exv10w7



 


Exhibit 10.7



PREEMPTIVE RIGHTS AGREEMENT



      AGREEMENT (this “Agreement”), dated as of September 10, 1999, by and
between Mercury Air Group, Inc. (the “Company”), a New York corporation, and J.
H. WHITNEY MEZZANINE FUND, L.P. (“WMF”), a Delaware limited partnership.



W   I   T   N   E   S   S   E   T   H   :



      WHEREAS, pursuant to the terms of the Securities Purchase Agreement (the
“Purchase Agreement”), dated as of the date hereof, by and between the Company and WMF has purchased from the Company a warrant (the “WMF Warrant”) to purchase an aggregate of 503,126 shares of common stock, par value $ .01 per
share.




      NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby
agree as follows:




      SECTION 1. Definitions. As used herein, the following terms shall have the
following respective meanings, and all capitalized terms used herein which are
not otherwise defined shall have the meaning assigned thereto in the Purchase
Agreement:




         (a)
“Common Stock” shall mean, collectively, the
shares of common stock, $.01 par value per share, of the Company and any class or series of common stock
of the Company authorized after the date hereof, or any other class or series
of stock resulting from successive changes or reclassifications of any class or
series of common stock of the Company.




         (b)
“Equity Equivalents” shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of
the Company and any rights to acquire the foregoing, including, without
limitation, any rights to acquire securities exercisable for, convertible into
or exchangeable for the foregoing.




         (c) “Institutional Investors” shall mean WMF, and its successors and
assigns.




         (d) “Person” shall mean any individual, partnership, corporation, limited
liability company, joint venture, trust, firm, association, unincorporated
organization or other entity.




         (e) “Whitney” shall mean J. H. Whitney & Co.





 








 



      SECTION 2. Preemptive Rights.




         (a) If at any time the Company wishes to issue any Equity Equivalents to
any Person or Persons, the Company shall promptly deliver a notice of its
intention to sell (the “Company’s Notice of Intention
to Sell”) to each
Institutional Investor (collectively, the “Eligible Stockholders”) setting
forth a description of the Equity Equivalents to be sold, the proposed purchase
price thereof and terms of sale. Upon receipt of the Company’s Notice of
Intention to Sell, each Eligible Stockholder shall have the right to elect to
purchase, at the price and on the terms stated in the Company’s Notice of
Intention to Sell, a number of the Equity Equivalents equal to the product of
(i) a fraction, the numerator of which is such Eligible Stockholder’s aggregate
ownership of Equity Equivalents (calculated on a fully-diluted basis) and the
denominator of which is the number of such Equity Equivalents outstanding
(calculated on a fully diluted basis), multiplied by (ii) the number of Equity
Equivalents to be issued (as so calculated, the “Eligible Equity Equivalents”).
Such election is to be made by the Eligible Stockholders by written notice to
the Company within 30 days after receipt by the Eligible Stockholders of the
Company’s Notice of Intention to Sell (the “Acceptance Period for Equity
Equivalents”). Each Eligible Stockholder shall also have the option,
exercisable by so specifying in such written notice, to purchase on a pro rata
basis similar to that described above, any remaining Eligible Equity
Equivalents not purchased by other Eligible Stockholders, in which case the
Eligible Stockholders exercising such further option shall be deemed to have
elected to purchase such remaining Eligible Equity Equivalents on such pro rata
basis, up to the aggregate number of Eligible Equity Equivalents which such Eligible
Stockholder shall have specified until either (A) no Eligible Stockholder
shall have elected to purchase any further amount of the Eligible Equity
Equivalents which are the subject of the Company’s Notice of Intention to Sell
or (B) all the Eligible Equity Equivalents which are the subject of the
Company’s Notice of Intention to Sell shall have been subscribed for by the
Eligible Stockholder(s). The Company shall promptly notify each electing
Eligible Stockholder in writing of each notice of election received from other
Eligible Stockholders pursuant to this paragraph 2(a).




         (b) The Company may, at its election, during a period of 120 days
following the expiration of the Acceptance Period for Equity Equivalents, sell
and issue the remaining Equity Equivalents to another Person at a price and upon
terms not more favorable to such Person than those stated in the Company’s
Notice of Intention to Sell; provided, however, that failure by an Eligible
Stockholder to exercise his, her or its option to purchase with respect to one
offering, sale and issuance of Equity Equivalents shall not affect his, her or
its option to purchase Equity Equivalents in any subsequent offering, sale and
purchase. In the event the Company has not sold the Equity Equivalents, or
entered into an agreement to sell the Equity Equivalents, within such 120 day
period, the Company shall not thereafter issue or sell any Equity Equivalents
without first offering such securities to each Eligible Stockholder in the
manner provided in Section 2(a) hereof.





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         (c) If an Eligible Stockholder gives the Company notice, pursuant to the
provisions of this Section 2, that such Eligible Stockholder desires to
purchase any of the Equity Equivalents, payment therefor shall be by check or
wire transfer, against delivery of the securities at the executive offices of
the Company within 15 Business Days after giving the Company such notice, or,
if later, the closing date for the sale of such Equity Equivalents. In the
event that any such proposed issuance is for a consideration other than cash,
such Eligible Stockholder will be entitled to pay cash for each share or other
unit, in lieu of such other consideration, in the amount determined in good
faith by the Board of Directors of the Company to constitute the fair value of
such consideration other than cash to be paid per share or other unit.




         (d) The preemptive rights contained in this Section 2 shall not apply to
(i) Common Stock issued (A) as a stock dividend to holders of Common Stock or
upon any subdivision or combination of shares of Common Stock, (B) pursuant to
a Public Offering, (C) upon the conversion of any equity security or debt
security of the Company issued on or prior to the date hereof, or (D) the
exercise of any option, warrant or other right to subscribe for, purchase or
otherwise acquire either Common Stock or any equity security or debt security
convertible into Common Stock, issued prior to the date hereof, and (ii) (A)
the issuance by the Company of up to 839,551 shares of Common Stock reserved
or to be reserved for issuance upon the exercise of stock options, granted or
to be granted exclusively to employees, officers, directors or consultants of
the Company or its Subsidiaries and/or Affiliates pursuant to the Company’s
employee stock option plan(s) now in existence or, to be established in the
future.




      SECTION 3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE (INCLUDING GIVING EFFECT TO
GOL SECTION 5-1401).




      SECTION
4. JURISDICTION.




         (a)
EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT THE ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT THE
SHARES, OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT THE SUCH COURTS
ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED
OR





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CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11
HEREOF, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.




         (b) THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT OR THE SHARES, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE COMPANY (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF WMF HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT WMF WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT WMF HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.




      SECTION 5. Benefits of Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, legal representatives and heirs. Any purported issuance of Equity
Equivalents by the Company, in violation of the provisions of this Agreement
shall be null and void ab initio.




      SECTION 6. Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier (with
receipt confirmed), courier service or personal delivery:




	 	 	 	 	 	 	 
	 	 	(a)	 	if to the Company:
	 	 	 	 	 	 	 
	 	 	 	 	Mercury Air Group, Inc.

5456 McConnell Avenue

Los Angeles, CA 90066

Telecopier: (310) 827-0650
	 	 	 	 	Attention:
	 	Mr. Joseph A. Czyzyk

Wayne J. Lovett, Esq.
	 	 	 	 	 	 	 
	 	 	 	 	with a copy to:
	 	 	 	 	 	 	 
	 	 	 	 	McBreen, McBreen & Kopko

80 North Wacker Drive, Suite 252

Chicago, Illinois 60606

Telecopier: (312) 332-2657
	 	 	 	 	Attention:
	 	Frederick Kopko, Esq.
	 	 	 	 	 	 	 
	 	 	(b)	 	if to WMF





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	 	 	 	 	J. H. Whitney Mezzanine Fund, L.P.

177 Broad Street

Stamford, Connecticut 06901

Telecopier No.: (203) 975-1422
	 	 	 	 	Attention:
	 	Mr. James H. Fordyce

Mr. Daniel J. O’Brien





or to such other address or addresses as shall have been furnished in writing to the other party hereto.



      All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; if mailed, five
Business Days (as defined in the Purchase Agreement) after being deposited in
the mail, postage prepaid; or if telecopied, when receipt is acknowledged.




      SECTION 7. Modification. Except as otherwise provided herein, neither this Agreement nor any provision hereof shall be modified, changed, discharged or
terminated except by an instrument in writing signed by the party against whom
the enforcement of any modification, change, discharge or termination is
sought.




      SECTION 8. Entire Agreement. This Agreement constitutes the entire
agreement among the undersigned with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings, oral or written,
among any or all of the undersigned relating thereto.




      SECTION 9. Signatures; Counterparts. Telefacsimile transmissions of any
executed original document and/or retransmission of any executed telefacsimile
transmission shall be deemed to be the same as the delivery of an executed
original. At the request of any party hereto, the other parties hereto shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement
may be executed in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.




      SECTION 10. Severability. If any one or more of the provisions contained
in this Agreement, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions of this Agreement. The parties hereto
further agree to





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replace such invalid, illegal or unenforceable provision of
this Agreement with a valid, legal and enforceable provision that will achieve,
to the extent possible, the economic, business and other purposes of such
invalid, illegal or unenforceable provision.





 








 



           IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.




	 	 	 	 	 
	 	 	MERCURY AIR GROUP, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Joseph A. Czyzyk
	 	 	 	 	

	 	 	 	 	Name: Joseph A. Czyzyk

Title: President
	 	 	 	 	 
	 	 	J. H. WHITEY MEZZANINE FUND, L.P.
	 	 	 	 	 
	 	 	By:	 	Whitney GP, L.L.C.,

        Its General Partner

	 	 	 	 	 
	 	 	
By:
	 	/s/ James H. Fordyce
	 	 	 	 	

	 	 	 	 	Name: James H. Fordyce

A Managing Member