury with respect to the voting of those shares held in escrow purchased by Lovett hereunder. (d) Vacation. Lovett shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Mercury's Right to Terminate For Cause (a) Cause. Mercury may at any time during the term of this Agreement discharge Lovett for "cause." The term "cause" is defined herein as Lovett's (i) misappropriation of corporate funds, fraud, embezzlement or other illegal conduct to the detriment of Mercury, (ii) negligence in the execution of his material assigned duties or Lovett's voluntary abandonment of his job for any reason other than disability; (iii) refusal or failure, after not less than 20 days written notice that such refusal or failure would constitute a default hereunder, to carry out any reasonable and material direction from the Board of Directors given to him in writing; (iv) conviction of a felony; (v) material breach or violation of the terms of this Agreement, which breach or violation shall not have been fully cured (as determined by the Board of Directors acting in good faith) by Lovett within 20 days after receipt of written notice of the same from the Board of Directors; (vi) Lovett's death or 4 disability (except that, in the event of Lovett's disability, Mercury shall, at Lovett's request, prior to discharge, grant Lovett a leave of absence of up to six months or such longer period of time as may be required by law); or (vii) Lovett's engagement in drug or alcohol abuse. Lovett shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors of Mercury. (b) No Rights Following Cause Termination. Following a termination of Lovett's employment with Mercury "for cause" pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Lovett pursuant to Article Sixth and Twelfth hereof); and (ii) Lovett shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Lovett asserts that his voluntary termination was actually a constructive termination, Mercury shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Lovett. Tenth: Termination Without Cause (a) Rights Following Termination Without Cause. Should Lovett be discharged by Mercury at any time during the term of this Agreement except as provided in Article Ninth, Mercury hereby agrees to pay Lovett within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement, with a minimum of six (6) months base compensation. (b) No Additional Rights. Except as set forth above in paragraph (a) of this Article Tenth following a termination of Lovett's employment by Mercury other that pursuant to Article Ninth above and Article Eleventh below: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Lovett pursuant to Articles Sixth and Twelfth); and (ii) Lovett shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Eleventh: Right to Voluntary Termination by Lovett (a) Conditions for Termination by Lovett. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Mercury representing 50% or more of the total voting power of Mercury's then outstanding stock, without the written consent of the Board of Directors of Mercury; or 5 (ii) Mercury is acquired by another entity through the purchase of substantially all of its assets, the purchase of all of its outstanding voting securities or a combination thereof, without the consent of the Board of Directors of Mercury; or (iii) Mercury is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the consent of the Board of Directors of Mercury; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Mercury cease for any reason to constitute at least a majority thereof unless the election, or the nomination or election by Mercury's stockholders, of each new director of Mercury was approved by a vote of at lease two-thirds of such directors of Mercury then still in office who were directors of Mercury at the beginning of any such period; then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), Lovett's duties are substantially altered or Lovett is demoted for cause, Lovett shall have the right and option to voluntarily terminate this Agreement upon written notice to Mercury. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Lovett pursuant to paragraph (a) of this Article Eleventh, Lovett shall be entitled to be paid by Mercury within thirty (30) days of such termination by Lovett, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Lovett over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Eleventh, following a voluntary termination of Lovett's employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Lovett pursuant to Articles Sixth and Twelfth); and (ii) Lovett shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Restrictive Covenant Lovett covenants and agrees that during the period commencing with the date hereof and ending six (6) months from the date Lovett's employment with Mercury is terminated for "cause" or by reason of Lovett's voluntary termination of employment from Mercury (the "Non-Compete Period"), Lovett will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial aviation, fuel sales, fixed base operations, or any business activities of the Companies existing on or developed subsequent to the date hereof. Lovett covenants and agrees that he will not, without the prior written consent of Mercury during the Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any contracts which were either being solicited by, or which were under 6 contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Mercury; or (c) induce any sales, operating, technical or other personnel of the Companies to leave the service, employ or business of the Companies. Lovett agrees that he will not violate this Article Eleventh: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or Lovett of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associated with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Lovett further agrees that doing or causing to be done any of the actions prohibited in this Article Eleventh by means of an indirect violation shall constitute a violation of this Article Eleventh as though violated by Lovett, subject to all of the remedies to Mercury provided for herein and as otherwise provided by law. Thirteenth: Arbitration; Governing Law. Any controversy or claim arising out of, or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the America Arbitration Association, and judgments upon the award rendered my be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Fourteenth: Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by certified mail to his residence, in the case of Lovett, or to its principal office, in the case of Mercury. Fifteenth: Waiver of Breach The waiver by Mercury of a breach of any provision of this Agreement by Lovett shall not operate or be construed as a waiver of any subsequent breach by Lovett. Sixteenth: Assignment The rights and obligations of Mercury under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Mercury. Seventeenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 7 Eighteenth: Equitable Relief; Partial Enforcement Mercury and Lovett have agreed that violation or breach of Articles Sixth and Eleventh will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief in addition to any other remedies provided at law. Mercury and Lovett have further agreed in the event that only a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Mercury and Lovett have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. By: /s Joseph A. Czyzyk -------------------------------------- Its: Chief Executive Officer /s/ Wayne J. Lovett -------------------------------------- Wayne J. Lovett 8 EX-10.2 4 a82137exv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), and Mr. Mark Coleman, residing at 16786 Calle de Catalina, Pacific Palisades, California 90272 (hereinafter referred to as "Coleman"). W I T N E S S E T H: WHEREAS, Coleman has been employed as Chief Operating Officer of Mercury Air Cargo since January 2001; and WHEREAS, Mercury's Board of Directors (the "Board of Directors") would like to continue Coleman's role as Chief Operating Officer of Mercury Air Cargo on the terms and conditions set forth in this Agreement; and WHEREAS, Coleman wishes to accept these positions on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: First: Employment (a) Employment. Mercury hereby confirms and agrees that Coleman will be appointed by the Board of Directors of Mercury to continue serving as Chief Operating Officer of Mercury Air Cargo. In his capacity as Chief Operating Officer of Mercury Air Cargo, Coleman shall continue to report directly to Mercury's Chief Executive Officer. (b) Coleman's Acceptance. Coleman hereby accepts his appointment as Chief Operating Officer of Mercury Air Cargo. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin on the date hereof and shall terminate three years thereafter. If Coleman is then employed by Mercury, on each successive anniversary date, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be one (1) year; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Coleman under this Agreement, Mercury shall pay Coleman a salary of $170,000 per year, payable in semi-monthly installments in accordance with Mercury's standard payroll practices. From time to time, the salary payable to Coleman may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Coleman's annual salary, as from time to time adjusted by the Compensation Committee, is hereinafter referred to as "Base Compensation". (b) Bonus Plans. The Board of Directors may, at its discretion, establish a bonus plan for Coleman. Fourth: Extent of Services Coleman shall devote his entire time, attention and energies to the business of Mercury (and its various subsidiaries) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Coleman from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Coleman in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Mercury, where Coleman's investment does not represent in excess of five percent (5%) of the outstanding equity of such company or entity. Fifth: Working Facilities Coleman shall be furnished with a private office and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Coleman shall be employed at the Mercury Air Cargo, Inc. offices of Mercury located in Los Angeles, California and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Mercury and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non-technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Proprietary Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. 2 (b) Access to Proprietary Information. The parties acknowledge that Coleman has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to others. Except as directed by Mercury in writing or verbally, Coleman shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Mercury or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Coleman acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Coleman is authorized to incur reasonable expenses for promoting the business of Mercury, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors of Mercury's Chief Executive Officer, as from time to time adopted. Mercury will reimburse Coleman for all such reasonable expenses upon the presentation by Coleman, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Mercury to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participating in General Plans. Coleman shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Mercury shall from time-to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Coleman and his family under Mercury's medical insurance plans. Coleman shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Mercury to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Mercury from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Mercury to take special steps to insure the eligibility of Coleman or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. (b) Stock Options. Coleman shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Board of Directors. 3 (c) 2002 Management Stock Purchase Plan. (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan, Coleman may purchase from CFK Partners, an Illinois general partnership, up to 25,000 unregistered shares of the common stock of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase Price"), such purchase to be funded by Mercury. (ii) In the event Coleman voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or in the event Coleman's employment is terminated with or without "cause", as defined in Article 9 hereof (except pursuant to Article 11(a) of the Employment Agreement or as set forth below), or in the event Coleman dies or becomes disabled (hereinafter the "Date of Discharge"), Coleman or his estate shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that, in connection with Coleman's employment with Mercury, Coleman's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Coleman shall receive 10% of the original amount of stock purchased on the anniversary date of the Employment Agreement's execution and will be fully vested and eligible to vote those shares. Coleman shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Mercury shall be granted a secured interest as a creditor of Coleman in the event Coleman defaults in his obligation to Mercury as herein set forth and Mercury will designate an escrow to hold the shares underlying the remaining debt obligation. In the event Coleman terminates his employment pursuant to Article 11(a) of the Employment Agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his Employment Agreement, Coleman shall have no further obligation to repay Mercury all or any portion of the Purchase Price. While Coleman has any obligation to Mercury hereunder, Coleman shall be obligated to comply with directions of the Board of Directors of Mercury with respect to the voting of those shares held in escrow purchased by Coleman hereunder. (d) Vacation. Coleman shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Mercury's Right to Terminate For Cause (a) Cause. Mercury may at any time during the term of this Agreement discharge Coleman for "cause." The term "cause" is defined herein as Coleman's (i) misappropriation of corporate funds, fraud, embezzlement or other illegal conduct to the detriment of Mercury, (ii) negligence in the execution of his material assigned duties or Coleman's voluntary abandonment of his job for any reason other than disability; (iii) refusal or failure, after not less than 20 days written notice that such refusal or failure would constitute a default hereunder, to carry out any reasonable and material direction from the Board of Directors given to him in writing; (iv) conviction of a felony; (v) material breach or violation of the terms of this Agreement, which breach or violation shall not have been fully cured (as determined by the Board of Directors acting in good faith) by 4 Coleman within 20 days after receipt of written notice of the same from the Board of Directors; (vi) Coleman's death or disability (except that, in the event of Coleman's disability, Mercury shall, at Coleman's request, prior to discharge, grant Coleman a leave of absence of up to six months or such longer period of time as may be required by law); or (vii) Coleman's engagement in drug or alcohol abuse. Coleman shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors of Mercury. (b) No Rights Following Cause Termination. Following a termination of Coleman's employment with Mercury "for cause" pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Coleman pursuant to Article Sixth and Twelfth hereof); and (ii) Coleman shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Coleman asserts that his voluntary termination was actually a constructive termination, Mercury shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Coleman. Tenth: Termination Without Cause (a) Rights Following Termination Without Cause. Should Coleman be discharged by Mercury at any time during the term of this Agreement except as provided in Article Ninth, Mercury hereby agrees to pay Coleman within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement with a minimum of six (6) months base compensation. (b) No Additional Rights. Except as set forth above in paragraph (a) of this Article Tenth following a termination of Coleman's employment by Mercury other that pursuant to Article Ninth above and Article Eleventh below: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Coleman pursuant to Articles Sixth and Twelfth); and (ii) Coleman shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Eleventh: Right to Voluntary Termination by Coleman (a) Conditions for Termination by Coleman. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Mercury representing 50% or more of the total voting power of Mercury's then outstanding stock, without the written consent of the Board of Directors of Mercury; or 5 (ii) Mercury is acquired by another entity through the purchase of substantially all of its assets, the purchase of all of its outstanding voting securities or a combination thereof, without the consent of the Board of Directors of Mercury; or (iii) Mercury is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the consent of the Board of Directors of Mercury; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Mercury cease for any reason to constitute at least a majority thereof unless the election, or the nomination or election by Mercury's stockholders, of each new director of Mercury was approved by a vote of at least two-thirds of such directors of Mercury then still in office who were directors of Mercury at the beginning of any such period; then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), Coleman's duties are substantially altered or Coleman is demoted for cause, Coleman shall have the right and option to voluntarily terminate this Agreement upon written notice to Mercury. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Coleman pursuant to paragraph (a) of this Article Eleventh, Coleman shall be entitled to be paid by Mercury within thirty (30) days of such termination by Coleman, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Coleman over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Eleventh, following a voluntary termination of Coleman's employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Coleman pursuant to Articles Sixth and Twelfth); and (ii) Coleman shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Restrictive Covenant Coleman covenants and agrees that during the period commencing with the date hereof and ending six (6) months from the date Coleman's employment with Mercury is terminated for "cause" or by reason of Coleman's voluntary termination of employment from Mercury (the "Non-Compete Period"), Coleman will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial aviation, fuel sales, fixed base operations, or any business activities of the Companies existing on or developed subsequent to the date hereof. Coleman covenants and agrees that he will not, without the prior written consent of Mercury during the Non-Compete Period: (a) solicit any customer of 6 the Companies; (b) solicit any contracts which were either being solicited by, or which were under contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Mercury; or (c) induce any sales, operating, technical or other personnel of the Companies to leave the service, employ or business of the Companies. Coleman agrees that he will not violate this Article Eleventh: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or Coleman of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associated with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Coleman further agrees that doing or causing to be done any of the actions prohibited in this Article Eleventh by means of an indirect violation shall constitute a violation of this Article Eleventh as though violated by Coleman, subject to all of the remedies to Mercury provided for herein and as otherwise provided by law. Thirteenth: Arbitration; Governing Law. Any controversy or claim arising out of, or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the America Arbitration Association, and judgments upon the award rendered my be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Fourteenth: Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by certified mail to his residence, in the case of Coleman, or to its principal office, in the case of Mercury. Fifteenth: Waiver of Breach The waiver by Mercury of a breach of any provision of this Agreement by Coleman shall not operate or be construed as a waiver of any subsequent breach by Coleman. Sixteenth: Assignment The rights and obligations of Mercury under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Mercury. Seventeenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 7 Eighteenth: Equitable Relief; Partial Enforcement Mercury and Coleman have agreed that violation or breach of Articles Sixth and Eleventh will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief in addition to any other remedies provided at law. Mercury and Coleman have further agreed in the event that only a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Mercury and Coleman have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. By: /s/ Joseph A. Czyzyk ----------------------------------- Its: Chief Executive Officer /s/ Mark Coleman -------------------------------------- Mark Coleman 8 EX-10.3 5 a82137exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), and Mr. John L. Enticknap, residing at 1878 Edgemont, Cumming, Georgia 30131 (hereinafter referred to as "Enticknap"). W I T N E S S E T H: WHEREAS, Enticknap has been employed as Executive Vice President of Mercury since December 2000, and Chief Operating Officer of Mercury Air Centers, Inc. since November 1999; and WHEREAS, Mercury's Board of Directors (the "Board of Directors") would like to continue Enticknap's role as Executive Vice President of Mercury and Chief Operating Officer of Mercury Air Centers on the terms and conditions set forth in this Agreement; and WHEREAS, Enticknap wishes to accept these positions on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: First: Employment (a) Employment. Mercury hereby confirms and agrees that Enticknap will be appointed by the Board of Directors of Mercury to continue serving as an Executive Vice President of Mercury and Chief Operating Officer of Mercury Air Centers. In his capacity as Executive Vice President of Mercury and Chief Operating Officer of Mercury Air Centers, Enticknap shall continue to report directly to Mercury's Chief Executive Officer. (b) Enticknap's Acceptance. Enticknap hereby accepts his appointments as Executive Vice President of Mercury and Chief Operating Officer of Mercury Air Centers. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin on the date hereof and shall terminate three years thereafter. If Enticknap is then employed by Mercury, on each successive anniversary date, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be one (1) year; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Enticknap under this Agreement, Mercury shall pay Enticknap a salary of $181,500 per year, payable in semi-monthly installments in accordance with Mercury's standard payroll practices. From time to time, the salary payable to Enticknap may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Enticknap's annual salary, as from time to time adjusted by the Compensation Committee, is hereinafter referred to as "Base Compensation". (b) Bonus Plans. The Board of Directors may, at its discretion, establish a bonus plan for Enticknap. Fourth: Extent of Services Enticknap shall devote his entire time, attention and energies to the business of Mercury (and its various subsidiaries) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Enticknap from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Enticknap in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Mercury, where Enticknap's investment does not represent in excess of five percent (5%) of the outstanding equity of such company or entity. Fifth: Working Facilities Enticknap shall be furnished with a private office and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Enticknap shall be employed at the Mercury Air Centers, Inc. offices of Mercury located in Atlanta, Georgia and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Mercury and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non-technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Proprietary Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. 2 (b) Access to Proprietary Information. The parties acknowledge that Enticknap has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to others. Except as directed by Mercury in writing or verbally, Enticknap shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Mercury or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Enticknap acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Enticknap is authorized to incur reasonable expenses for promoting the business of Mercury, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors of Mercury's Chief Executive Officer, as from time to time adopted. Mercury will reimburse Enticknap for all such reasonable expenses upon the presentation by Enticknap, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Mercury to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participating in General Plans. Enticknap shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Mercury shall from time-to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Enticknap and his family under Mercury's medical insurance plans. Enticknap shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Mercury to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Mercury from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Mercury to take special steps to insure the eligibility of Enticknap or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. (b) Stock Options. Enticknap shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Board of Directors. 3 (c) 2002 Management Stock Purchase Plan. (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan, Enticknap may purchase from CFK Partners, an Illinois general partnership, up to 30,000 unregistered shares of the common stock of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase Price"), such purchase to be funded by Mercury. (ii) In the event Enticknap voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or in the event Enticknap's employment is terminated with or without "cause", as defined in Article 9 hereof (except pursuant to Article 11(a) of the Employment Agreement or as set forth below), or in the event Enticknap dies or becomes disabled (hereinafter the "Date of Discharge"), Enticknap or his estate shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that, in connection with Enticknap's employment with Mercury, Enticknap's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Enticknap shall receive 10% of the original amount of stock purchased on the anniversary date of the Employment Agreement's execution and will be fully vested and eligible to vote those shares. Enticknap shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Mercury shall be granted a secured interest as a creditor of Enticknap in the event Enticknap defaults in his obligation to Mercury as herein set forth and Mercury will designate an escrow to hold the shares underlying the remaining debt obligation In the event Enticknap terminates his employment pursuant to Article 11(a) of the Employment Agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his Employment Agreement, Enticknap shall have no further obligation to repay Mercury all or any portion of the Purchase Price. While Enticknap has any obligation to Mercury hereunder, Enticknap shall be obligated to comply with directions of the Board of Directors of Mercury with respect to the voting of those shares held in escrow purchased by Enticknap hereunder. (d) Vacation. Enticknap shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Mercury's Right to Terminate For Cause (a) Cause. Mercury may at any time during the term of this Agreement discharge Enticknap for "cause." The term "cause" is defined herein as Enticknap's (i) misappropriation of corporate funds, fraud, embezzlement or other illegal conduct to the detriment of Mercury, (ii) negligence in the execution of his material assigned duties or Enticknap's voluntary abandonment of his job for any reason other than disability; (iii) refusal or failure, after not less than 20 days written notice that such refusal or failure would constitute a default hereunder, to carry out any reasonable 4 and material direction from the Board of Directors given to him in writing; (iv) conviction of a felony; (v) material breach or violation of the terms of this Agreement, which breach or violation shall not have been fully cured (as determined by the Board of Directors acting in good faith) by Enticknap within 20 days after receipt of written notice of the same from the Board of Directors; (vi) Enticknap's death or disability (except that, in the event of Enticknap's disability, Mercury shall, at Enticknap's request, prior to discharge, grant Enticknap a leave of absence of up to six months or such longer period of time as may be required by law); or (vii) Enticknap's engagement in drug or alcohol abuse. Enticknap shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors of Mercury. (b) No Rights Following Cause Termination. Following a termination of Enticknap's employment with Mercury "for cause" pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Enticknap pursuant to Article Sixth and Twelfth hereof); and (ii) Enticknap shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Enticknap asserts that his voluntary termination was actually a constructive termination, Mercury shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Enticknap. Tenth: Termination Without Cause (a) Rights Following Termination Without Cause. Should Enticknap be discharged by Mercury at any time during the term of this Agreement except as provided in Article Ninth, Mercury hereby agrees to pay Enticknap within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement, with a minimum of six (6) months base compensation. (b) No Additional Rights. Except as set forth above in paragraph (a) of this Article Tenth following a termination of Enticknap's employment by Mercury other that pursuant to Article Ninth above and Article Eleventh below: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Enticknap pursuant to Articles Sixth and Twelfth); and (ii) Enticknap shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Eleventh: Right to Voluntary Termination by Enticknap (a) Conditions for Termination by Enticknap. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Mercury representing 5 50% or more of the total voting power of Mercury's then outstanding stock, without the written consent of the Board of Directors of Mercury; or (ii) Mercury is acquired by another entity through the purchase of substantially all of its assets, the purchase of all of its outstanding voting securities or a combination thereof, without the consent of the Board of Directors of Mercury; or (iii) Mercury is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the consent of the Board of Directors of Mercury; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Mercury cease for any reason to constitute at least a majority thereof unless the election, or the nomination or election by Mercury's stockholders, of each new director of Mercury was approved by a vote of at least two-thirds of such directors of Mercury then still in office who were directors of Mercury at the beginning of any such period; then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), Enticknap's duties are substantially altered or Enticknap is demoted for cause, Enticknap shall have the right and option to voluntarily terminate this Agreement upon written notice to Mercury. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Enticknap pursuant to paragraph (a) of this Article Eleventh, Enticknap shall be entitled to be paid by Mercury within thirty (30) days of such termination by Enticknap, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Enticknap over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Eleventh, following a voluntary termination of Enticknap's employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Enticknap pursuant to Articles Sixth and Twelfth); and (ii) Enticknap shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Restrictive Covenant Enticknap covenants and agrees that during the period commencing with the date hereof and ending six (6) months from the date Enticknap's employment with Mercury is terminated for "cause" or by reason of Enticknap's voluntary termination of employment from Mercury (the "Non-Compete Period"), Enticknap will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial 6 aviation, fuel sales, fixed base operations, or any business activities of the Companies existing on or developed subsequent to the date hereof. Enticknap covenants and agrees that he will not, without the prior written consent of Mercury during the Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any contracts which were either being solicited by, or which were under contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Mercury; or (c) induce any sales, operating, technical or other personnel of the Companies to leave the service, employ or business of the Companies. Enticknap agrees that he will not violate this Article Eleventh: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or Enticknap of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associated with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Enticknap further agrees that doing or causing to be done any of the actions prohibited in this Article Eleventh by means of an indirect violation shall constitute a violation of this Article Eleventh as though violated by Enticknap, subject to all of the remedies to Mercury provided for herein and as otherwise provided by law. Thirteenth: Arbitration; Governing Law. Any controversy or claim arising out of, or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the America Arbitration Association, and judgments upon the award rendered my be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Fourteenth: Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by certified mail to his residence, in the case of Enticknap, or to its principal office, in the case of Mercury. Fifteenth: Waiver of Breach The waiver by Mercury of a breach of any provision of this Agreement by Enticknap shall not operate or be construed as a waiver of any subsequent breach by Enticknap. Sixteenth: Assignment The rights and obligations of Mercury under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Mercury. Seventeenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the 7 provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. Eighteenth: Equitable Relief; Partial Enforcement Mercury and Enticknap have agreed that violation or breach of Articles Sixth and Eleventh will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief in addition to any other remedies provided at law. Mercury and Enticknap have further agreed in the event that only a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Mercury and Enticknap have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. By: /s/ Joseph A. Czyzyk ----------------------------------- Its: Chief Executive Officer /s/ John L. Enticknap -------------------------------------- John L. Enticknap 8 EX-10.4 6 a82137exv10w4.txt EXHIBIT 10.4 EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), and Mr. Robert Schlax, residing at 15 Windham Lane, Laguna Miguel, California 92677 (hereinafter referred to as "Schlax"). W I T N E S S E T H: WHEREAS, Schlax has been employed as Vice President of Finance of Mercury since February 2002 and Treasurer since March 2002; and WHEREAS, Mercury's Board of Directors (the "Board of Directors") would like to continue Schlax's role as Vice President of Finance and Treasurer of Mercury on the terms and conditions set forth in this Agreement; and WHEREAS, Schlax wishes to accept this position on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: First: Employment (a) Employment. Mercury hereby confirms and agrees that Schlax will be appointed by the Board of Directors of Mercury to continue serving as the Vice President of Finance and Treasurer of Mercury. In his capacity as Vice President of Finance and Treasurer of Mercury, Schlax shall continue to report directly to Mercury's Chief Executive Officer. (b) Schlax's Acceptance. Schlax hereby accepts his appointments as Vice President of Finance and Treasurer of Mercury. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin on the date hereof and shall terminate three years thereafter. If Schlax is then employed by Mercury, on each successive anniversary date, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be one (1) year; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Schlax under this Agreement, Mercury shall pay Schlax a salary of $170,000 per year, payable in semi-monthly installments in accordance with Mercury's standard payroll practices. From time to time, the salary payable to Schlax may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Schlax's annual salary, as from time to time adjusted by the Compensation Committee, is hereinafter referred to as "Base Compensation". (b) Bonus Plans. The Board of Directors may, at its discretion, establish a bonus plan for Schlax. Fourth: Extent of Services Schlax shall devote his entire time, attention and energies to the business of Mercury (and its various subsidiaries) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Schlax from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Schlax in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Mercury, where Schlax's investment does not represent in excess of five percent (5%) of the outstanding equity of such company or entity. Fifth: Working Facilities Schlax shall be furnished with a private office and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Schlax shall be employed at the principal offices of Mercury located in Los Angeles, California and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Mercury and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non-technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Proprietary Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. 2 (b) Access to Proprietary Information. The parties acknowledge that Schlax has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to others. Except as directed by Mercury in writing or verbally, Schlax shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Mercury or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Schlax acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Schlax is authorized to incur reasonable expenses for promoting the business of Mercury, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors of Mercury's Chief Executive Officer, as from time to time adopted. Mercury will reimburse Schlax for all such reasonable expenses upon the presentation by Schlax, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Mercury to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participating in General Plans. Schlax shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Mercury shall from time-to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Schlax and his family under Mercury's medical insurance plans. Schlax shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Mercury to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Mercury from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Mercury to take special steps to insure the eligibility of Schlax or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. (b) Stock Options. Schlax shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Board of Directors. 3 (c) 2002 Management Stock Purchase Plan. (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan, Schlax may purchase from CFK Partners, an Illinois general partnership, up to 25,000 unregistered shares of the common stock of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase Price"), such purchase to be funded by Mercury. (ii) In the event Schlax voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or in the event Schlax's employment is terminated with or without "cause", as defined in Article 9 hereof (except pursuant to Article 11(a) of the Employment Agreement or as set forth below), or in the event Schlax dies or becomes disabled (hereinafter the "Date of Discharge"), Schlax or his estate shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that, in connection with Schlax's employment with Mercury, Schlax's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Schlax shall receive 10% of the original amount of stock purchased on the anniversary date of the Employment Agreement's execution and will be fully vested and eligible to vote those shares. Schlax shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Mercury shall be granted a secured interest as a creditor of Schlax in the event Schlax defaults in his obligation to Mercury as herein set forth and Mercury will designate an escrow to hold the shares underlying the remaining debt obligation. In the event Schlax terminates his employment pursuant to Article 11(a) of the Employment Agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his Employment Agreement, Schlax shall have no further obligation to repay Mercury all or any portion of the Purchase Price. While Schlax has any obligation to Mercury hereunder, Schlax shall be obligated to comply with directions of the Board of Directors of Mercury with respect to the voting of those shares held in escrow purchased by Schlax hereunder. (d) Vacation. Schlax shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Mercury's Right to Terminate For Cause (a) Cause. Mercury may at any time during the term of this Agreement discharge Schlax for "cause." The term "cause" is defined herein as Schlax's (i) misappropriation of corporate funds, fraud, embezzlement or other illegal conduct to the detriment of Mercury, (ii) negligence in the execution of his material assigned duties or Schlax's voluntary abandonment of his job for any reason other than disability; (iii) refusal or failure, after not less than 20 days written notice that such refusal or failure would constitute a default hereunder, to carry out any reasonable and material direction from the Board of Directors given to him in writing; (iv) conviction of a felony; (v) material breach or violation of the terms of this Agreement, which breach or violation shall not have been fully cured (as determined by the Board of Directors acting in good faith) by Schlax within 20 days after receipt of written notice of the same from the Board of Directors; (vi) Schlax's death or 4 disability (except that, in the event of Schlax's disability, Mercury shall, at Schlax's request, prior to discharge, grant Schlax a leave of absence of up to six months or such longer period of time as may be required by law); or (vii) Schlax's engagement in drug or alcohol abuse. Schlax shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors of Mercury. (b) No Rights Following Cause Termination. Following a termination of Schlax's employment with Mercury "for cause" pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Schlax pursuant to Article Sixth and Twelfth hereof); and (ii) Schlax shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Schlax asserts that his voluntary termination was actually a constructive termination, Mercury shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Schlax. Tenth: Termination Without Cause (a) Rights Following Termination Without Cause. Should Schlax be discharged by Mercury at any time during the term of this Agreement except as provided in Article Ninth, Mercury hereby agrees to pay Schlax within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement, with a minimum of six (6) months base compensation. (b) No Additional Rights. Except as set forth above in paragraph (a) of this Article Tenth following a termination of Schlax's employment by Mercury other that pursuant to Article Ninth above and Article Eleventh below: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Schlax pursuant to Articles Sixth and Twelfth); and (ii) Schlax shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Eleventh: Right to Voluntary Termination by Schlax (a) Conditions for Termination by Schlax. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Mercury representing 50% or more of the total voting power of Mercury's then outstanding stock, without the written consent of the Board of Directors of Mercury; or 5 (ii) Mercury is acquired by another entity through the purchase of substantially all of its assets, the purchase of all of its outstanding voting securities or a combination thereof, without the consent of the Board of Directors of Mercury; or (iii) Mercury is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the consent of the Board of Directors of Mercury; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Mercury cease for any reason to constitute at least a majority thereof unless the election, or the nomination or election by Mercury's stockholders, of each new director of Mercury was approved by a vote of at least two-thirds of such directors of Mercury then still in office who were directors of Mercury at the beginning of any such period; then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), Schlax's duties are substantially altered or Schlax is demoted for cause, Schlax shall have the right and option to voluntarily terminate this Agreement upon written notice to Mercury. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Schlax pursuant to paragraph (a) of this Article Eleventh, Schlax shall be entitled to be paid by Mercury within thirty (30) days of such termination by Schlax, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Schlax over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Eleventh, following a voluntary termination of Schlax's employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Schlax pursuant to Articles Sixth and Twelfth); and (ii) Schlax shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Restrictive Covenant Schlax covenants and agrees that during the period commencing with the date hereof and ending six (6) months from the date Schlax's employment with Mercury is terminated for "cause" or by reason of Schlax's voluntary termination of employment from Mercury (the "Non-Compete Period"), Schlax will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial aviation, fuel sales, fixed base operations, or any business activities of the Companies existing on or developed subsequent to the date hereof. Schlax covenants and agrees that he will not, without the prior written consent of Mercury during the Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any contracts which were either being solicited by, or which were under 6 contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Mercury; or (c) induce any sales, operating, technical or other personnel of the Companies to leave the service, employ or business of the Companies. Schlax agrees that he will not violate this Article Eleventh: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or Schlax of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associated with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Schlax further agrees that doing or causing to be done any of the actions prohibited in this Article Eleventh by means of an indirect violation shall constitute a violation of this Article Eleventh as though violated by Schlax, subject to all of the remedies to Mercury provided for herein and as otherwise provided by law. Thirteenth: Arbitration; Governing Law. Any controversy or claim arising out of, or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the America Arbitration Association, and judgments upon the award rendered my be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Fourteenth: Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by certified mail to his residence, in the case of Schlax, or to its principal office, in the case of Mercury. Fifteenth: Waiver of Breach The waiver by Mercury of a breach of any provision of this Agreement by Schlax shall not operate or be construed as a waiver of any subsequent breach by Schlax. Sixteenth: Assignment The rights and obligations of Mercury under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Mercury. Seventeenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 7 Eighteenth: Equitable Relief; Partial Enforcement Mercury and Schlax have agreed that violation or breach of Articles Sixth and Eleventh will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief in addition to any other remedies provided at law. Mercury and Schlax have further agreed in the event that only a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Mercury and Schlax have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. By: /s/ Joseph A. Czyzyk ----------------------------------- Its: Chief Executive Officer /s/ Robert Schlax -------------------------------------- Robert Schlax 8 EX-10.5 7 a82137exv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), and Mr. Steve Antonoff, residing at 119 South Helberta Avenue, #7, Redondo Beach, California 90277 (hereinafter referred to as "Antonoff"). W I T N E S S E T H: WHEREAS, Antonoff has been employed as Vice President of Human Services of Mercury; and WHEREAS, Mercury's Board of Directors (the "Board of Directors") would like to continue Antonoff's role as Vice President of Human Resources of Mercury on the terms and conditions set forth in this Agreement; and WHEREAS, Antonoff wishes to accept this position on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties agree as follows: First: Employment (a) Employment. Mercury hereby confirms and agrees that Antonoff will be appointed by the Board of Directors of Mercury to continue serving as an Vice President of Human Resources of Mercury. In his capacity as Vice President of Human Resources of Mercury, Antonoff shall continue to report directly to Mercury's Chief Executive Officer. (b) Antonoff's Acceptance. Antonoff hereby accepts his appointments as Vice President of Human Resources of Mercury. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin on the date hereof and shall terminate three years thereafter. If Antonoff is then employed by Mercury, on each successive anniversary date, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be one (1) year; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Antonoff under this Agreement, Mercury shall pay Antonoff a salary of $116,600 per year, payable in semi-monthly installments in accordance with Mercury's standard payroll practices. From time to time, the salary payable to Antonoff may be adjusted at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Antonoff's annual salary, as from time to time adjusted by the Compensation Committee, is hereinafter referred to as "Base Compensation". (b) Bonus Plans. The Board of Directors may, at its discretion, establish a bonus plan for Antonoff. Fourth: Extent of Services Antonoff shall devote his entire time, attention and energies to the business of Mercury (and its various subsidiaries) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Antonoff from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Antonoff in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Mercury, where Antonoff's investment does not represent in excess of five percent (5%) of the outstanding equity of such company or entity. Fifth: Working Facilities Antonoff shall be furnished with a private office and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Antonoff shall be employed at the principal offices of Mercury located in Los Angeles, California and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Mercury and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non-technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Proprietary Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. 2 (b) Access to Proprietary Information. The parties acknowledge that Antonoff has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to others. Except as directed by Mercury in writing or verbally, Antonoff shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Mercury or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Antonoff acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Antonoff is authorized to incur reasonable expenses for promoting the business of Mercury, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors of Mercury's Chief Executive Officer, as from time to time adopted. Mercury will reimburse Antonoff for all such reasonable expenses upon the presentation by Antonoff, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Mercury to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participating in General Plans. Antonoff shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Mercury shall from time-to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Antonoff and his family under Mercury's medical insurance plans. Antonoff shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Mercury to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Mercury from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Mercury to take special steps to insure the eligibility of Antonoff or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. (b) Stock Options. Antonoff shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Board of Directors. (c) 2002 Management Stock Purchase Plan. 3 (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan, Antonoff may purchase from CFK Partners, an Illinois general partnership, up to 25,000 unregistered shares of the common stock of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase Price"), such purchase to be funded by Mercury. (ii) In the event Antonoff voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or in the event Antonoff's employment is terminated with or without "cause", as defined in Article 9 hereof (except pursuant to Article 11(a) of the Employment Agreement or as set forth below), or in the event Antonoff dies or becomes disabled (hereinafter the "Date of Discharge"), Antonoff or his estate shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that, in connection with Antonoff's employment with Mercury, Antonoff's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Antonoff shall receive 10% of the original amount of stock purchased on the anniversary date of the Employment Agreement's execution and will be fully vested and eligible to vote those shares. Antonoff shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Mercury shall be granted a secured interest as a creditor of Antonoff in the event Antonoff defaults in his obligation to Mercury as herein set forth and Mercury will designate an escrow to hold the shares underlying the remaining debt obligation. In the event Antonoff terminates his employment pursuant to Article 11(a) of the Employment Agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his Employment Agreement, Antonoff shall have no further obligation to repay Mercury all or any portion of the Purchase Price. While Antonoff has any obligation to Mercury hereunder, Antonoff shall be obligated to comply with directions of the Board of Directors of Mercury with respect to the voting of those shares held in escrow purchased by Antonoff hereunder. (d) Vacation. Antonoff shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Mercury's Right to Terminate For Cause (a) Cause. Mercury may at any time during the term of this Agreement discharge Antonoff for "cause." The term "cause" is defined herein as Antonoff's (i) misappropriation of corporate funds, fraud, embezzlement or other illegal conduct to the detriment of Mercury, (ii) negligence in the execution of his material assigned duties or Antonoff's voluntary abandonment of his job for any reason other than disability; (iii) refusal or failure, after not less than 20 days written notice that such refusal or failure would constitute a default hereunder, to carry out any reasonable and material direction from the Board of Directors given to him in writing; (iv) conviction of a felony; (v) material breach or violation of the terms of this Agreement, which breach or violation shall not have been fully cured (as determined by the Board of Directors acting in good faith) by Antonoff within 20 days after receipt of written notice of the same from the Board of Directors; (vi) Antonoff's death or disability (except that, in the event of Antonoff's disability, Mercury shall, at 4 Antonoff's request, prior to discharge, grant Antonoff a leave of absence of up to six months or such longer period of time as may be required by law); or (vii) Antonoff's engagement in drug or alcohol abuse. Antonoff shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors of Mercury. (b) No Rights Following Cause Termination. Following a termination of Antonoff's employment with Mercury "for cause" pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Antonoff pursuant to Article Sixth and Twelfth hereof); and (ii) Antonoff shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Antonoff asserts that his voluntary termination was actually a constructive termination, Mercury shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Antonoff. Tenth: Termination Without Cause (a) Rights Following Termination Without Cause. Should Antonoff be discharged by Mercury at any time during the term of this Agreement except as provided in Article Ninth, Mercury hereby agrees to pay Antonoff within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement, with a minimum of six (6) months base compensation. (b) No Additional Rights. Except as set forth above in paragraph (a) of this Article Tenth following a termination of Antonoff's employment by Mercury other that pursuant to Article Ninth above and Article Eleventh below: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Antonoff pursuant to Articles Sixth and Twelfth); and (ii) Antonoff shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Eleventh: Right to Voluntary Termination by Antonoff (a) Conditions for Termination by Antonoff. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Mercury representing 50% or more of the total voting power of Mercury's then outstanding stock, without the written consent of the Board of Directors of Mercury; or (ii) Mercury is acquired by another entity through the purchase of substantially all of its assets, the purchase of all of its outstanding voting securities or a combination thereof, without the consent of the Board of Directors of Mercury; or 5 (iii) Mercury is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the consent of the Board of Directors of Mercury; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Mercury cease for any reason to comstitute at least a majority thereof unless the election, or the nomination or election by Mercury's stockholders, of each new director of Mercury was approved by a vote of at least two-thirds of such directors of Mercury then still in office who were directors of Mercury at the beginning of any such period; then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), Antonoff's duties are substantially altered or Antonoff is demoted for cause, Antonoff shall have the right and option to voluntarily terminate this Agreement upon written notice to Mercury. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Antonoff pursuant to paragraph (a) of this Article Eleventh, Antonoff shall be entitled to be paid by Mercury within thirty (30) days of such termination by Antonoff, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Antonoff over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Eleventh, following a voluntary termination of Antonoff's employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Antonoff pursuant to Articles Sixth and Twelfth); and (ii) Antonoff shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Restrictive Covenant Antonoff covenants and agrees that during the period commencing with the date hereof and ending six (6) months from the date Antonoff's employment with Mercury is terminated for "cause" or by reason of Antonoff's voluntary termination of employment from Mercury (the "Non-Compete Period"), Antonoff will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial aviation, fuel sales, fixed base operations, or any business activities of the Companies existing on or developed subsequent to the date hereof. Antonoff covenants and agrees that he will not, without the prior written consent of Mercury during the Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any contracts which were either being solicited by, or which were under contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Mercury; or (c) induce any sales, operating, 6 technical or other personnel of the Companies to leave the service, employ or business of the Companies. Antonoff agrees that he will not violate this Article Eleventh: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or Antonoff of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associated with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Antonoff further agrees that doing or causing to be done any of the actions prohibited in this Article Eleventh by means of an indirect violation shall constitute a violation of this Article Eleventh as though violated by Antonoff, subject to all of the remedies to Mercury provided for herein and as otherwise provided by law. Thirteenth: Arbitration; Governing Law. Any controversy or claim arising out of, or relating to this Agreement or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the America Arbitration Association, and judgments upon the award rendered my be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Fourteenth: Notices Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by certified mail to his residence, in the case of Antonoff, or to its principal office, in the case of Mercury. Fifteenth: Waiver of Breach The waiver by Mercury of a breach of any provision of this Agreement by Antonoff shall not operate or be construed as a waiver of any subsequent breach by Antonoff. Sixteenth: Assignment The rights and obligations of Mercury under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Mercury. Seventeenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. Eighteenth: Equitable Relief; Partial Enforcement Mercury and Antonoff have agreed that violation or breach of Articles Sixth and Eleventh will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief 7 in addition to any other remedies provided at law. Mercury and Antonoff have further agreed in the event that only a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Mercury and Antonoff have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. By: /s/ Joseph A. Czyzyk ----------------------------------- Its: Chief Executive Officer /s/ Steve Antonoff -------------------------------------- Steve Antonoff 8 EX-10.6 8 a82137exv10w6.txt EXHIBIT 10.6 EXHIBIT 10.6 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP, INC., a Delaware corporation having its principal offices at 5456 McConnell Avenue, Los Angeles, California 9OO66 (hereinafter referred to as "Employer"), and Mr. Joseph A. Czyzyk, residing at 8141 Cabora Drive, Playa Del Rey, California 90293 (hereinafter referred to as "Employee"). WITNESSETH: WHEREAS, Employer and Employee entered into that certain Employment Agreement dated November 15, 1994 as amended on October 15, 1998, April 12, 1999, and September 11, 2000 (as amended, the "Employment Agreement"); and WHEREAS, Employer and Employee wish to amend and restate the Employment Agreement. NOW, THEREFORE, the parties hereby enter into an amended and restated employment agreement, as follows: First: Employment; Appointment as a Director; Expression of Intent (a) Employment. Employer hereby confirms and agrees that Employee has been elected by the Board of Directors to act as Employer's President/Chief Executive Officer, and, subject to the directions of the Board of Directors, shall have general charge of the business, affairs and property of Employer; charge of implementing strategic direction for Employer; general supervision over all of Employer's officers, employees and agents; subject to the direction of the Board of Directors, shall exercise all powers and perform all duties incident to the office of President and shall exercise such other powers and perform such other duties as from time-to-time may be assigned to him by the Board. (b) Appointment as Director. The Board of Directors agrees to maintain Employee as one of the candidates nominated by the Board of Directors in connection with each annual meeting of shareholders for so long as he serves as the Chief Executive Officer/President of Employer. (c) Employee's Acceptance. Employee hereby accepts his appointments and elections as President/Chief Executive Officer of Employer, and a director of Employer. Second: Term Subject to the provisions governing termination as hereinafter provided, the term of this Agreement shall begin effective November 15, 2001 and shall terminate on November 15, 2004. If Employee is then employed by Employer, on each November 15 beginning November 15, 2002, the term of this Agreement shall be automatically extended for one additional year such that the remaining term of the Agreement shall then be three (3) years; provided, however, that upon written notice given by either party at least thirty (30) days prior to the next automatic extension, the automatic extension right may be terminated. Third: Compensation (a) Base Compensation. For all services rendered by Employee to Employer under this Agreement, Employer shall pay Employee a salary of $520,000 per year, payable in semi-monthly installments in accordance with Employer's standard payroll practices. From time to time, the salary payable to Employee may be increased at the sole discretion of the Compensation Committee of the Board of Directors (the "Compensation Committee"). Employee's annual salary, as from time to time increased by the Compensation Committee, is hereinafter referred to as "Base Compensation." (b) Bonus Plans. In addition, the Compensation Committee has enacted the following Bonus Plan for Employee, which shall be maintained in effect during the term of this Agreement. For purposes of the bonus plan, EBIT shall be defined as Operating Income of Employer on a consolidated basis minus Sales and General Administrative Expense and Depreciation of Employer on a consolidated basis. Employee shall receive a bonus (i) under Part I of the bonus plan, equal to 25% of his base compensation if EBIT for the fiscal year in question exceeds the average EBIT for the prior three fiscal years; and (ii) under Part II of the bonus plan, equal to 4.166% of the amount by which EBIT for such fiscal year exceeds the average of EBIT for the prior three fiscal years. Fourth: Extent of Services Employee shall devote his entire time, attention and energies to the business of Employer (and its various subsidiaries on terms and conditions as may be determined) and shall not during the term of this Agreement be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Employee from investing his assets in companies or other entities in such form or manner as will not require any services on the part of Employee in the operation of the affairs of such companies or entities in which such investments are made, and, with respect to companies or other entities which are competitors of Employer, where Employee's investment does not represent in excess of Ten Percent (10%) of the outstanding equity of such company or entity, a loan in excess of Ten Percent (10%) of the net assets of such company or entity or any combination of the foregoing totaling Ten Percent (10%). Fifth: Working Facilities -2- Employee shall be furnished with a private office, secretarial help and other facilities and services reasonably suitable to his position and adequate for the performance of his duties. Employee shall be employed at Employer's principal executive offices in Los Angeles, California and shall travel to the extent necessary to fulfill his duties in his discretion. Sixth: Disclosure of Information (a) Generally. The parties acknowledge that Employer and its affiliates (individually and collectively, the "Companies"), have developed and intend to continue the development of and to formulate, acquire and use commercially valuable technical and non- technical information, design and specification documents, concepts, technology, know-how, improvements, proposals, patent applications, techniques, marketing plans, strategies, forecasts, inventions (not limited by the definition of an invention contained in the United States Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade Secrets Act) and processes which are considered proprietary by the Companies, particularly including, without limitation, customer and supplier lists, books and records, computer programs, pricing information and business plans (collectively, the "Propriety Information"). It is necessary for the Companies to protect the Proprietary Information by patents or copyrights or by holding it secret and confidential. (b) Access to Proprietary Information. The parties acknowledge that Employee has access to the Proprietary Information and that the disclosure or misuse of such Proprietary Information could irreparably damage the Companies and/or their respective clients or customers. (c) Nondisclosure to Others. Except as directed by Employer in writing or verbally, Employee shall not at any time during or after the Term disclose any Proprietary Information to any person whatsoever, examine or make copies of any reports or other documents, papers, memoranda or extracts for use other than in connection with his duties with Employer or utilize for his own benefit or for the benefit of any other party any such Proprietary Information and will use reasonable diligence to maintain the confidential, secret or proprietary character of all Proprietary Information. (d) Survivability. Employee acknowledges that his obligations hereunder shall continue beyond the Term with respect to any Proprietary Information (as defined in Article Sixth, paragraph (a) hereof) which came into his possession during the Term. Seventh: Expenses Employee is authorized to incur reasonable expenses for promoting the business of Employer, including expenses for entertainment, travel and similar items but only in accordance with the policies of the Board of Directors or Employer's Chief Executive Officer, as from time to time adopted. Employer will reimburse Employee for all such -3- reasonable expenses upon the presentation by Employee, from time to time, of an itemized account and documentation of such expenditures in sufficient detail to allow Employer to claim an income tax deduction for each paid item, if such item is deductible. Eighth: Fringe Benefits (a) Participation in General Plans. Subject to the provisions of paragraph (b) below, Employee shall have such employee benefits (including medical insurance, life insurance, 401(k) and disability insurance plans) as Employer shall from time- to-time establish, promulgate or keep in effect for the benefit of its management level employees. Such benefits will include company paid medical insurance for Employee and his family under Employer's medical insurance plans. Employee shall be required to comply with, and be entitled to benefits only in accordance with, the terms and conditions of such plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall be construed to require Employer to establish any life, disability or medical insurance plans not in existence on the date hereof, to continue any plans in existence on the date hereof, to prevent Employer from modifying and/or terminating any of the plans in existence on the date hereof or otherwise require Employer to take special steps to insure the eligibility of Employee or his dependents under the provisions of such plans, and no such act or omission shall be deemed to affect this Agreement or to require modification of the compensation, additional benefit or other provisions contained herein. The provisions of this paragraph (a) of Article Eighth shall not limit or modify Employee's rights with respect to life insurance and payment following disability specifically set forth in this Agreement. (b) Stock Options. Employee shall be entitled to the grant of stock options as from time to time determined in the sole discretion of the Compensation Committee. Notwithstanding any other provision of this Agreement, any options granted to Employee shall be exercisable for a minimum of Ninety (90) days following his termination as set forth in the Existing Option agreement. (c) 2002 Management Stock Purchase Plan. (i) By virtue of his eligibility to participate in the 2002 Management Stock Purchase Plan (the "Plan"), Employee may purchase from CFK Partners, an Illinois general partnership, up to 387,650 unregistered shares (the "Shares") of the common stock of Employer, $0.01 par value, at a price of $7.50 per share, such purchase to be funded by the Employer. (ii) In the event Employee voluntarily leaves the full- time employment of Employer or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Employer, or Employee is discharged with or without cause (except for a termination pursuant to Article 12(a) hereof or as otherwise provided herein) (hereinafter the "Date of Discharge"), Employee shall be obligated to repay the -4- sums provided by Employer hereunder, provided, however, that Employee's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year beginning March 1, 2002 (so that if for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Czyzyk shall have no obligation to repay Mercury if he remains employed by Mercury after March 1, 2012. Employer shall be granted a secured interest as a creditor of Employee in the event Employee defaults in his obligation to repay Employer as herein set forth. In the event Employee terminates his employment pursuant to Article 12(a) hereof or is terminated by Employer for any reason following an event set forth in Article 12(a) hereof, or in the event Employee dies or becomes disabled, Employee shall have no further obligation to repay Employer all or any portion of the purchase price of the shares purchased pursuant to the Plan. (d) Vacation. Employee shall be entitled each year to a vacation of four (4) weeks, during which time his compensation shall be paid in full. Ninth: Disability (a) Rights Following Disability. If Employee is unable to perform his services by reason of illness or incapacity ("Disabled") for a period of more than six (6) weeks as determined in the reasonable discretion of Employer's Chief Executive Officer, the compensation otherwise payable to him during the continued period of such illness or incapacity shall be reduced by fifty (50%) percent. Unless this Agreement has been terminated prior thereto, Employee's full compensation shall be reinstated effective and commencing on the date of his return to employment and the discharge of his full duties hereunder. Notwithstanding anything herein to the contrary, Employer may terminate this Agreement at any time after Employee shall be Disabled for a period of more than twelve (12) months as determined in the reasonable discretion of Employer's Chief Executive Officer. Following any such termination: (i) Employer shall continue to pay Employee's Base Compensation for one-year as severance pay or such lesser period as may remain on the term of this Agreement; and (ii) Employer shall pay to Employee a pro rated bonus for the portion of the fiscal year during which he was employed prior to such termination. For purposes of the foregoing pro ration, the bonus for the fiscal year in which the termination occurs shall be calculated in accordance with the terms of and on the schedule set forth in Article Third of this Agreement. Following such calculation, the bonus for the total fiscal year shall be multiplied by a fraction, the numerator of which shall be the number of days in the fiscal year of termination during which Employee was employed by Employer, and the denominator of which shall be 365. The result of such calculation shall determine the pro rated bonus paid to Employee. For purposes of this Article Ninth all amounts paid to Employee under any long- term disability insurance policy maintained by Employer shall be credited as if paid by Employer to Employee to Employee and after giving effect to any federal or state income tax savings resulting from the payment under a disability policy (as opposed to as taxable salary). -5- (b) No Additional Rights. Except as set forth above in paragraph (a), clauses (i) and (ii) of this Article Ninth, following a termination of Employee's employment with Employer pursuant to paragraph (a) of this Article Ninth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Employee pursuant to Articles Sixth and Fourteenth); and (ii) Employee shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Tenth: Employer's Right to Terminate For Cause (a) Cause. Employer may at any time during the term of this Agreement discharge Employee for "cause." The term "cause" is defined herein as Employee's acts of misappropriation of corporate funds, embezzlement, negligence or Employee's voluntary abandonment of his job (other than pursuant to Article Twelfth) or a material breach of this Agreement. Employee shall be terminated only following a finding of "cause" in a resolution adopted by majority vote of the Board of Directors, with Employee abstaining. (b) No Rights Following Cause Termination. Following a termination of Employee's employment with Employer "for cause" pursuant to paragraph (a) of this Article Tenth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Employee pursuant to Article Sixth and Fourteenth hereof); and (ii) Employee shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA, salary accrued through the date of termination and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. In the event that Employee asserts that his voluntary termination was actually a constructive termination, Employer shall be entitled to assert as "cause" for such termination any grounds present at the time of such termination which the Board of Directors could have asserted as "cause" if called upon to terminate Employee. Eleventh: Termination Without Cause (a) Rights Following Termination Without Cause. Should Employee be discharged by Employer at any time during the term of this Agreement except as provided in Article Tenth, Employer hereby agrees to: (i) pay Employee within thirty (30) days from such discharge the lesser of one year's Base Compensation or the Base Compensation that would otherwise be paid to him over the remaining term of this Agreement; and (ii) Employer shall pay to Employee a pro rated bonus for the portion of the fiscal year during which he was employed prior to such termination. For purposes of the foregoing pro ration, the bonus for the fiscal year in which the termination occurs shall be calculated in accordance with the terms of and on the schedule set forth in -6- Article Third of this Agreement. Following such calculation, the bonus for the total fiscal year shall be multiplied by a fraction, the numerator of which shall be the number of days in the fiscal year of termination during which Employee was employed by Employer, and the denominator of which shall be 365. The result of such calculation shall determine the pro rated bonus paid to Employee. (b) No Additional Rights. Except as set forth above in paragraph (a), clauses (i) and (ii) of this Article Eleventh following a termination of Employee's employment by Employer other than pursuant to Article Tenth above: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Employee pursuant to Articles Sixth and Fourteenth); and (ii) Employee shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Twelfth: Right to Voluntary Termination By Employee (a) Conditions for Termination by Employee. In the event that: (i) Any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of Employer representing 50% or more of the total voting power of Employer's then outstanding stock, without the written consent of Employee; or (ii) Employer is acquired by another entity through the purchase of substantially all of the assets of the Companies, the purchase of all of Employer's outstanding voting securities or a combination thereof, without the written consent of Employee; (iii) Employer is merged with another entity, consolidated with another entity or reorganized in a manner in which any "person" other than CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity's then outstanding stock, without the written consent of Employee; or (iv) During any period of one, two or three consecutive years, individuals who at the beginning of any such period constitute the directors of Employer cease for any reason to constitute at least a majority thereof unless the election, or the nomination or election by the Employer's stockholders, of each new director of the Employer was approved by a vote of at least two- thirds of such directors of the Employer then still in office who were directors of the Employer at the beginning of any such period. then, if following any of the events set forth in clauses (i), (ii), (iii) or (iv), -7- Employee's duties are substantially altered or Employee is demoted for cause, Employee shall have the right and option to voluntarily terminate this Agreement upon written notice to Employer. All terms used in quotations in clauses (i) and (iii) shall have the meanings assigned to such terms in Section 13 of the Securities Exchange Act of 1934 and the rules, regulations, releases and no-action letters of the Securities and Exchange Commission promulgated thereunder or interpreting any of the same. For purposes of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned to such term in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the releases and no-action letters interpreting the same. (b) Rights Following Voluntary Termination After a Change of Control. Following any voluntary termination of employment by Employee pursuant paragraph (a) of this Article Twelfth, Employee shall be entitled to be paid by Employer within thirty (30) days of such termination by Employee, the lesser of one year's Base Compensation or the entire balance of his Base Compensation remaining to be paid to Employee over the full remaining term of this Agreement. (c) No Additional Rights. Except as set forth above in paragraph (b) of this Article Twelfth and in paragraph (c) of Article Eighth, following a voluntary termination of Employee's employment with Employer pursuant to paragraph (a) of this Article Twelfth: (i) all rights and liabilities of the parties hereto shall cease and this Agreement shall be terminated (subject to the continuing obligations of Employee pursuant to Articles Sixth and Fourteenth); and (ii) Employee shall not be entitled to receive any severance benefits, salary, other benefits or compensation of any kind (except for health insurance continuation as required by COBRA and accrued vacation pay as required by law) either as consideration for his employment or in connection with the termination of his employment. Thirteenth: Death During Employment If Employee dies during the term of this Agreement, Employer shall pay to the estate of Employee the Base Compensation which would otherwise be payable to Employee up to the end of the month in which his death occurs. In addition, Employer shall maintain a life insurance policy or policies providing One Million Dollars ($1,000,000)in death benefits payable to Employee's estate or other designated beneficiary. Employee shall be entitled to and the owner of the cash surrender value of all such insurance policies in excess of the premiums paid by Employer (if any). Notwithstanding any other provision of this Agreement, following any termination of Employee's employment with Employer: (a) Employer shall cease paying the premiums on any such life insurance policy and shall be entitled to withdraw (or be paid by Employee in the form of a set- off against any severance payments due or otherwise) its portion of the cash surrender value of the life insurance policies; and (b) Employee shall be entitled, in his discretion, to continue such policies for his benefit by payment of the premiums and shall be entitled to the full cash surrender value of such policies following -8- withdrawal or repayment of Employer's interest in the cash surrender value. Employee and Employer will execute such assignments as are necessary to reflect this allocation of the death and cash surrender values of any life insurance policies paid for by Employer on the life of Employee. Fourteenth: Restrictive Covenant Employee covenants and agrees that, during the period commencing with the date hereof and ending five (5) years from the date Employee's employment with Employer is terminated (the "Non- Compete Period"), Employee will not compete or attempt to compete with or become associated with any business which competes with the Companies' government contracts, cargo, commercial aviation, fuel sales and fixed base operation activities or any business activities of the Companies developed subsequent to the date hereof. Employee covenants and agrees that he will not, without the prior written consent of Employer during the Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any contracts which were either being solicited by, or which were under contract with, the Companies by performing or causing to be performed any work which was either being solicited by, or which was under contract with, Employer; or (c) induce any sales, operating, technical or other personnel of the Companies to leave the service, employ or business of the Companies. Employee agrees that he will not violate this Article Fourteenth: (a) directly or indirectly; (b) in any capacity, either individually or as a member of any firm; (c) as an officer, director, stockholder, partner or employee of any business; or (d) through or with any persons, relatives (either through blood or marriage), firms, corporations or individuals controlled by or associate with him (each and every such method of violation referred to in clauses (a) through (d) shall hereinafter be referred to as an "indirect violation"). Employee further agrees that doing or causing to be done any of the actions prohibited in this Article Fourteenth by means of an indirect violation shall constitute a violation of this Article Fourteenth as though violated by Employee, subject to all of the remedies to Employer provided for herein and as otherwise provided by law. Fifteenth: Arbitration; Governing Law Any controversy or claim arising out of, or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration in the City of Los Angeles pursuant to the laws of the State of California in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of California. The arbitrators shall have the power in their discretion to award attorneys' fees and other legal costs and expenses to the prevailing party in connection with any arbitration. Sixteenth: Notices Any notice required or permitted to be given under this Agreement shall be -9- sufficient if in writing and sent by certified mail to his residence, in the case of Employee, or to its principal office, in the case of Employer. Seventeenth: Waiver of Breach The waiver by Employer of a breach of any provision of this Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee. Eighteenth: Assignment The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. Nineteenth: Entire Agreement; Written Amendment This instrument contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended, modified, extended or discharged and the provisions of this Agreement may only be waived by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. Twentieth: Equitable Relief Partial Enforcement Employer and Employee have agreed that violation or breach of Articles Sixth and Fourteenth will result in irreparable injury to the Companies and shall entitle the Companies to equitable relief in addition to any other remedies provided at law. Employer and Employee have further agreed in the event that only a portion of Articles Sixth or Fourteenth shall be deemed enforceable or valid that portion of such Articles as shall be enforceable or valid shall be enforced. Employer and Employee have further agreed that the court making a determination of the validity or enforceability of such Articles shall have the power and authority to rewrite the restrictions contained in such Articles to include the maximum portion of the restrictions included within such Articles as are enforceable, valid and consistent with the intent of the parties as expressed in such Articles. Twenty-First: Attorney's Fees Employer shall pay up to Five Thousand Dollars ($5,000) in legal fees to an attorney or attorneys retained by Employee for the purpose of reviewing this Agreement. -10- IN WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement as of the day and year first above written. MERCURY AIR GROUP, INC. BY: /s/ Wayne J. Lovett -------------------------------- Wayne J. Lovett, Secretary /s/ Joseph A. Czyzyk -------------------------------- Joseph A. Czyzyk, Individually -11- EX-10.7 9 a82137exv10w7.txt EXHIBIT 10.7 EXHIBIT 10.7 MERCURY AIR GROUP, INC. 2002 MANAGEMENT STOCK PURCHASE PLAN STOCK PURCHASE AGREEMENT THIS AGREEMENT made in connection with the 2002 Management Stock Purchase Plan effective as of the 22nd day of May, 2002, by and between Mercury Air Group, Inc., a Delaware corporation, having its principal offices of 5456 McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"), CFK Partners, an Illinois general partnership ("Seller"), Joseph A. Czyzyk, residing at 8141 Cabora Drive, Playa Del Rey, CA 90293 (hereinafter referred to as "Czyzyk"), Wayne Lovett, residing at 5908 Finecrest, Rancho Palos Verdes, CA 90066 (hereinafter referred to as "Lovett"), Mark Coleman, residing at 16786 Calle de Catalina, Pacific Palisades, California 90272 (hereinafter referred to as "Coleman"), John Enticknap, residing at 1878 Edgemont, Cumming, Georgia 30131 (hereinafter referred to as "Enticknap"), Robert Schlax, residing at 15 Windham Lane, Laguna Miguel, California 92677 (hereinafter referred to as "Schlax"), and Steve Antonoff, residing at 119 South Helberta Avenue, #7, Redondo Beach, California 90277 (hereinafter referred to as "Antonoff", and Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff collectively referred to as the "Purchasers"). W I T N E S S E T H: WHEREAS, the Purchasers are all key executive officers of Mercury; and WHEREAS, Mercury wishes to enter into a transaction with such officers (the "Transaction") to secure the continued services of such officers consistent with past practices; and WHEREAS, Mercury and the Seller wish to secure for Mercury the benefits of incentives inherent in ownership of Mercury's Common Stock by its key employees, to encourage Mercury's key employees to increase their interest in the future growth and prosperity of Mercury, to sustain constructive and imaginative thinking by key employees, to further the identity of interests of key employees as stockholders of Mercury with Mercury's present shareholders, to induce continued employment of its key employees and to enable Mercury to compete with other organizations offering similar or other incentives in obtaining and retaining the services of competent executives; and WHEREAS, a 2002 Management Stock Purchase Plan was approved by the board of directors of Mercury in furtherance of such Transaction; and WHEREAS, Mercury wishes to allow for the Purchasers to purchase the shares from Sellers at $7.50 per share by amending or entering into employment agreements with such officers. NOW THEREFORE, in consideration of the mutual covenants and provisions herein contained and subject to the conditions hereinafter set forth, the parties intending to be legally bound, agree as follows: FIRST: COMMON STOCK TO BE SOLD Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties contained herein, the Purchasers hereby purchase from Seller and the Seller hereby sells to the Purchasers, at $7.50 per share, that number of unregistered shares of the Common Stock of Mercury Air Group, Inc., $0.01 par value, set forth below (hereinafter referred to as the "Stock") on terms and conditions as hereinafter set forth: Purchaser Number of Shares --------- ---------------- Czyzyk 387,650 Lovett 31,896 Coleman 25,000 Enticknap 30,000 Schlax 25,000 Antonoff 25,000 A total of 524,546 shares shall be purchased from Sellers and allocated to this Plan. 2 SECOND PURCHASE PRICE (a) The purchase price of the Stock is Seven Dollars and 50/100 ($7.50) per share. (b) Czyzyk hereby separately and individually purchases Three Hundred Eighty-Seven Thousand Six Hundred Fifty (387,650) shares of such Stock. (c) Lovett hereby separately and individually purchases Thirty-One Thousand Eight Hundred Ninety-Six (31,896) shares of such Stock. (d) Coleman hereby separately and individually purchases Twenty-Five Thousand (25,000) shares of such Stock. (e) Enticknap hereby separately and individually purchases Thirty Thousand (30,000) shares of such Stock. (f) Schlax hereby separately and individually purchases Twenty Five Thousand (25,000) shares of such Stock. (g) Antonoff hereby separately and individually purchases Twenty Five Thousand (25,000) shares of such Stock. (h) Upon closing the Stock being sold herein shall be represented by one or more certificates totaling five hundred twenty-four thousand, five hundred forty-six (524,546) shares. The Transaction between Mercury and Czyzyk shall be reflected in an amendment to his employment agreement and the Transaction between Mercury, Lovett, Coleman, Enticknap, Schlax and Antonoff shall be reflected in their employment agreements. THIRD: INTENTIONALLY DELETED FOURTH: TERMINATION As shall be reflected in the employment agreements or amendment to employment agreement, in the event Czyzyk, Lovett, Coleman, Enticknap, Schlax or Antonoff voluntary leave the full-time employment of Mercury or any of its subsidiaries or related companies for 3 any reason whatsoever without the prior written consent of Mercury or in the event Czyzyk, Lovett, Coleman, Enticknap, Schlax or Antonoff are discharged with or without cause, then in any of those events the balance of the purchase price as set forth in Article Seventh shall be immediately due and payable by the defaulting purchaser to Mercury, subject to the provisions set forth in Article Seventh, and the Stock purchased by such defaulting party shall be applied toward the balance of the purchase price against which Seller or Mercury shall have a secured interest as a creditor of the defaulting party. FIFTH: [INTENTIONALLY OMITTED] SIXTH: SELLER'S REPRESENTATIONS (a) Seller represents to the Purchasers that it will pay any and all taxes required to be paid and arising out of the sale of the Stock to the Purchasers. (b) Seller agrees to sign any and all other documents reasonably required to be signed in order to effectuate the transfer and assignment of the Stock being sold herein to the Purchaser including, but not limited to, the stock certificates with signature guaranteed, along with stock powers. SEVENTH: UNDERTAKING BY MERCURY UNDERTAKING WITH CZYZYK (a) Mercury hereby agrees to provide to Czyzyk, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: In the event Czyzyk voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury or Czyzyk is discharged with or without cause (except pursuant to Article 12(a) of his employment agreement or as set forth below) (hereinafter the "Date of Discharge") Czyzyk 4 shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that Czyzyk's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2). Czyzyk shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. The Stock being held by Bank of America shall be security to Mercury and subordinate to Bank of America for the payment of the balance of the purchase price to Mercury. Mercury shall be granted a secured interest as a creditor of Czyzyk in the event Czyzyk defaults in his obligation to repay Mercury as herein set forth. In the event Czyzyk terminates his employment pursuant to Article 12(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 12(a) of his employment agreement, or in the event Czyzyk dies or becomes disabled, Czyzyk shall have no further obligation to repay Mercury all or any portion of the purchase price of the Stock purchased hereunder. UNDERTAKING BY MERCURY UNDERTAKING WITH LOVETT (b) Mercury hereby agrees to provide to Lovett, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: In the event Lovett voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or Lovett is discharged with our without cause (except pursuant to Article 11(a) of his employment agreement or as set forth below) or in the event Lovett dies or becomes disabled, (hereinafter the "Date of Discharge"), Lovett shall be obligated to repay the sums provided by 5 Mercury hereunder, provided, however, that Lovett's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2); provided further, that such obligation shall be limited in dollar amount to the net monies received after deducting all expenses incurred from the sale of the shares of common stock of Mercury being held as security for the payment of the shares purchased hereunder. Lovett shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days following the Date of Discharge, purchase that number of shares of stock (the "Unvested Shares") calculated by multiplying the (x) total shares of stock purchased by Lovett by (y) the percentage with respect to which the obligation set forth above has not been forgiven, by tendering the Purchase Price per share of stock (as adjusted to reflect any subdivision, combination, or dividend or distribution which has been paid in additional shares of common stock) to Mercury, following which Mercury shall discharge the remainder of Lovett's obligation hereunder. In the event CFK does not exercise its right set forth above, then Mercury shall be obligated to purchase, and Lovett shall be obligated to sell, the Unvested Shares at the price set forth immediately above. The consideration for Mercury's purchase of the Unvested Shares shall be the cancellation of Lovett's remaining obligations hereunder. Mercury shall be granted a secured interest as a creditor of Lovett in the event Lovett defaults in his obligation to Mercury as herein set forth. In the event Lovett terminates his employment pursuant to Article 11(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his employment agreement, Lovett shall have no further obligation to repay Mercury all or any portion of the purchase price of the stock purchased hereunder. 6 UNDERTAKING BY MERCURY UNDERTAKING WITH COLEMAN (c) Mercury hereby agrees to provide to Coleman, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: In the event Coleman voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or Coleman is discharged with our without cause (except pursuant to Article 11(a) of his employment agreement or as set forth below) (hereinafter the "Date of Discharge"), Coleman shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that Coleman's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2); provided further, that such obligation shall be limited in dollar amount to the net monies received after deducting all expenses incurred from the sale of the shares of common stock of Mercury being held as security for the payment of the shares purchased hereunder. Coleman shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days following the Date of Discharge, purchase that number of shares of stock (the "Unvested Shares") calculated by multiplying the (x) total shares of stock purchased by Coleman by (y) the percentage with respect to which the obligation set forth above has not been forgiven, by tendering the Purchase Price per share of stock (as adjusted to reflect any subdivision, combination, or dividend or distribution which has been paid in additional shares of common stock) to Mercury, following which Mercury shall discharge the remainder of Coleman's 7 obligation hereunder. In the event CFK does not exercise its right set forth above, then Mercury shall be obligated to purchase, and Coleman shall be obligated to sell, the Unvested Shares. The consideration for Mercury's purchase of the Unvested Shares shall be the cancellation of Coleman's remaining obligations hereunder. Mercury shall be granted a secured interest as a creditor of Coleman in the event Coleman defaults in his obligation to Mercury as herein set forth. In the event Coleman terminates his employment pursuant to Article 11(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his employment agreement, Coleman shall have no further obligation to repay Mercury all or any portion of the purchase price of the stock purchased hereunder. UNDERTAKING BY MERCURY UNDERTAKING WITH ENTICKNAP (d) Mercury hereby agrees to provide to Enticknap, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: In the event Enticknap voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or Enticknap is discharged with our without cause (except pursuant to Article 11(a) of his employment agreement or as set forth below) (hereinafter the "Date of Discharge"), Enticknap shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that Enticknap's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2); provided further, that such obligation shall be limited in dollar amount to the net monies received after 8 deducting all expenses incurred from the sale of the shares of common stock of Mercury being held as security for the payment of the shares purchased hereunder. Enticknap shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days following the Date of Discharge, purchase that number of shares of stock (the "Unvested Shares") calculated by multiplying the (x) total shares of stock purchased by Enticknap by (y) the percentage with respect to which the obligation set forth above has not been forgiven, by tendering the Purchase Price per share of stock (as adjusted to reflect any subdivision, combination, or dividend or distribution which has been paid in additional shares of common stock) to Mercury, following which Mercury shall discharge the remainder of Enticknap's obligation hereunder. In the event CFK does not exercise its right set forth above, then Mercury shall be obligated to purchase, and Enticknap shall be obligated to sell, the Unvested Shares. The consideration for Mercury's purchase of the Unvested Shares shall be the cancellation of Enticknap's remaining obligations hereunder. Mercury shall be granted a secured interest as a creditor of Enticknap in the event Enticknap defaults in his obligation to Mercury as herein set forth. In the event Enticknap terminates his employment pursuant to Article 11(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his employment agreement, Enticknap shall have no further obligation to repay Mercury all or any portion of the purchase price of the stock purchased hereunder. UNDERTAKING BY MERCURY UNDERTAKING WITH SCHLAX (e) Mercury hereby agrees to provide to Schlax, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: 9 In the event Schlax voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or Schlax is discharged with our without cause (except pursuant to Article 11(a) of his employment agreement or as set forth below) (hereinafter the "Date of Discharge"), Schlax shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that Schlax's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2); provided further, that such obligation shall be limited in dollar amount to the net monies received after deducting all expenses incurred from the sale of the shares of common stock of Mercury being held as security for the payment of the shares purchased hereunder. Schlax shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days following the Date of Discharge, purchase that number of shares of stock (the "Unvested Shares") calculated by multiplying the (x) total shares of stock purchased by Schlax by (y) the percentage with respect to which the obligation set forth above has not been forgiven, by tendering the Purchase Price per share of stock (as adjusted to reflect any subdivision, combination, or dividend or distribution which has been paid in additional shares of common stock) to Mercury, following which Mercury shall discharge the remainder of Schlax obligation hereunder. In the event CFK does not exercise its right set forth above, then Mercury shall be obligated to purchase, and Schlax shall be obligated to sell, the Unvested Shares. The consideration for Mercury's purchase of the Unvested Shares shall be the cancellation of Schlax's remaining obligations hereunder. Mercury shall be granted a secured interest as a creditor of Schlax in the event Schlax defaults in his obligation to Mercury as herein set forth. In the event 10 Schlax terminates his employment pursuant to Article 11(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his employment agreement, Schlax shall have no further obligation to repay Mercury all or any portion of the purchase price of the stock purchased hereunder. UNDERTAKING BY MERCURY UNDERTAKING WITH ANTONOFF (d) Mercury hereby agrees to provide to Antonoff, in connection with his services to Mercury and pursuant to the terms and conditions set forth in his employment agreement, the funds to purchase the amount of Shares set forth above pursuant to the following terms and conditions: In the event Antonoff voluntarily leaves the full-time employment of Mercury or any of its subsidiaries or related companies for any reason whatsoever without the prior consent of Mercury, or Antonoff is discharged with our without cause (except pursuant to Article 11(a) of his employment agreement or as set forth below) (hereinafter the "Date of Discharge"), Antonoff shall be obligated to repay the sums provided by Mercury hereunder, provided, however, that Antonoff's obligations hereunder shall be forgiven by the percentage equal to the product of (i) 10% and (ii) the number of years from the date hereof to the Date of Discharge, with the number of years calculated on a March 1st fiscal year (so that if, for example, the Date of Discharge is April 1, 2004, the number of years calculated hereunder shall be 2); provided further, that such obligation shall be limited in dollar amount to the net monies received after deducting all expenses incurred from the sale of the shares of common stock of Mercury being held as security for the payment of the shares purchased hereunder. Antonoff shall have no obligation to repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days following the Date of Discharge, purchase that number of shares of stock (the "Unvested Shares") calculated by multiplying the (x) total shares of stock 11 purchased by Antonoff by (y) the percentage with respect to which the obligation set forth above has not been forgiven, by tendering the Purchase Price per share of stock (as adjusted to reflect any subdivision, combination, or dividend or distribution which has been paid in additional shares of common stock) to Mercury, following which Mercury shall discharge the remainder of Antonoff's obligation hereunder. In the event CFK does not exercise its right set forth above, then Mercury shall be obligated to purchase, and Antonoff shall be obligated to sell, the Unvested Shares. The consideration for Mercury's purchase of the Unvested Shares shall be the cancellation of Antonoff's remaining obligations hereunder. Mercury shall be granted a secured interest as a creditor of Antonoff in the event Antonoff defaults in his obligation to Mercury as herein set forth. In the event Antonoff terminates his employment pursuant to Article 11(a) of his employment agreement or is terminated by Mercury for any reason following an event set forth in Article 11(a) of his employment agreement, Antonoff shall have no further obligation to repay Mercury all or any portion of the purchase price of the stock purchased hereunder. EIGHT: PURCHASER REPRESENTATIONS (1) Each of Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff represents to Mercury and the Seller that they shall use their best effort to perform their duties assigned to them as employees of Mercury or any of its subsidiaries or related companies consistent with the manner in which they have been performing those duties prior to the execution of this agreement. (2) Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff each agree for themselves that for a period of one (1) year following the date on which he is no longer employed by Mercury or any of its subsidiaries he will not, directly or indirectly, or in any capacity, compete or attempt to compete with Mercury, any parent, subsidiary or affiliate of Mercury, or any corporation merged into, or merged or consolidated by Mercury, any parent, subsidiary or affiliate of Mercury as of the date of such termination of employment: 12 (i) By soliciting any customer of Mercury or any of its divisions, subsidiaries, or affiliated companies; (ii) By soliciting any contracts which were either being solicited by, or which were under contract with, Mercury or any of its divisions, subsidiaries or affiliated companies during the period of his employment, or by performing or causing to be performed any work which was either being solicited by, or which was under contract with or being performed by, Mercury or any of its divisions, subsidiaries or affiliated companies during said period; (iii) By inducing any sales or technical personnel of Mercury or any of its divisions, subsidiaries or affiliated companies to leave the service of Mercury or any of its divisions, subsidiaries or affiliated companies to engage in activities prohibited to the Purchaser under this paragraph, or by employment such personnel for the purpose of engaging in such activities. This representation on the part of each of the Purchaser is of the essence of this Agreement without which Mercury would not enter into this Agreement and this representation shall be construed as an agreement independent of any other provision contained herein and shall be enforceable in both law and equity, including by temporary or permanent restraining orders, notwithstanding the existence of any claim or cause of action of the Purchasers or any of them against Mercury, whether predicated on this Agreement or otherwise. The parties recognize and agree that there is no adequate remedy at law to compensate Mercury in place of injunctive relief to prevent the Purchasers or any of them from in any way competing with Mercury as hereinabove outlined. NINTH: NON-DISCLOSURE 13 The Purchasers acknowledge that as a result of their employment with Mercury and/or any of its subsidiaries or related companies he has and will have information concerning Mercury and its business including, but not limited to, the manner in which Mercury establishes its prices to customers for services, supplies and materials sold; the mark-up or profits that Mercury receives for services, supplies and materials Mercury sells to its customers; the names, address and nature of relationship of Mercury's customers to Mercury, the names, address and nature of the relationship of Mercury's suppliers of products, services and/or equipment to Mercury, the nature of Mercury's relationship to its banks; the nature of Mercury's relationship with its employees and subsidiary and related corporations and their employees, banks, unions and customers; the nature of Mercury's financial situation, credit relationships and lines of credit with financial institutions and financial resources; the manner in which Mercury conducts its business with competitors to Mercury, as well as its customers and its employees; the nature of Mercury's relationship with its union; the nature of the Mercury relationship in relation to government services installations and government contracts and the terms and conditions of its contracts, both with governmental agencies and private entities; the cost of product to Mercury; the nature and terms of Mercury's real estate leases and personal property leases that it has entered into at various times with various governmental agencies and private business; the book value, fair market value and liquidation value of Mercury's assets; the general and specific financial condition of Mercury; the nature of various claims, litigations and/or contingencies that may be outstanding between Mercury and other entities or persons; the nature of Mercury's credit relationships with its customers, suppliers and financial institutions and all other information related thereto (hereinafter referred to as "CONFIDENTIAL INFORMATION"). The Purchasers and each of them acknowledge and agree that the discussion or revealing of such CONFIDENTIAL INFORMATION to any person, firm, entity, corporation, union, 14 financial institution, stockholder of Mercury, competitor of Mercury, customer of Mercury or any other individual, organization or entity could cause substantial irreparable damage to Mercury. The Purchaser and each of them agree that they shall not, directly or indirectly, reveal any such CONFIDENTIAL INFORMATION in any way, in any nature to any firm, entity, corporation, union or individual without the prior written consent of Mercury. The Purchasers and each of them acknowledge and agree that this Non-Disclosure Agreement on their part is of the essence of this Agreement without which Mercury would not enter into this Agreement and this Non-Disclosure Agreement shall be construed as an agreement independent of any other provision contained herein and shall be enforceable in both law and equity, including by temporary of permanent restraining orders, notwithstanding the existence or any claim or cause of action of the Purchasers or any of them against Mercury whether predicated on this Agreement or otherwise. The parties recognize and agree that there is no adequate remedy at law to compensate Mercury in place of injunctive relief to prevent the Purchasers or any of them from revealing any such CONFIDENTIAL INFORMATION to outside parties or entities. TENTH: APPROVAL OF BOARD OF DIRECTORS This Stock Purchase Agreement and the terms and conditions therein are subject to the prior approval of the Board of Directors of Mercury, through formal executed resolutions of the Board of Directors of Mercury. ELEVENTH: CONSTRUCTION This Agreement and other documents shall be governed by and construed in accordance with the laws of the State of California. Any action or proceeding in connection with this Agreement or any of the other documents may be brought in a court of record of the State of 15 California, the parties hereby consenting to the jurisdiction thereof, and services of process may be made upon any party by mailing a copy of the summons to such party, by registered or certified mail, at its address to be used for the giving of notices under this Agreement. In any action or proceeding relating to this Agreement and/or any other document, the parties mutually waive trial by jury and the parties waive any claim that Los Angeles County is an inconvenient forum. TWELFTH: NON-WAIVER All representations, warranties and agreements made by the Purchasers, Mercury and the Seller in this Agreement or pursuant hereto shall survive the closing. No action or omission by Purchaser, Mercury or Seller shall constitute a wavier of any of the covenants, warranties or representations, unless such waiver shall be executed in writing by the party for whose benefit such covenant, warranty or representation is designed. THIRTEENTH: OTHER DOCUMENTS The parties shall execute such other documents as may be reasonably necessary for the implementation and consummation of this Agreement. FOURTEENTH: RESTRICTION ON TRANSFER OF THE STOCK Except as otherwise provided herein, Purchasers may not sell, transfer, assign, pledge, hypothecate or otherwise dispose of any of the Stock, or any right or interest therein, while any obligation to Mercury is owed hereunder. Any purported sale, transfer (including involuntary transfers initiated by operation of legal process), hypothecation or disposition of any of the Stock or any right or interest therein, except in strict compliance with the terms and conditions of this Agreement, shall be null and void. FIFTEENTH: PLEDGE AND ESCROW 16 Purchasers hereby grant to Mercury a security interest in the Stock, pledge and hypothecate the Stock to Mercury, and deposit the certificates evidencing the Stock (the "Certificates") with Mercury's Corporate Counsel as collateral security for the full, faithful and timely performance by Purchaser of its obligations under this Agreement. The Stock is also delivered to Mercury's Corporate Counsel pursuant to the terms of this Agreement to be held in escrow in order to ensure performance of all repurchase rights Mercury may have in the Stock as and when such right becomes exercisable. The Certificates, together with a stock assignment duly executed in blank with signatures appropriately guaranteed or witnessed, are being retained by Mercury's Corporate Counsel, as the pledgeholder and escrow holder for the Stock. SIXTEENTH: LEGENDS ON CERTIFICATES Any and all certificates now or hereafter issued evidencing Stock which is purchased hereunder shall have endorsed upon them a legend substantially as follows: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS UPON TRANSFER AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THAT CERTAIN STOCK PURCHASE AGREEMENT UNDER THE 2002 MANAGEMENT STOCK PURCHASE PLAN, AND RELATED EMPLOYMENT AGREEMENTS, COPIES OF WHICH AGREEMENTS ARE ON FILE AT THE PRINCIPAL OFFICE OF MERCURY AIR GROUP, INC." Such certificates shall also bear such legends and shall be subject to such restrictions on transfer as may be necessary to comply with all applicable federal and state securities laws and regulations. SEVENTEENTH: MISCELLANEOUS In the event litigation ensues as a result of the terms and conditions of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees and costs of suit. 17 EIGHTEENTH: NOTICES All necessary notices, demands and required or permitted to be given under the provisions of this Agreement shall be deemed duly given if mailed by certified mail, return receipt requested, postage prepaid and addressed as follows: (a) If to be given to Mercury: 5456 McConnell Avenue Los Angeles, California 90066 Attention: Board of Directors (b) If to be given to Seller: CFK Partners 20 North Wacker Drive Suite 2520 Chicago, Illinois 60606 (c) If to be given to Purchasers: Joseph A. Czyzyk 8141 Cabora Drive Playa Del Rey, California 90293 Wayne J. Lovett 5908 Finecrest Rancho Palos Verdes, California 90066 Mark Coleman 16786 Calle de Catalina Pacific Palisades, California 90272 John Enticknap 1878 Edgemont Cumming, Georgia 30131 Robert Schlax 15 Windham Lane Laguna Miguel, California 92677 Steve Antonoff 119 South Helberta Avenue Redondo Beach, California 90277 NINETEENTH: ENTIRE AGREEMENT 18 This Agreement, together with all Exhibits attached hereto, contains all of the terms agreed upon by the parties with respect to the subject matter hereof and may be modified and amended only by a writing signed by the parties and approved by the Board of Directors, where required. TWENTIETH: HEADINGS The headings of the paragraphs of this Agreement are for the convenience of reference only and do not form a part thereof and in no way modify, interpret or construe the meanings of the parties. TWENTY-FIRST: COUNTERPARTS This Agreement may be signed upon any number of counterparts with the same effect as if the signature to each were upon the same agreement. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties have duly executed this Agreement effective as of the date first above written. [SEAL] Mercury Air Group, Inc. By: /s/ Joseph A. Czyzyk ----------------------------------- Joseph A. Czyzyk, President CFK Partners By: /s/ Frederick H. Kopko, Jr. ----------------------------------- Partner /s/ Joseph A. Cyzyk -------------------------------------- Joseph A. Czyzyk 19 /s/ Wayne J. Lovett -------------------------------------- Wayne J. Lovett /s/ Mark Coleman -------------------------------------- Mark Coleman /s/ John Enticknap -------------------------------------- John Enticknap /s/ Robert Schlax -------------------------------------- Robert Schlax /s/ Steve Antonoff -------------------------------------- Steve Antonoff 20 STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of _________, 2002, before me personally came JOSEPH A. CZYZK, to me known, who being by me duly sworn, did depose and say that he is the Chief Executive Officer of Mercury Air Group, Inc., the corporation described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. ______________________________________ Notary Public My Commission Expires: ______________________________________ STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of _________, 2002, before me personally came JOSEPH A. CYZYZK, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ 21 STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of _________, 2002, before me personally came WAYNE J. LOVETT, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of ___________, 2002, before me personally came MARK COLEMAN, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ 22 STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of __________, 2002, before me personally came JOHN ENTICKNAP, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of _________, 2002, before me personally came ROBERT SCHLAX, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ 23 STATE OF CALIFORNIA ) ) ss: COUNTY OF LOS ANGELES ) On the ____ day of ___________, 2002, before me personally came STEVE ANTONOFF, to me known, who being by me duly sworn, did depose and say that he is the person described herein and who executed the foregoing instrument. ______________________________________ Notary Public My Commission Expires: ______________________________________ 24 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP,
INC., a Delaware corporation having its principal offices at 5456 McConnell
Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"),
and Mr. Wayne J. Lovett, residing at 5908 Finecrest, Rancho Palos Verdes,
California 90066 (hereinafter referred to as "Lovett").

                              W I T N E S S E T H:

      WHEREAS, Lovett has been employed as Executive Vice President, Corporate
Secretary and General Counsel of Mercury since May 2001; and

      WHEREAS, Mercury's Board of Directors (the "Board of Directors") would
like to continue Lovett's role as Executive Vice President, Corporate Secretary
and General Counsel on the terms and conditions set forth in this Agreement; and

      WHEREAS, Lovett wishes to accept these positions on the terms and
conditions set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:

      First:       Employment

      (a) Employment. Mercury hereby confirms and agrees that Lovett will be
appointed by the Board of Directors of Mercury to continue serving as an
Executive Vice President, Corporate Secretary and General Counsel of Mercury. In
his capacity as Executive Vice President, Corporate Secretary and General
Counsel of Mercury, Lovett shall continue to report directly to Mercury's Chief
Executive Officer.

      (b) Lovett's Acceptance. Lovett hereby accepts his appointments as
Executive Vice President, Corporate Secretary and General Counsel of Mercury.

      Second:      Term

      Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin on the date hereof and shall terminate
three years thereafter. If Lovett is then employed by Mercury, on each
successive anniversary date, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be one (1) year; provided, however, that upon written notice given by
either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.




      Third:       Compensation

      (a) Base Compensation. For all services rendered by Lovett under this
Agreement, Mercury shall pay Lovett a salary of $179,000 per year, payable in
semi-monthly installments in accordance with Mercury's standard payroll
practices. From time to time, the salary payable to Lovett may be adjusted at
the sole discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Lovett's annual salary, as from time to time adjusted
by the Compensation Committee, is hereinafter referred to as "Base
Compensation".

      (b) Bonus Plans. The Board of Directors may, at its discretion, establish
a bonus plan for Lovett.

      Fourth:      Extent of Services

      Lovett shall devote his entire time, attention and energies to the
business of Mercury (and its various subsidiaries) and shall not during the term
of this Agreement be engaged in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Lovett from investing his assets in
companies or other entities in such form or manner as will not require any
services on the part of Lovett in the operation of the affairs of such companies
or entities in which such investments are made, and, with respect to companies
or other entities which are competitors of Mercury, where Lovett's investment
does not represent in excess of five percent (5%) of the outstanding equity of
such company or entity.

      Fifth:       Working Facilities

      Lovett shall be furnished with a private office and other facilities and
services reasonably suitable to his position and adequate for the performance of
his duties. Lovett shall be employed at the principal offices of Mercury located
in Los Angeles, California and shall travel to the extent necessary to fulfill
his duties in his discretion.

      Sixth:       Disclosure of Information

      (a) Generally. The parties acknowledge that Mercury and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non-technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Proprietary Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.



                                       2


      (b) Access to Proprietary Information. The parties acknowledge that Lovett
has access to the Proprietary Information and that the disclosure or misuse of
such Proprietary Information could irreparably damage the Companies and/or their
respective clients or customers.

      (c) Nondisclosure to others. Except as directed by Mercury in writing or
verbally, Lovett shall not at any time during or after the Term disclose any
Proprietary Information to any person whatsoever, examine or make copies of any
reports or other documents, papers, memoranda or extracts for use other than in
connection with his duties with Mercury or utilize for his own benefit or for
the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

      (d) Survivability. Lovett acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

      Seventh:     Expenses

      Lovett is authorized to incur reasonable expenses for promoting the
business of Mercury, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors of
Mercury's Chief Executive Officer, as from time to time adopted. Mercury will
reimburse Lovett for all such reasonable expenses upon the presentation by
Lovett, from time to time, of an itemized account and documentation of such
expenditures in sufficient detail to allow Mercury to claim an income tax
deduction for each paid item, if such item is deductible.

      Eighth:      Fringe Benefits

      (a) Participating in General Plans. Lovett shall have such employee
benefits (including medical insurance, life insurance, 401(k) and disability
insurance plans) as Mercury shall from time-to-time establish, promulgate or
keep in effect for the benefit of its management level employees. Such benefits
will include company paid medical insurance for Lovett and his family under
Mercury's medical insurance plans. Lovett shall be required to comply with, and
be entitled to benefits only in accordance with, the terms and conditions of
such plans. Nothing contained in this paragraph (a) of Article Eighth, however,
shall be construed to require Mercury to establish any life, disability or
medical insurance plans not in existence on the date hereof, to continue any
plans in existence on the date hereof, to prevent Mercury from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Mercury to take special steps to insure the eligibility of Lovett or his
dependents under the provisions of such plans, and no such act or omission shall
be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein.

      (b) Stock Options. Lovett shall be entitled to the grant of stock options
          as from time to time determined in the sole discretion of the Board of
          Directors.



                                       3


      (c) 2002 Management Stock Purchase Plan.

          (i) By virtue of his eligibility to participate in the 2002 Management
      Stock Purchase Plan, Lovett may purchase from CFK Partners, an Illinois
      general partnership, up to 31,896 unregistered shares of the common stock
      of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase
      Price"), such purchase to be funded by Mercury.

          (ii) In the event Lovett voluntarily leaves the full-time employment
      of Mercury or any of its subsidiaries or related companies for any reason
      whatsoever without the prior consent of Mercury, or in the event Lovett's
      employment is terminated with or without "cause", as defined in Article 9
      hereof (except pursuant to Article 11(a) of the Employment Agreement or as
      set forth below), or in the event Lovett dies or becomes disabled
      (hereinafter the "Date of Discharge"), Lovett or his estate shall be
      obligated to repay the sums provided by Mercury hereunder, provided,
      however, that, in connection with Lovett's employment with Mercury,
      Lovett's obligations hereunder shall be forgiven by the percentage equal
      to the product of (i) 10% and (ii) the number of years from the date
      hereof to the Date of Discharge, with the number of years calculated on a
      March 1st fiscal year (so that if, for example, the Date of Discharge is
      April 1, 2004, the number of years calculated hereunder shall be 2).
      Lovett shall receive 10% of the original amount of stock purchased on the
      anniversary date of the Employment Agreement's execution and will be fully
      vested and eligible to vote those shares. Lovett shall have no obligation
      to repay Mercury if he remains employed by Mercury after March 1, 2012.
      Mercury shall be granted a secured interest as a creditor of Lovett in the
      event Lovett defaults in his obligation to Mercury as herein set forth and
      Mercury will designate an escrow to hold the shares underlying the
      remaining debt obligation. In the event Lovett terminates his employment
      pursuant to Article 11(a) of the Employment Agreement or is terminated by
      Mercury for any reason following an event set forth in Article 11(a) of
      his Employment Agreement, Lovett shall have no further obligation to repay
      Mercury all or any portion of the Purchase Price. While Lovett has any
      obligation to Mercury hereunder, Lovett shall be obligated to comply with
      directions of the Board of Directors of Mercury with respect to the voting
      of those shares held in escrow purchased by Lovett hereunder.

      (d) Vacation. Lovett shall be entitled each year to a vacation of four (4)
weeks, during which time his compensation shall be paid in full.

      Ninth:       Mercury's Right to Terminate For Cause

      (a) Cause. Mercury may at any time during the term of this Agreement
discharge Lovett for "cause." The term "cause" is defined herein as Lovett's (i)
misappropriation of corporate funds, fraud, embezzlement or other illegal
conduct to the detriment of Mercury, (ii) negligence in the execution of his
material assigned duties or Lovett's voluntary abandonment of his job for any
reason other than disability; (iii) refusal or failure, after not less than 20
days written notice that such refusal or failure would constitute a default
hereunder, to carry out any reasonable and material direction from the Board of
Directors given to him in writing; (iv) conviction of a felony; (v) material
breach or violation of the terms of this Agreement, which breach or violation
shall not have been fully cured (as determined by the Board of Directors acting
in good faith) by Lovett within 20 days after receipt of written notice of the
same from the Board of Directors; (vi) Lovett's death or



                                       4


disability (except that, in the event of Lovett's disability, Mercury shall, at
Lovett's request, prior to discharge, grant Lovett a leave of absence of up to
six months or such longer period of time as may be required by law); or (vii)
Lovett's engagement in drug or alcohol abuse. Lovett shall be terminated only
following a finding of "cause" in a resolution adopted by majority vote of the
Board of Directors of Mercury.

      (b) No Rights Following Cause Termination. Following a termination of
Lovett's employment with Mercury "for cause" pursuant to paragraph (a) of this
Article Ninth: (i) all rights and liabilities of the parties hereto shall cease
and this Agreement shall be terminated (subject to the continuing obligations of
Lovett pursuant to Article Sixth and Twelfth hereof); and (ii) Lovett shall not
be entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA, salary accrued through the date of termination and accrued vacation
pay as required by law) either as consideration for his employment or in
connection with the termination of his employment. In the event that Lovett
asserts that his voluntary termination was actually a constructive termination,
Mercury shall be entitled to assert as "cause" for such termination any grounds
present at the time of such termination which the Board of Directors could have
asserted as "cause" if called upon to terminate Lovett.

      Tenth:       Termination Without Cause

      (a) Rights Following Termination Without Cause. Should Lovett be
discharged by Mercury at any time during the term of this Agreement except as
provided in Article Ninth, Mercury hereby agrees to pay Lovett within thirty
(30) days from such discharge the lesser of one year's Base Compensation or the
Base Compensation that would otherwise be paid to him over the remaining term of
this Agreement, with a minimum of six (6) months base compensation.

      (b) No Additional Rights. Except as set forth above in paragraph (a) of
this Article Tenth following a termination of Lovett's employment by Mercury
other that pursuant to Article Ninth above and Article Eleventh below: (i) all
rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Lovett pursuant to
Articles Sixth and Twelfth); and (ii) Lovett shall not be entitled to receive
any severance benefits, salary, other benefits or compensation of any kind
(except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Eleventh:    Right to Voluntary Termination by Lovett

      (a) Conditions for Termination by Lovett. In the event that:

          (i) Any "person" other than CFK Partners or an affiliate of CFK
      Partners is or becomes a "beneficial" owner, "directly or indirectly", of
      stock of Mercury representing 50% or more of the total voting power of
      Mercury's then outstanding stock, without the written consent of the Board
      of Directors of Mercury; or



                                       5


          (ii) Mercury is acquired by another entity through the purchase of
      substantially all of its assets, the purchase of all of its outstanding
      voting securities or a combination thereof, without the consent of the
      Board of Directors of Mercury; or

          (iii) Mercury is merged with another entity, consolidated with another
      entity or reorganized in a manner in which any "person" other than CFK
      Partners or an affiliate of CFK Partners is or becomes a "beneficial"
      owner, "directly or indirectly", of stock of the surviving entity
      representing 50% or more of the total voting power of the surviving
      entity's then outstanding stock, without the consent of the Board of
      Directors of Mercury; or

          (iv) During any period of one, two or three consecutive years,
      individuals who at the beginning of any such period constitute the
      directors of Mercury cease for any reason to constitute at least a
      majority thereof unless the election, or the nomination or election by
      Mercury's stockholders, of each new director of Mercury was approved by a
      vote of at lease two-thirds of such directors of Mercury then still in
      office who were directors of Mercury at the beginning of any such period;

      then, if following any of the events set forth in clauses (i), (ii),
(iii) or (iv), Lovett's duties are substantially altered or Lovett is demoted
for cause, Lovett shall have the right and option to voluntarily terminate this
Agreement upon written notice to Mercury. All terms used in quotations in
clauses (i) and (iii) shall have the meanings assigned to such terms in Section
13 of the Securities Exchange Act of 1934 and the rules, regulations, releases
and no-action letters of the Securities and Exchange Commission promulgated
thereunder or interpreting any of the same. For purposes of clauses (i) and
(iii), the term "affiliate" shall have the meaning assigned to such term in Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the releases and no-action letters interpreting the
same.

      (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Lovett pursuant to
paragraph (a) of this Article Eleventh, Lovett shall be entitled to be paid by
Mercury within thirty (30) days of such termination by Lovett, the lesser of one
year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Lovett over the full remaining term of this Agreement.

      (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Eleventh, following a voluntary termination of Lovett's employment
with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights
and liabilities of the parties hereto shall cease and this Agreement shall be
terminated (subject to the continuing obligations of Lovett pursuant to Articles
Sixth and Twelfth); and (ii) Lovett shall not be entitled to receive any
severance benefits, salary, other benefits or compensation of any kind (except
for health insurance continuation as required by COBRA and accrued vacation pay
as required by law) either as consideration for his employment or in connection
with the termination of his employment.

      Twelfth:     Restrictive Covenant

      Lovett covenants and agrees that during the period commencing with the
date hereof and ending six (6) months from the date Lovett's employment with
Mercury is terminated for "cause" or by reason of Lovett's voluntary termination
of employment from Mercury (the "Non-Compete Period"), Lovett will not compete
or attempt to compete with or become associated with any business which competes
with the Companies' government contracts, cargo, commercial aviation, fuel
sales, fixed base operations, or any business activities of the Companies
existing on or developed subsequent to the date hereof. Lovett covenants and
agrees that he will not, without the prior written consent of Mercury during the
Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any
contracts which were either being solicited by, or which were under



                                       6


contract with, the Companies by performing or causing to be performed any work
which was either being solicited by, or which was under contract with, Mercury;
or (c) induce any sales, operating, technical or other personnel of the
Companies to leave the service, employ or business of the Companies. Lovett
agrees that he will not violate this Article Eleventh: (a) directly or
indirectly; (b) in any capacity, either individually or as a member of any firm;
(c) as an officer, director, stockholder, partner or Lovett of any business; or
(d) through or with any persons, relatives (either through blood or marriage),
firms, corporations or individuals controlled by or associated with him (each
and every such method of violation referred to in clauses (a) through (d) shall
hereinafter be referred to as an "indirect violation"). Lovett further agrees
that doing or causing to be done any of the actions prohibited in this Article
Eleventh by means of an indirect violation shall constitute a violation of this
Article Eleventh as though violated by Lovett, subject to all of the remedies to
Mercury provided for herein and as otherwise provided by law.

      Thirteenth:  Arbitration; Governing Law.

      Any controversy or claim arising out of, or relating to this Agreement or
the breach thereof, shall be settled by binding arbitration in the City of Los
Angeles pursuant to the laws of the State of California in accordance with the
rules then obtaining of the America Arbitration Association, and judgments upon
the award rendered my be entered in any court having jurisdiction thereof. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of California. The arbitrators shall have the power in their
discretion to award attorneys' fees and other legal costs and expenses to the
prevailing party in connection with any arbitration.

      Fourteenth:  Notices

      Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by certified mail to his residence, in the
case of Lovett, or to its principal office, in the case of Mercury.

      Fifteenth:   Waiver of Breach

      The waiver by Mercury of a breach of any provision of this Agreement by
Lovett shall not operate or be construed as a waiver of any subsequent breach by
Lovett.

      Sixteenth:   Assignment

      The rights and obligations of Mercury under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Mercury.

      Seventeenth: Entire Agreement; Written Amendment

      This instrument contains the entire agreement of the parties with respect
to the subject matter hereof. This Agreement may only be amended, modified,
extended or discharged and the provisions of this Agreement may only be waived
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.



                                       7


      Eighteenth:  Equitable Relief; Partial Enforcement

      Mercury and Lovett have agreed that violation or breach of Articles Sixth
and Eleventh will result in irreparable injury to the Companies and shall
entitle the Companies to equitable relief in addition to any other remedies
provided at law. Mercury and Lovett have further agreed in the event that only a
portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that
portion of such Articles as shall be enforceable or valid shall be enforced.
Mercury and Lovett have further agreed that the court making a determination of
the validity or enforceability of such Articles shall have the power and
authority to rewrite the restrictions contained in such Articles to include the
maximum portion of the restrictions included within such Articles as are
enforceable, valid and consistent with the intent of the parties as expressed in
such Articles.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                          MERCURY AIR GROUP, INC.



                                          By:  /s Joseph A. Czyzyk
                                          --------------------------------------
                                          Its: Chief Executive Officer



                                          /s/ Wayne J. Lovett
                                          --------------------------------------
                                          Wayne J. Lovett



                                       8

EX-10.2

                                                                    EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP,
INC., a Delaware corporation having its principal offices at 5456 McConnell
Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"),
and Mr. Mark Coleman, residing at 16786 Calle de Catalina, Pacific Palisades,
California 90272 (hereinafter referred to as "Coleman").

                              W I T N E S S E T H:

      WHEREAS, Coleman has been employed as Chief Operating Officer of Mercury
Air Cargo since January 2001; and

      WHEREAS, Mercury's Board of Directors (the "Board of Directors") would
like to continue Coleman's role as Chief Operating Officer of Mercury Air Cargo
on the terms and conditions set forth in this Agreement; and

      WHEREAS, Coleman wishes to accept these positions on the terms and
conditions set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:

      First:       Employment

      (a) Employment. Mercury hereby confirms and agrees that Coleman will be
appointed by the Board of Directors of Mercury to continue serving as Chief
Operating Officer of Mercury Air Cargo. In his capacity as Chief Operating
Officer of Mercury Air Cargo, Coleman shall continue to report directly to
Mercury's Chief Executive Officer.

      (b) Coleman's Acceptance. Coleman hereby accepts his appointment as Chief
Operating Officer of Mercury Air Cargo.

      Second:      Term

      Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin on the date hereof and shall terminate
three years thereafter. If Coleman is then employed by Mercury, on each
successive anniversary date, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be one (1) year; provided, however, that upon written notice given by
either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.




      Third:       Compensation

      (a) Base Compensation. For all services rendered by Coleman under this
Agreement, Mercury shall pay Coleman a salary of $170,000 per year, payable in
semi-monthly installments in accordance with Mercury's standard payroll
practices. From time to time, the salary payable to Coleman may be adjusted at
the sole discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Coleman's annual salary, as from time to time
adjusted by the Compensation Committee, is hereinafter referred to as "Base
Compensation".

      (b) Bonus Plans. The Board of Directors may, at its discretion, establish
a bonus plan for Coleman.

      Fourth:      Extent of Services

      Coleman shall devote his entire time, attention and energies to the
business of Mercury (and its various subsidiaries) and shall not during the term
of this Agreement be engaged in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Coleman from investing his assets in
companies or other entities in such form or manner as will not require any
services on the part of Coleman in the operation of the affairs of such
companies or entities in which such investments are made, and, with respect to
companies or other entities which are competitors of Mercury, where Coleman's
investment does not represent in excess of five percent (5%) of the outstanding
equity of such company or entity.

      Fifth:       Working Facilities

      Coleman shall be furnished with a private office and other facilities and
services reasonably suitable to his position and adequate for the performance of
his duties. Coleman shall be employed at the Mercury Air Cargo, Inc. offices of
Mercury located in Los Angeles, California and shall travel to the extent
necessary to fulfill his duties in his discretion.

      Sixth:       Disclosure of Information

      (a) Generally. The parties acknowledge that Mercury and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non-technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Proprietary Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.



                                       2


      (b) Access to Proprietary Information. The parties acknowledge that
Coleman has access to the Proprietary Information and that the disclosure or
misuse of such Proprietary Information could irreparably damage the Companies
and/or their respective clients or customers.

      (c) Nondisclosure to others. Except as directed by Mercury in writing or
verbally, Coleman shall not at any time during or after the Term disclose any
Proprietary Information to any person whatsoever, examine or make copies of any
reports or other documents, papers, memoranda or extracts for use other than in
connection with his duties with Mercury or utilize for his own benefit or for
the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

      (d) Survivability. Coleman acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

      Seventh:     Expenses

      Coleman is authorized to incur reasonable expenses for promoting the
business of Mercury, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors of
Mercury's Chief Executive Officer, as from time to time adopted. Mercury will
reimburse Coleman for all such reasonable expenses upon the presentation by
Coleman, from time to time, of an itemized account and documentation of such
expenditures in sufficient detail to allow Mercury to claim an income tax
deduction for each paid item, if such item is deductible.

      Eighth:      Fringe Benefits

      (a) Participating in General Plans. Coleman shall have such employee
benefits (including medical insurance, life insurance, 401(k) and disability
insurance plans) as Mercury shall from time-to-time establish, promulgate or
keep in effect for the benefit of its management level employees. Such benefits
will include company paid medical insurance for Coleman and his family under
Mercury's medical insurance plans. Coleman shall be required to comply with, and
be entitled to benefits only in accordance with, the terms and conditions of
such plans. Nothing contained in this paragraph (a) of Article Eighth, however,
shall be construed to require Mercury to establish any life, disability or
medical insurance plans not in existence on the date hereof, to continue any
plans in existence on the date hereof, to prevent Mercury from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Mercury to take special steps to insure the eligibility of Coleman or
his dependents under the provisions of such plans, and no such act or omission
shall be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein.

      (b) Stock Options. Coleman shall be entitled to the grant of stock options
          as from time to time determined in the sole discretion of the Board of
          Directors.



                                       3


      (c) 2002 Management Stock Purchase Plan.

          (i) By virtue of his eligibility to participate in the 2002 Management
      Stock Purchase Plan, Coleman may purchase from CFK Partners, an Illinois
      general partnership, up to 25,000 unregistered shares of the common stock
      of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase
      Price"), such purchase to be funded by Mercury.

          (ii) In the event Coleman voluntarily leaves the full-time employment
      of Mercury or any of its subsidiaries or related companies for any reason
      whatsoever without the prior consent of Mercury, or in the event Coleman's
      employment is terminated with or without "cause", as defined in Article 9
      hereof (except pursuant to Article 11(a) of the Employment Agreement or as
      set forth below), or in the event Coleman dies or becomes disabled
      (hereinafter the "Date of Discharge"), Coleman or his estate shall be
      obligated to repay the sums provided by Mercury hereunder, provided,
      however, that, in connection with Coleman's employment with Mercury,
      Coleman's obligations hereunder shall be forgiven by the percentage equal
      to the product of (i) 10% and (ii) the number of years from the date
      hereof to the Date of Discharge, with the number of years calculated on a
      March 1st fiscal year (so that if, for example, the Date of Discharge is
      April 1, 2004, the number of years calculated hereunder shall be 2).
      Coleman shall receive 10% of the original amount of stock purchased on the
      anniversary date of the Employment Agreement's execution and will be fully
      vested and eligible to vote those shares. Coleman shall have no obligation
      to repay Mercury if he remains employed by Mercury after March 1, 2012.
      Mercury shall be granted a secured interest as a creditor of Coleman in
      the event Coleman defaults in his obligation to Mercury as herein set
      forth and Mercury will designate an escrow to hold the shares underlying
      the remaining debt obligation. In the event Coleman terminates his
      employment pursuant to Article 11(a) of the Employment Agreement or is
      terminated by Mercury for any reason following an event set forth in
      Article 11(a) of his Employment Agreement, Coleman shall have no further
      obligation to repay Mercury all or any portion of the Purchase Price.
      While Coleman has any obligation to Mercury hereunder, Coleman shall be
      obligated to comply with directions of the Board of Directors of Mercury
      with respect to the voting of those shares held in escrow purchased by
      Coleman hereunder.

      (d) Vacation. Coleman shall be entitled each year to a vacation of four
(4) weeks, during which time his compensation shall be paid in full.

      Ninth:       Mercury's Right to Terminate For Cause

      (a) Cause. Mercury may at any time during the term of this Agreement
discharge Coleman for "cause." The term "cause" is defined herein as Coleman's
(i) misappropriation of corporate funds, fraud, embezzlement or other illegal
conduct to the detriment of Mercury, (ii) negligence in the execution of his
material assigned duties or Coleman's voluntary abandonment of his job for any
reason other than disability; (iii) refusal or failure, after not less than 20
days written notice that such refusal or failure would constitute a default
hereunder, to carry out any reasonable and material direction from the Board of
Directors given to him in writing; (iv) conviction of a felony; (v) material
breach or violation of the terms of this Agreement, which breach or violation
shall not have been fully cured (as determined by the Board of Directors acting
in good faith) by



                                       4


Coleman within 20 days after receipt of written notice of the same from the
Board of Directors; (vi) Coleman's death or disability (except that, in the
event of Coleman's disability, Mercury shall, at Coleman's request, prior to
discharge, grant Coleman a leave of absence of up to six months or such longer
period of time as may be required by law); or (vii) Coleman's engagement in drug
or alcohol abuse. Coleman shall be terminated only following a finding of
"cause" in a resolution adopted by majority vote of the Board of Directors of
Mercury.

      (b) No Rights Following Cause Termination. Following a termination of
Coleman's employment with Mercury "for cause" pursuant to paragraph (a) of this
Article Ninth: (i) all rights and liabilities of the parties hereto shall cease
and this Agreement shall be terminated (subject to the continuing obligations of
Coleman pursuant to Article Sixth and Twelfth hereof); and (ii) Coleman shall
not be entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA, salary accrued through the date of termination and accrued vacation
pay as required by law) either as consideration for his employment or in
connection with the termination of his employment. In the event that Coleman
asserts that his voluntary termination was actually a constructive termination,
Mercury shall be entitled to assert as "cause" for such termination any grounds
present at the time of such termination which the Board of Directors could have
asserted as "cause" if called upon to terminate Coleman.

      Tenth:       Termination Without Cause

      (a) Rights Following Termination Without Cause. Should Coleman be
discharged by Mercury at any time during the term of this Agreement except as
provided in Article Ninth, Mercury hereby agrees to pay Coleman within thirty
(30) days from such discharge the lesser of one year's Base Compensation or the
Base Compensation that would otherwise be paid to him over the remaining term of
this Agreement with a minimum of six (6) months base compensation.

      (b) No Additional Rights. Except as set forth above in paragraph (a) of
this Article Tenth following a termination of Coleman's employment by Mercury
other that pursuant to Article Ninth above and Article Eleventh below: (i) all
rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Coleman pursuant
to Articles Sixth and Twelfth); and (ii) Coleman shall not be entitled to
receive any severance benefits, salary, other benefits or compensation of any
kind (except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Eleventh:    Right to Voluntary Termination by Coleman

      (a) Conditions for Termination by Coleman. In the event that:

          (i) Any "person" other than CFK Partners or an affiliate of CFK
      Partners is or becomes a "beneficial" owner, "directly or indirectly", of
      stock of Mercury representing 50% or more of the total voting power of
      Mercury's then outstanding stock, without the written consent of the Board
      of Directors of Mercury; or



                                       5


          (ii) Mercury is acquired by another entity through the purchase of
      substantially all of its assets, the purchase of all of its outstanding
      voting securities or a combination thereof, without the consent of the
      Board of Directors of Mercury; or

          (iii) Mercury is merged with another entity, consolidated with another
      entity or reorganized in a manner in which any "person" other than CFK
      Partners or an affiliate of CFK Partners is or becomes a "beneficial"
      owner, "directly or indirectly", of stock of the surviving entity
      representing 50% or more of the total voting power of the surviving
      entity's then outstanding stock, without the consent of the Board of
      Directors of Mercury; or

          (iv) During any period of one, two or three consecutive years,
      individuals who at the beginning of any such period constitute the
      directors of Mercury cease for any reason to constitute at least a
      majority thereof unless the election, or the nomination or election by
      Mercury's stockholders, of each new director of Mercury was approved by a
      vote of at least two-thirds of such directors of Mercury then still in
      office who were directors of Mercury at the beginning of any such period;

      then, if following any of the events set forth in clauses (i), (ii),
(iii) or (iv), Coleman's duties are substantially altered or Coleman is demoted
for cause, Coleman shall have the right and option to voluntarily terminate this
Agreement upon written notice to Mercury. All terms used in quotations in
clauses (i) and (iii) shall have the meanings assigned to such terms in Section
13 of the Securities Exchange Act of 1934 and the rules, regulations, releases
and no-action letters of the Securities and Exchange Commission promulgated
thereunder or interpreting any of the same. For purposes of clauses (i) and
(iii), the term "affiliate" shall have the meaning assigned to such term in Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the releases and no-action letters interpreting the
same.

      (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Coleman pursuant to
paragraph (a) of this Article Eleventh, Coleman shall be entitled to be paid by
Mercury within thirty (30) days of such termination by Coleman, the lesser of
one year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Coleman over the full remaining term of this Agreement.

      (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Eleventh, following a voluntary termination of Coleman's employment
with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights
and liabilities of the parties hereto shall cease and this Agreement shall be
terminated (subject to the continuing obligations of Coleman pursuant to
Articles Sixth and Twelfth); and (ii) Coleman shall not be entitled to receive
any severance benefits, salary, other benefits or compensation of any kind
(except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Twelfth:     Restrictive Covenant

      Coleman covenants and agrees that during the period commencing with the
date hereof and ending six (6) months from the date Coleman's employment with
Mercury is terminated for "cause" or by reason of Coleman's voluntary
termination of employment from Mercury (the "Non-Compete Period"), Coleman will
not compete or attempt to compete with or become associated with any business
which competes with the Companies' government contracts, cargo, commercial
aviation, fuel sales, fixed base operations, or any business activities of the
Companies existing on or developed subsequent to the date hereof. Coleman
covenants and agrees that he will not, without the prior written consent of
Mercury during the Non-Compete Period: (a) solicit any customer of



                                       6


the Companies; (b) solicit any contracts which were either being solicited by,
or which were under contract with, the Companies by performing or causing to be
performed any work which was either being solicited by, or which was under
contract with, Mercury; or (c) induce any sales, operating, technical or other
personnel of the Companies to leave the service, employ or business of the
Companies. Coleman agrees that he will not violate this Article Eleventh: (a)
directly or indirectly; (b) in any capacity, either individually or as a member
of any firm; (c) as an officer, director, stockholder, partner or Coleman of any
business; or (d) through or with any persons, relatives (either through blood or
marriage), firms, corporations or individuals controlled by or associated with
him (each and every such method of violation referred to in clauses (a) through
(d) shall hereinafter be referred to as an "indirect violation"). Coleman
further agrees that doing or causing to be done any of the actions prohibited in
this Article Eleventh by means of an indirect violation shall constitute a
violation of this Article Eleventh as though violated by Coleman, subject to all
of the remedies to Mercury provided for herein and as otherwise provided by law.

      Thirteenth:  Arbitration; Governing Law.

      Any controversy or claim arising out of, or relating to this Agreement or
the breach thereof, shall be settled by binding arbitration in the City of Los
Angeles pursuant to the laws of the State of California in accordance with the
rules then obtaining of the America Arbitration Association, and judgments upon
the award rendered my be entered in any court having jurisdiction thereof. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of California. The arbitrators shall have the power in their
discretion to award attorneys' fees and other legal costs and expenses to the
prevailing party in connection with any arbitration.

      Fourteenth:  Notices

      Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by certified mail to his residence, in the
case of Coleman, or to its principal office, in the case of Mercury.

      Fifteenth:   Waiver of Breach

      The waiver by Mercury of a breach of any provision of this Agreement by
Coleman shall not operate or be construed as a waiver of any subsequent breach
by Coleman.

      Sixteenth:   Assignment

      The rights and obligations of Mercury under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Mercury.

      Seventeenth: Entire Agreement; Written Amendment

      This instrument contains the entire agreement of the parties with respect
to the subject matter hereof. This Agreement may only be amended, modified,
extended or discharged and the provisions of this Agreement may only be waived
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.



                                       7


      Eighteenth:  Equitable Relief; Partial Enforcement

      Mercury and Coleman have agreed that violation or breach of Articles Sixth
and Eleventh will result in irreparable injury to the Companies and shall
entitle the Companies to equitable relief in addition to any other remedies
provided at law. Mercury and Coleman have further agreed in the event that only
a portion of Articles Sixth or Eleventh shall be deemed enforceable or valid
that portion of such Articles as shall be enforceable or valid shall be
enforced. Mercury and Coleman have further agreed that the court making a
determination of the validity or enforceability of such Articles shall have the
power and authority to rewrite the restrictions contained in such Articles to
include the maximum portion of the restrictions included within such Articles as
are enforceable, valid and consistent with the intent of the parties as
expressed in such Articles.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                          MERCURY AIR GROUP, INC.



                                          By: /s/ Joseph A. Czyzyk
                                             -----------------------------------
                                          Its: Chief Executive Officer

                                          /s/ Mark Coleman
                                          --------------------------------------
                                          Mark Coleman


                                       8

EX-10.3

                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP,
INC., a Delaware corporation having its principal offices at 5456 McConnell
Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"),
and Mr. John L. Enticknap, residing at 1878 Edgemont, Cumming, Georgia 30131
(hereinafter referred to as "Enticknap").

                              W I T N E S S E T H:

      WHEREAS, Enticknap has been employed as Executive Vice President of
Mercury since December 2000, and Chief Operating Officer of Mercury Air Centers,
Inc. since November 1999; and

      WHEREAS, Mercury's Board of Directors (the "Board of Directors") would
like to continue Enticknap's role as Executive Vice President of Mercury and
Chief Operating Officer of Mercury Air Centers on the terms and conditions set
forth in this Agreement; and

      WHEREAS, Enticknap wishes to accept these positions on the terms and
conditions set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:

      First:       Employment

      (a) Employment. Mercury hereby confirms and agrees that Enticknap will be
appointed by the Board of Directors of Mercury to continue serving as an
Executive Vice President of Mercury and Chief Operating Officer of Mercury Air
Centers. In his capacity as Executive Vice President of Mercury and Chief
Operating Officer of Mercury Air Centers, Enticknap shall continue to report
directly to Mercury's Chief Executive Officer.

      (b) Enticknap's Acceptance. Enticknap hereby accepts his appointments as
Executive Vice President of Mercury and Chief Operating Officer of Mercury Air
Centers.

      Second:      Term

      Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin on the date hereof and shall terminate
three years thereafter. If Enticknap is then employed by Mercury, on each
successive anniversary date, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be one (1) year; provided, however, that upon written notice given by
either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.




      Third:       Compensation

      (a) Base Compensation. For all services rendered by Enticknap under this
Agreement, Mercury shall pay Enticknap a salary of $181,500 per year, payable in
semi-monthly installments in accordance with Mercury's standard payroll
practices. From time to time, the salary payable to Enticknap may be adjusted at
the sole discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Enticknap's annual salary, as from time to time
adjusted by the Compensation Committee, is hereinafter referred to as "Base
Compensation".

      (b) Bonus Plans. The Board of Directors may, at its discretion, establish
a bonus plan for Enticknap.

      Fourth:      Extent of Services

      Enticknap shall devote his entire time, attention and energies to the
business of Mercury (and its various subsidiaries) and shall not during the term
of this Agreement be engaged in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Enticknap from investing his assets in
companies or other entities in such form or manner as will not require any
services on the part of Enticknap in the operation of the affairs of such
companies or entities in which such investments are made, and, with respect to
companies or other entities which are competitors of Mercury, where Enticknap's
investment does not represent in excess of five percent (5%) of the outstanding
equity of such company or entity.

      Fifth:       Working Facilities

      Enticknap shall be furnished with a private office and other facilities
and services reasonably suitable to his position and adequate for the
performance of his duties. Enticknap shall be employed at the Mercury Air
Centers, Inc. offices of Mercury located in Atlanta, Georgia and shall travel to
the extent necessary to fulfill his duties in his discretion.

      Sixth:       Disclosure of Information

      (a) Generally. The parties acknowledge that Mercury and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non-technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Proprietary Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.



                                       2


      (b) Access to Proprietary Information. The parties acknowledge that
Enticknap has access to the Proprietary Information and that the disclosure or
misuse of such Proprietary Information could irreparably damage the Companies
and/or their respective clients or customers.

      (c) Nondisclosure to others. Except as directed by Mercury in writing or
verbally, Enticknap shall not at any time during or after the Term disclose any
Proprietary Information to any person whatsoever, examine or make copies of any
reports or other documents, papers, memoranda or extracts for use other than in
connection with his duties with Mercury or utilize for his own benefit or for
the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

      (d) Survivability. Enticknap acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

      Seventh:     Expenses

      Enticknap is authorized to incur reasonable expenses for promoting the
business of Mercury, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors of
Mercury's Chief Executive Officer, as from time to time adopted. Mercury will
reimburse Enticknap for all such reasonable expenses upon the presentation by
Enticknap, from time to time, of an itemized account and documentation of such
expenditures in sufficient detail to allow Mercury to claim an income tax
deduction for each paid item, if such item is deductible.

      Eighth:      Fringe Benefits

      (a) Participating in General Plans. Enticknap shall have such employee
benefits (including medical insurance, life insurance, 401(k) and disability
insurance plans) as Mercury shall from time-to-time establish, promulgate or
keep in effect for the benefit of its management level employees. Such benefits
will include company paid medical insurance for Enticknap and his family under
Mercury's medical insurance plans. Enticknap shall be required to comply with,
and be entitled to benefits only in accordance with, the terms and conditions of
such plans. Nothing contained in this paragraph (a) of Article Eighth, however,
shall be construed to require Mercury to establish any life, disability or
medical insurance plans not in existence on the date hereof, to continue any
plans in existence on the date hereof, to prevent Mercury from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Mercury to take special steps to insure the eligibility of Enticknap or
his dependents under the provisions of such plans, and no such act or omission
shall be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein.

      (b) Stock Options. Enticknap shall be entitled to the grant of stock
          options as from time to time determined in the sole discretion of the
          Board of Directors.



                                       3


      (c) 2002 Management Stock Purchase Plan.

          (i) By virtue of his eligibility to participate in the 2002 Management
          Stock Purchase Plan, Enticknap may purchase from CFK Partners, an
          Illinois general partnership, up to 30,000 unregistered shares of the
          common stock of Mercury, $0.01 par value, at a price of $7.50 per
          share (the "Purchase Price"), such purchase to be funded by Mercury.

          (ii) In the event Enticknap voluntarily leaves the full-time
          employment of Mercury or any of its subsidiaries or related companies
          for any reason whatsoever without the prior consent of Mercury, or in
          the event Enticknap's employment is terminated with or without
          "cause", as defined in Article 9 hereof (except pursuant to Article
          11(a) of the Employment Agreement or as set forth below), or in the
          event Enticknap dies or becomes disabled (hereinafter the "Date of
          Discharge"), Enticknap or his estate shall be obligated to repay the
          sums provided by Mercury hereunder, provided, however, that, in
          connection with Enticknap's employment with Mercury, Enticknap's
          obligations hereunder shall be forgiven by the percentage equal to the
          product of (i) 10% and (ii) the number of years from the date hereof
          to the Date of Discharge, with the number of years calculated on a
          March 1st fiscal year (so that if, for example, the Date of Discharge
          is April 1, 2004, the number of years calculated hereunder shall be
          2). Enticknap shall receive 10% of the original amount of stock
          purchased on the anniversary date of the Employment Agreement's
          execution and will be fully vested and eligible to vote those shares.
          Enticknap shall have no obligation to repay Mercury if he remains
          employed by Mercury after March 1, 2012. Mercury shall be granted a
          secured interest as a creditor of Enticknap in the event Enticknap
          defaults in his obligation to Mercury as herein set forth and Mercury
          will designate an escrow to hold the shares underlying the remaining
          debt obligation In the event Enticknap terminates his employment
          pursuant to Article 11(a) of the Employment Agreement or is terminated
          by Mercury for any reason following an event set forth in Article
          11(a) of his Employment Agreement, Enticknap shall have no further
          obligation to repay Mercury all or any portion of the Purchase Price.
          While Enticknap has any obligation to Mercury hereunder, Enticknap
          shall be obligated to comply with directions of the Board of Directors
          of Mercury with respect to the voting of those shares held in escrow
          purchased by Enticknap hereunder.

      (d) Vacation. Enticknap shall be entitled each year to a vacation of four
(4) weeks, during which time his compensation shall be paid in full.

      Ninth:       Mercury's Right to Terminate For Cause

      (a) Cause. Mercury may at any time during the term of this Agreement
discharge Enticknap for "cause." The term "cause" is defined herein as
Enticknap's (i) misappropriation of corporate funds, fraud, embezzlement or
other illegal conduct to the detriment of Mercury, (ii) negligence in the
execution of his material assigned duties or Enticknap's voluntary abandonment
of his job for any reason other than disability; (iii) refusal or failure, after
not less than 20 days written notice that such refusal or failure would
constitute a default hereunder, to carry out any reasonable



                                       4


and material direction from the Board of Directors given to him in writing; (iv)
conviction of a felony; (v) material breach or violation of the terms of this
Agreement, which breach or violation shall not have been fully cured (as
determined by the Board of Directors acting in good faith) by Enticknap within
20 days after receipt of written notice of the same from the Board of Directors;
(vi) Enticknap's death or disability (except that, in the event of Enticknap's
disability, Mercury shall, at Enticknap's request, prior to discharge, grant
Enticknap a leave of absence of up to six months or such longer period of time
as may be required by law); or (vii) Enticknap's engagement in drug or alcohol
abuse. Enticknap shall be terminated only following a finding of "cause" in a
resolution adopted by majority vote of the Board of Directors of Mercury.

      (b) No Rights Following Cause Termination. Following a termination of
Enticknap's employment with Mercury "for cause" pursuant to paragraph (a) of
this Article Ninth: (i) all rights and liabilities of the parties hereto shall
cease and this Agreement shall be terminated (subject to the continuing
obligations of Enticknap pursuant to Article Sixth and Twelfth hereof); and (ii)
Enticknap shall not be entitled to receive any severance benefits, salary, other
benefits or compensation of any kind (except for health insurance continuation
as required by COBRA, salary accrued through the date of termination and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment. In the event that
Enticknap asserts that his voluntary termination was actually a constructive
termination, Mercury shall be entitled to assert as "cause" for such termination
any grounds present at the time of such termination which the Board of Directors
could have asserted as "cause" if called upon to terminate Enticknap.

      Tenth:       Termination Without Cause

      (a) Rights Following Termination Without Cause. Should Enticknap be
discharged by Mercury at any time during the term of this Agreement except as
provided in Article Ninth, Mercury hereby agrees to pay Enticknap within thirty
(30) days from such discharge the lesser of one year's Base Compensation or the
Base Compensation that would otherwise be paid to him over the remaining term of
this Agreement, with a minimum of six (6) months base compensation.

      (b) No Additional Rights. Except as set forth above in paragraph (a) of
this Article Tenth following a termination of Enticknap's employment by Mercury
other that pursuant to Article Ninth above and Article Eleventh below: (i) all
rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Enticknap pursuant
to Articles Sixth and Twelfth); and (ii) Enticknap shall not be entitled to
receive any severance benefits, salary, other benefits or compensation of any
kind (except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Eleventh:    Right to Voluntary Termination by Enticknap

      (a) Conditions for Termination by Enticknap. In the event that:

          (i) Any "person" other than CFK Partners or an affiliate of CFK
      Partners is or becomes a "beneficial" owner, "directly or indirectly", of
      stock of Mercury representing



                                       5


      50% or more of the total voting power of Mercury's then outstanding stock,
      without the written consent of the Board of Directors of Mercury; or

          (ii) Mercury is acquired by another entity through the purchase of
      substantially all of its assets, the purchase of all of its outstanding
      voting securities or a combination thereof, without the consent of the
      Board of Directors of Mercury; or

          (iii) Mercury is merged with another entity, consolidated with another
      entity or reorganized in a manner in which any "person" other than CFK
      Partners or an affiliate of CFK Partners is or becomes a "beneficial"
      owner, "directly or indirectly", of stock of the surviving entity
      representing 50% or more of the total voting power of the surviving
      entity's then outstanding stock, without the consent of the Board of
      Directors of Mercury; or

          (iv) During any period of one, two or three consecutive years,
      individuals who at the beginning of any such period constitute the
      directors of Mercury cease for any reason to constitute at least a
      majority thereof unless the election, or the nomination or election by
      Mercury's stockholders, of each new director of Mercury was approved by a
      vote of at least two-thirds of such directors of Mercury then still in
      office who were directors of Mercury at the beginning of any such period;

      then, if following any of the events set forth in clauses (i), (ii),
(iii) or (iv), Enticknap's duties are substantially altered or Enticknap is
demoted for cause, Enticknap shall have the right and option to voluntarily
terminate this Agreement upon written notice to Mercury. All terms used in
quotations in clauses (i) and (iii) shall have the meanings assigned to such
terms in Section 13 of the Securities Exchange Act of 1934 and the rules,
regulations, releases and no-action letters of the Securities and Exchange
Commission promulgated thereunder or interpreting any of the same. For purposes
of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned
to such term in Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and the releases and no-action
letters interpreting the same.

      (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Enticknap pursuant to
paragraph (a) of this Article Eleventh, Enticknap shall be entitled to be paid
by Mercury within thirty (30) days of such termination by Enticknap, the lesser
of one year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Enticknap over the full remaining term of this
Agreement.

      (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Eleventh, following a voluntary termination of Enticknap's
employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i)
all rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Enticknap pursuant
to Articles Sixth and Twelfth); and (ii) Enticknap shall not be entitled to
receive any severance benefits, salary, other benefits or compensation of any
kind (except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Twelfth:     Restrictive Covenant

      Enticknap covenants and agrees that during the period commencing with the
date hereof and ending six (6) months from the date Enticknap's employment with
Mercury is terminated for "cause" or by reason of Enticknap's voluntary
termination of employment from Mercury (the "Non-Compete Period"), Enticknap
will not compete or attempt to compete with or become associated with any
business which competes with the Companies' government contracts, cargo,
commercial



                                       6


aviation, fuel sales, fixed base operations, or any business activities of the
Companies existing on or developed subsequent to the date hereof. Enticknap
covenants and agrees that he will not, without the prior written consent of
Mercury during the Non-Compete Period: (a) solicit any customer of the
Companies; (b) solicit any contracts which were either being solicited by, or
which were under contract with, the Companies by performing or causing to be
performed any work which was either being solicited by, or which was under
contract with, Mercury; or (c) induce any sales, operating, technical or other
personnel of the Companies to leave the service, employ or business of the
Companies. Enticknap agrees that he will not violate this Article Eleventh: (a)
directly or indirectly; (b) in any capacity, either individually or as a member
of any firm; (c) as an officer, director, stockholder, partner or Enticknap of
any business; or (d) through or with any persons, relatives (either through
blood or marriage), firms, corporations or individuals controlled by or
associated with him (each and every such method of violation referred to in
clauses (a) through (d) shall hereinafter be referred to as an "indirect
violation"). Enticknap further agrees that doing or causing to be done any of
the actions prohibited in this Article Eleventh by means of an indirect
violation shall constitute a violation of this Article Eleventh as though
violated by Enticknap, subject to all of the remedies to Mercury provided for
herein and as otherwise provided by law.

      Thirteenth:  Arbitration; Governing Law.

      Any controversy or claim arising out of, or relating to this Agreement or
the breach thereof, shall be settled by binding arbitration in the City of Los
Angeles pursuant to the laws of the State of California in accordance with the
rules then obtaining of the America Arbitration Association, and judgments upon
the award rendered my be entered in any court having jurisdiction thereof. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of California. The arbitrators shall have the power in their
discretion to award attorneys' fees and other legal costs and expenses to the
prevailing party in connection with any arbitration.

      Fourteenth:  Notices

      Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by certified mail to his residence, in the
case of Enticknap, or to its principal office, in the case of Mercury.

      Fifteenth:   Waiver of Breach

      The waiver by Mercury of a breach of any provision of this Agreement by
Enticknap shall not operate or be construed as a waiver of any subsequent breach
by Enticknap.

      Sixteenth:   Assignment

      The rights and obligations of Mercury under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Mercury.

      Seventeenth: Entire Agreement; Written Amendment

      This instrument contains the entire agreement of the parties with respect
to the subject matter hereof. This Agreement may only be amended, modified,
extended or discharged and the



                                       7


provisions of this Agreement may only be waived by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

      Eighteenth:  Equitable Relief; Partial Enforcement

      Mercury and Enticknap have agreed that violation or breach of Articles
Sixth and Eleventh will result in irreparable injury to the Companies and shall
entitle the Companies to equitable relief in addition to any other remedies
provided at law. Mercury and Enticknap have further agreed in the event that
only a portion of Articles Sixth or Eleventh shall be deemed enforceable or
valid that portion of such Articles as shall be enforceable or valid shall be
enforced. Mercury and Enticknap have further agreed that the court making a
determination of the validity or enforceability of such Articles shall have the
power and authority to rewrite the restrictions contained in such Articles to
include the maximum portion of the restrictions included within such Articles as
are enforceable, valid and consistent with the intent of the parties as
expressed in such Articles.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                          MERCURY AIR GROUP, INC.



                                          By:  /s/ Joseph A. Czyzyk
                                             -----------------------------------
                                          Its: Chief Executive Officer



                                          /s/ John L. Enticknap
                                          --------------------------------------
                                          John L. Enticknap



                                       8

EX-10.4

                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP,
INC., a Delaware corporation having its principal offices at 5456 McConnell
Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"),
and Mr. Robert Schlax, residing at 15 Windham Lane, Laguna Miguel, California
92677 (hereinafter referred to as "Schlax").

                              W I T N E S S E T H:

      WHEREAS, Schlax has been employed as Vice President of Finance of Mercury
since February 2002 and Treasurer since March 2002; and

      WHEREAS, Mercury's Board of Directors (the "Board of Directors") would
like to continue Schlax's role as Vice President of Finance and Treasurer of
Mercury on the terms and conditions set forth in this Agreement; and

      WHEREAS, Schlax wishes to accept this position on the terms and conditions
set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:

      First:       Employment

      (a) Employment. Mercury hereby confirms and agrees that Schlax will be
appointed by the Board of Directors of Mercury to continue serving as the Vice
President of Finance and Treasurer of Mercury. In his capacity as Vice President
of Finance and Treasurer of Mercury, Schlax shall continue to report directly to
Mercury's Chief Executive Officer.

      (b) Schlax's Acceptance. Schlax hereby accepts his appointments as Vice
President of Finance and Treasurer of Mercury.

      Second:      Term

      Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin on the date hereof and shall terminate
three years thereafter. If Schlax is then employed by Mercury, on each
successive anniversary date, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be one (1) year; provided, however, that upon written notice given by
either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.




      Third:       Compensation

      (a) Base Compensation. For all services rendered by Schlax under this
Agreement, Mercury shall pay Schlax a salary of $170,000 per year, payable in
semi-monthly installments in accordance with Mercury's standard payroll
practices. From time to time, the salary payable to Schlax may be adjusted at
the sole discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Schlax's annual salary, as from time to time adjusted
by the Compensation Committee, is hereinafter referred to as "Base
Compensation".

      (b) Bonus Plans. The Board of Directors may, at its discretion, establish
a bonus plan for Schlax.

      Fourth:      Extent of Services

      Schlax shall devote his entire time, attention and energies to the
business of Mercury (and its various subsidiaries) and shall not during the term
of this Agreement be engaged in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Schlax from investing his assets in
companies or other entities in such form or manner as will not require any
services on the part of Schlax in the operation of the affairs of such companies
or entities in which such investments are made, and, with respect to companies
or other entities which are competitors of Mercury, where Schlax's investment
does not represent in excess of five percent (5%) of the outstanding equity of
such company or entity.

      Fifth:       Working Facilities

      Schlax shall be furnished with a private office and other facilities and
services reasonably suitable to his position and adequate for the performance of
his duties. Schlax shall be employed at the principal offices of Mercury located
in Los Angeles, California and shall travel to the extent necessary to fulfill
his duties in his discretion.

      Sixth:       Disclosure of Information

      (a) Generally. The parties acknowledge that Mercury and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non-technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Proprietary Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.



                                       2


      (b) Access to Proprietary Information. The parties acknowledge that Schlax
has access to the Proprietary Information and that the disclosure or misuse of
such Proprietary Information could irreparably damage the Companies and/or their
respective clients or customers.

      (c) Nondisclosure to others. Except as directed by Mercury in writing or
verbally, Schlax shall not at any time during or after the Term disclose any
Proprietary Information to any person whatsoever, examine or make copies of any
reports or other documents, papers, memoranda or extracts for use other than in
connection with his duties with Mercury or utilize for his own benefit or for
the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

      (d) Survivability. Schlax acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

      Seventh:     Expenses

      Schlax is authorized to incur reasonable expenses for promoting the
business of Mercury, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors of
Mercury's Chief Executive Officer, as from time to time adopted. Mercury will
reimburse Schlax for all such reasonable expenses upon the presentation by
Schlax, from time to time, of an itemized account and documentation of such
expenditures in sufficient detail to allow Mercury to claim an income tax
deduction for each paid item, if such item is deductible.

      Eighth:      Fringe Benefits

      (a) Participating in General Plans. Schlax shall have such employee
benefits (including medical insurance, life insurance, 401(k) and disability
insurance plans) as Mercury shall from time-to-time establish, promulgate or
keep in effect for the benefit of its management level employees. Such benefits
will include company paid medical insurance for Schlax and his family under
Mercury's medical insurance plans. Schlax shall be required to comply with, and
be entitled to benefits only in accordance with, the terms and conditions of
such plans. Nothing contained in this paragraph (a) of Article Eighth, however,
shall be construed to require Mercury to establish any life, disability or
medical insurance plans not in existence on the date hereof, to continue any
plans in existence on the date hereof, to prevent Mercury from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Mercury to take special steps to insure the eligibility of Schlax or his
dependents under the provisions of such plans, and no such act or omission shall
be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein.

      (b) Stock Options. Schlax shall be entitled to the grant of stock options
          as from time to time determined in the sole discretion of the Board of
          Directors.



                                       3


      (c) 2002 Management Stock Purchase Plan.

          (i) By virtue of his eligibility to participate in the 2002 Management
      Stock Purchase Plan, Schlax may purchase from CFK Partners, an Illinois
      general partnership, up to 25,000 unregistered shares of the common stock
      of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase
      Price"), such purchase to be funded by Mercury.

          (ii) In the event Schlax voluntarily leaves the full-time employment
      of Mercury or any of its subsidiaries or related companies for any reason
      whatsoever without the prior consent of Mercury, or in the event Schlax's
      employment is terminated with or without "cause", as defined in Article 9
      hereof (except pursuant to Article 11(a) of the Employment Agreement or as
      set forth below), or in the event Schlax dies or becomes disabled
      (hereinafter the "Date of Discharge"), Schlax or his estate shall be
      obligated to repay the sums provided by Mercury hereunder, provided,
      however, that, in connection with Schlax's employment with Mercury,
      Schlax's obligations hereunder shall be forgiven by the percentage equal
      to the product of (i) 10% and (ii) the number of years from the date
      hereof to the Date of Discharge, with the number of years calculated on a
      March 1st fiscal year (so that if, for example, the Date of Discharge is
      April 1, 2004, the number of years calculated hereunder shall be 2).
      Schlax shall receive 10% of the original amount of stock purchased on the
      anniversary date of the Employment Agreement's execution and will be fully
      vested and eligible to vote those shares. Schlax shall have no obligation
      to repay Mercury if he remains employed by Mercury after March 1, 2012.
      Mercury shall be granted a secured interest as a creditor of Schlax in the
      event Schlax defaults in his obligation to Mercury as herein set forth and
      Mercury will designate an escrow to hold the shares underlying the
      remaining debt obligation. In the event Schlax terminates his employment
      pursuant to Article 11(a) of the Employment Agreement or is terminated by
      Mercury for any reason following an event set forth in Article 11(a) of
      his Employment Agreement, Schlax shall have no further obligation to repay
      Mercury all or any portion of the Purchase Price. While Schlax has any
      obligation to Mercury hereunder, Schlax shall be obligated to comply with
      directions of the Board of Directors of Mercury with respect to the voting
      of those shares held in escrow purchased by Schlax hereunder.

          (d) Vacation. Schlax shall be entitled each year to a vacation of four
      (4) weeks, during which time his compensation shall be paid in full.

      Ninth:       Mercury's Right to Terminate For Cause

      (a) Cause. Mercury may at any time during the term of this Agreement
discharge Schlax for "cause." The term "cause" is defined herein as Schlax's (i)
misappropriation of corporate funds, fraud, embezzlement or other illegal
conduct to the detriment of Mercury, (ii) negligence in the execution of his
material assigned duties or Schlax's voluntary abandonment of his job for any
reason other than disability; (iii) refusal or failure, after not less than 20
days written notice that such refusal or failure would constitute a default
hereunder, to carry out any reasonable and material direction from the Board of
Directors given to him in writing; (iv) conviction of a felony; (v) material
breach or violation of the terms of this Agreement, which breach or violation
shall not have been fully cured (as determined by the Board of Directors acting
in good faith) by Schlax within 20 days after receipt of written notice of the
same from the Board of Directors; (vi) Schlax's death or



                                       4


disability (except that, in the event of Schlax's disability, Mercury shall, at
Schlax's request, prior to discharge, grant Schlax a leave of absence of up to
six months or such longer period of time as may be required by law); or (vii)
Schlax's engagement in drug or alcohol abuse. Schlax shall be terminated only
following a finding of "cause" in a resolution adopted by majority vote of the
Board of Directors of Mercury.

      (b) No Rights Following Cause Termination. Following a termination of
Schlax's employment with Mercury "for cause" pursuant to paragraph (a) of this
Article Ninth: (i) all rights and liabilities of the parties hereto shall cease
and this Agreement shall be terminated (subject to the continuing obligations of
Schlax pursuant to Article Sixth and Twelfth hereof); and (ii) Schlax shall not
be entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA, salary accrued through the date of termination and accrued vacation
pay as required by law) either as consideration for his employment or in
connection with the termination of his employment. In the event that Schlax
asserts that his voluntary termination was actually a constructive termination,
Mercury shall be entitled to assert as "cause" for such termination any grounds
present at the time of such termination which the Board of Directors could have
asserted as "cause" if called upon to terminate Schlax.

      Tenth:       Termination Without Cause

      (a) Rights Following Termination Without Cause. Should Schlax be
discharged by Mercury at any time during the term of this Agreement except as
provided in Article Ninth, Mercury hereby agrees to pay Schlax within thirty
(30) days from such discharge the lesser of one year's Base Compensation or the
Base Compensation that would otherwise be paid to him over the remaining term of
this Agreement, with a minimum of six (6) months base compensation.

      (b) No Additional Rights. Except as set forth above in paragraph (a) of
this Article Tenth following a termination of Schlax's employment by Mercury
other that pursuant to Article Ninth above and Article Eleventh below: (i) all
rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Schlax pursuant to
Articles Sixth and Twelfth); and (ii) Schlax shall not be entitled to receive
any severance benefits, salary, other benefits or compensation of any kind
(except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Eleventh:    Right to Voluntary Termination by Schlax

      (a) Conditions for Termination by Schlax. In the event that:

          (i) Any "person" other than CFK Partners or an affiliate of CFK
      Partners is or becomes a "beneficial" owner, "directly or indirectly", of
      stock of Mercury representing 50% or more of the total voting power of
      Mercury's then outstanding stock, without the written consent of the Board
      of Directors of Mercury; or



                                       5


          (ii) Mercury is acquired by another entity through the purchase of
      substantially all of its assets, the purchase of all of its outstanding
      voting securities or a combination thereof, without the consent of the
      Board of Directors of Mercury; or

          (iii) Mercury is merged with another entity, consolidated with another
      entity or reorganized in a manner in which any "person" other than CFK
      Partners or an affiliate of CFK Partners is or becomes a "beneficial"
      owner, "directly or indirectly", of stock of the surviving entity
      representing 50% or more of the total voting power of the surviving
      entity's then outstanding stock, without the consent of the Board of
      Directors of Mercury; or

          (iv) During any period of one, two or three consecutive years,
      individuals who at the beginning of any such period constitute the
      directors of Mercury cease for any reason to constitute at least a
      majority thereof unless the election, or the nomination or election by
      Mercury's stockholders, of each new director of Mercury was approved by a
      vote of at least two-thirds of such directors of Mercury then still in
      office who were directors of Mercury at the beginning of any such period;

      then, if following any of the events set forth in clauses (i), (ii),
(iii) or (iv), Schlax's duties are substantially altered or Schlax is demoted
for cause, Schlax shall have the right and option to voluntarily terminate this
Agreement upon written notice to Mercury. All terms used in quotations in
clauses (i) and (iii) shall have the meanings assigned to such terms in Section
13 of the Securities Exchange Act of 1934 and the rules, regulations, releases
and no-action letters of the Securities and Exchange Commission promulgated
thereunder or interpreting any of the same. For purposes of clauses (i) and
(iii), the term "affiliate" shall have the meaning assigned to such term in Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the releases and no-action letters interpreting the
same.

      (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Schlax pursuant to
paragraph (a) of this Article Eleventh, Schlax shall be entitled to be paid by
Mercury within thirty (30) days of such termination by Schlax, the lesser of one
year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Schlax over the full remaining term of this Agreement.

      (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Eleventh, following a voluntary termination of Schlax's employment
with Mercury pursuant to paragraph (a) of this Article Eleventh: (i) all rights
and liabilities of the parties hereto shall cease and this Agreement shall be
terminated (subject to the continuing obligations of Schlax pursuant to Articles
Sixth and Twelfth); and (ii) Schlax shall not be entitled to receive any
severance benefits, salary, other benefits or compensation of any kind (except
for health insurance continuation as required by COBRA and accrued vacation pay
as required by law) either as consideration for his employment or in connection
with the termination of his employment.

      Twelfth:     Restrictive Covenant

      Schlax covenants and agrees that during the period commencing with the
date hereof and ending six (6) months from the date Schlax's employment with
Mercury is terminated for "cause" or by reason of Schlax's voluntary termination
of employment from Mercury (the "Non-Compete Period"), Schlax will not compete
or attempt to compete with or become associated with any business which competes
with the Companies' government contracts, cargo, commercial aviation, fuel
sales, fixed base operations, or any business activities of the Companies
existing on or developed subsequent to the date hereof. Schlax covenants and
agrees that he will not, without the prior written consent of Mercury during the
Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any
contracts which were either being solicited by, or which were under



                                       6


contract with, the Companies by performing or causing to be performed any work
which was either being solicited by, or which was under contract with, Mercury;
or (c) induce any sales, operating, technical or other personnel of the
Companies to leave the service, employ or business of the Companies. Schlax
agrees that he will not violate this Article Eleventh: (a) directly or
indirectly; (b) in any capacity, either individually or as a member of any firm;
(c) as an officer, director, stockholder, partner or Schlax of any business; or
(d) through or with any persons, relatives (either through blood or marriage),
firms, corporations or individuals controlled by or associated with him (each
and every such method of violation referred to in clauses (a) through (d) shall
hereinafter be referred to as an "indirect violation"). Schlax further agrees
that doing or causing to be done any of the actions prohibited in this Article
Eleventh by means of an indirect violation shall constitute a violation of this
Article Eleventh as though violated by Schlax, subject to all of the remedies to
Mercury provided for herein and as otherwise provided by law.

      Thirteenth:  Arbitration; Governing Law.

      Any controversy or claim arising out of, or relating to this Agreement or
the breach thereof, shall be settled by binding arbitration in the City of Los
Angeles pursuant to the laws of the State of California in accordance with the
rules then obtaining of the America Arbitration Association, and judgments upon
the award rendered my be entered in any court having jurisdiction thereof. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of California. The arbitrators shall have the power in their
discretion to award attorneys' fees and other legal costs and expenses to the
prevailing party in connection with any arbitration.

      Fourteenth:  Notices

      Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by certified mail to his residence, in the
case of Schlax, or to its principal office, in the case of Mercury.

      Fifteenth:   Waiver of Breach

      The waiver by Mercury of a breach of any provision of this Agreement by
Schlax shall not operate or be construed as a waiver of any subsequent breach by
Schlax.

      Sixteenth:   Assignment

      The rights and obligations of Mercury under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Mercury.

      Seventeenth: Entire Agreement; Written Amendment

      This instrument contains the entire agreement of the parties with respect
to the subject matter hereof. This Agreement may only be amended, modified,
extended or discharged and the provisions of this Agreement may only be waived
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.



                                       7


      Eighteenth:  Equitable Relief; Partial Enforcement

      Mercury and Schlax have agreed that violation or breach of Articles Sixth
and Eleventh will result in irreparable injury to the Companies and shall
entitle the Companies to equitable relief in addition to any other remedies
provided at law. Mercury and Schlax have further agreed in the event that only a
portion of Articles Sixth or Eleventh shall be deemed enforceable or valid that
portion of such Articles as shall be enforceable or valid shall be enforced.
Mercury and Schlax have further agreed that the court making a determination of
the validity or enforceability of such Articles shall have the power and
authority to rewrite the restrictions contained in such Articles to include the
maximum portion of the restrictions included within such Articles as are
enforceable, valid and consistent with the intent of the parties as expressed in
such Articles.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                          MERCURY AIR GROUP, INC.



                                          By:  /s/ Joseph A. Czyzyk
                                             -----------------------------------
                                          Its: Chief Executive Officer


                                          /s/ Robert Schlax
                                          --------------------------------------
                                          Robert Schlax



                                       8

EX-10.5

                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT made as of May 22, 2002 by and between MERCURY AIR GROUP,
INC., a Delaware corporation having its principal offices at 5456 McConnell
Avenue, Los Angeles, California 90066 (hereinafter referred to as "Mercury"),
and Mr. Steve Antonoff, residing at 119 South Helberta Avenue, #7, Redondo
Beach, California 90277 (hereinafter referred to as "Antonoff").

                              W I T N E S S E T H:

      WHEREAS, Antonoff has been employed as Vice President of Human Services of
Mercury; and

      WHEREAS, Mercury's Board of Directors (the "Board of Directors") would
like to continue Antonoff's role as Vice President of Human Resources of Mercury
on the terms and conditions set forth in this Agreement; and

      WHEREAS, Antonoff wishes to accept this position on the terms and
conditions set forth in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:

      First:       Employment

      (a) Employment. Mercury hereby confirms and agrees that Antonoff will be
appointed by the Board of Directors of Mercury to continue serving as an Vice
President of Human Resources of Mercury. In his capacity as Vice President of
Human Resources of Mercury, Antonoff shall continue to report directly to
Mercury's Chief Executive Officer.

      (b) Antonoff's Acceptance. Antonoff hereby accepts his appointments as
Vice President of Human Resources of Mercury.

      Second:      Term

      Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin on the date hereof and shall terminate
three years thereafter. If Antonoff is then employed by Mercury, on each
successive anniversary date, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be one (1) year; provided, however, that upon written notice given by
either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.




      Third:       Compensation

      (a) Base Compensation. For all services rendered by Antonoff under this
Agreement, Mercury shall pay Antonoff a salary of $116,600 per year, payable in
semi-monthly installments in accordance with Mercury's standard payroll
practices. From time to time, the salary payable to Antonoff may be adjusted at
the sole discretion of the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Antonoff's annual salary, as from time to time
adjusted by the Compensation Committee, is hereinafter referred to as "Base
Compensation".

      (b) Bonus Plans. The Board of Directors may, at its discretion, establish
a bonus plan for Antonoff.

      Fourth:      Extent of Services

      Antonoff shall devote his entire time, attention and energies to the
business of Mercury (and its various subsidiaries) and shall not during the term
of this Agreement be engaged in any other business activity whether or not such
business activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing Antonoff from investing his assets in
companies or other entities in such form or manner as will not require any
services on the part of Antonoff in the operation of the affairs of such
companies or entities in which such investments are made, and, with respect to
companies or other entities which are competitors of Mercury, where Antonoff's
investment does not represent in excess of five percent (5%) of the outstanding
equity of such company or entity.

      Fifth:       Working Facilities

      Antonoff shall be furnished with a private office and other facilities and
services reasonably suitable to his position and adequate for the performance of
his duties. Antonoff shall be employed at the principal offices of Mercury
located in Los Angeles, California and shall travel to the extent necessary to
fulfill his duties in his discretion.

      Sixth:       Disclosure of Information

      (a) Generally. The parties acknowledge that Mercury and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non-technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Proprietary Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.



                                       2


      (b) Access to Proprietary Information. The parties acknowledge that
Antonoff has access to the Proprietary Information and that the disclosure or
misuse of such Proprietary Information could irreparably damage the Companies
and/or their respective clients or customers.

      (c) Nondisclosure to others. Except as directed by Mercury in writing or
verbally, Antonoff shall not at any time during or after the Term disclose any
Proprietary Information to any person whatsoever, examine or make copies of any
reports or other documents, papers, memoranda or extracts for use other than in
connection with his duties with Mercury or utilize for his own benefit or for
the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

      (d) Survivability. Antonoff acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

      Seventh:     Expenses

      Antonoff is authorized to incur reasonable expenses for promoting the
business of Mercury, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors of
Mercury's Chief Executive Officer, as from time to time adopted. Mercury will
reimburse Antonoff for all such reasonable expenses upon the presentation by
Antonoff, from time to time, of an itemized account and documentation of such
expenditures in sufficient detail to allow Mercury to claim an income tax
deduction for each paid item, if such item is deductible.

      Eighth:      Fringe Benefits

      (a) Participating in General Plans. Antonoff shall have such employee
benefits (including medical insurance, life insurance, 401(k) and disability
insurance plans) as Mercury shall from time-to-time establish, promulgate or
keep in effect for the benefit of its management level employees. Such benefits
will include company paid medical insurance for Antonoff and his family under
Mercury's medical insurance plans. Antonoff shall be required to comply with,
and be entitled to benefits only in accordance with, the terms and conditions of
such plans. Nothing contained in this paragraph (a) of Article Eighth, however,
shall be construed to require Mercury to establish any life, disability or
medical insurance plans not in existence on the date hereof, to continue any
plans in existence on the date hereof, to prevent Mercury from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Mercury to take special steps to insure the eligibility of Antonoff or
his dependents under the provisions of such plans, and no such act or omission
shall be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein.

      (b) Stock Options. Antonoff shall be entitled to the grant of stock
options as from time to time determined in the sole discretion of the Board of
Directors.

      (c) 2002 Management Stock Purchase Plan.



                                       3


          (i) By virtue of his eligibility to participate in the 2002 Management
      Stock Purchase Plan, Antonoff may purchase from CFK Partners, an Illinois
      general partnership, up to 25,000 unregistered shares of the common stock
      of Mercury, $0.01 par value, at a price of $7.50 per share (the "Purchase
      Price"), such purchase to be funded by Mercury.

          (ii) In the event Antonoff voluntarily leaves the full-time employment
      of Mercury or any of its subsidiaries or related companies for any reason
      whatsoever without the prior consent of Mercury, or in the event
      Antonoff's employment is terminated with or without "cause", as defined in
      Article 9 hereof (except pursuant to Article 11(a) of the Employment
      Agreement or as set forth below), or in the event Antonoff dies or becomes
      disabled (hereinafter the "Date of Discharge"), Antonoff or his estate
      shall be obligated to repay the sums provided by Mercury hereunder,
      provided, however, that, in connection with Antonoff's employment with
      Mercury, Antonoff's obligations hereunder shall be forgiven by the
      percentage equal to the product of (i) 10% and (ii) the number of years
      from the date hereof to the Date of Discharge, with the number of years
      calculated on a March 1st fiscal year (so that if, for example, the Date
      of Discharge is April 1, 2004, the number of years calculated hereunder
      shall be 2). Antonoff shall receive 10% of the original amount of stock
      purchased on the anniversary date of the Employment Agreement's execution
      and will be fully vested and eligible to vote those shares. Antonoff shall
      have no obligation to repay Mercury if he remains employed by Mercury
      after March 1, 2012. Mercury shall be granted a secured interest as a
      creditor of Antonoff in the event Antonoff defaults in his obligation to
      Mercury as herein set forth and Mercury will designate an escrow to hold
      the shares underlying the remaining debt obligation. In the event Antonoff
      terminates his employment pursuant to Article 11(a) of the Employment
      Agreement or is terminated by Mercury for any reason following an event
      set forth in Article 11(a) of his Employment Agreement, Antonoff shall
      have no further obligation to repay Mercury all or any portion of the
      Purchase Price. While Antonoff has any obligation to Mercury hereunder,
      Antonoff shall be obligated to comply with directions of the Board of
      Directors of Mercury with respect to the voting of those shares held in
      escrow purchased by Antonoff hereunder.

      (d) Vacation. Antonoff shall be entitled each year to a vacation of four
(4) weeks, during which time his compensation shall be paid in full.

      Ninth:       Mercury's Right to Terminate For Cause

      (a) Cause. Mercury may at any time during the term of this Agreement
discharge Antonoff for "cause." The term "cause" is defined herein as Antonoff's
(i) misappropriation of corporate funds, fraud, embezzlement or other illegal
conduct to the detriment of Mercury, (ii) negligence in the execution of his
material assigned duties or Antonoff's voluntary abandonment of his job for any
reason other than disability; (iii) refusal or failure, after not less than 20
days written notice that such refusal or failure would constitute a default
hereunder, to carry out any reasonable and material direction from the Board of
Directors given to him in writing; (iv) conviction of a felony; (v) material
breach or violation of the terms of this Agreement, which breach or violation
shall not have been fully cured (as determined by the Board of Directors acting
in good faith) by Antonoff within 20 days after receipt of written notice of the
same from the Board of Directors; (vi) Antonoff's death or disability (except
that, in the event of Antonoff's disability, Mercury shall, at



                                       4


Antonoff's request, prior to discharge, grant Antonoff a leave of absence of up
to six months or such longer period of time as may be required by law); or (vii)
Antonoff's engagement in drug or alcohol abuse. Antonoff shall be terminated
only following a finding of "cause" in a resolution adopted by majority vote of
the Board of Directors of Mercury.

      (b) No Rights Following Cause Termination. Following a termination of
Antonoff's employment with Mercury "for cause" pursuant to paragraph (a) of this
Article Ninth: (i) all rights and liabilities of the parties hereto shall cease
and this Agreement shall be terminated (subject to the continuing obligations of
Antonoff pursuant to Article Sixth and Twelfth hereof); and (ii) Antonoff shall
not be entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA, salary accrued through the date of termination and accrued vacation
pay as required by law) either as consideration for his employment or in
connection with the termination of his employment. In the event that Antonoff
asserts that his voluntary termination was actually a constructive termination,
Mercury shall be entitled to assert as "cause" for such termination any grounds
present at the time of such termination which the Board of Directors could have
asserted as "cause" if called upon to terminate Antonoff.

      Tenth:       Termination Without Cause

      (a) Rights Following Termination Without Cause. Should Antonoff be
discharged by Mercury at any time during the term of this Agreement except as
provided in Article Ninth, Mercury hereby agrees to pay Antonoff within thirty
(30) days from such discharge the lesser of one year's Base Compensation or the
Base Compensation that would otherwise be paid to him over the remaining term of
this Agreement, with a minimum of six (6) months base compensation.

      (b) No Additional Rights. Except as set forth above in paragraph (a) of
this Article Tenth following a termination of Antonoff's employment by Mercury
other that pursuant to Article Ninth above and Article Eleventh below: (i) all
rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Antonoff pursuant
to Articles Sixth and Twelfth); and (ii) Antonoff shall not be entitled to
receive any severance benefits, salary, other benefits or compensation of any
kind (except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Eleventh:    Right to Voluntary Termination by Antonoff

      (a) Conditions for Termination by Antonoff. In the event that:

          (i) Any "person" other than CFK Partners or an affiliate of CFK
      Partners is or becomes a "beneficial" owner, "directly or indirectly", of
      stock of Mercury representing 50% or more of the total voting power of
      Mercury's then outstanding stock, without the written consent of the Board
      of Directors of Mercury; or

          (ii) Mercury is acquired by another entity through the purchase of
      substantially all of its assets, the purchase of all of its outstanding
      voting securities or a combination thereof, without the consent of the
      Board of Directors of Mercury; or



                                       5


          (iii) Mercury is merged with another entity, consolidated with another
      entity or reorganized in a manner in which any "person" other than CFK
      Partners or an affiliate of CFK Partners is or becomes a "beneficial"
      owner, "directly or indirectly", of stock of the surviving entity
      representing 50% or more of the total voting power of the surviving
      entity's then outstanding stock, without the consent of the Board of
      Directors of Mercury; or

          (iv) During any period of one, two or three consecutive years,
      individuals who at the beginning of any such period constitute the
      directors of Mercury cease for any reason to comstitute at least a
      majority thereof unless the election, or the nomination or election by
      Mercury's stockholders, of each new director of Mercury was approved by a
      vote of at least two-thirds of such directors of Mercury then still in
      office who were directors of Mercury at the beginning of any such period;

      then, if following any of the events set forth in clauses (i), (ii),
(iii) or (iv), Antonoff's duties are substantially altered or Antonoff is
demoted for cause, Antonoff shall have the right and option to voluntarily
terminate this Agreement upon written notice to Mercury. All terms used in
quotations in clauses (i) and (iii) shall have the meanings assigned to such
terms in Section 13 of the Securities Exchange Act of 1934 and the rules,
regulations, releases and no-action letters of the Securities and Exchange
Commission promulgated thereunder or interpreting any of the same. For purposes
of clauses (i) and (iii), the term "affiliate" shall have the meaning assigned
to such term in Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and the releases and no-action
letters interpreting the same.

      (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Antonoff pursuant to
paragraph (a) of this Article Eleventh, Antonoff shall be entitled to be paid by
Mercury within thirty (30) days of such termination by Antonoff, the lesser of
one year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Antonoff over the full remaining term of this Agreement.

      (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Eleventh, following a voluntary termination of Antonoff's
employment with Mercury pursuant to paragraph (a) of this Article Eleventh: (i)
all rights and liabilities of the parties hereto shall cease and this Agreement
shall be terminated (subject to the continuing obligations of Antonoff pursuant
to Articles Sixth and Twelfth); and (ii) Antonoff shall not be entitled to
receive any severance benefits, salary, other benefits or compensation of any
kind (except for health insurance continuation as required by COBRA and accrued
vacation pay as required by law) either as consideration for his employment or
in connection with the termination of his employment.

      Twelfth:     Restrictive Covenant

      Antonoff covenants and agrees that during the period commencing with the
date hereof and ending six (6) months from the date Antonoff's employment with
Mercury is terminated for "cause" or by reason of Antonoff's voluntary
termination of employment from Mercury (the "Non-Compete Period"), Antonoff will
not compete or attempt to compete with or become associated with any business
which competes with the Companies' government contracts, cargo, commercial
aviation, fuel sales, fixed base operations, or any business activities of the
Companies existing on or developed subsequent to the date hereof. Antonoff
covenants and agrees that he will not, without the prior written consent of
Mercury during the Non-Compete Period: (a) solicit any customer of the
Companies; (b) solicit any contracts which were either being solicited by, or
which were under contract with, the Companies by performing or causing to be
performed any work which was either being solicited by, or which was under
contract with, Mercury; or (c) induce any sales, operating,



                                       6


technical or other personnel of the Companies to leave the service, employ or
business of the Companies. Antonoff agrees that he will not violate this Article
Eleventh: (a) directly or indirectly; (b) in any capacity, either individually
or as a member of any firm; (c) as an officer, director, stockholder, partner or
Antonoff of any business; or (d) through or with any persons, relatives (either
through blood or marriage), firms, corporations or individuals controlled by or
associated with him (each and every such method of violation referred to in
clauses (a) through (d) shall hereinafter be referred to as an "indirect
violation"). Antonoff further agrees that doing or causing to be done any of the
actions prohibited in this Article Eleventh by means of an indirect violation
shall constitute a violation of this Article Eleventh as though violated by
Antonoff, subject to all of the remedies to Mercury provided for herein and as
otherwise provided by law.

      Thirteenth:  Arbitration; Governing Law.

      Any controversy or claim arising out of, or relating to this Agreement or
the breach thereof, shall be settled by binding arbitration in the City of Los
Angeles pursuant to the laws of the State of California in accordance with the
rules then obtaining of the America Arbitration Association, and judgments upon
the award rendered my be entered in any court having jurisdiction thereof. This
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of California. The arbitrators shall have the power in their
discretion to award attorneys' fees and other legal costs and expenses to the
prevailing party in connection with any arbitration.

      Fourteenth:  Notices

      Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and sent by certified mail to his residence, in the
case of Antonoff, or to its principal office, in the case of Mercury.

      Fifteenth:   Waiver of Breach

      The waiver by Mercury of a breach of any provision of this Agreement by
Antonoff shall not operate or be construed as a waiver of any subsequent breach
by Antonoff.

      Sixteenth:   Assignment

      The rights and obligations of Mercury under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Mercury.

      Seventeenth: Entire Agreement; Written Amendment

      This instrument contains the entire agreement of the parties with respect
to the subject matter hereof. This Agreement may only be amended, modified,
extended or discharged and the provisions of this Agreement may only be waived
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.

      Eighteenth:  Equitable Relief; Partial Enforcement

      Mercury and Antonoff have agreed that violation or breach of Articles
Sixth and Eleventh will result in irreparable injury to the Companies and shall
entitle the Companies to equitable relief



                                       7


in addition to any other remedies provided at law. Mercury and Antonoff have
further agreed in the event that only a portion of Articles Sixth or Eleventh
shall be deemed enforceable or valid that portion of such Articles as shall be
enforceable or valid shall be enforced. Mercury and Antonoff have further agreed
that the court making a determination of the validity or enforceability of such
Articles shall have the power and authority to rewrite the restrictions
contained in such Articles to include the maximum portion of the restrictions
included within such Articles as are enforceable, valid and consistent with the
intent of the parties as expressed in such Articles.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                          MERCURY AIR GROUP, INC.



                                          By:  /s/ Joseph A. Czyzyk
                                             -----------------------------------
                                          Its: Chief Executive Officer



                                          /s/ Steve Antonoff
                                          --------------------------------------
                                          Steve Antonoff



                                       8

EX-10.6

                                                                    EXHIBIT 10.6

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

        THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of May 22, 2002
by and between MERCURY AIR GROUP, INC., a Delaware corporation having its
principal offices at 5456 McConnell Avenue, Los Angeles, California 9OO66
(hereinafter referred to as "Employer"), and Mr. Joseph A. Czyzyk, residing at
8141 Cabora Drive, Playa Del Rey, California 90293 (hereinafter referred to as
"Employee").

                                   WITNESSETH:

        WHEREAS, Employer and Employee entered into that certain Employment
Agreement dated November 15, 1994 as amended on October 15, 1998, April 12,
1999, and September 11, 2000 (as amended, the "Employment Agreement"); and

        WHEREAS, Employer and Employee wish to amend and restate the Employment
Agreement.

        NOW, THEREFORE, the parties hereby enter into an amended and restated
employment agreement, as follows:

        First: Employment; Appointment as a Director; Expression of Intent

        (a) Employment. Employer hereby confirms and agrees that Employee has
been elected by the Board of Directors to act as Employer's President/Chief
Executive Officer, and, subject to the directions of the Board of Directors,
shall have general charge of the business, affairs and property of Employer;
charge of implementing strategic direction for Employer; general supervision
over all of Employer's officers, employees and agents; subject to the direction
of the Board of Directors, shall exercise all powers and perform all duties
incident to the office of President and shall exercise such other powers and
perform such other duties as from time-to-time may be assigned to him by the
Board.

        (b) Appointment as Director. The Board of Directors agrees to maintain
Employee as one of the candidates nominated by the Board of Directors in
connection with each annual meeting of shareholders for so long as he serves as
the Chief Executive Officer/President of Employer.

        (c) Employee's Acceptance. Employee hereby accepts his appointments and
elections as President/Chief Executive Officer of Employer, and a director of
Employer.

        Second: Term

        Subject to the provisions governing termination as hereinafter provided,
the term of this Agreement shall begin effective November 15, 2001 and shall
terminate on

November 15, 2004. If Employee is then employed by Employer, on each November 15
beginning November 15, 2002, the term of this Agreement shall be automatically
extended for one additional year such that the remaining term of the Agreement
shall then be three (3) years; provided, however, that upon written notice given
by either party at least thirty (30) days prior to the next automatic extension,
the automatic extension right may be terminated.

        Third: Compensation

        (a) Base Compensation. For all services rendered by Employee to Employer
under this Agreement, Employer shall pay Employee a salary of $520,000 per year,
payable in semi-monthly installments in accordance with Employer's standard
payroll practices. From time to time, the salary payable to Employee may be
increased at the sole discretion of the Compensation Committee of the Board of
Directors (the "Compensation Committee"). Employee's annual salary, as from time
to time increased by the Compensation Committee, is hereinafter referred to as
"Base Compensation."

        (b) Bonus Plans. In addition, the Compensation Committee has enacted the
following Bonus Plan for Employee, which shall be maintained in effect during
the term of this Agreement. For purposes of the bonus plan, EBIT shall be
defined as Operating Income of Employer on a consolidated basis minus Sales and
General Administrative Expense and Depreciation of Employer on a consolidated
basis. Employee shall receive a bonus (i) under Part I of the bonus plan, equal
to 25% of his base compensation if EBIT for the fiscal year in question exceeds
the average EBIT for the prior three fiscal years; and (ii) under Part II of the
bonus plan, equal to 4.166% of the amount by which EBIT for such fiscal year
exceeds the average of EBIT for the prior three fiscal years.

        Fourth: Extent of Services

        Employee shall devote his entire time, attention and energies to the
business of Employer (and its various subsidiaries on terms and conditions as
may be determined) and shall not during the term of this Agreement be engaged in
any other business activity whether or not such business activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing Employee from investing his assets in companies or other entities in
such form or manner as will not require any services on the part of Employee in
the operation of the affairs of such companies or entities in which such
investments are made, and, with respect to companies or other entities which are
competitors of Employer, where Employee's investment does not represent in
excess of Ten Percent (10%) of the outstanding equity of such company or entity,
a loan in excess of Ten Percent (10%) of the net assets of such company or
entity or any combination of the foregoing totaling Ten Percent (10%).

        Fifth: Working Facilities


                                      -2-

        Employee shall be furnished with a private office, secretarial help and
other facilities and services reasonably suitable to his position and adequate
for the performance of his duties. Employee shall be employed at Employer's
principal executive offices in Los Angeles, California and shall travel to the
extent necessary to fulfill his duties in his discretion.

        Sixth: Disclosure of Information

        (a) Generally. The parties acknowledge that Employer and its affiliates
(individually and collectively, the "Companies"), have developed and intend to
continue the development of and to formulate, acquire and use commercially
valuable technical and non- technical information, design and specification
documents, concepts, technology, know-how, improvements, proposals, patent
applications, techniques, marketing plans, strategies, forecasts, inventions
(not limited by the definition of an invention contained in the United States
Patent Laws), Trade Secrets (as defined in Sec. 3426.1(d) of the Uniform Trade
Secrets Act) and processes which are considered proprietary by the Companies,
particularly including, without limitation, customer and supplier lists, books
and records, computer programs, pricing information and business plans
(collectively, the "Propriety Information"). It is necessary for the Companies
to protect the Proprietary Information by patents or copyrights or by holding it
secret and confidential.

        (b) Access to Proprietary Information. The parties acknowledge that
Employee has access to the Proprietary Information and that the disclosure or
misuse of such Proprietary Information could irreparably damage the Companies
and/or their respective clients or customers.

        (c) Nondisclosure to Others. Except as directed by Employer in writing
or verbally, Employee shall not at any time during or after the Term disclose
any Proprietary Information to any person whatsoever, examine or make copies of
any reports or other documents, papers, memoranda or extracts for use other than
in connection with his duties with Employer or utilize for his own benefit or
for the benefit of any other party any such Proprietary Information and will use
reasonable diligence to maintain the confidential, secret or proprietary
character of all Proprietary Information.

        (d) Survivability. Employee acknowledges that his obligations hereunder
shall continue beyond the Term with respect to any Proprietary Information (as
defined in Article Sixth, paragraph (a) hereof) which came into his possession
during the Term.

        Seventh: Expenses

        Employee is authorized to incur reasonable expenses for promoting the
business of Employer, including expenses for entertainment, travel and similar
items but only in accordance with the policies of the Board of Directors or
Employer's Chief Executive Officer, as from time to time adopted. Employer will
reimburse Employee for all such


                                      -3-



reasonable expenses upon the presentation by Employee, from time to time, of an
itemized account and documentation of such expenditures in sufficient detail to
allow Employer to claim an income tax deduction for each paid item, if such item
is deductible.

        Eighth: Fringe Benefits

        (a) Participation in General Plans. Subject to the provisions of
paragraph (b) below, Employee shall have such employee benefits (including
medical insurance, life insurance, 401(k) and disability insurance plans) as
Employer shall from time- to-time establish, promulgate or keep in effect for
the benefit of its management level employees. Such benefits will include
company paid medical insurance for Employee and his family under Employer's
medical insurance plans. Employee shall be required to comply with, and be
entitled to benefits only in accordance with, the terms and conditions of such
plans. Nothing contained in this paragraph (a) of Article Eighth, however, shall
be construed to require Employer to establish any life, disability or medical
insurance plans not in existence on the date hereof, to continue any plans in
existence on the date hereof, to prevent Employer from modifying and/or
terminating any of the plans in existence on the date hereof or otherwise
require Employer to take special steps to insure the eligibility of Employee or
his dependents under the provisions of such plans, and no such act or omission
shall be deemed to affect this Agreement or to require modification of the
compensation, additional benefit or other provisions contained herein. The
provisions of this paragraph (a) of Article Eighth shall not limit or modify
Employee's rights with respect to life insurance and payment following
disability specifically set forth in this Agreement.

        (b) Stock Options. Employee shall be entitled to the grant of stock
options as from time to time determined in the sole discretion of the
Compensation Committee. Notwithstanding any other provision of this Agreement,
any options granted to Employee shall be exercisable for a minimum of Ninety
(90) days following his termination as set forth in the Existing Option
agreement.

        (c) 2002 Management Stock Purchase Plan.

               (i) By virtue of his eligibility to participate in the 2002
Management Stock Purchase Plan (the "Plan"), Employee may purchase from CFK
Partners, an Illinois general partnership, up to 387,650 unregistered shares
(the "Shares") of the common stock of Employer, $0.01 par value, at a price of
$7.50 per share, such purchase to be funded by the Employer.

               (ii) In the event Employee voluntarily leaves the full- time
employment of Employer or any of its subsidiaries or related companies for any
reason whatsoever without the prior consent of Employer, or Employee is
discharged with or without cause (except for a termination pursuant to Article
12(a) hereof or as otherwise provided herein) (hereinafter the "Date of
Discharge"), Employee shall be obligated to repay the


                                      -4-



sums provided by Employer hereunder, provided, however, that Employee's
obligations hereunder shall be forgiven by the percentage equal to the product
of (i) 10% and (ii) the number of years from the date hereof to the Date of
Discharge, with the number of years calculated on a March 1st fiscal year
beginning March 1, 2002 (so that if for example, the Date of Discharge is April
1, 2004, the number of years calculated hereunder shall be 2). Czyzyk shall have
no obligation to repay Mercury if he remains employed by Mercury after March 1,
2012. Employer shall be granted a secured interest as a creditor of Employee in
the event Employee defaults in his obligation to repay Employer as herein set
forth. In the event Employee terminates his employment pursuant to Article 12(a)
hereof or is terminated by Employer for any reason following an event set forth
in Article 12(a) hereof, or in the event Employee dies or becomes disabled,
Employee shall have no further obligation to repay Employer all or any portion
of the purchase price of the shares purchased pursuant to the Plan.

        (d) Vacation. Employee shall be entitled each year to a vacation of four
(4) weeks, during which time his compensation shall be paid in full.

        Ninth: Disability

        (a) Rights Following Disability. If Employee is unable to perform his
services by reason of illness or incapacity ("Disabled") for a period of more
than six (6) weeks as determined in the reasonable discretion of Employer's
Chief Executive Officer, the compensation otherwise payable to him during the
continued period of such illness or incapacity shall be reduced by fifty (50%)
percent. Unless this Agreement has been terminated prior thereto, Employee's
full compensation shall be reinstated effective and commencing on the date of
his return to employment and the discharge of his full duties hereunder.
Notwithstanding anything herein to the contrary, Employer may terminate this
Agreement at any time after Employee shall be Disabled for a period of more than
twelve (12) months as determined in the reasonable discretion of Employer's
Chief Executive Officer. Following any such termination: (i) Employer shall
continue to pay Employee's Base Compensation for one-year as severance pay or
such lesser period as may remain on the term of this Agreement; and (ii)
Employer shall pay to Employee a pro rated bonus for the portion of the fiscal
year during which he was employed prior to such termination. For purposes of the
foregoing pro ration, the bonus for the fiscal year in which the termination
occurs shall be calculated in accordance with the terms of and on the schedule
set forth in Article Third of this Agreement. Following such calculation, the
bonus for the total fiscal year shall be multiplied by a fraction, the numerator
of which shall be the number of days in the fiscal year of termination during
which Employee was employed by Employer, and the denominator of which shall be
365. The result of such calculation shall determine the pro rated bonus paid to
Employee. For purposes of this Article Ninth all amounts paid to Employee under
any long- term disability insurance policy maintained by Employer shall be
credited as if paid by Employer to Employee to Employee and after giving effect
to any federal or state income tax savings resulting from the payment under a
disability policy (as opposed to as taxable salary).


                                      -5-



        (b) No Additional Rights. Except as set forth above in paragraph (a),
clauses (i) and (ii) of this Article Ninth, following a termination of
Employee's employment with Employer pursuant to paragraph (a) of this Article
Ninth: (i) all rights and liabilities of the parties hereto shall cease and this
Agreement shall be terminated (subject to the continuing obligations of Employee
pursuant to Articles Sixth and Fourteenth); and (ii) Employee shall not be
entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA and accrued vacation pay as required by law) either as consideration
for his employment or in connection with the termination of his employment.

        Tenth: Employer's Right to Terminate For Cause

        (a) Cause. Employer may at any time during the term of this Agreement
discharge Employee for "cause." The term "cause" is defined herein as Employee's
acts of misappropriation of corporate funds, embezzlement, negligence or
Employee's voluntary abandonment of his job (other than pursuant to Article
Twelfth) or a material breach of this Agreement. Employee shall be terminated
only following a finding of "cause" in a resolution adopted by majority vote of
the Board of Directors, with Employee abstaining.

        (b) No Rights Following Cause Termination. Following a termination of
Employee's employment with Employer "for cause" pursuant to paragraph (a) of
this Article Tenth: (i) all rights and liabilities of the parties hereto shall
cease and this Agreement shall be terminated (subject to the continuing
obligations of Employee pursuant to Article Sixth and Fourteenth hereof); and
(ii) Employee shall not be entitled to receive any severance benefits, salary,
other benefits or compensation of any kind (except for health insurance
continuation as required by COBRA, salary accrued through the date of
termination and accrued vacation pay as required by law) either as consideration
for his employment or in connection with the termination of his employment. In
the event that Employee asserts that his voluntary termination was actually a
constructive termination, Employer shall be entitled to assert as "cause" for
such termination any grounds present at the time of such termination which the
Board of Directors could have asserted as "cause" if called upon to terminate
Employee.

        Eleventh: Termination Without Cause

        (a) Rights Following Termination Without Cause. Should Employee be
discharged by Employer at any time during the term of this Agreement except as
provided in Article Tenth, Employer hereby agrees to: (i) pay Employee within
thirty (30) days from such discharge the lesser of one year's Base Compensation
or the Base Compensation that would otherwise be paid to him over the remaining
term of this Agreement; and (ii) Employer shall pay to Employee a pro rated
bonus for the portion of the fiscal year during which he was employed prior to
such termination. For purposes of the foregoing pro ration, the bonus for the
fiscal year in which the termination occurs shall be calculated in accordance
with the terms of and on the schedule set forth in


                                      -6-



Article Third of this Agreement. Following such calculation, the bonus for the
total fiscal year shall be multiplied by a fraction, the numerator of which
shall be the number of days in the fiscal year of termination during which
Employee was employed by Employer, and the denominator of which shall be 365.
The result of such calculation shall determine the pro rated bonus paid to
Employee.

        (b) No Additional Rights. Except as set forth above in paragraph (a),
clauses (i) and (ii) of this Article Eleventh following a termination of
Employee's employment by Employer other than pursuant to Article Tenth above:
(i) all rights and liabilities of the parties hereto shall cease and this
Agreement shall be terminated (subject to the continuing obligations of Employee
pursuant to Articles Sixth and Fourteenth); and (ii) Employee shall not be
entitled to receive any severance benefits, salary, other benefits or
compensation of any kind (except for health insurance continuation as required
by COBRA and accrued vacation pay as required by law) either as consideration
for his employment or in connection with the termination of his employment.

        Twelfth: Right to Voluntary Termination By Employee

        (a) Conditions for Termination by Employee. In the event that:

               (i) Any "person" other than CFK Partners or an affiliate of
CFK Partners is or becomes a "beneficial" owner, "directly or indirectly", of
stock of Employer representing 50% or more of the total voting power of
Employer's then outstanding stock, without the written consent of Employee; or

               (ii) Employer is acquired by another entity through the purchase
of substantially all of the assets of the Companies, the purchase of all of
Employer's outstanding voting securities or a combination thereof, without the
written consent of Employee;

               (iii) Employer is merged with another entity, consolidated with
another entity or reorganized in a manner in which any "person" other than
CFK Partners or an affiliate of CFK Partners is or becomes a "beneficial" owner,
"directly or indirectly", of stock of the surviving entity representing 50% or
more of the total voting power of the surviving entity's then outstanding stock,
without the written consent of Employee; or

               (iv) During any period of one, two or three consecutive years,
individuals who at the beginning of any such period constitute the directors of
Employer cease for any reason to constitute at least a majority thereof unless
the election, or the nomination or election by the Employer's stockholders, of
each new director of the Employer was approved by a vote of at least two- thirds
of such directors of the Employer then still in office who were directors of the
Employer at the beginning of any such period.

   then, if following any of the events set forth in clauses (i), (ii), (iii) or
(iv),


                                      -7-



Employee's duties are substantially altered or Employee is demoted for cause,
Employee shall have the right and option to voluntarily terminate this Agreement
upon written notice to Employer. All terms used in quotations in clauses (i) and
(iii) shall have the meanings assigned to such terms in Section 13 of the
Securities Exchange Act of 1934 and the rules, regulations, releases and
no-action letters of the Securities and Exchange Commission promulgated
thereunder or interpreting any of the same. For purposes of clauses (i) and
(iii), the term "affiliate" shall have the meaning assigned to such term in Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and the releases and no-action letters interpreting the
same.

        (b) Rights Following Voluntary Termination After a Change of Control.
Following any voluntary termination of employment by Employee pursuant paragraph
(a) of this Article Twelfth, Employee shall be entitled to be paid by Employer
within thirty (30) days of such termination by Employee, the lesser of one
year's Base Compensation or the entire balance of his Base Compensation
remaining to be paid to Employee over the full remaining term of this Agreement.

        (c) No Additional Rights. Except as set forth above in paragraph (b) of
this Article Twelfth and in paragraph (c) of Article Eighth, following a
voluntary termination of Employee's employment with Employer pursuant to
paragraph (a) of this Article Twelfth: (i) all rights and liabilities of the
parties hereto shall cease and this Agreement shall be terminated (subject to
the continuing obligations of Employee pursuant to Articles Sixth and
Fourteenth); and (ii) Employee shall not be entitled to receive any severance
benefits, salary, other benefits or compensation of any kind (except for health
insurance continuation as required by COBRA and accrued vacation pay as required
by law) either as consideration for his employment or in connection with the
termination of his employment.

        Thirteenth: Death During Employment

        If Employee dies during the term of this Agreement, Employer shall pay
to the estate of Employee the Base Compensation which would otherwise be payable
to Employee up to the end of the month in which his death occurs. In addition,
Employer shall maintain a life insurance policy or policies providing One
Million Dollars ($1,000,000)in death benefits payable to Employee's estate or
other designated beneficiary. Employee shall be entitled to and the owner of the
cash surrender value of all such insurance policies in excess of the premiums
paid by Employer (if any). Notwithstanding any other provision of this
Agreement, following any termination of Employee's employment with Employer: (a)
Employer shall cease paying the premiums on any such life insurance policy and
shall be entitled to withdraw (or be paid by Employee in the form of a set- off
against any severance payments due or otherwise) its portion of the cash
surrender value of the life insurance policies; and (b) Employee shall be
entitled, in his discretion, to continue such policies for his benefit by
payment of the premiums and shall be entitled to the full cash surrender value
of such policies following


                                      -8-



withdrawal or repayment of Employer's interest in the cash surrender value.
Employee and Employer will execute such assignments as are necessary to reflect
this allocation of the death and cash surrender values of any life insurance
policies paid for by Employer on the life of Employee.

        Fourteenth: Restrictive Covenant

        Employee covenants and agrees that, during the period commencing with
the date hereof and ending five (5) years from the date Employee's employment
with Employer is terminated (the "Non- Compete Period"), Employee will not
compete or attempt to compete with or become associated with any business which
competes with the Companies' government contracts, cargo, commercial aviation,
fuel sales and fixed base operation activities or any business activities of the
Companies developed subsequent to the date hereof. Employee covenants and agrees
that he will not, without the prior written consent of Employer during the
Non-Compete Period: (a) solicit any customer of the Companies; (b) solicit any
contracts which were either being solicited by, or which were under contract
with, the Companies by performing or causing to be performed any work which was
either being solicited by, or which was under contract with, Employer; or (c)
induce any sales, operating, technical or other personnel of the Companies to
leave the service, employ or business of the Companies. Employee agrees that he
will not violate this Article Fourteenth: (a) directly or indirectly; (b) in any
capacity, either individually or as a member of any firm; (c) as an officer,
director, stockholder, partner or employee of any business; or (d) through or
with any persons, relatives (either through blood or marriage), firms,
corporations or individuals controlled by or associate with him (each and every
such method of violation referred to in clauses (a) through (d) shall
hereinafter be referred to as an "indirect violation"). Employee further agrees
that doing or causing to be done any of the actions prohibited in this Article
Fourteenth by means of an indirect violation shall constitute a violation of
this Article Fourteenth as though violated by Employee, subject to all of the
remedies to Employer provided for herein and as otherwise provided by law.

        Fifteenth: Arbitration; Governing Law

        Any controversy or claim arising out of, or relating to this Agreement,
or the breach thereof, shall be settled by binding arbitration in the City of
Los Angeles pursuant to the laws of the State of California in accordance with
the rules then obtaining of the American Arbitration Association, and judgment
upon the award rendered may be entered in any court having jurisdiction thereof.
This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of California. The arbitrators shall have the
power in their discretion to award attorneys' fees and other legal costs and
expenses to the prevailing party in connection with any arbitration.

        Sixteenth: Notices

        Any notice required or permitted to be given under this Agreement shall
be


                                      -9-



sufficient if in writing and sent by certified mail to his residence, in the
case of Employee, or to its principal office, in the case of Employer.

        Seventeenth: Waiver of Breach

        The waiver by Employer of a breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver of any subsequent breach
by Employee.

        Eighteenth: Assignment

        The rights and obligations of Employer under this Agreement shall inure
to the benefit of and shall be binding upon the successors and assigns of
Employer.

        Nineteenth: Entire Agreement; Written Amendment

        This instrument contains the entire agreement of the parties with
respect to the subject matter hereof. This Agreement may only be amended,
modified, extended or discharged and the provisions of this Agreement may only
be waived by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.

        Twentieth: Equitable Relief Partial Enforcement

        Employer and Employee have agreed that violation or breach of Articles
Sixth and Fourteenth will result in irreparable injury to the Companies and
shall entitle the Companies to equitable relief in addition to any other
remedies provided at law. Employer and Employee have further agreed in the event
that only a portion of Articles Sixth or Fourteenth shall be deemed enforceable
or valid that portion of such Articles as shall be enforceable or valid shall be
enforced. Employer and Employee have further agreed that the court making a
determination of the validity or enforceability of such Articles shall have the
power and authority to rewrite the restrictions contained in such Articles to
include the maximum portion of the restrictions included within such Articles as
are enforceable, valid and consistent with the intent of the parties as
expressed in such Articles.

        Twenty-First: Attorney's Fees

        Employer shall pay up to Five Thousand Dollars ($5,000) in legal fees to
an attorney or attorneys retained by Employee for the purpose of reviewing this
Agreement.


                                      -10-



        IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Agreement as of the day and year first above written.

                              MERCURY AIR GROUP, INC.



                              BY: /s/ Wayne J. Lovett
                                 --------------------------------
                              Wayne J. Lovett, Secretary

                              /s/ Joseph A. Czyzyk
                                 --------------------------------
                              Joseph A. Czyzyk, Individually


                                      -11-

EX-10.7

                                                                    EXHIBIT 10.7

                             MERCURY AIR GROUP, INC.
                       2002 MANAGEMENT STOCK PURCHASE PLAN
                            STOCK PURCHASE AGREEMENT

      THIS AGREEMENT made in connection with the 2002 Management Stock Purchase
Plan effective as of the 22nd day of May, 2002, by and between Mercury Air
Group, Inc., a Delaware corporation, having its principal offices of 5456
McConnell Avenue, Los Angeles, California 90066 (hereinafter referred to as
"Mercury"), CFK Partners, an Illinois general partnership ("Seller"), Joseph A.
Czyzyk, residing at 8141 Cabora Drive, Playa Del Rey, CA 90293 (hereinafter
referred to as "Czyzyk"), Wayne Lovett, residing at 5908 Finecrest, Rancho Palos
Verdes, CA 90066 (hereinafter referred to as "Lovett"), Mark Coleman, residing
at 16786 Calle de Catalina, Pacific Palisades, California 90272 (hereinafter
referred to as "Coleman"), John Enticknap, residing at 1878 Edgemont, Cumming,
Georgia 30131 (hereinafter referred to as "Enticknap"), Robert Schlax, residing
at 15 Windham Lane, Laguna Miguel, California 92677 (hereinafter referred to as
"Schlax"), and Steve Antonoff, residing at 119 South Helberta Avenue, #7,
Redondo Beach, California 90277 (hereinafter referred to as "Antonoff", and
Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff collectively referred to
as the "Purchasers").

                              W I T N E S S E T H:

      WHEREAS, the Purchasers are all key executive officers of Mercury; and

      WHEREAS, Mercury wishes to enter into a transaction with such officers
(the "Transaction") to secure the continued services of such officers consistent
with past practices; and

      WHEREAS, Mercury and the Seller wish to secure for Mercury the benefits of
incentives inherent in ownership of Mercury's Common Stock by its key employees,
to encourage Mercury's key employees to increase their interest in the future
growth and prosperity of




Mercury, to sustain constructive and imaginative thinking by key employees, to
further the identity of interests of key employees as stockholders of Mercury
with Mercury's present shareholders, to induce continued employment of its key
employees and to enable Mercury to compete with other organizations offering
similar or other incentives in obtaining and retaining the services of competent
executives; and

      WHEREAS, a 2002 Management Stock Purchase Plan was approved by the board
of directors of Mercury in furtherance of such Transaction; and

      WHEREAS, Mercury wishes to allow for the Purchasers to purchase the shares
from Sellers at $7.50 per share by amending or entering into employment
agreements with such officers.

      NOW THEREFORE, in consideration of the mutual covenants and provisions
herein contained and subject to the conditions hereinafter set forth, the
parties intending to be legally bound, agree as follows:

      FIRST:       COMMON STOCK TO BE SOLD

      Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties contained herein, the Purchasers hereby
purchase from Seller and the Seller hereby sells to the Purchasers, at $7.50 per
share, that number of unregistered shares of the Common Stock of Mercury Air
Group, Inc., $0.01 par value, set forth below (hereinafter referred to as the
"Stock") on terms and conditions as hereinafter set forth:


      Purchaser                          Number of Shares
      ---------                          ----------------
                                           
      Czyzyk                                  387,650
      Lovett                                   31,896
      Coleman                                  25,000
      Enticknap                                30,000
      Schlax                                   25,000
      Antonoff                                 25,000


      A total of 524,546 shares shall be purchased from Sellers and allocated to
this Plan.



                                       2


      SECOND       PURCHASE PRICE

      (a) The purchase price of the Stock is Seven Dollars and 50/100 ($7.50)
per share.

      (b) Czyzyk hereby separately and individually purchases Three Hundred
Eighty-Seven Thousand Six Hundred Fifty (387,650) shares of such Stock.

      (c) Lovett hereby separately and individually purchases Thirty-One
Thousand Eight Hundred Ninety-Six (31,896) shares of such Stock.

      (d) Coleman hereby separately and individually purchases Twenty-Five
Thousand (25,000) shares of such Stock.

      (e) Enticknap hereby separately and individually purchases Thirty Thousand
(30,000) shares of such Stock.

      (f) Schlax hereby separately and individually purchases Twenty Five
Thousand (25,000) shares of such Stock.

      (g) Antonoff hereby separately and individually purchases Twenty Five
Thousand (25,000) shares of such Stock.

      (h) Upon closing the Stock being sold herein shall be represented by one
or more certificates totaling five hundred twenty-four thousand, five hundred
forty-six (524,546) shares. The Transaction between Mercury and Czyzyk shall be
reflected in an amendment to his employment agreement and the Transaction
between Mercury, Lovett, Coleman, Enticknap, Schlax and Antonoff shall be
reflected in their employment agreements.

      THIRD:       INTENTIONALLY DELETED

      FOURTH:      TERMINATION

      As shall be reflected in the employment agreements or amendment to
employment agreement, in the event Czyzyk, Lovett, Coleman, Enticknap, Schlax or
Antonoff voluntary leave the full-time employment of Mercury or any of its
subsidiaries or related companies for



                                       3


any reason whatsoever without the prior written consent of Mercury or in the
event Czyzyk, Lovett, Coleman, Enticknap, Schlax or Antonoff are discharged with
or without cause, then in any of those events the balance of the purchase price
as set forth in Article Seventh shall be immediately due and payable by the
defaulting purchaser to Mercury, subject to the provisions set forth in Article
Seventh, and the Stock purchased by such defaulting party shall be applied
toward the balance of the purchase price against which Seller or Mercury shall
have a secured interest as a creditor of the defaulting party.

      FIFTH:       [INTENTIONALLY OMITTED]

      SIXTH:       SELLER'S REPRESENTATIONS

      (a) Seller represents to the Purchasers that it will pay any and all taxes
required to be paid and arising out of the sale of the Stock to the Purchasers.

      (b) Seller agrees to sign any and all other documents reasonably required
to be signed in order to effectuate the transfer and assignment of the Stock
being sold herein to the Purchaser including, but not limited to, the stock
certificates with signature guaranteed, along with stock powers.

      SEVENTH:     UNDERTAKING BY MERCURY
                   UNDERTAKING WITH CZYZYK

      (a) Mercury hereby agrees to provide to Czyzyk, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:

          In the event Czyzyk voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury or Czyzyk is discharged with or
without cause (except pursuant to Article 12(a) of his employment agreement or
as set forth below) (hereinafter the "Date of Discharge") Czyzyk



                                       4


shall be obligated to repay the sums provided by Mercury hereunder, provided,
however, that Czyzyk's obligations hereunder shall be forgiven by the percentage
equal to the product of (i) 10% and (ii) the number of years from the date
hereof to the Date of Discharge, with the number of years calculated on a March
1st fiscal year (so that if for example, the Date of Discharge is April 1, 2004,
the number of years calculated hereunder shall be 2). Czyzyk shall have no
obligation to repay Mercury if he remains employed by Mercury on or after March
1, 2012. The Stock being held by Bank of America shall be security to Mercury
and subordinate to Bank of America for the payment of the balance of the
purchase price to Mercury. Mercury shall be granted a secured interest as a
creditor of Czyzyk in the event Czyzyk defaults in his obligation to repay
Mercury as herein set forth. In the event Czyzyk terminates his employment
pursuant to Article 12(a) of his employment agreement or is terminated by
Mercury for any reason following an event set forth in Article 12(a) of his
employment agreement, or in the event Czyzyk dies or becomes disabled, Czyzyk
shall have no further obligation to repay Mercury all or any portion of the
purchase price of the Stock purchased hereunder.

                             UNDERTAKING BY MERCURY
                             UNDERTAKING WITH LOVETT

      (b) Mercury hereby agrees to provide to Lovett, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:

          In the event Lovett voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury, or Lovett is discharged with
our without cause (except pursuant to Article 11(a) of his employment agreement
or as set forth below) or in the event Lovett dies or becomes disabled,
(hereinafter the "Date of Discharge"), Lovett shall be obligated to repay the
sums provided by



                                       5


Mercury hereunder, provided, however, that Lovett's obligations hereunder shall
be forgiven by the percentage equal to the product of (i) 10% and (ii) the
number of years from the date hereof to the Date of Discharge, with the number
of years calculated on a March 1st fiscal year (so that if, for example, the
Date of Discharge is April 1, 2004, the number of years calculated hereunder
shall be 2); provided further, that such obligation shall be limited in dollar
amount to the net monies received after deducting all expenses incurred from the
sale of the shares of common stock of Mercury being held as security for the
payment of the shares purchased hereunder. Lovett shall have no obligation to
repay Mercury if he remains employed by Mercury on or after March 1, 2012. CFK
Partners may, within 90 days following the Date of Discharge, purchase that
number of shares of stock (the "Unvested Shares") calculated by multiplying the
(x) total shares of stock purchased by Lovett by (y) the percentage with respect
to which the obligation set forth above has not been forgiven, by tendering the
Purchase Price per share of stock (as adjusted to reflect any subdivision,
combination, or dividend or distribution which has been paid in additional
shares of common stock) to Mercury, following which Mercury shall discharge the
remainder of Lovett's obligation hereunder. In the event CFK does not exercise
its right set forth above, then Mercury shall be obligated to purchase, and
Lovett shall be obligated to sell, the Unvested Shares at the price set forth
immediately above. The consideration for Mercury's purchase of the Unvested
Shares shall be the cancellation of Lovett's remaining obligations hereunder.
Mercury shall be granted a secured interest as a creditor of Lovett in the event
Lovett defaults in his obligation to Mercury as herein set forth. In the event
Lovett terminates his employment pursuant to Article 11(a) of his employment
agreement or is terminated by Mercury for any reason following an event set
forth in Article 11(a) of his employment agreement, Lovett shall have no further
obligation to repay Mercury all or any portion of the purchase price of the
stock purchased hereunder.



                                       6


                             UNDERTAKING BY MERCURY
                            UNDERTAKING WITH COLEMAN

      (c) Mercury hereby agrees to provide to Coleman, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:

          In the event Coleman voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury, or Coleman is discharged with
our without cause (except pursuant to Article 11(a) of his employment agreement
or as set forth below) (hereinafter the "Date of Discharge"), Coleman shall be
obligated to repay the sums provided by Mercury hereunder, provided, however,
that Coleman's obligations hereunder shall be forgiven by the percentage equal
to the product of (i) 10% and (ii) the number of years from the date hereof to
the Date of Discharge, with the number of years calculated on a March 1st fiscal
year (so that if, for example, the Date of Discharge is April 1, 2004, the
number of years calculated hereunder shall be 2); provided further, that such
obligation shall be limited in dollar amount to the net monies received after
deducting all expenses incurred from the sale of the shares of common stock of
Mercury being held as security for the payment of the shares purchased
hereunder. Coleman shall have no obligation to repay Mercury if he remains
employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days
following the Date of Discharge, purchase that number of shares of stock (the
"Unvested Shares") calculated by multiplying the (x) total shares of stock
purchased by Coleman by (y) the percentage with respect to which the obligation
set forth above has not been forgiven, by tendering the Purchase Price per share
of stock (as adjusted to reflect any subdivision, combination, or dividend or
distribution which has been paid in additional shares of common stock) to
Mercury, following which Mercury shall discharge the remainder of Coleman's



                                       7


obligation hereunder. In the event CFK does not exercise its right set forth
above, then Mercury shall be obligated to purchase, and Coleman shall be
obligated to sell, the Unvested Shares. The consideration for Mercury's purchase
of the Unvested Shares shall be the cancellation of Coleman's remaining
obligations hereunder. Mercury shall be granted a secured interest as a creditor
of Coleman in the event Coleman defaults in his obligation to Mercury as herein
set forth. In the event Coleman terminates his employment pursuant to Article
11(a) of his employment agreement or is terminated by Mercury for any reason
following an event set forth in Article 11(a) of his employment agreement,
Coleman shall have no further obligation to repay Mercury all or any portion of
the purchase price of the stock purchased hereunder.

                             UNDERTAKING BY MERCURY
                           UNDERTAKING WITH ENTICKNAP

      (d) Mercury hereby agrees to provide to Enticknap, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:

          In the event Enticknap voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury, or Enticknap is discharged with
our without cause (except pursuant to Article 11(a) of his employment agreement
or as set forth below) (hereinafter the "Date of Discharge"), Enticknap shall be
obligated to repay the sums provided by Mercury hereunder, provided, however,
that Enticknap's obligations hereunder shall be forgiven by the percentage equal
to the product of (i) 10% and (ii) the number of years from the date hereof to
the Date of Discharge, with the number of years calculated on a March 1st fiscal
year (so that if, for example, the Date of Discharge is April 1, 2004, the
number of years calculated hereunder shall be 2); provided further, that such
obligation shall be limited in dollar amount to the net monies received after



                                       8


deducting all expenses incurred from the sale of the shares of common stock of
Mercury being held as security for the payment of the shares purchased
hereunder. Enticknap shall have no obligation to repay Mercury if he remains
employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days
following the Date of Discharge, purchase that number of shares of stock (the
"Unvested Shares") calculated by multiplying the (x) total shares of stock
purchased by Enticknap by (y) the percentage with respect to which the
obligation set forth above has not been forgiven, by tendering the Purchase
Price per share of stock (as adjusted to reflect any subdivision, combination,
or dividend or distribution which has been paid in additional shares of common
stock) to Mercury, following which Mercury shall discharge the remainder of
Enticknap's obligation hereunder. In the event CFK does not exercise its right
set forth above, then Mercury shall be obligated to purchase, and Enticknap
shall be obligated to sell, the Unvested Shares. The consideration for Mercury's
purchase of the Unvested Shares shall be the cancellation of Enticknap's
remaining obligations hereunder. Mercury shall be granted a secured interest as
a creditor of Enticknap in the event Enticknap defaults in his obligation to
Mercury as herein set forth. In the event Enticknap terminates his employment
pursuant to Article 11(a) of his employment agreement or is terminated by
Mercury for any reason following an event set forth in Article 11(a) of his
employment agreement, Enticknap shall have no further obligation to repay
Mercury all or any portion of the purchase price of the stock purchased
hereunder.

                             UNDERTAKING BY MERCURY
                             UNDERTAKING WITH SCHLAX

      (e) Mercury hereby agrees to provide to Schlax, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:



                                       9


          In the event Schlax voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury, or Schlax is discharged with
our without cause (except pursuant to Article 11(a) of his employment agreement
or as set forth below) (hereinafter the "Date of Discharge"), Schlax shall be
obligated to repay the sums provided by Mercury hereunder, provided, however,
that Schlax's obligations hereunder shall be forgiven by the percentage equal to
the product of (i) 10% and (ii) the number of years from the date hereof to the
Date of Discharge, with the number of years calculated on a March 1st fiscal
year (so that if, for example, the Date of Discharge is April 1, 2004, the
number of years calculated hereunder shall be 2); provided further, that such
obligation shall be limited in dollar amount to the net monies received after
deducting all expenses incurred from the sale of the shares of common stock of
Mercury being held as security for the payment of the shares purchased
hereunder. Schlax shall have no obligation to repay Mercury if he remains
employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days
following the Date of Discharge, purchase that number of shares of stock (the
"Unvested Shares") calculated by multiplying the (x) total shares of stock
purchased by Schlax by (y) the percentage with respect to which the obligation
set forth above has not been forgiven, by tendering the Purchase Price per share
of stock (as adjusted to reflect any subdivision, combination, or dividend or
distribution which has been paid in additional shares of common stock) to
Mercury, following which Mercury shall discharge the remainder of Schlax
obligation hereunder. In the event CFK does not exercise its right set forth
above, then Mercury shall be obligated to purchase, and Schlax shall be
obligated to sell, the Unvested Shares. The consideration for Mercury's purchase
of the Unvested Shares shall be the cancellation of Schlax's remaining
obligations hereunder. Mercury shall be granted a secured interest as a creditor
of Schlax in the event Schlax defaults in his obligation to Mercury as herein
set forth. In the event



                                       10


Schlax terminates his employment pursuant to Article 11(a) of his employment
agreement or is terminated by Mercury for any reason following an event set
forth in Article 11(a) of his employment agreement, Schlax shall have no further
obligation to repay Mercury all or any portion of the purchase price of the
stock purchased hereunder.

                             UNDERTAKING BY MERCURY
                            UNDERTAKING WITH ANTONOFF

      (d) Mercury hereby agrees to provide to Antonoff, in connection with his
services to Mercury and pursuant to the terms and conditions set forth in his
employment agreement, the funds to purchase the amount of Shares set forth above
pursuant to the following terms and conditions:

          In the event Antonoff voluntarily leaves the full-time employment of
Mercury or any of its subsidiaries or related companies for any reason
whatsoever without the prior consent of Mercury, or Antonoff is discharged with
our without cause (except pursuant to Article 11(a) of his employment agreement
or as set forth below) (hereinafter the "Date of Discharge"), Antonoff shall be
obligated to repay the sums provided by Mercury hereunder, provided, however,
that Antonoff's obligations hereunder shall be forgiven by the percentage equal
to the product of (i) 10% and (ii) the number of years from the date hereof to
the Date of Discharge, with the number of years calculated on a March 1st fiscal
year (so that if, for example, the Date of Discharge is April 1, 2004, the
number of years calculated hereunder shall be 2); provided further, that such
obligation shall be limited in dollar amount to the net monies received after
deducting all expenses incurred from the sale of the shares of common stock of
Mercury being held as security for the payment of the shares purchased
hereunder. Antonoff shall have no obligation to repay Mercury if he remains
employed by Mercury on or after March 1, 2012. CFK Partners may, within 90 days
following the Date of Discharge, purchase that number of shares of stock (the
"Unvested Shares") calculated by multiplying the (x) total shares of stock



                                       11


purchased by Antonoff by (y) the percentage with respect to which the obligation
set forth above has not been forgiven, by tendering the Purchase Price per share
of stock (as adjusted to reflect any subdivision, combination, or dividend or
distribution which has been paid in additional shares of common stock) to
Mercury, following which Mercury shall discharge the remainder of Antonoff's
obligation hereunder. In the event CFK does not exercise its right set forth
above, then Mercury shall be obligated to purchase, and Antonoff shall be
obligated to sell, the Unvested Shares. The consideration for Mercury's purchase
of the Unvested Shares shall be the cancellation of Antonoff's remaining
obligations hereunder. Mercury shall be granted a secured interest as a creditor
of Antonoff in the event Antonoff defaults in his obligation to Mercury as
herein set forth. In the event Antonoff terminates his employment pursuant to
Article 11(a) of his employment agreement or is terminated by Mercury for any
reason following an event set forth in Article 11(a) of his employment
agreement, Antonoff shall have no further obligation to repay Mercury all or any
portion of the purchase price of the stock purchased hereunder.

      EIGHT:       PURCHASER REPRESENTATIONS

      (1) Each of Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff
represents to Mercury and the Seller that they shall use their best effort to
perform their duties assigned to them as employees of Mercury or any of its
subsidiaries or related companies consistent with the manner in which they have
been performing those duties prior to the execution of this agreement.

      (2) Czyzyk, Lovett, Coleman, Enticknap, Schlax and Antonoff each agree for
themselves that for a period of one (1) year following the date on which he is
no longer employed by Mercury or any of its subsidiaries he will not, directly
or indirectly, or in any capacity, compete or attempt to compete with Mercury,
any parent, subsidiary or affiliate of Mercury, or any corporation merged into,
or merged or consolidated by Mercury, any parent, subsidiary or affiliate of
Mercury as of the date of such termination of employment:



                                       12


          (i) By soliciting any customer of Mercury or any of its divisions,
      subsidiaries, or affiliated companies;

          (ii) By soliciting any contracts which were either being solicited by,
      or which were under contract with, Mercury or any of its divisions,
      subsidiaries or affiliated companies during the period of his employment,
      or by performing or causing to be performed any work which was either
      being solicited by, or which was under contract with or being performed
      by, Mercury or any of its divisions, subsidiaries or affiliated companies
      during said period;

          (iii) By inducing any sales or technical personnel of Mercury or any
      of its divisions, subsidiaries or affiliated companies to leave the
      service of Mercury or any of its divisions, subsidiaries or affiliated
      companies to engage in activities prohibited to the Purchaser under this
      paragraph, or by employment such personnel for the purpose of engaging in
      such activities.

      This representation on the part of each of the Purchaser is of the essence
of this Agreement without which Mercury would not enter into this Agreement and
this representation shall be construed as an agreement independent of any other
provision contained herein and shall be enforceable in both law and equity,
including by temporary or permanent restraining orders, notwithstanding the
existence of any claim or cause of action of the Purchasers or any of them
against Mercury, whether predicated on this Agreement or otherwise.

      The parties recognize and agree that there is no adequate remedy at law to
compensate Mercury in place of injunctive relief to prevent the Purchasers or
any of them from in any way competing with Mercury as hereinabove outlined.

      NINTH:       NON-DISCLOSURE



                                       13


      The Purchasers acknowledge that as a result of their employment with
Mercury and/or any of its subsidiaries or related companies he has and will have
information concerning Mercury and its business including, but not limited to,
the manner in which Mercury establishes its prices to customers for services,
supplies and materials sold; the mark-up or profits that Mercury receives for
services, supplies and materials Mercury sells to its customers; the names,
address and nature of relationship of Mercury's customers to Mercury, the names,
address and nature of the relationship of Mercury's suppliers of products,
services and/or equipment to Mercury, the nature of Mercury's relationship to
its banks; the nature of Mercury's relationship with its employees and
subsidiary and related corporations and their employees, banks, unions and
customers; the nature of Mercury's financial situation, credit relationships and
lines of credit with financial institutions and financial resources; the manner
in which Mercury conducts its business with competitors to Mercury, as well as
its customers and its employees; the nature of Mercury's relationship with its
union; the nature of the Mercury relationship in relation to government services
installations and government contracts and the terms and conditions of its
contracts, both with governmental agencies and private entities; the cost of
product to Mercury; the nature and terms of Mercury's real estate leases and
personal property leases that it has entered into at various times with various
governmental agencies and private business; the book value, fair market value
and liquidation value of Mercury's assets; the general and specific financial
condition of Mercury; the nature of various claims, litigations and/or
contingencies that may be outstanding between Mercury and other entities or
persons; the nature of Mercury's credit relationships with its customers,
suppliers and financial institutions and all other information related thereto
(hereinafter referred to as "CONFIDENTIAL INFORMATION").

      The Purchasers and each of them acknowledge and agree that the discussion
or revealing of such CONFIDENTIAL INFORMATION to any person, firm, entity,
corporation, union,



                                       14


financial institution, stockholder of Mercury, competitor of Mercury, customer
of Mercury or any other individual, organization or entity could cause
substantial irreparable damage to Mercury.

      The Purchaser and each of them agree that they shall not, directly or
indirectly, reveal any such CONFIDENTIAL INFORMATION in any way, in any nature
to any firm, entity, corporation, union or individual without the prior written
consent of Mercury.

      The Purchasers and each of them acknowledge and agree that this
Non-Disclosure Agreement on their part is of the essence of this Agreement
without which Mercury would not enter into this Agreement and this
Non-Disclosure Agreement shall be construed as an agreement independent of any
other provision contained herein and shall be enforceable in both law and
equity, including by temporary of permanent restraining orders, notwithstanding
the existence or any claim or cause of action of the Purchasers or any of them
against Mercury whether predicated on this Agreement or otherwise.

      The parties recognize and agree that there is no adequate remedy at law to
compensate Mercury in place of injunctive relief to prevent the Purchasers or
any of them from revealing any such CONFIDENTIAL INFORMATION to outside parties
or entities.

      TENTH:       APPROVAL OF BOARD OF DIRECTORS

      This Stock Purchase Agreement and the terms and conditions therein are
subject to the prior approval of the Board of Directors of Mercury, through
formal executed resolutions of the Board of Directors of Mercury.

      ELEVENTH:    CONSTRUCTION

      This Agreement and other documents shall be governed by and construed in
accordance with the laws of the State of California. Any action or proceeding in
connection with this Agreement or any of the other documents may be brought in a
court of record of the State of



                                       15


California, the parties hereby consenting to the jurisdiction thereof, and
services of process may be made upon any party by mailing a copy of the summons
to such party, by registered or certified mail, at its address to be used for
the giving of notices under this Agreement. In any action or proceeding relating
to this Agreement and/or any other document, the parties mutually waive trial by
jury and the parties waive any claim that Los Angeles County is an inconvenient
forum.

      TWELFTH:     NON-WAIVER

      All representations, warranties and agreements made by the Purchasers,
Mercury and the Seller in this Agreement or pursuant hereto shall survive the
closing. No action or omission by Purchaser, Mercury or Seller shall constitute
a wavier of any of the covenants, warranties or representations, unless such
waiver shall be executed in writing by the party for whose benefit such
covenant, warranty or representation is designed.

      THIRTEENTH:  OTHER DOCUMENTS

      The parties shall execute such other documents as may be reasonably
necessary for the implementation and consummation of this Agreement.

      FOURTEENTH:  RESTRICTION ON TRANSFER OF THE STOCK

      Except as otherwise provided herein, Purchasers may not sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any of the Stock, or any
right or interest therein, while any obligation to Mercury is owed hereunder.
Any purported sale, transfer (including involuntary transfers initiated by
operation of legal process), hypothecation or disposition of any of the Stock or
any right or interest therein, except in strict compliance with the terms and
conditions of this Agreement, shall be null and void.

      FIFTEENTH:   PLEDGE AND ESCROW



                                       16


      Purchasers hereby grant to Mercury a security interest in the Stock,
pledge and hypothecate the Stock to Mercury, and deposit the certificates
evidencing the Stock (the "Certificates") with Mercury's Corporate Counsel as
collateral security for the full, faithful and timely performance by Purchaser
of its obligations under this Agreement. The Stock is also delivered to
Mercury's Corporate Counsel pursuant to the terms of this Agreement to be held
in escrow in order to ensure performance of all repurchase rights Mercury may
have in the Stock as and when such right becomes exercisable. The Certificates,
together with a stock assignment duly executed in blank with signatures
appropriately guaranteed or witnessed, are being retained by Mercury's Corporate
Counsel, as the pledgeholder and escrow holder for the Stock.

      SIXTEENTH:   LEGENDS ON CERTIFICATES

      Any and all certificates now or hereafter issued evidencing Stock which is
purchased hereunder shall have endorsed upon them a legend substantially as
follows:

            "THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
            SUBJECT TO RESTRICTIONS UPON TRANSFER AND MAY NOT BE
            SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
            OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH THE
            TERMS AND CONDITIONS OF THAT CERTAIN STOCK PURCHASE
            AGREEMENT UNDER THE 2002 MANAGEMENT STOCK PURCHASE
            PLAN, AND RELATED EMPLOYMENT AGREEMENTS, COPIES OF
            WHICH AGREEMENTS ARE ON FILE AT THE PRINCIPAL OFFICE
            OF MERCURY AIR GROUP, INC."

Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.

      SEVENTEENTH: MISCELLANEOUS

      In the event litigation ensues as a result of the terms and conditions of
this Agreement, the prevailing party shall be entitled to reasonable attorneys
fees and costs of suit.



                                       17


      EIGHTEENTH:  NOTICES

      All necessary notices, demands and required or permitted to be given under
the provisions of this Agreement shall be deemed duly given if mailed by
certified mail, return receipt requested, postage prepaid and addressed as
follows:

      (a) If to be given to Mercury:
          5456 McConnell Avenue
          Los Angeles, California  90066
          Attention:  Board of Directors

      (b) If to be given to Seller:

          CFK Partners
          20 North Wacker Drive
          Suite 2520
          Chicago, Illinois  60606

      (c) If to be given to Purchasers:

          Joseph A. Czyzyk
          8141 Cabora Drive
          Playa Del Rey, California  90293

          Wayne J. Lovett
          5908 Finecrest
          Rancho Palos Verdes, California  90066

          Mark Coleman
          16786 Calle de Catalina
          Pacific Palisades, California  90272

          John Enticknap
          1878 Edgemont
          Cumming, Georgia  30131

          Robert Schlax
          15 Windham Lane
          Laguna Miguel, California  92677

          Steve Antonoff
          119 South Helberta Avenue
          Redondo Beach, California  90277

      NINETEENTH:  ENTIRE AGREEMENT



                                       18


      This Agreement, together with all Exhibits attached hereto, contains all
of the terms agreed upon by the parties with respect to the subject matter
hereof and may be modified and amended only by a writing signed by the parties
and approved by the Board of Directors, where required.

      TWENTIETH:   HEADINGS

      The headings of the paragraphs of this Agreement are for the convenience
of reference only and do not form a part thereof and in no way modify, interpret
or construe the meanings of the parties.

      TWENTY-FIRST: COUNTERPARTS

      This Agreement may be signed upon any number of counterparts with the same
effect as if the signature to each were upon the same agreement.

                            [SIGNATURE PAGE FOLLOWS]

      IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective as of the date first above written.

[SEAL]
                                          Mercury Air Group, Inc.


                                          By: /s/ Joseph A. Czyzyk
                                             -----------------------------------
                                              Joseph A. Czyzyk, President


                                          CFK Partners

                                          By:  /s/ Frederick H. Kopko, Jr.
                                             -----------------------------------
                                               Partner


                                          /s/ Joseph A. Cyzyk
                                          --------------------------------------
                                          Joseph A. Czyzyk



                                       19


                                          /s/ Wayne J. Lovett
                                          --------------------------------------
                                          Wayne J. Lovett


                                          /s/ Mark Coleman
                                          --------------------------------------
                                          Mark Coleman


                                          /s/ John Enticknap
                                          --------------------------------------
                                          John Enticknap


                                          /s/ Robert Schlax
                                          --------------------------------------
                                          Robert Schlax


                                          /s/ Steve Antonoff
                                          --------------------------------------
                                          Steve Antonoff



                                       20



STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of _________, 2002, before me personally came JOSEPH A.
CZYZK, to me known, who being by me duly sworn, did depose and say that he is
the Chief Executive Officer of Mercury Air Group, Inc., the corporation
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________



STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of _________, 2002, before me personally came JOSEPH A.
CYZYZK, to me known, who being by me duly sworn, did depose and say that he is
the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________



                                       21


STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of _________, 2002, before me personally came WAYNE J.
LOVETT, to me known, who being by me duly sworn, did depose and say that he is
the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________





STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of ___________, 2002, before me personally came MARK
COLEMAN, to me known, who being by me duly sworn, did depose and say that he is
the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________



                                       22


STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of __________, 2002, before me personally came JOHN
ENTICKNAP, to me known, who being by me duly sworn, did depose and say that he
is the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________





STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of _________, 2002, before me personally came ROBERT
SCHLAX, to me known, who being by me duly sworn, did depose and say that he is
the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________



                                       23


STATE OF CALIFORNIA    )
                       )   ss:
COUNTY OF LOS ANGELES  )

      On the ____ day of ___________, 2002, before me personally came STEVE
ANTONOFF, to me known, who being by me duly sworn, did depose and say that he is
the person described herein and who executed the foregoing instrument.


                                          ______________________________________
                                          Notary Public

My Commission Expires:

______________________________________




                                       24