<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MERCURY AIR GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MERCURY AIR GROUP, INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
TO BE HELD FEBRUARY 5, 1996
To the Shareholders of Mercury Air Group, Inc.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of the Shareholders (the
"Meeting") of Mercury Air Group, Inc. (the "Company") will be held on February
5, 1996 at 10:00 o'clock a.m. Pacific Standard Time at the principal office of
the Company located at 5456 McConnell Avenue, Suite 100, Los Angeles, California
90066, for the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified.
2. To consider and vote upon an amendment to the Company's Restated
Certificate of Incorporation to increase from 9,000,000 to 18,000,000 the
number of authorized shares of Mercury common stock, par value $.01 per
share ("Mercury Common Stock").
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on December 26, 1995, which has been fixed as the record date for the
Meeting, shall be entitled to notice of and to vote at the Meeting and any
adjournment or postponement thereof.
Shareholders are cordially invited to attend the Meeting in person. Whether
or not you plan to attend the Meeting, please sign, date and return the enclosed
proxy to ensure that your shares are represented at the Meeting. Shareholders
who attend the Meeting may vote their shares personally even though they have
sent in their proxies.
Randolph E. Ajer
SECRETARY
Los Angeles, California
January 5, 1996
<PAGE>
MERCURY AIR GROUP, INC.
5456 MCCONNELL AVENUE
SUITE 100
LOS ANGELES, CALIFORNIA 90066
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 5, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mercury Air Group, Inc., a New York
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
of the Company (the "Meeting") which will be held on February 5, 1996 at 10:00
o'clock a.m. Pacific Standard Time at the principal offices of the Company
located at 5456 McConnell Avenue, Suite 100, Los Angeles, California 90066, and
any adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders and in this Proxy
Statement.
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional information furnished to shareholders. Copies of solicitation
material will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward proxy materials to such beneficial owners. The Company may
reimburse persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. The Company's
original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
Proxies duly executed and received in time for the Meeting will be voted at
the Meeting in accordance with the instructions on the proxies. Unless
previously revoked or unless other instructions are on the proxy, proxies will
be voted at the Meeting: (a) for the six director nominees named herein, (b) for
the amendment to the Company's Restated Certificate of Incorporation, and (c) as
determined by the persons holding the proxies with regard to all other matters
which come before the Meeting.
The approximate date on which this Proxy Statement and accompanying proxy
will first be sent or given to shareholders is January 5, 1996.
VOTING SECURITIES
At the record date for the Meeting, the close of business on December 26,
1995 (the "Record Date"), the Company had outstanding shares of common
stock, par value $0.01 ("Common Stock"). Each shareholder is entitled to one
vote for every share of Common Stock standing in his name as of the Record Date.
A shareholder who has given a proxy may revoke it at any time before it is
exercised at the Meeting by filing with the Secretary of the Company a written
notice of revocation, by executing and delivering a subsequent proxy bearing a
later date, or by attending the Meeting and voting in person. The presence at
the Meeting or any adjournments or postponements thereof, in person or by proxy,
of the holders of record of one-third of the shares of Common Stock will
constitute a quorum for the transaction of business. Mr. Seymour Kahn, Chairman
of the Board and Chief Executive Officer of the company and the beneficial owner
of approximately % of the outstanding Common Stock, has indicated that he
intends to vote for the six director nominees named herein and for the amendment
to the Company's Restated Certificate of Incorporation.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors has nominated six individuals for election to the
Company's Board of Directors. The solicited proxies may be voted to fill only
the six vacancies on the Board of Directors for which nominees are named in this
Proxy Statement. Each director elected will hold office until the next annual
meeting of shareholders and until his successor is elected and qualified or
until the director's earlier death, resignation or removal. With the exception
of Joseph A. Czyzyk, who was appointed to the Board of Directors in November,
1994, all of the nominees are currently directors of the Company previously
elected by the shareholders.
Unless otherwise indicated thereon, all proxies received will be voted in
favor of the election of the indicated six nominees of the Board of Directors
named below as directors of the Company. Should any of the nominees not remain a
candidate for election on the date of the Meeting (which contingency is not now
contemplated or foreseen by the Board of Directors), proxies solicited hereunder
may be voted for substitute nominees selected by the Board of Directors.
Directors shall be elected by a plurality of the votes cast by the Common Stock
at the Meeting.
INFORMATION REGARDING NOMINEES
Listed below are the persons who have been nominated to serve as directors
for the ensuing year, together with their ages and all Company positions held by
them.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- --------------------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Seymour Kahn 68 Chairman of the Board and Chief Executive Officer of Mercury
Joseph A. Czyzyk 48 President, Chief Operating Officer and Director of Mercury and President
of Mercury Air Cargo
Philip J. Fagan, Jr., M.D. 51 Director
Frederick H. Kopko, Jr. 40 Director
William G. Langton 49 Director
Robert L. List 59 Director
</TABLE>
SEYMOUR KAHN served as President of Mercury from 1969 until 1989 and has
served as Chief Executive Officer and Director of Mercury since 1969.
JOSEPH A. CZYZYK is President, Chief Operating Officer and Director of
Mercury and President of Mercury Air Cargo. Mr. Czyzyk also served as President
of Mercury Service, a division of Mercury which sells aviation fuel and provides
refueling services for commercial aircraft, from August 1985 until January 1992.
Mr. Czyzyk was appointed an Executive Vice President of Mercury in November 1990
and was appointed to his current positions in November 1994. Pursuant to his
employment agreement, the Board of Directors will continue to nominate Mr.
Czyzyk as a candidate for election to the Board of Directors while Mr. Czyzyk
remains employed by Mercury. See "-- Employment Agreements".
PHILIP J. FAGAN, JR., M.D. has been a director of Mercury since September
1989. Dr. Fagan has been the Chief Executive Officer and President of the
Emergency Department Physicians Medical Group, Inc. in Culver City, California
since 1978. Dr. Fagan has also been President of Fagan Emergency Room Medical
Group, III since its inception in 1989.
FREDERICK H. KOPKO, JR. has been a director of Mercury since October 1992.
Mr. Kopko has been a partner in the law firm of McBreen, McBreen & Kopko since
January 1990. Previously, Mr. Kopko served as managing partner of the law firm
of D'Ancona & Pflaum, a firm which he was associated with from August 1983
through December 1989. Mr. Kopko presently serves on the board of directors of
Butler International, Inc.
2
<PAGE>
WILLIAM G. LANGTON has been a director of Mercury since August 1993. Mr.
Langton has been President and Chief Operating Officer of Southern Air
Transport, a provider of a wide range of aviation services to commercial
airlines and the United States government, for over ten years.
ROBERT L. LIST has been a director of Mercury since September 1989. Mr. List
is presently an independent financial consultant. From December 1989 to August
1992, Mr. List was President of Yellowstone Environmental Services, Inc. of
Phoenix, Arizona, an environmental/engineering consulting firm. Prior to that,
Mr. List owned and operated Cimarron Research, an investment consulting firm,
based in Durango, Colorado and Dallas, Texas since 1977. Mr. List serves on the
board of directors of Pancho's Mexican Buffet, Inc.
There were seven meetings of the Board of Directors of the Company held
during fiscal 1995, the period from July 1, 1994 through June 30, 1995.
The Audit Committee reviews the internal controls of the Company and the
objectivity of its financial reporting and meets with appropriate Company
financial personnel and the Company's independent public accountants in
connection with these reviews. During fiscal 1995, the Audit Committee met one
time.
The Compensation Committee makes all decisions regarding cash and non-cash
compensation (excluding standard employee benefits) paid or given to executive
officers of the Company; administers the Company's non-cash employee incentive
plans, including stock purchase and stock option grants; negotiates and approves
all employment agreements with executive officers; and negotiates and approves
all transactions between the Company and its executive officers (whether or not
the primary purpose of such transactions are compensatory). During fiscal 1995,
the Compensation Committee consisted of Messrs. Kopko and List and Dr. Fagan.
The Board does not have a nominating committee or any other committee
performing a similar function.
During fiscal 1995, each member of the Board of Directors attended at least
75% of the Board meetings and committee meetings for the committees on which he
served.
During fiscal 1995, directors who were not employees of the Company were
paid $1,000 per meeting with an annual minimum of $7,500 in fees paid in advance
on the annual meeting date. Directors were also reimbursed for their travel,
meals, lodging and out-of-pocket expenses incurred in connection with attending
Board meetings.
THE MERCURY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
COMMON STOCK VOTE FOR THE ELECTION OF ALL NOMINEES.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of December 26, 1995,
with respect to the ownership of the Company's Common Stock by: (a) each
director or director nominee of the Company; (b) each executive officer named in
the Summary Compensation Table on page of this Proxy Statement; (c) the
directors, nominees and executive officers of the Company, as a group; and (d)
all persons known to the Company to be the beneficial owners of more than five
percent of its outstanding
3
<PAGE>
Common Stock. As of December 26, 1995, there were shares of Common
Stock outstanding. The stock ownership information includes current
shareholdings and shares with respect to which the named individual has the
right to acquire beneficial ownership under options exercisable within 60 days.
<TABLE>
<CAPTION>
NAME AND ADDRESS (1) SHARES OF COMMON PERCENT
- ------------------------------------------------------------ ---------------- -------
<S> <C> <C>
Seymour Kahn................................................ 1,398,140(2) 25.5%
Joseph A. Czyzyk............................................ 396,450(3) 7.3%
Randolph E. Ajer............................................ 143,000(4) 2.7%
Kevin J. Walsh.............................................. 132,000(5) 2.4%
William L. Silva............................................ 137,500(6) 2.5%
Robert L. List.............................................. 11,000(7) *
810 Duval Street
Key West, FL 33040
Philip J. Fagan, Jr., M.D................................... 99,000(8) 1.8%
624A South San Fernando Blvd.
Burbank, CA 91502
Frederick H. Kopko, Jr...................................... 33,000(9) *
20 North Wacker Drive, Suite 2520
Chicago, IL 60606
William G. Langton.......................................... 22,000(10) *
2255 Kimberly Parkway, East
Columbus, OH 43232
Kennedy Capital Management, Inc............................. 395,000 7.4%
425 N. New Ballas Road #181
St. Louis, MO 63141-6821
All directors and executive officers as a group (9
persons)................................................... 1,932,090(11) 33.9%
</TABLE>
- ------------------------
* Less than one percent.
(1) Unless otherwise indicated in the table, the address for each of the
individuals named in the table is 5456 McConnell Avenue, Suite 100, Los
Angeles, California 90066.
(2) Includes 829,660 shares held of record by SK Acquisition, Inc., a Delaware
corporation wholly-owned by Mr. Kahn ("SKAI"). Also includes 440,000 shares
owned by four executive officers of Mercury which SKAI holds a proxy to vote
and which are subject to a security interest held by SKAI. See "Certain
Transactions." Includes 110,000 shares issuable upon the exercise of options
exercisable within 60 days from the date hereof. Also includes 8,800 shares
held of record by Mr. Kahn's wife, as to which Mr. Kahn disclaims beneficial
ownership.
(3) Includes 22,800 shares issuable upon exercise of options exercisable within
60 days from the date hereof. Includes 110,000 shares beneficially owned by
Mr. Czyzyk for which Mr. Czyzyk has granted a proxy to SKAI and which are
subject to pledges. See "Certain Transactions." Includes 3,850 shares held
by Mr. Czyzyk, as custodian for his children, and 1,100 shares held by Mr.
Czyzyk's spouse's IRA account with respect to which Mr. Czyzyk disclaims
beneficial ownership.
(4) Includes 22,000 shares issuable upon exercise of options exercisable within
60 days from the date hereof. Includes 110,000 shares beneficially owned by
Mr. Ajer for which Mr. Ajer has granted a proxy to SKAI and which are
subject to pledges. See "Certain Transactions."
4
<PAGE>
(5) Includes 22,000 shares issuable upon exercise of options exercisable within
60 days from the date hereof. Includes 110,000 shares beneficially owned by
Mr. Walsh for which Mr. Walsh has granted a proxy to SKAI and which are
subjected to pledges. See "Certain Transactions."
(6) Includes 27,500 shares issuable upon exercise of options exercisable within
60 days from the date hereof. Includes 110,000 shares beneficially owned by
Mr. Silva which Mr. Silva has granted a proxy to SKAI and which are subject
to pledges. See "Certain Transactions."
(7) Consists of 11,000 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
(8) Includes 66,000 shares issuable upon exercise of options exercisable within
60 days from the date hereof.
(9) Consists of 33,000 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
(10) Consists of 22,000 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
(11) Includes 336,300 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Set forth in the table below are the names, ages and positions held by all
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- --------------------- --- ------------------------------------------------------------
<S> <C> <C>
Seymour Kahn 68 Chairman of the Board and Chief Executive Officer of Mercury
Joseph A. Czyzyk 48 President, Chief Operating Officer and Director of Mercury
and President of Mercury Air Cargo
Randolph E. Ajer 42 Executive Vice President, Chief Financial Officer, Secretary
and Treasurer of Mercury
William L. Silva 45 Executive Vice President of Mercury and Executive Vice
President of Maytag
Kevin J. Walsh 45 Executive Vice President and Senior Vice President of Maytag
</TABLE>
Executive officers of the Company are elected and serve at the discretion of
the Board of Directors. Set forth below is a brief description of the business
experience for the previous five years o f all executive officers other
than Messrs. Kahn and Czyzyk, who are also directors and whose business
experiences are described above under the caption "Information Regarding
Nominees."
RANDOLPH E. AJER has been Chief Financial Officer of Mercury since 1987 and
Secretary and Treasurer since 1985. Mr. Ajer served as a director of Mercury
from September 1989 until December 1990. He was appointed an Executive Vice
President of Mercury in November 1990.
WILLIAM L. SILVA has been employed with Maytag since October 1982. Following
Mercury's purchase of Maytag in July 1984, Mr. Silva served as a Vice President
of Maytag until June 1992 when he was appointed Executive Vice President of
Maytag. Maytag conducts Mercury's military refueling business. Mr. Silva became
an Executive Vice President of Mercury in August 1993.
5
<PAGE>
KEVIN J. WALSH served as Vice President of Maytag from 1987 to June 1992
when he was appointed Senior Vice President of Maytag. Since January 1992, Mr.
Walsh has been managing the Mercury Service division. Mr. Walsh was appointed an
Executive Vice President of Mercury in November 1990. Mr. Walsh has been
employed by Mercury in various capacities since 1972.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by the
Company for the Chairman of the Board and Chief Executive Officer and for each
of the four additional most highly compensated executive officers (collectively,
the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS PAYOUTS
--------------------------
ANNUAL COMPENSATION SECURITIES LONG-TERM
FISCAL ---------------------- UNDERLYING COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR (1) SALARY ($) BONUS ($) OPTIONS (#) PAYOUTS ($) COMPENSATION (2)($)
- ------------------------------------------- -------- ---------- --------- ----------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Seymour Kahn 1995 300,000 408,000 -0- -0- 14,362
Chairman of the Board 1994 230,000 301,500 -0- -0- 2,536
1993 230,000 196,433 100,000 -0- 2,436
Joseph A. Czyzyk 1995 271,000 136,000 -0- -0- 56,030
Executive Vice President 1994 271,000 -0- -0- -0- 54,388
1993 271,000 -0- 25,000 -0- 288
Randolph E. Ajer 1995 130,000 258,000 -0- -0- 55,382
Executive Vice President 1994 126,500 198,500 -0- -0- 54,388
1993 126,500 71,092 -0- -0- 288
Kevin J. Walsh 1995 156,000 40,000 -0- -0- 55,463
Executive Vice President 1994 144,375 75,000 -0- -0- 54,188
1993 137,500 10,000 -0- -0- 188
William L. Silva 1995 102,917 37,000 -0- -0- 410
Executive Vice President 1994 100,000 50,000 -0- -0- 200
1993 80,000 33,738 -0- -0- 100
</TABLE>
- ------------------------
(1) The period July 1, 1992 through June 30, 1993 is referred to as Fiscal Year
1993; the period July 1, 1993 through June 30, 1994 is referred to as Fiscal
Year 1994; and the period July 1, 1994 through June 30, 1995 is referred to
as Fiscal Year 1995.
(2) Amounts reflected include Mercury's contributions to a 401(k) Plan
maintained for the benefit of all employees, premiums paid for life
insurance policies to the extent such policies are for the benefit of an
executive officer's designated beneficiary and loan forgiveness with respect
to Mercury financed purchases of Common Stock. See "Certain Transactions."
6
<PAGE>
The following table sets forth information regarding option exercises during
fiscal year 1995, as well as the number and total of in-the-money options at
June 30, 1995, for each of the named executive officers. No named executive
officers were granted options during fiscal year 1995.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-THE- MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)(4)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($)(2)(3) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------- ------------ ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Seymour Kahn.......................... -0- -0- 110,000/-0- 688,050/-0-
Joseph A. Czyzyk...................... 4,200 31,500 22,800/-0- 146,946/-0-
Randolph E. Ajer...................... 5,000 30,875 22,000/-0- 139,150/-0-
Kevin J. Walsh........................ 5,000 32,500 22,000/-0- 139,150/-0-
William L. Silva...................... -0- -0- 27,500/-0- 153,807/-0-
</TABLE>
- ------------------------
(1) As adjusted for 10% stock dividend, effective June 16, 1995.
(2) In accordance with the rules of the Securities and Exchange Commission, the
amounts set forth in the "Value Realized" column of this table are
calculated by subtracting the exercise price from the fair market value of
the underlying Common Stock on the exercise date. The amounts reported thus
reflect the increase in the price of Mercury's common stock from the option
grant date to the option exercise date, but do not necessarily reflect
actual proceeds received upon option exercises.
(3) For purposes of this table, fair market value is deemed to be the average of
the high and low Common Stock price reported by the American Stock Exchange
Composite Transactions on the date indicated.
(4) Based upon a fair market value of $8.375 per share at June 30, 1995.
EMPLOYMENT AGREEMENTS
Mr. Kahn has an employment agreement with Mercury dated as of December 1,
1993 pursuant to which Mercury will employ him as Chairman of the Board and
Chief Executive Officer for a three year period with automatic one year
extensions at the end of each year unless either party terminates the agreement
in writing prior to such renewal. Under the employment agreement, Mr. Kahn's
annual compensation was $230,000 from December 1, 1993 to December 1, 1994.
Since December 1, 1994, Mr. Kahn has been paid compensation at the rate of
$350,000 per year.
If Mr. Kahn is disabled for more than six weeks while employed, his
compensation will be reduced by 50%. If Mr. Kahn is disabled for more than
twelve months, Mercury may terminate his employment with a severance payment
equal to his salary for the lesser of one year or the remaining term of the
employment agreement. If Mr. Kahn's employment is terminated without cause,
Mercury will be obligated to pay him all amounts which would otherwise be paid
to him over the remaining term of the employment agreement. Mr. Kahn may
voluntarily terminate the employment agreement and receive all amounts which
would otherwise be paid to him over the remaining term of the employment
agreement if any of the following events occurs without Mr. Kahn's written
consent, including: (i) any person gains sufficient control over the voting
stock of Mercury so as to control Mercury or the election of a majority of the
Board of Directors, (ii) Mercury is acquired by another entity, either through
the purchase of Mercury's assets or stock or a combination thereof, or (iii)
Mercury is merged or consolidated with another entity or reorganized, in a
manner in which Mercury's present status, business or methods are changed. If
Mr. Kahn dies during the term of the employment agreement, Mercury will pay to
Mr. Kahn's estate the compensation which would otherwise be paid to Mr. Kahn
7
<PAGE>
through the end of the month in which he dies. In addition, Mercury will pay Mr.
Kahn's estate or other designated beneficiary $2,250,000 upon his death. Mercury
has obtained a life insurance policy on Mr. Kahn's life which designates Mr.
Kahn's wife as beneficiary to fund this payment.
Mr. Kahn has agreed not to compete with Mercury within a radius of 300 miles
from Mercury's present place of business for five years after the termination of
the employment agreement. Mercury must make the severance payments required by
the employment agreement for this non-competition agreement to be effective.
Mr. Czyzyk has an employment agreement with Mercury, dated as of November
15, 1994, pursuant to which Mercury will employ him as its President/Chief
Operating Officer and as the president of Mercury Air Cargo for a term ending on
November 15, 1997, subject to automatic one-year extensions each successive
November 15, unless either party gives 30 days' notice of non-renewal. The
agreement provides that Mr. Czyzyk's tenure as President/Chief Operating Officer
shall serve as a period of training and evaluation for appointment as Chief
Executive Officer of Mercury, when and as such position may be vacated by Mr.
Kahn, subject to the sole discretion and judgment of the Board of Directors. The
agreement further provides for the continued nomination of Mr. Czyzyk to the
Board of Directors of Mercury, so long as Mr. Czyzyk continues to serve as
President/Chief Operating Officer.
Mr. Czyzyk will receive an annual salary of $270,000 plus a bonus at the end
of each fiscal year based on the following: (i) for fiscal 1995, in the event
Mercury's operating income on a consolidated basis minus sales and general
administrative expense and depreciation (EBIT) for that year exceeds EBIT for
fiscal 1994, then Mr. Czyzyk shall be paid a bonus of 25% of his base
compensation, under part I of the Bonus Plan and 2 1/2% of the amount of which
fiscal 1995 EBIT exceeds fiscal 1994 EBIT, under part II of the Bonus Plan; (ii)
for fiscal 1996, part I and part II of the Bonus Plan remain in effect except
that the threshold EBIT is based on the average of EBIT for fiscal 1994 and
1995; and (iii) for fiscal years subsequent to fiscal 1996, part I and part II
of the Bonus Plan remain in effect except that the threshold EBIT is based on a
trailing average of EBIT for the prior three (3) fiscal years.
In the event Mr. Czyzyk's employment is terminated for cause, Mr. Czyzyk
will not be entitled to receive or be paid a bonus. In the event Mr. Czyzyk's
employment is terminated without cause, Mercury will be obligated to pay Mr.
Czyzyk the lesser of one year's base compensation or the base compensation that
would otherwise be paid to him over the remaining term of the agreement, and a
bonus for the fiscal year of termination in an amount which would otherwise be
paid to him prorated over the days Mr. Czyzyk was employed by Mercury during the
fiscal year of termination. "Cause" is defined in the employment agreement as
misappropriation of corporate funds, negligence, Mr. Czyzyk's voluntary
abandonment of his job (other than following a Change in Control) or a breach of
the employment agreement. In the event of Mr. Czyzyk's death, Mr. Czyzyk's
estate or beneficiary will be entitled to receive the death benefits of a
$1,000,000 insurance policy, but all other obligations under his employment
agreement will terminate and Mercury's only obligation will be to pay Mr. Czyzyk
or his estate all accrued salary through the end of the month of his death. In
the event of Mr. Czyzyk's disability (as determined by the Chief Executive
Officer of Mercury), Mr. Czyzyk's base salary will be reduced by 50% during the
period of disability. If Mr. Czyzyk is disabled for a period of more than 12
months (as determined by the Chief Executive Officer of Mercury), Mercury will
be obligated to pay Mr. Czyzyk the same amount that would have been paid to Mr.
Czyzyk if his employment was terminated without cause, except that all amounts
paid to Mr. Czyzyk under any long-term disability insurance policy maintained by
Mercury will be credited as if paid by Mercury to Mr. Czyzyk and after giving
effect to any federal or state income tax savings resulting from the payment
under a disability policy (as opposed to taxable salary). The employment
agreement further provides that Mr. Czyzyk may terminate his employment
following a "Change in Control", in which event Mr. Czyzyk will be entitled to
be paid the lesser of one year's base compensation or the entire balance of his
base compensation remaining to be paid to Mr. Czyzyk over the remaining term of
the agreement.
8
<PAGE>
Mr. Czyzyk also received a signing bonus in the amount of $100,000 upon the
execution of the employment agreement. The agreement provides for a five-year
post-employment, non-competition covenant.
CERTAIN TRANSACTIONS
In November 1994, Mercury acquired from Mr. Czyzyk the outstanding minority
interest in Mercury's 80% owned subsidiary, Mercury Air Cargo. The transaction
included a redemption of 5% of the capital stock of Mercury Air Cargo held by
Mr. Czyzyk in exchange for $450,000 in cash and acquisition of the remaining 15%
of the capital stock of Mercury Air Cargo held by Mr. Czyzyk through the
issuance of 225,000 common shares of Mercury's common stock valued at $1,406,000
($6.25 per share, the closing price of Mercury's common stock on the date the
Board approved the transaction) for a total consideration of $1,856,000,
$130,000 of which was a repayment of a September 1994 loan from Mercury. In
addition, concurrent with the acquisition, Mercury entered into an employment
agreement with Mr. Czyzyk. See "-- Employment Agreements."
Pursuant to a Stock Purchase Agreement (the "First Stock Purchase
Agreement") dated December 10, 1990 between Mercury, SK Acquisition, Inc., a
Delaware corporation wholly-owned by Mr. Kahn ("SKAI"), Randolph E. Ajer, Kevin
J. Walsh, Grant G. Murray, a former full-time employee and Executive Vice
President of Mercury, and Joseph A. Czyzyk (the "First Purchasers"), SKAI sold
110,000 shares of Common Stock to each of Messrs. Ajer, Walsh, Murray and
Czyzyk, at the price of $2.73 per share, with each purchaser paying a purchase
price of $300,000, or an aggregate of $1,200,000. On December 10, 1990, the
closing price of the Common Stock on the American Stock Exchange was $2.73 per
share. Pursuant to a Stock Purchase Agreement (the "Second Stock Purchase
Agreement", collectively, the First and Second Stock Purchase Agreements are
hereinafter referred to as the "Stock Purchase Agreement") dated August 9, 1993
between Mercury, SKAI and William L. Silva, SKAI sold 110,000 shares of Common
Stock to Mr. Silva at a price of $2.73 per share, with Mr. Silva paying a total
purchase price of $300,000. On August 9, 1993, the closing price of the Common
Stock on the American Stock Exchange was $2.84 per share. Each of the First
Purchasers and Mr. Silva (collectively, the "Purchasers") paid $30,000 cash at
the closing of his purchase, or an aggregate of $150,000, and agreed to pay the
remaining $270,000, or an aggregate of $1,350,000, over a period of five years
from the date of purchase, together with interest at the rate of 10% per annum
on the outstanding balance. The purchase price owed to SKAI is secured by a
first security interest in the Common Stock sold to each Purchaser and each such
loan is non-recourse. Each Purchaser has given SKAI an irrevocable proxy to vote
the Common Stock purchased by him for all purposes until the purchase price for
his Common Stock has been paid in full.
As part of the Stock Purchase Agreement, Mercury has agreed to loan the
principal balance of the unpaid purchase price to each of the Purchasers during
the five-year payment period as each payment is required to be made on March 1,
June 1, September 1 and December 1 of each year until the principal amount owed
by each Purchaser is paid in full, which will occur by the end of 1995 with
respect to the First Purchasers and the end of 1998 with respect to Mr. Silva.
Such loans are non-recourse and are secured by a second security interest in the
purchased stock. The Purchasers have each agreed to pay their own interest on
the balance of the purchase price outstanding from personal funds. Commencing
March 1, 1994, and annually thereafter, for each of the First Purchasers who
remain employed by Mercury, one-fifth of his loan will be forgiven. For each
First Purchaser who remains employed by Mercury through March 1, 1998, his loan
will be forgiven in full, his shares of Common Stock will be owned without any
further lien in favor of Mercury or SKAI and the proxy granted to SKAI will
expire by its terms. Commencing January 1, 1997, and annually thereafter, for
Mr. Silva if he remains employed by Mercury, one-fifth of his loan will be
forgiven. If Mr. Silva remains employed by Mercury through January 1, 2001, his
loans will be forgiven in full, his shares of Common Stock will be owned without
any further lien in favor of Mercury or SKAI and the proxy granted to SKAI will
expire by its terms.
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During fiscal 1995, Mercury loaned an aggregate of $337,500 to the First
Purchasers and Mr. Silva which was used to make the June 1, 1994 through June 1,
1995 payments to SKAI. Amounts outstanding as of June 30, 1995 were as follows:
Mr. Ajer $162,000, Mr. Walsh $162,000, Mr. Murray $162,000, Mr. Czyzyk $162,000,
and Mr. Silva $270,000.
During March 1994 and March 1995, Mercury loaned Mr. Ajer $19,274, Mr. Walsh
$19,143, and Mr. Murray $22,491, which was used to pay withholding taxes
associated with the loan forgiveness under the First Stock Purchase Agreement.
Such loans bore or bear no interest and were or are being repaid through ratable
payroll deductions over a one-year period.
On August 1, 1995, Grant G. Murray and Mercury entered into an agreement
("Agreement") in connection with the termination of Mr. Murray's employment. The
Agreement provides for the payment to Mr. Murray by Mercury of the sum of
$275,000, payable $75,000 upon execution of the Agreement followed by quarterly
payments of $50,000 on November 1, 1995, February 1, 1996, May 1, 1996 and
August 1, 1996.
In consideration for the payment of $275,000, Mr. Murray transferred to
Mercury 110,000 shares acquired by him pursuant to the First Stock Purchase
Agreement and returned all stock options held by him. The Agreement also
provides (i) for the forgiveness of all debts or loans owed by Mr. Murray to
Mercury ($178,000); (ii) for Mr. Murray to procure new business for Mercury and
to receive as compensation a percentage of net margins realized on such new
business; (iii) for Mr. Murray not to compete with Mercury or its affiliates
until August 1, 1996; (iv) for the continuation of medical insurance for Mr.
Murray through December, 1995; (v) for a release by Mr. Murray of all claims
against Mercury, including his claim with respect to an accrued bonus of
$60,000; and (vi) for a release by Mercury of all claims against Mr. Murray. In
consideration for SKAI's facilitating the stock repurchase transaction by
waiving its right to restrict the transfer of Mr. Murray's shares, and as
payment in full of all interest and remaining amounts due to SKAI in connection
with the purchase transaction, Mercury agreed to pay SKAI the amount of $100,000
in the form of options to purchase 30,000 shares of Mercury's Common Stock. Such
options are to be granted at $3.33 below the closing price of Mercury's Common
Stock on the American Stock Exchange as of August 24, 1995 (the date the Board
approved the transaction), and will, subject to continued employment, vest and
become exercisable six months from the date of grant. Such options will be
granted subject to: (1) an increase in the authorized shares of Mercury at the
next annual meeting of shareholders; (2) acceptance of the shares underlying
such options for listing on the American Stock Exchange; and (3) the ability of
Mercury to grant the options without affecting earnings. If the conditions for
the issuance of the options are not met, Mercury will reconsider the form of
payment of the $100,000 to SKAI.
During Fiscal 1995, Mercury sold approximately $211,000 in fuel to
Millionaire of Long Beach, a company owned by Mr. Murray. As part of the stock
repurchase arrangement, Mr. Murray agreed to let Mercury off-set any amounts
owed to Mercury by Millionaire of Long Beach for such purchases against amounts
due under the stock repurchase arrangement. No amounts were owed as of the
closing of the transaction.
Mercury has Indemnity Agreements with each of its directors and executive
officers which require Mercury, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors, officers, employees or agents of Mercury, and, under certain
circumstances, to advance their expenses incurred as a result of proceedings
brought against them. In order to be entitled to indemnification, the executive
officer or director must have acted in a manner reasonably believed to be in, or
not opposed to, the best interests of Mercury and, with respect to a criminal
matter, in a manner which he had no reason to believe was illegal.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. List and Kopko and
Dr. Fagan. During fiscal 1995, the Company paid $8,646 to the law firm of
McBreen, McBreen & Kopko, of which Mr. Kopko is a partner, for legal services.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
This report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing made by the Company under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
Under the rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information regarding the
compensation and benefits provided to the Company's Chairman of the board and
Chief Executive Officer, Mr. Kahn, and the four other most highly compensated
executive officers, Messrs. Czyzyk, Ajer, Walsh and Silva. The disclosure
requirements for the named executive officers include the use of tables and a
report explaining the rationale and considerations that led to fundamental
executive compensation decisions affecting those individuals. In fulfillment of
this requirement, the Compensation Committee, at the direction of the Board of
Directors, has prepared the following report for inclusion in this Proxy
Statement.
COMPENSATION PHILOSOPHY
This report reflects the Company's compensation philosophy as endorsed by
the Compensation Committee and resulting actions taken by the Company for the
reporting periods shown in the various compensation tables supporting this
report. The Compensation Committee determines salary and bonus amounts, other
award levels and benefits for all executive officers of the Company. In
connection with its decisions, the Compensation Committee reviews and considers
the written recommendations of the Company's Chairman of the Board and Chief
Executive Officer, Mr. Kahn. As described below, a large portion of Mr. Kahn's
compensation is based on the earnings of the Company and Mr. Kahn is a
significant shareholder of the Company. Accordingly, the Compensation Committee
believes that Mr. Kahn's recommendations are consistent with the Compensation
Committee's philosophy of encouraging earnings growth and encouraging strategic
decisions designed to maximize shareholder return.
The executive compensation programs of the Company have been designed to:
- Embody a pay for performance policy where compensation amounts are
affected by corporate, operating unit and individual performance as
measured by earnings;
- Motivate key senior executives to achieve strategic business initiatives
and reward them for their achievements;
- Provide compensation opportunities which are comparable to those offered
by other leading companies, thus allowing the Company to compete for and
retain talented executives who are critical to the Company's long-term
success; and
- Align the interest of executives with long-term interests of the
shareholders through common stock ownership and stock option programs.
COMPENSATION MECHANISMS
At present, the executive compensation program is comprised of salary,
annual cash bonus programs, long-term incentive opportunities in the form of
Company financed stock ownership opportunities and stock options and other
benefits typically provided to executives by major corporations.
Executive officer salaries are determined based on competitive data,
individual performance, position tenure, salary history, internal comparability
considerations and in some instances the results of arm's length negotiations in
connection with the start-up of a new operating unit. For each executive
officer, a significant portion of total compensation is a bonus based on the
earnings of the Company or the specific operating unit for which he has profit
and loss statement responsibility. As a result, an executive officer's
compensation can vary substantially from year-to-year based on the
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<PAGE>
Company's or a specific operating unit's earnings performance. Except as
described below, for fiscal 1995 and 1996, the bonus for executive officers with
operating unit responsibility was/will be based on an individual's success in
exceeding the budgeted earnings for his operating unit. The budgeted earnings
for each unit are based on a comprehensive review of unit operations conducted
by Messrs. Kahn, Czyzyk, and Ajer and the responsible executive officer at the
start of each fiscal year and are subject to approval by the Board of Directors.
During the budget process, Messrs. Kahn, Czyzyk, and Ajer focus on challenging
each executive officer to attain revenue growth and cost savings for his
operating unit. As described below, the bonus plan for Messrs. Kahn, Czyzyk, and
Ajer is based on exceeding the Company's average earnings for the prior three
years, encouraging Messrs. Kahn, Czyzyk, and Ajer to budget for aggressive
growth. The Compensation Committee also retains discretion to reward exceptional
achievement through discretionary bonuses. During fiscal 1995, the Compensation
Committee awarded one executive officer a bonus for operating unit results in
excess of budget. A second executive officer had met, but not exceeded his
budget. However, the Compensation Committee awarded the officer a discretionary
bonus based on his strong efforts in laying the foundation for additional growth
in his unit.
Each of the Company's executive officers is also compensated in part through
Company financed common stock ownership and stock options. The Company currently
has in place the 1990 Long-Term Incentive Plan which provides for stock option
grants to key employees (other than Mr. Kahn) at the current fair market value
on the date of grant. Each of the Company's executive officers currently holds
options granted under the plan. Option awards to each executive officer have
been based on the executive's level of responsibility, past performance and
internal comparability considerations. In addition, the Company is currently
financing the purchase of 110,000 shares of Common Stock at $2.73 per share for
each executive officer (other than Mr. Kahn). The shares are being purchased
from SKAI, a corporation wholly-owned by Mr. Kahn. Subject to continued
employment, each executive officer will have fully-paid for the Common Stock and
all loans made by the Company to facilitate the stock purchase will be forgiven
seven years from the date of the purchase. In addition to serving as a
compensation device, the stock purchase program was designed to insure an
orderly transition in control of the Company, to avoid excessive dilution and to
some degree to maintain internal comparability in officer compensation. As a
result of the stock options and company financed stock purchases, each executive
officer has a strong incentive to continue his association with the Company and
to enhance the value of the Company's equity securities in the long-term.
During fiscal 1995, the executive officers requested assistance in paying
taxes associated with the annual forgiveness of the stock purchase loans. The
compensation Committee determined that each executive vice president should
invest in his own future and the Company by personally bearing the taxes
associated with the loan forgiveness. The Compensation Committee agreed,
however, to somewhat mitigate the cash flow effects of the withholding for taxes
by providing annual, interest-free loans to be paid back from bonus or payroll
deductions. See "Certain Transactions."
FISCAL 1995 COMPENSATION DECISIONS FOR THE CHAIRMAN OF THE BOARD
Mr. Kahn has an employment agreement with the Company dated as of December
1, 1993 pursuant to which Mercury will employ him as Chairman of the Board and
Chief Executive Officer for a three year period with automatic one year
extensions at the end of each year unless either party terminates the agreement
in writing prior to such renewal. Under the employment agreement, Mr. Kahn's
annual compensation was $230,000 from December 1, 1993 to December 1, 1994, and
Mr. Kahn will continue to be paid compensation at the rate of $350,000 per year
from December 1, 1994 to December 1, 1995.
A cash bonus plan for Mr. Kahn was approved by the Board of Directors in
November 1990 (commencing fiscal 1991). The Compensation Committee continued the
bonus plan during fiscal 1995 and will continue the bonus plan during fiscal
1996. The two-part bonus plan is based on earnings before interest and taxes
("EBIT") of the Company for the year in which the bonus is calculated. Under
Part I of the bonus plan, if the bonus year's EBIT meets or exceeds the trailing
three-year EBIT
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average, Mr. Kahn is entitled to a bonus equal to 25% of his salary. For years
where EBIT falls below the trailing three-year average, any bonus paid to Mr.
Kahn is solely at the discretion of the Compensation Committee. Under Part II of
the bonus plan, an additional bonus is paid to Mr. Kahn in an amount equal to
6.67% of any increase in the bonus year's EBIT level over the trailing
three-year average EBIT level.
For fiscal 1995, Mr. Kahn earned a bonus in the amount of $448,000 under the
bonus plan. At Mr. Kahn's request, the Compensation Committee, however,
re-allocated $40,000 of Mr. Kahn's earned bonus, as a special bonus for Mr.
Ajer, and paid Mr. Kahn a bonus of $408,000. Mr. Kahn made this request based on
his personal appreciation of Mr. Ajer's over-all contribution to the Company.
The Compensation Committee felt Mr. Kahn's perceptions regarding merit and
personal generosity should be respected.
OTHER EXECUTIVE OFFICER COMPENSATION
Mr. Czyzyk is compensated pursuant to an employment agreement described
under "Employment Agreements." A cash bonus plan for Mr. Ajer was approved by
the Board of Directors in November 1990 (commencing fiscal 1991). The
Compensation Committee continued the bonus plan during fiscal 1995 and will
continue the bonus plan during fiscal 1996. As with Mr. Kahn, the two-part bonus
plan is based on EBIT of the Company for the year in which the bonus is
calculated. Under Part I of the bonus plan, if the bonus year's EBIT meets or
exceeds the trailing three-year EBIT average, Mr. Ajer is entitled to a bonus
equal to 25% of his salary. For years where EBIT falls below the trailing
three-year average, any bonus paid to Mr. Ajer is solely at the discretion of
the Compensation Committee. Under Part II of the bonus plan, an additional bonus
is paid to Mr. Ajer in an amount equal to 3.33% of any increase in the bonus
year's EBIT level over the trailing three-year average EBIT level. For fiscal
1995, Mr. Ajer earned a bonus in the amount of $218,000 under the bonus plan.
Due to the reallocation of $40,000 of Mr. Kahn's bonus, as described above, Mr.
Ajer was paid a total bonus of $258,000.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, generally disallows a tax
deduction to public companies for annual compensation over $1 million paid to a
corporation's chief executive officer and four other most highly compensated
individuals. Qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. Because the current
compensation levels of the Company's executive officers are well below the $1
million threshold, the Compensation Committee has not determined what steps are
required to structure qualifying performance-based compensation and whether or
not the required steps would be in the best interest of the Company.
COMPENSATION COMMITTEE MEMBERS
Robert L. List
Frederick H. Kopko, Jr.
Dr. Philip J. Fagan, Jr.
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors recommends that the shareholders approve a proposal
to amend the Restated Certificate of Incorporation of the Company (the
"Certificate") to increase the authorized shares of Mercury Common Stock from
9,000,000 shares to 18,000,000 shares.
At December 26, 1995, there were shares of Mercury Common Stock
outstanding and an additional were reserved for issuance, of which 288,750
shares of Common Stock were reserved for issuance upon the exercise of options
granted or to be granted under the Company's 1990 Director's Stock Option Plan,
231,880 shares of Common Stock were reserved for issuance upon the exercise of
options granted or to be granted under the Company's 1990 Long- Term Incentive
Stock
13
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Plan, 110,000 shares of Common Stock were reserved for issuance upon the
exercise of a Non-Qualified Stock Option dated January 31, 1993, 18,335 shares
of Common Stock were reserved for issuance upon the exercise of a certain Common
Stock Purchase Warrant dated January 20, 1994, and 167,970 shares of Common
Stock were reserved for issuance upon conversion of a debenture. If the
amendment is adopted, approximately shares of Mercury Common Stock would be
authorized and unissued.
On December 15, 1995, the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 to register $25,000,000 of
convertible suborindate debentures ("Debentures"), with provision for an
over-allotment option of an additional $3,750,000. The terms and conditions of
the Debentures have not yet been determined, with the result that the number of
shares of Mercury Common Stock into which the Debentures may be converted cannot
now be determined. If this amendment is approved, there can be no assurance that
the Debentures will be registered and/or sold. However, if this amendment is not
approved the Company may not have sufficient authorized shares to enable it to
sell the full $28,750,000 of Debentures.
There are no pre-emptive rights relating to the Mercury Common Stock. Except
to the extent that the Company may issue the shares of Mercury Common Stock
reserved therefor pursuant to its stock option plans, and, except to the extent
the Company may issue debt or equity securities in connection with the offering
described above, the Company has not entered into any agreement or
understandings, and has no present plans, for the issuance of additional shares
of Mercury Common Stock, but wishes to have such shares available for future
issuances as the need may arise. No further shareholder approval would be
required prior to the issuance of the additional shares authorized by this
amendment.
The Board's purpose in proposing the increase in the number of authorized
shares of Mercury Common Stock is to have shares available for future issuances
from time to time in connection with the financing transaction described above
or in other instances as and when the Board determines that such issuances may
be desirable. The Securities and Exchange Commission requires the Company to
discuss how such shares could be used to make it more difficult to effect a
change in control of the Company. For example, the additional shares of Mercury
Common Stock could be used to dilute the stock ownership of a person seeking to
obtain control of the Company or could be privately placed with purchasers who
would support the Board in opposing a hostile takeover attempt. This proposal to
amend the Certificate is not in response to any effort of which the Company is
aware to accumulate Mercury Common Stock or obtain control of the Company, nor
is it part of a plan by management to recommend a series of similar amendments
to the Board of Directors and shareholders. The Board does not presently
contemplate recommending the adoption of any other amendments to the Certificate
which could be construed to affect the ability of third parties to take over or
change control of the Company.
In addition to Mercury Common Stock, under the current Certificate, the
Company is authorized to issue 3,000,000 shares of Preferred Stock, par value
$.01 per share ("Preferred Stock"). There are currently no shares of such
Preferred Stock outstanding.
Approval of this amendment to the Certificate requires approval by a
majority of the shares of Mercury Common Stock entitled to vote thereon. As a
result, any shares not voted (whether by abstention, broker non-vote or
otherwise) will have the same effect as a vote against the proposal.
Your Board of Directors recommends a vote FOR the proposal to approve this
Amendment.
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph set forth below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing made
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by the Company under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such acts.
The graph below compares cumulative total return of Mercury Air Group, Inc.,
the AMEX Market Value and the S & P Transportation Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MERCURY AIR GROUP, THE AMEX MARKET VALUE INDEX
AND THE S&P TRANSPORTATION INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
6/90 6/91 6/92 6/93 6/94 6/95
<S> <C> <C> <C> <C> <C> <C>
MERCURY AIR GROUP 100 147 76 141 253 435
AMEX MARKET VALUE 100 99 105 120 117 138
S&P TRANSPORTATION 100 105 128 146 152 167
</TABLE>
* $100 Invested on 06/30/90 in Stock or Index, including reinvestment of
dividends. Fiscal year ending June 30.
SECTION 16 DISCLOSURE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the Common
Stock, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission and the American Stock Exchange. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons that no annual corrective filings were required
for those persons, the Company believes that all filing requirements applicable
to its officers, directors and greater than ten-percent beneficial owners were
complied with, except that Messrs. Kopko, Langton, and List, and Dr. Fagan,
failed to timely file reports with respect to the issuance of options pursuant
to the 1990 Directors Stock Option Plan, Mr. Ajer failed to timely file a report
with respect to the sale of certain stock acquired upon exercise of the
Company's Common Stock Purchase Warrants, and Mr. List failed to timely file a
second report with respect to the exercise of options and sale of stock acquired
pursuant to the 1990 Directors Stock Option Plan.
INFORMATION RELATING TO INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for fiscal year 1995 were
Deloitte & Touche and the Board of Directors of the Company has selected
Deloitte & Touche as the Company's independent
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public accountants for fiscal year 1996. Representatives of Deloitte & Touche
are expected to be present at the Meeting and will have an opportunity to
respond to appropriate questions and to make a statement if they desire to do
so.
ANNUAL REPORT ON FORMS 10-K AND 10-K/A
Any shareholder of record on December 26, 1995 may request at no cost to
such shareholder a copy of the Annual Report on Forms 10-K and 10-K/A filed with
the Securities and Exchange Commission by mailing such request to Randolph E.
Ajer, Secretary, Mercury Air Group, Inc., 5456 McConnell Avenue, Suite 100, Los
Angeles, California 90066. Such request must indicate the name of the
shareholder, the amount of shares held on December 26, 1995 and the address to
which the Forms 10-K and 10-K/A are to be sent.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder proposal intended to be presented at the Company's next
annual meeting must be received by Randolph E. Ajer, the Secretary of the
Company, at 5456 McConnell Avenue, Suite 100, Los Angeles, California 90066, no
later than September 7, 1996 in order to be considered for inclusion in the
proxy statement and form of proxy for such meeting.
[Balance of page intentionally left blank]
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OTHER MATTERS
Management knows of no other matters to be presented at the Meeting which is
a proper subject for action by the shareholders. However, if any other matters
should properly come before the Meeting, it is intended that proxies in the
accompanying form will be voted thereon in accordance with the judgment of the
person or persons voting such proxies.
The Annual Report to Shareholders of the Company for the fiscal year ended
June 30, 1995 was recently transmitted to the shareholders of the Company.
Except to the extent that portions of such report are specifically referenced in
this Proxy Statement, such report is not to be regarded as proxy soliciting
material and is not incorporated in this Proxy Statement.
By Order of the Board of Directors
Randolph E. Ajer
SECRETARY
Los Angeles, California
January 5, 1996
17
