<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[x] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year ended June 30, 1995
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number: 1-7134
MERCURY AIR GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York 11-1800515
- ------------------------------- ---------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
5456 McConnell Avenue, Los Angeles, California 90066
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (310) 827-2737
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------- -------------------------
Common Stock - Par Value $.01 American Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
As of October 25, 1995, 5,371,087 shares of the Registrant's Common
Stock were outstanding. Of these shares, 1,595,790 shares were held by persons
who may be deemed to be affiliates. The 3,775,297 shares held by
non-affiliates as of October 26, 1995 had an aggregate market value (based on
the closing price of these shares on the American Stock Exchange of $9.875 a
share) of $37,281,057.88.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE> 3
Item 10. Directors and Executive Officers of the Registrant.
Set forth in the table below is certain information with respect to
the executive officers and directors of the registrant "Mercury" and certain of
its subsidiaries.
<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 Aircraft Corporation ("Maytag")
Kevin J. Walsh 45 Executive Vice President and Senior Vice President of Maytag
Philip J. Fagan, Jr., M.D.(1) 51 Director
Frederick H. Kopko, Jr.(1) 40 Director
William G. Langton 49 Director
Robert L. List(1) 58 Director
</TABLE>
(1) Member of Audit and Compensation Committees
Except for Messrs. Kahn and Czyzyk, the executive officers of Mercury, who
are appointed by the Board of Directors, hold office for one-year terms or
until their respective successors have been duly elected and have qualified.
See "Item 11 -- Executive Compensation -- Employment Agreements." The executive
officers of Mercury's subsidiaries, who are appointed by such subsidiaries'
Boards of Directors, hold office for one-year terms or until their respective
successors have been duly elected and have qualified.
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, 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 "Item 11 -- Executive Compensation --
Employment Agreements".
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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.
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.
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.
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 and Treasurer 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.
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Item 11. Executive Compensation.
The following table sets forth the cash compensation paid or accrued
by Mercury for the Chairman of the Board and Chief Executive Officer and for
each of the four other most highly compensated officers (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------- --------------------------
Awards Payouts
----------- ------------
All Other
Name and Securities Long-Term Compen-
Principal Fiscal Underlying Compensation sation(1)
Position Year Salary($) Bonus($) Options(#) Payouts($) ($)
-------- ------ --------- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Seymour Kahn 1995 300,000 408,000 -0- -0- 14,362
Chairman of the 1994 230,000 301,500 -0- -0- 2,536
Board 1993 230,000 196,433 100,000 -0- 2,436
Joseph A. Czyzyk 1995 271,000 136,000 -0- -0- 56,030
President and 1994 271,000 -0- -0- -0- 54,388
Chief Operating 1993 271,000 -0- 25,000 -0- 288
Officer
Randolph E. Ajer 1995 130,000 258,000 -0- -0- 55,382
Executive Vice 1994 126,500 198,500 -0- -0- 54,388
President 1993 126,500 71,092 -0- -0- 288
Kevin J. Walsh 1995 156,000 40,000 -0- -0- 55,463
Executive Vice 1994 144,375 75,000 -0- -0- 54,188
President 1993 137,500 10,000 -0- -0- 188
William L. Silva 1995 102,917 37,000 -0- -0- 410
Executive Vice 1994 100,000 50,000 -0- -0- 200
President 1993 80,000 33,738 -0- -0- 100
</TABLE>
(1) 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 "Item
13--Certain Relationships and Related Party Transactions."
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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, 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.
If Mr. Kahn is disabled for more than six months 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
through the end of the month in which he dies. In addition, Mercury will pay
Mr. Kahn's wife, children or estate $2,025,000 within 60 days of 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.
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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.
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.
COMPENSATION OF DIRECTORS
Commencing July 1994, Mercury determined to pay each director $1,000 per
meeting with an annual minimum of $7,500 in fees paid in advance on the annual
meeting date. Directors are also reimbursed for their travel, meals, lodging
and out-of-pocket expenses incurred in connection with attending Board
meetings.
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Under the 1990 Directors Stock Option Plan (the "1990 Directors Plan"),
each individual who was a non-employee director on March 9, 1990, received an
option to purchase 11,000 shares of Common Stock. As of the date of each
annual meeting of shareholders ("Annual Meeting Date") occurring after March 9,
1990, each individual who was a non-employee director at any time since the end
of the next preceding Annual Meeting Date was, and will continue to be awarded
options to purchase 11,000 shares of Common Stock.
The purchase price of a share of Common Stock under an option is equal to
the greater of 100% of the fair market value of a share of Common Stock as of
the date the option is granted or the par value of a share of such Common Stock
on such date. The options vest one year after the date of grant except
following a "change in control", as defined, in which event the options vest
immediately. Each option expires ten years after the date of grant.
Under the 1990 Directors Plan, each of the current directors who are not
employees of Mercury were granted non-qualified stock options at exercise
prices equal to the fair market value of the Common Stock on the date of
grants, as follows: Philip Fagan, Jr., M.D., options to purchase 66,000
shares, all currently outstanding, exercisable at prices between $1.70 and
$6.36 per share; Frederick H. Kopko, Jr., options to purchase 33,000 shares,
all currently outstanding, exercisable at prices between $1.93 and $6.36 per
share; Robert L. List, options to purchase 62,250 shares, 45,250 exercised,
17,000 currently outstanding, exercisable at $3.35 to $6.36 per share; and
William Langton, options to purchase 22,000 shares, all currently outstanding,
exercisable at $3.35 to $6.36 per share. Mr. Langton was also granted a
non-qualified stock option outside the 1990 Directors Plan on August 9, 1993,
exercisable to purchase 10,000 shares at $3.125, the fair market value on the
date of grant. This option was exercised in March, 1995.
STOCK OPTIONS
The following table sets forth information regarding option exercises
during fiscal 1995, as well as the number and total of in-the-money options at
June 30, 1995, for each of the Named Executive Officers. No Named Executive
Officers were granted options during fiscal 1995.
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AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised Options In-The-Money Options
at Fiscal at Fiscal
Year-End (#) Year-End ($)(4)
------------------- --------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(2)(3) Unexercisable 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mercury's Compensation Committee consists of Messrs. List and Kopko and
Dr. Fagan. During fiscal 1995, Mercury paid $8,646.21 to the law firm of
McBreen, McBreen & Kopko, of which Mr. Kopko is a partner, for legal services.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the
beneficial ownership of Mercury's Common Stock as of October 26, 1995 by (i)
each person (or group of affiliated persons) known to Mercury to be the
beneficial owner of more than five percent of Mercury's Common Stock, (ii) each
director of Mercury, (iii) each Named Executive Officer and (iv) all executive
officers and directors of Mercury as a group. As of October 26, 1995, there
were 5,371,087 shares of Common
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Stock outstanding. Unless otherwise indicated below, to the knowledge of
Mercury, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent such power is
shared by spouses under applicable law.
<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 17,000 (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
All directors and executive 1,938,090(11) 33.9%
officers as a group (9 persons)
</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 "Item 13--Certain Relationships and Related Party Transactions."
Includes 110,000 shares issuable upon the exercise of options exercisable
within 60 days from October 26, 1995. 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 October 26, 1995. 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 "Item 13--Certain
Relationships and Related Party 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.
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(4) Includes 22,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995. 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 "Item 13--Certain
Relationships and Related Party Transactions."
(5) Includes 22,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995. 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 "Item 13--Certain
Relationships and Related Party Transactions."
(6) Includes 27,500 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995. 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 "Item 13--Certain
Relationships and Related Party Transactions."
(7) Consists of 17,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995.
(8) Includes 66,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995.
(9) Consists of 33,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995.
(10) Consists of 22,000 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995.
(11) Includes 342,300 shares issuable upon exercise of options exercisable
within 60 days from October 26, 1995.
Item 13. Certain Relationships and Related Party 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. In addition, concurrent with the acquisition, Mercury entered into
an employment agreement with Mr. Czyzyk. See "Item 11 -- Executive
Compensation -- 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 and Joseph A. Czyzyk (the "First Purchasers"), all
full-time employees and Executive Vice Presidents of Mercury, 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, a full-time employee and Executive Vice
President of Mercury, 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
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(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. See Note 6 of
"Notes to Consolidated Financial Statements".
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 to Mercury 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
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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 has agreed to let Mercury off-set the
approximately $44,760 still owed to Mercury by Millionaire of Long Beach for
such purchases against amounts due under the stock repurchase arrangement.
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.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
MERCURY AIR GROUP, INC.
______________________________
(Registrant)
BY: /s/ SEYMOUR KAHN
______________________________
Chairman of the Board and
Chief Executive Officer
Date: October 26, 1995
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