<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 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> 2
MERCURY AIR GROUP, INC.
___________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________
TO BE HELD DECEMBER 12, 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 December
12, 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 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 October 25, 1996 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
October 28, 1996
<PAGE> 3
MERCURY AIR GROUP, INC.
5456 MCCONNELL AVENUE
SUITE 100
LOS ANGELES, CALIFORNIA 90066
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 12, 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 December 12, 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 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, and
(b) 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 October 28, 1996.
VOTING SECURITIES
At the record date for the Meeting, the close of business on October
25, 1996 (the "Record Date"), the Company had outstanding 6,007,721 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. Shareholders
who either (a) specifically abstained from voting on one or more matters by so
marking their ballot or proxy
<PAGE> 4
card (abstentions) or (b) are nominees holding shares for beneficial owners
who, although they may have voted on certain matters at the meeting pursuant to
discretionary authority or instructions from the beneficial owners, have not
voted on the specific matter in question because they have not received
instructions from the beneficial owners with respect to such matter and they do
not have discretionary authority with respect thereto (broker non-votes) will
be considered as present at the Meeting for purposes of determining whether a
quorum exists with respect to all other matters considered at the Meeting. Mr.
Seymour Kahn, Chairman of the Board and Chief Executive Officer of the company
and the beneficial owner of approximately 25.6% of the outstanding Common
Stock, has indicated that he intends to vote for the six director nominees
named herein.
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. 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 69 Chairman of the Board and Chief Executive Officer of Mercury
Joseph A. Czyzyk 49 President, Chief Operating Officer and Director of Mercury and President of
Mercury Air Cargo, Inc. ("Mercury Air Cargo")
Philip J. Fagan, Jr., M.D. 52 Director
Frederick H. Kopko, Jr. 41 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 Chairman of the Board of Directors of
Mercury since 1974.
Joseph A. Czyzyk has been President, Chief Operating Officer and a
Director of Mercury since November 1994 and President of Mercury Air Cargo
since August 1988. 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 August 1988. Mr. Czyzyk served
as an Executive Vice President of Mercury from November 1990 through November
1994. Pursuant to his employment agreement, the Board
2
<PAGE> 5
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. since its inception in
1978. Dr. Fagan has also been President of Fagan Emergency Room Medical Group
since its inception in 1989. Both companies are currently located in Burbank,
California.
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. 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 commercial and supplemental aviation
services, for over ten years.
Robert L. List has been a director of Mercury since 1990. Mr. List is a
small business owner in the candy and confection business. From December 1989 to
August 1992, Mr. List was President of Yellowstone Environmental Services, Inc.
of Phoenix, Arizona, an environmental/engineering consulting firm. Mr. List
serves on the board of directors of Pancho's Mexican Buffet, Inc.
There were four meetings of the Board of Directors of the Company held
during fiscal 1996, the period from July 1, 1995 through June 30, 1996.
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 1996, the Audit Committee
consisted of Messrs. Kopko and List and Dr. Fagan.
During fiscal 1996, 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 1996, the Compensation Committee consisted of Messrs. Kopko and
List and Dr. Fagan and met four times.
The Board does not have a nominating committee or any other committee
performing a similar function. During fiscal 1996, 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.
In order to be elected, a nominee must receive the vote of a plurality
of the votes cast by the Common Stock at the meeting. Shares may be voted for
or withheld from each nominee. Shares that are withheld and broker non-votes
will have no effect on the outcome of the election because directors will be
elected by a plurality of the shares voted for directors.
THE MERCURY BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS
OF COMMON STOCK VOTE FOR THE ELECTION OF ALL NOMINEES.
3
<PAGE> 6
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of October 25,
1996, 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; (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 Common
Stock. As of October 25, 1996, there were 6,007,721 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,575,254(2) 25.6%
Joseph A. Czyzyk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436,095(3) 7.2%
Randolph E. Ajer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,100(4) 2.5%
Kevin J. Walsh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,200(5) 2.4%
William L. Silva . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,250(6) 2.5%
Robert L. List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000(7) *
1112 Southard Street
Key West, FL 33040
Philip J. Fagan, Jr., M.D. . . . . . . . . . . . . . . . . . . . . . . . . . 73,600(8) 1.2%
624A South San Fernando Blvd.
Burbank, CA 91502
Frederick H. Kopko, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,800(9) *
20 North Wacker Drive, Suite 2520
Chicago, IL 60606
William G. Langton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,100(10) *
2255 Kimberly Parkway, East
Columbus, OH 43232
Kennedy Capital Management, Inc. . . . . . . . . . . . . . . . . . . . . . . 434,115(11) 7.2%
425 N. New Ballas Road #181
St. Louis, MO 63141-6821
FMR Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588,522(12) 9.8%
82 Devonshire Street
Boston, Massachusetts 02109
All directors and executive officers as a group (8 persons) . . . . . . . . . 2,107,399(13) 33.0%
</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 912,626 shares held of record by SK Acquisition, Inc., a
Delaware corporation wholly-owned by Mr. Kahn ("SKAI"). Also includes 484,000
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 121,000 shares issuable to Mr. Kahn upon the exercise
of options exercisable within
4
<PAGE> 7
60 days from the date hereof, and 36,300 shares issuable to SKAI upon the
exercise of options exercisable within 60 days from the date hereof. Also
includes 10,680 shares held of record by Mr. Kahn's wife, as to which Mr. Kahn
disclaims beneficial ownership.
(3) Includes 25,168 shares issuable upon exercise of options exercisable
within 60 days from the date hereof. Includes 121,000 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 4,235 shares held by
Mr. Czyzyk, as custodian for his children, and 1,210 shares held by Mr.
Czyzyk's spouse's IRA account with respect to which Mr. Czyzyk disclaims
beneficial ownership.
(4) Includes 19,000 shares issuable upon exercise of options exercisable
within 60 days from the date hereof. Includes 121,000 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."
(5) Includes 24,200 shares issuable upon exercise of options exercisable
within 60 days from the date hereof. Includes 121,000 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 30,250 shares issuable upon exercise of options exercisable
within 60 days from the date hereof. Includes 121,000 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 4,000 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
(8) Includes 72,600 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
(9) Consists of 41,800 shares issuable upon exercise of options
exercisable within 60 days from the date hereof.
(10) Consists of 12,100 shares issuable upon exercise of options
exercisable within 60 days from the date hereof.
(11) Based on publicly available information reported on February 13, 1996,
as contained in a disclosure document filed by Gerald T. Kennedy for Kennedy
Capital Management.
(12) Based on publicly available information reported on February 14, 1996,
Fidelity Management & Research Company ("Fidelity"), a wholly-owned subsidiary
of FMR Corp., is also a beneficial owner of the 588,522 shares as a result of
acting as an investment advisor to various investment companies (the "Funds").
In addition, FMR Corp., Edward C. Johnson 3d, and the Funds, each has the sole
power to dispose of the 588,522 shares owned by the Funds. Through their
ownership of voting common stock and the execution of a shareholder's voting
agreement, Abigal P. Johnson and other members of the Johnson family may be
deemed to be a controlling group with respect to FMR Corp.
(13) Includes 386,418 shares issuable upon exercise of options exercisable
within 60 days from the date hereof.
5
<PAGE> 8
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 69 Chairman of the Board and Chief Executive Officer of Mercury
Joseph A. Czyzyk 49 President, Chief Operating Officer and Director of Mercury and President of
Mercury Air Cargo
Randolph E. Ajer 43 Executive Vice President, Chief Financial Officer, Secretary and
Treasurer of Mercury
William L. Silva 46 Executive Vice President of Mercury and Executive Vice President of
Maytag Aircraft Corporation ("Maytag")
Kevin J. Walsh 46 Executive Vice President
</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 of 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 May 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 served as Director of Operations of Maytag from
October 1982 to October 1987 and was appointed Vice President of Maytag in
November 1987. Since June 1992, Mr. Silva has been an Executive Vice President
of Maytag. Mr. Silva became an Executive Vice President of Mercury in August
1993.
Kevin J. Walsh served as Vice President and then Senior Vice President
of Maytag from 1987 to April 1996. 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"):
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND FISCAL SALARY (2) ($)BONUS ($) SECURITIES LONG-TERM ALL OTHER
PRINCIPAL YEAR (1) UNDERLYING COMPENSATION COMPENSATION (3)($)
POSITION OPTIONS (#) PAYOUTS ($)
ANNUAL COMPENSATION AWARDS PAYOUTS
LONG-TERM COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Seymour Kahn 1996 350,000 248,000 -0- -0- 15,737(4)
Chairman of 1995 300,000 408,000 -0- -0- 14,362
the Board 1994 230,000 301,500 -0- -0- 2,536
Joseph A. 1996 325,000 99,500 -0- -0- 493(5)
Czyzyk 1995 325,000 136,000 -0- -0- 2,030
Executive 1994 325,000 -0- -0- -0- 388
Vice President
Randolph E. 1996 186,825 155,000 -0- -0- 407(6)
Ajer 1995 184,000 258,000 -0- -0- 1,382
Executive 1994 180,500 198,500 -0- -0- 388
Vice President
Kevin J. 1996 212,813 -0- -0- -0- 248(7)
Walsh 1995 210,000 40,000 -0- -0- 1,463
Executive 1994 198,375 75,000 -0- -0- 188
Vice President
William L. 1996 105,000 -0- -0- -0- 425(8)
Silva 1995 102,917 37,000 -0- -0- 410
Executive 1994 100,000 50,000 -0- -0- 200
Vice President
</TABLE>
___________
(1) The period July 1, 1993 through June 30, 1994 is referred to as Fiscal
Year 1994; the period July 1, 1994 through June 30, 1995 is referred to as
Fiscal Year 1995; and the period July 1, 1995 through June 30, 1996 is referred
to as Fiscal Year 1996.
(2) Includes and has been restated to include loan forgiveness with
respect to Mercury financed purchases of Common Stock. See "Certain
Transactions."
(3) Amounts reflected include Mercury's contributions to a 401(k) Plan
maintained for the benefit of all employees and premiums paid for life
insurance policies to the extent such policies are for the benefit of an
executive officer's designated beneficiary.
7
<PAGE> 10
(4) Consists of 401(k) contributions and life insurance premiums in the
amounts of $200 and $15,537, respectively.
(5) Consists of 401(k) contributions and life insurance in the amounts of
$200 and $293, respectively.
(6) Consists of 401(k) contributions and life insurance premiums in the
amounts of $200 and $207, respectively.
(7) Consists of life insurance premiums.
(8) Consists of 401(k) contributions and life insurance premiums in the
amounts of $200 and $225, respectively.
The following table sets forth information concerning options granted
to the named executive officer who was granted options during fiscal 1996:
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable
Value At Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
------------------------------------------------------------------------------- -------------------------
Percent of
Total
Number of Options Exercise
Securities Granted to or
Underlying Employees Base
Options in Fiscal Price Expiration
Name Granted (#) Year ($/Sh) Date 5%($) 10%($)
- --------------------- ------------ ----------- --------- ---------- ------ -------
<S> <C>
Seymour Kahn (1) 36,300 45.2 4.59 8/21/2005 253,625 482,372
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The options were granted to SKAI, a corporation wholly-owned by
Seymour Kahn, in connection with SKAI facilitating a stock repurchase
transaction with Grant Murray by waiving its rights 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 transaction.
See "Certain Transactions". The options were granted outside the
Company's 1990 Incentive Stock Option Plan but are otherwise subject
to the terms and conditions of such plan. The options vested and
became exercisable on October 17, 1996. At the discretion of
8
<PAGE> 11
the Compensation Committee, the exercise price may be paid with
previously held shares of Common Stock valued at fair market value on
the date of exercise.
The following table sets forth information regarding option exercises
during fiscal 1996, as well as the number and total of in-the-money options at
June 30, 1996, for each of the named executive officers:
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
SHARES ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED ($)(2)(3) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----- --------------- ---------------------- ------------------------- -------------------------
VALUE OF
NUMBER OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FISCAL MONEY OPTIONS AT
YEAR-END (#) FISCAL YEAR-END ($)(3)(4)
-------------------------- ------------------------
<S> <C> <C> <C> <C>
Seymour Kahn. . . . . -0- -0- 157,300/-0-(5) 848,917/-0-(5)
Joseph A. Czyzyk. . . -0- -0- 25,168/-0- 155,613/-0-
Randolph E. Ajer. . . 5,200 40,034 19,000/-0- 115,403/-0-
Kevin J. Walsh . . . -0- -0- 24,200/-0- 146,987/-0-
William L. Silva . . -0- -0- 30,250/-0- 163,604/-0-
</TABLE>
___________
(1) As adjusted for a 10% stock dividend effective May 1, 1996.
(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 $7.9375 per share at June 30, 1996.
(5) Includes 36,300 options issued to SKAI, a corporation wholly-owned by
Seymour Kahn.
9
<PAGE> 12
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 is $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
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.
Relating to this obligation, Mercury has obtained a life insurance policy on
Mr. Kahn's life in the amount of $2,025,000 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 1996, in the
event Mercury's operating income on a consolidated basis minus sales and
general administrative expense and depreciation (EBIT) for that year exceeds
the average of EBIT for fiscal 1994 and 1995, then Mr. Czyzyk shall be paid a
bonus of 25% of his base compensation, under Part I of the Bonus Plan and 21/2%
of the amount of which fiscal 1996 EBIT exceeds the average of EBIT for fiscal
1994 and 1995, under Part II of the Bonus Plan; and (ii) 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.
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<PAGE> 13
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. The agreement provides for a
five-year post-employment, non-competition covenant.
CERTAIN TRANSACTIONS
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
121,000 shares of Common Stock (after adjustment for two 10% stock dividends)
to each of Messrs. Ajer, Walsh, Murray and Czyzyk, at the price of $2.48 per
share, with each purchaser paying a purchase price of $300,000, or an aggregate
of $1,200,000. On December 10, 1990, the adjusted closing price of the Common
Stock on the American Stock Exchange was $2.48 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 Agreements") dated August 9, 1993 between Mercury, SKAI and
William L. Silva, SKAI sold 121,000 shares of Common Stock (after adjustment
for two 10% stock dividends) to Mr. Silva at a price of $2.48 per share, with
Mr. Silva paying a total purchase price of $300,000. On August 9, 1993, the
adjusted closing price of the Common Stock on the American Stock Exchange was
$2.58 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.
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<PAGE> 14
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 occurred in April, 1996,
with respect to the First Purchasers and will occur by the end of 1998, with
respect to Mr. Silva. Such loans are non-recourse, bear no interest, 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
due SKAI 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.
During fiscal 1996, Mercury loaned an aggregate of $202,500 to the
First Purchasers and Mr. Silva which was used to make the September 1995
through March 1996 payments to SKAI. Amounts outstanding on the loans made by
the Company as of June 30, 1996 and September 30, 1996 were as follows: Mr.
Ajer $108,000, Mr. Walsh $108,000, Mr. Czyzyk $108,000 and Mr. Silva $135,000.
The maximum amounts outstanding on the loans made by the Company during fiscal
1996 were as follows: Mr. Ajer $162,000, Mr. Walsh $162,000, Mr. Czyzyk
$162,000 and Mr. Silva $135,000.
During fiscal 1996, Mercury loaned Mr. Ajer and Mr. Walsh $19,143
each, which was used to pay withholding taxes associated with the loan
forgiveness under the First Stock Purchase Agreement. Such loans bear no
interest and 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 provided 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 121,000 shares acquired by him pursuant to the First Stock Purchase
Agreement and returned all stock options held by him. The Agreement also
provided (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 36,300 shares of Mercury's Common
Stock. Such options were granted on April 30, 1996 at an exercise price of
$4.59 ($2.75 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 vested and became exercisable on October 17, 1996. Based on
the consideration paid by Mercury to Mr. Murray, the effective per share price
paid by Mercury for the 121,000 shares acquired from Mr. Murray, including the
12
<PAGE> 15
$100,000 in options paid to SKAI was approximately $4.57. (All per share and
number of share data has been adjusted for the two 10% stock dividends).
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 OF DIRECTORS
During fiscal 1996, 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. In addition, during fiscal 1996 and continuing
through fiscal 1997, the law firm of McBreen, McBreen & Kopko, of which Mr.
Kopko is a partner, has been providing legal services to the Company at its
standard billing rates. See "Compensation Committee Interlocks and Insider
Participation."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. List and
Kopko and Dr. Fagan. During fiscal 1996, the Company paid $147,000 to the law
firm of McBreen, McBreen & Kopko for legal services.
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.
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<PAGE> 16
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 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, in the judgment
of the Compensation Committee, 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 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. In determining
salaries, the Compensation Committee uses the personal knowledge of its members
regarding compensation levels for similar positions at other companies
generally. No peer group or other salary surveys were undertaken to determine
salaries at comparable companies. 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 Company's or a specific operating
unit's earnings performance. For fiscal 1996 and 1997, 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
14
<PAGE> 17
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 1996, the Compensation Committee did not award any discretionary
bonuses.
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 121,000 shares of Common Stock at $2.48
per share for each executive officer (other than Mr. Kahn). The shares are
being or were 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 1996, 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 1996 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. Mr. Kahn's annual compensation has
been set by the Compensation Committee at $350,000 per year. The Compensation
Committee based Mr. Kahn's compensation primarily on the salary of the officer
holding the next highest position in the Company. Based on the improvement in
the Company's profitability, the favorable performance of the Company's common
stock, Mr. Kahn's individual performance and leadership within the Company, and
the longevity of his service to the Company, the Committee determined that an
approximate 30% differential between Mr. Kahn's salary and the salary of the
officer holding the next highest position was appropriate. The Committee's
decision with respect to Mr. Kahn's salary was not based on any quantitative
measure of the Company's profitability or the performance of the Common Stock
but rather a subjective determination that the improvements in profitability
and stock performance were of sufficient magnitude to merit the 30% salary
differential.
15
<PAGE> 18
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 1996 and will continue the bonus plan during
fiscal 1997. 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 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 1996, Mr. Kahn earned a bonus in the amount of $275,500
under the bonus plan. At Mr. Kahn's request, the Compensation Committee,
however, re-allocated $27,500 of Mr. Kahn's earned bonus, as a special bonus
for Mr. Ajer, and paid Mr. Kahn a bonus of $248,000. 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 1996 and will
continue the bonus plan during fiscal 1997. 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 1996, Mr. Ajer earned a bonus in the amount of $127,500 under the bonus
plan. Due to the reallocation of $27,500 of Mr. Kahn's bonus, as described
above, Mr. Ajer was paid a total bonus of $155,000.
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.
16
<PAGE> 19
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 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
<TABLE>
<CAPTION>
AMEX
MEASUREMENT PERIOD MERCURY MARKET S&P
(FISCAL YEAR COVERED) AIR GROUP VALUE TRANSPORTATION
<S> <C> <C> <C>
6/91 100 100 100
6/92 52 106 122
6/93 121 121 139
6/94 172 118 144
6/95 296 140 159
6/96 312 161 199
</TABLE>
* $100 Invested on 06/30/91 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.
INFORMATION RELATING TO INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for fiscal year 1996 were
Deloitte & Touche and the Board of Directors of the Company has selected
Deloitte & Touche as the Company's independent public accountants for fiscal
year 1997. 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 FORM 10-K
Any shareholder of record on October 25, 1996 may request at no cost
to such shareholder a copy of the Annual Report on Form 10-K 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 October 25, 1996 and the address to
which the Form 10-K is to be sent.
17
<PAGE> 20
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 June 30, 1997 in order to be considered for inclusion in the proxy
statement and form of proxy for such meeting.
OTHER MATTERS
Management knows of no other matter to be presented at the Meeting
which are proper subjects 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, 1996 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
October 28, 1996
18
<PAGE> 21
MERCURY AIR GROUP, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Mercury Air Group, Inc., a New York
corporation (the "Company"), acting under the New York General Corporation Law,
hereby constitutes and appoints Seymour Kahn and Randolph E. Ajer, and each of
them, the attorneys and proxies of the undersigned, each with the power of
substitution, to attend and act for the undersigned at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held on December 12, 1996 at
10:00 a.m., Pacific Standard Time, at the Company's headquarters located at
5456 McConnell Avenue, Suite 100, Los Angeles, California 90066 and at any
adjournments thereof, and in connection therewith to vote and represent all of
the shares of Common Stock of the Company which the undersigned would be
entitled to vote, as specified on the reverse side.
Said attorneys and proxies, and each of them, shall have all the
powers which the undersigned would have if acting in person. The undersigned
hereby revokes any other proxy to vote at the Meeting and hereby ratifies and
confirms all that said attorneys and proxies, and each of them, may lawfully do
by virtue hereof. Said proxies, without hereby limiting their general
authority, are specifically authorized to vote in accordance with their best
judgment with respect to matters incident to the conduct of the Meeting;
matters presented at the Meeting but which are not known to the Board of
Directors at the time of the solicitation of this Proxy; and with respect to
the election of any person as a director if a bona fide nominee for that office
is named in the Proxy Statement and such nominee is unable to serve or for good
cause will not serve.
IMPORTANT - - PLEASE SIGN ON THE OTHER SIDE
<PAGE> 22
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
PROPOSAL 1. Election of Directors: Seymour Kahn, Joseph A. Czyzyk,
Dr. Philip J. Fagan, Jr., Frederick
H. Kopko, Jr., William G. Langton
and Robert L. List.
/ / FOR ALL NOMINEES (EXCEPT AS MARKED TO THE CONTRARY BELOW).
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES.
INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name in the space provided.__________________________________
A majority of the above-named proxies present at the Meeting, either in person
or by substitute (or if only one thereof shall be present and act, then that
one), shall have and exercise all the powers of said proxies hereunder. This
proxy will be voted in accordance with the choices specified by this
undersigned above. IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED HEREON,
THIS PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR THE ELECTION OF
THE NOMINEES FOR THE BOARD OF DIRECTORS NAMED ABOVE.
The undersigned hereby acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement and a copy of the Company's Annual Report to
Shareholders for the year ended June 30, 1996.
DATE: ________________________________________________
SHAREHOLDERS SIGNATURE(S)
- ------------------------------------------------------
- ------------------------------------------------------
IMPORTANT. Sign your name or names on the signature line in the same way it is
stenciled on this proxy.
