Document:

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                                                                    EXHIBIT 10.1

                                 MERCFUEL, INC.

                                 2001 STOCK PLAN

       1.     Purposes of the Plan. The purposes of this 2001 Stock Plan are:

              -      to attract and retain the best available personnel for
                     positions of substantial responsibility,

              -      to provide additional incentive to Employees and Directors,
                     and

              -      to promote the success of the Company's business.

              Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.

       2. Definitions. As used herein, the following definitions shall apply:

              (a) "Administrator" means the Board or any of its Committees as
       shall be administering the Plan, in accordance with Section 4 of the
       Plan.

              (b) "Applicable Laws" means the requirements relating to the
       administration of stock option plans under the U.S. state corporate laws,
       U.S. federal and state securities laws, the Code, any stock exchange or
       quotation system on which the Common Stock is listed or quoted and the
       applicable laws of any foreign country or jurisdiction where Options are,
       or will be, granted under the Plan.

              (c) "Board" means the Board of Directors of the Company.

              (d) "Cause" shall mean (i) an act of personal dishonesty taken by
       the Optionee in connection with his or her responsibilities as a Service
       Provider and intended to result in substantial personal enrichment of the
       Optionee, (ii) Optionee being convicted of a felony, (iii) a willful act
       by the Optionee which constitutes gross misconduct and which is injurious
       to the Company, and (iv) following delivery to the Optionee of a written
       demand for performance from the Company which describes the basis for the
       Company's reasonable belief that the Optionee has not substantially
       performed his duties, continued violations by the Optionee of the
       Optionee's obligations to the Company which are demonstrably willful and
       deliberate on the Optionee's part.

              (e)    "Change of Control" means the occurrence of any of the
       following events:

                     (i)    Any "person" (as such term is used in Sections 13(d)
                            and 14(d) of the Exchange Act) becomes the
                            "beneficial owner" (as defined in Rule 13d-3 under
                            the Exchange Act), directly or indirectly, of
                            securities of the Company representing fifty percent
                            (50%) or more of the total voting power represented
                            by the Company's then outstanding voting securities
                            who is not already such as of the Effective Date; or

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                     (ii)   The consummation of the sale or disposition by the
                            Company of all or substantially all the Company's
                            assets; or

                     (iii)  The consummation of a merger or consolidation of the
                            Company with any other corporation, other than a
                            merger or consolidation which would result in the
                            voting securities of the Company outstanding
                            immediately prior thereto continuing to represent
                            (either by remaining outstanding or by being
                            converted into voting securities of the surviving
                            entity or its parent) at least fifty percent (50%)
                            of the total voting power represented by the voting
                            securities of the Company or such surviving entity
                            or its parent outstanding immediately after such
                            merger or consolidation; or

                     (iv)   A change in the composition of the Board occurring
                            within a two-year period, as a result of which fewer
                            than a majority of the directors are Incumbent
                            Directors. "Incumbent Directors" shall mean
                            directors who either (A) are directors of the
                            Company as of the Effective Date, or (B) are
                            elected, or nominated for election, to the Board
                            with the affirmative votes of at least a majority of
                            those directors whose election or nomination was not
                            in connection with any transaction described in
                            subsections (i), (ii) or (iii) above, or in
                            connection with an actual or threatened proxy
                            contest relating to the election of directors to the
                            Company.

       Notwithstanding the foregoing, in no event shall either or both of the
following events constitute a Change of Control: (i) the initial public offering
of the Company's securities pursuant to a registration statement filed under
Section 12 of the Exchange Act or (ii) the spin-off of the Company from Mercury
pursuant to one or more transactions in which Mercury distributes eighty percent
(80%) or more of its securities ownership of the Company to the stockholders of
Mercury.

              (f) "Code" means the Internal Revenue Code of 1986, as amended.

              (g) "Committee" means a committee of Directors appointed by the
       Board in accordance with Section 4 of the Plan.

              (h) "Common Stock" means the common stock of the Company.

              (i) "Company" means MercFuel, Inc., a Delaware corporation.

              (j) "Director" means a member of the Board.

              (k) "Disability" means total and permanent disability as defined
       in Section 22(e)(3) of the Code.

              (l) "Effective Date" means the effective date of this Plan as
       determined in accordance with Section 7.

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              (m) "Employee" means any person, including Officers and Directors,
       employed by the Company or any Parent or Subsidiary of the Company. A
       Service Provider shall not cease to be an Employee in the case of (i) any
       leave of absence approved by the Company or (ii) transfers between
       locations of the Company or between the Company, its Parent, any
       Subsidiary, or any successor. For purposes of Incentive Stock Options, no
       such leave may exceed ninety days, unless reemployment upon expiration of
       such leave is guaranteed by statute or contract. If reemployment upon
       expiration of a leave of absence approved by the Company is not so
       guaranteed, then three (3) months following the 91st day of such leave
       any Incentive Stock Option held by the Optionee shall cease to be treated
       as an Incentive Stock Option and shall be treated for tax purposes as a
       Nonstatutory Stock Option. Neither service as a Director nor payment of a
       director's fee by the Company shall be sufficient to constitute
       "employment" by the Company.

              (n) "Exchange Act" means the Securities Exchange Act of 1934, as
       amended.

              (o) "Fair Market Value" means, as of any date, the value of Common
       Stock determined as follows:

                     (i)    If the Common Stock is listed on any established
                            stock exchange or a national market system,
                            including without limitation the Nasdaq National
                            Market or the Nasdaq Small Cap Market of the Nasdaq
                            Stock Market, its Fair Market Value shall be the
                            closing sales price for such stock (or the closing
                            bid, if no sales were reported) as quoted on such
                            exchange or system for the last market trading day
                            prior to the time of determination, as reported in
                            The Wall Street Journal or such other source as the
                            Administrator deems reliable;

                     (ii)   If the Common Stock is regularly quoted by a
                            recognized securities dealer but selling prices are
                            not reported, the Fair Market Value of a Share of
                            Common Stock shall be the mean between the high bid
                            and low asked prices for the Common Stock on the
                            last market trading day prior to the day of
                            determination, as reported in The Wall Street
                            Journal or such other source as the Administrator
                            deems reliable;

                     (iii)  In the absence of an established market for the
                            Common Stock, the Fair Market Value shall be
                            determined in good faith by the Administrator; or

                     (iv)   For purposes of Option grants made on the effective
                            date of the Company's initial public offering of
                            Common Stock, the Fair Market Value shall be the
                            initial price to the public as set forth in the
                            final prospectus included with the registration on
                            Form S-1 filed with the Securities and Exchange
                            Commission for such offering.

              (p) "Incentive Stock Option" means an Option intended to qualify
       as an incentive stock option within the meaning of Section 422 of the
       Code and the regulations promulgated thereunder.

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              (q) "Nonstatutory Stock Option" means an Option not intended to
       qualify as an Incentive Stock Option.

              (r) "Notice of Grant" means a written or electronic notice
       evidencing certain terms and conditions of an individual Option or Stock
       Purchase Right grant. The Notice of Grant is part of the Option
       Agreement.

              (s) "Officer" means a person who is an officer of the Company
       within the meaning of Section 16 of the Exchange Act and the rules and
       regulations promulgated thereunder.

              (t) "Option" means a stock option granted pursuant to the Plan.

              (u) "Option Agreement" means an agreement between the Company and
       an Optionee evidencing the terms and conditions of an individual Option
       grant. The Option Agreement is subject to the terms and conditions of the
       Plan.

              (v) "Option Exchange Program" means a program whereby outstanding
       Options are surrendered in exchange for Options with a lower exercise
       price.

              (w) "Optioned Stock" means the Common Stock subject to an Option.

              (x) "Optionee" means the holder of an outstanding Option granted
       under the Plan.

              (y) "Parent" means a "parent corporation", whether now or
       hereafter existing, as defined in Section 424(e) of the Code.

              (z) "Plan" means this 2001 Stock Plan.

              (aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
       successor to Rule 16b-3, as in effect when discretion is being exercised
       with respect to the Plan.

              (bb) "Section 16(b)" means Section 16(b) of the Exchange Act.

              (cc) "Service Provider" means an Employee or Director. In
       addition, an individual who receives an award under this Plan while an
       Employee or Director, and who ceases to be an Employee or Director, but
       who remains an Employee or Director to Mercury shall be deemed Service
       Provider for purposes of this Plan.

              (dd) "Share" means a share of the Common Stock, as adjusted in
       accordance with Section 13 of the Plan.

              (ee) "Subsidiary" means a "subsidiary corporation", whether now or
       hereafter existing, as defined in Section 424(f) of the Code.

              (ff) "Mercury" means Mercury Air Group, Inc., a Delaware
       corporation.

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       3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is __________.

       If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares have actually been issued under the Plan, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares are repurchased by the Company at their
original purchase price, such Shares shall become available for future grant
under the Plan.

       4.     Administration of the Plan.

              (a)    Procedure.

                     (i)    Multiple Administrative Bodies. Different Committees
                            with respect to different groups of Service
                            Providers may administer the Plan.

                     (ii)   Section 162(m). To the extent that the Administrator
                            determines it to be desirable to qualify Options
                            granted hereunder as "performance-based
                            compensation" within the meaning of Section 162(m)
                            of the Code, the Plan shall be administered by a
                            Committee of two or more "outside directors" within
                            the meaning of Section 162(m) of the Code.

                     (iii)  Rule 16b-3. To the extent desirable to qualify
                            transactions hereunder as exempt under Rule 16b-3,
                            the transactions contemplated hereunder shall be
                            structured to satisfy the requirements for exemption
                            under Rule 16b-3.

                     (iv)   Other Administration. Other than as provided above,
                            the Plan shall be administered by (A) the Board or
                            (B) a Committee, which committee shall be
                            constituted to satisfy Applicable Laws.

              (b) Powers of the Administrator. Subject to the provisions of the
       Plan, and in the case of a Committee, subject to the specific duties
       delegated by the Board to such Committee, the Administrator shall have
       the authority, in its discretion:

                     (i)    to determine the Fair Market Value;

                     (ii)   to select the Employees and Directors to whom
                            Options may be granted hereunder;

                     (iii)  to determine the number of shares of Common Stock to
                            be covered by each Option granted hereunder;

                     (iv)   to approve forms of agreement for use under the
                            Plan;

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                     (v)    to determine the terms and conditions, not
                            inconsistent with the terms of the Plan, of any
                            Option granted hereunder. Such terms and conditions
                            include, but are not limited to, the exercise price,
                            the time or times when Options may be exercised
                            (which may be based on performance criteria), any
                            vesting acceleration or waiver of forfeiture
                            restrictions, and any restriction or limitation
                            regarding any Option or the shares of Common Stock
                            relating thereto, based in each case on such factors
                            as the Administrator, in its sole discretion, shall
                            determine;

                     (vi)   to reduce the exercise price of any Option to the
                            then current Fair Market Value if the Fair Market
                            Value of the Common Stock covered by such Option
                            shall have declined since the date the Option was
                            granted;

                     (vii)  to institute an Option Exchange Program;

                     (viii) to construe and interpret the terms of the Plan and
                            awards granted pursuant to the Plan;

                     (ix)   to prescribe, amend and rescind rules and
                            regulations relating to the Plan, including rules
                            and regulations relating to sub-plans established
                            for the purpose of qualifying for preferred
                            treatment under foreign laws;

                     (x)    to modify or amend each Option (subject to Section
                            15(c) of the Plan), including the discretionary
                            authority to extend the post-termination
                            exercisability period of Options longer than is
                            otherwise provided for in the Plan;

                     (xi)   to allow Optionees to satisfy withholding tax
                            obligations by electing to have the Company withhold
                            from the Shares to be issued upon exercise of an
                            Option that number of Shares having a Fair Market
                            Value equal to (or less than) the minimum amount
                            required to be withheld. The Fair Market Value of
                            the Shares to be withheld shall be determined on the
                            date that the amount of tax to be withheld is to be
                            determined. All elections by an Optionee to have
                            Shares withheld for this purpose shall be made in
                            such form and under such conditions as the
                            Administrator may deem necessary or advisable;

                     (xii)  to authorize any person to execute on behalf of the
                            Company any instrument required to effect the grant
                            of an Option previously granted by the
                            Administrator;

                     (xiii) to make all other determinations deemed necessary or
                            advisable for administering the Plan.

              (c) Effect of Administrator's Decision. The Administrator's
       decisions, determinations and interpretations shall be final and binding
       on all Optionees and any other holders of Options.

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       5. Eligibility. Nonstatutory Stock Options may be granted to Employees or
Directors. Incentive Stock Options may be granted only to Employees.

       6. Limitations.

              (a) Each Option shall be designated in the Option Agreement as
       either an Incentive Stock Option or a Nonstatutory Stock Option. However,
       notwithstanding such designation, to the extent that the aggregate Fair
       Market Value of the Shares with respect to which Incentive Stock Options
       are exercisable for the first time by the Optionee during any calendar
       year (under all plans of the Company and any Parent or Subsidiary)
       exceeds $100,000, such Options shall be treated as Nonstatutory Stock
       Options. For purposes of this Section 6(a), Incentive Stock Options shall
       be taken into account in the order in which they were granted. The Fair
       Market Value of the Shares shall be determined as of the time the Option
       with respect to such Shares is granted.

              (b) Neither the Plan nor any Option shall confer upon an Optionee
       any right with respect to continuing the Optionee's relationship as a
       Service Provider, nor shall they interfere in any way with the Optionee's
       right or the Company's or Mercury's right, as applicable, to terminate
       such relationship at any time, with or without cause.

       7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.

       8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

       9. Option Exercise Price and Consideration.

              (a) Exercise Price. The per share exercise price for the Shares to
       be issued pursuant to exercise of an Option shall be determined by the
       Administrator, subject to the following:

                     (i)    In the case of an Incentive Stock Option

                            (A)    granted to an Employee who, at the time the
                                   Incentive Stock Option is granted, owns stock
                                   representing more then ten percent (10%) of
                                   the voting power of all classes of stock of
                                   the Company or any Parent or Subsidiary, the
                                   per Share exercise price shall be no less
                                   than 110% of the Fair Market Value per Share
                                   on the date of grant.

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                            (B)    granted to any Employee other than an
                                   Employee described in paragraph (A)
                                   immediately above, the per Share exercise
                                   price shall be no less than 100% of the Faire
                                   Market Value per Share on the date of grant.

                     (ii)   In the case of a Nonstatutory Stock Option, the per
                            Share exercise price shall be determined by the
                            Administrator. In the case of a Nonstatutory Stock
                            Option intended to qualify as "performance-based
                            compensation" within the meaning of Section 162(m)
                            of the Code, the per Share exercise price shall be
                            no less than 100% of the Fair Market Value per Share
                            on the date of grant.

                     (iii)  Notwithstanding the foregoing, Options may be
                            granted with a per Share exercise price of less than
                            100% of the Fair Market Value per Share on the date
                            of grant pursuant to a merger or other corporate
                            transaction.

              (b) Waiting Period and Exercise Dates. At the time an Option is
       granted, the Administrator shall fix the period within which the Option
       may be exercised and shall determine any conditions that must be
       satisfied before the Option may be exercised.

              (c) Form of Consideration. The Administrator shall determine the
       acceptable form of consideration for exercising an Option, including the
       method of payment. In the case of an Incentive Stock Option, the
       Administrator shall determine the acceptable form of consideration at the
       time of grant. Such consideration may consist entirely of:

                     (i)    cash;

                     (ii)   check;

                     (iii)  promissory note;

                     (iv)   other Shares which (A) in the case of Shares
                            acquired upon exercise of an option, have been owned
                            by the Optionee for more than six months on the date
                            of surrender, and (B) have a Fair Market Value on
                            the date of surrender equal to the aggregate
                            exercise price of the Shares as to which said Option
                            shall be exercised;

                     (v)    consideration received by the Company under a
                            cashless exercise program implemented by the Company
                            in connection with the Plan;

                     (vi)   a reduction in the amount of any Company liability
                            to the Optionee, including any liability
                            attributable to the Optionee's participation in any
                            Company-sponsored deferred compensation program or
                            arrangement;

                     (vii)  any combination of the foregoing methods of payment;
                            or

                     (viii) such other consideration and method of payment for
                            the issuance of Shares to the extent permitted by
                            Applicable Laws.

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       10. Exercise of Option.

              (a) Procedure for Exercise; Rights as a Shareholder. Any Option
       granted hereunder shall be exercisable according to the terms of the Plan
       and at such times and under such conditions as determined by the
       Administrator and set forth in the Option Agreement. Unless the
       Administrator provides otherwise, vesting of Options granted hereunder
       shall be tolled during any unpaid leave of absence. An Option may not be
       exercised for a fraction of a Share.

              An Option shall be deemed exercised when the Company receives: (i)
       written or electronic notice of exercise (in accordance with the Option
       Agreement) from the person entitled to exercise the Option, and (ii) full
       payment for the Shares with respect to which the Option is exercised.
       Full payment may consist of any consideration and method of payment
       authorized by the Administrator and permitted by the Option Agreement and
       the Plan. Shares issued upon exercise of an Option shall be issued in the
       name of the Optionee or, if requested by the Optionee, in the name of the
       Optionee and his or her spouse. Until the Shares are issued (as evidenced
       by the appropriate entry on the books of the Company or of a duly
       authorized transfer agent of the Company), no right to vote or receive
       dividends or any other rights as a shareholder shall exist with respect
       to the Optioned Stock, notwithstanding the exercise of the Option. The
       Company shall issue (or cause to be issued) such Shares promptly after
       the Option is exercised. No adjustment will be made for a dividend or
       other right for which the record date is prior to the date the Shares are
       issued, except as provided in Section 13 of the Plan.

              Exercising an Option in any manner shall decrease the number of
       Shares thereafter available, both for purposes of the Plan and for sale
       under the Option, by the number of Shares as to which the Option is
       exercised.

              (b) Termination of Relationship as a Service Provider. If an
       Optionee ceases to be a Service Provider, other than upon the Optionee's
       death or Disability, the Optionee may exercise his or her Option within
       such period of time as is specified in the Option Agreement to the extent
       that the Option is vested on the date of termination (but in no event
       later than the expiration of the term of such Option as set forth in the
       Option Agreement). In the absence of a specified time in the Option
       Agreement, the Option shall remain exercisable for three (3) months
       following the Optionee's termination. If, on the date of termination, the
       Optionee is not vested as to his or her entire Option, the Shares covered
       by the unvested portion of the Option shall revert to the Plan. If, after
       termination, the Optionee does not exercise his or her Option within the
       time specified by the Administrator, the Option shall terminate, and the
       Shares covered by such Option shall revert to the Plan.

              (c) Disability of Optionee. If an Optionee ceases to be a Service
       Provider as a result of the Optionee's Disability, the Optionee may
       exercise his or her Option within such period of time as is specified in
       the Option Agreement to the extent the Option is vested on the date of
       termination (but in no event later than the expiration of the term of
       such Option as set forth in the Option Agreement). In the absence of a
       specified time in the Option Agreement, the Option shall remain
       exercisable for twelve (12) months

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       following the Optionee's termination. If, in the date of termination, the
       Optionee is not vested as to his or her entire Option, the Shares covered
       by the unvested portion of the Option shall revert to the Plan. If, after
       termination, the Optionee does not exercise his or her Option within the
       time specified herein, the Option shall terminate, and the Shares covered
       by such Option shall revert to the Plan. (d) Death of Optionee. If an
       Optionee dies while a Service Provider, the Option may be exercised
       within such period of time as is specified in the Option Agreement (but
       in no event later than the expiration of the term of such Option as set
       forth in the Notice of Grant) but only to the extent that the Option is
       vested on the date of death. In the absence of a specified time in the
       Option Agreement, the Option shall remain exercisable for twelve (12)
       months following the Optionee's death. The Option may be exercised by the
       Optionee's designated beneficiary, provided such beneficiary has been
       designated prior to Optionee's death in a form acceptable by the
       Administrator. If no such beneficiary has been designated by the
       Optionee, then such Option may be exercised within the applicable time
       period by the personal representative of the Optionee's estate or by the
       person or persons to whom the Option is transferred pursuant to the
       Optionee's will or in accordance with the laws of descent and
       distribution. If, at the time of death, the Optionee is not vested as to
       his or her entire Option, the Shares covered by the unvested portion of
       the Option shall immediately revert to the Plan. If the Option is not so
       exercised within the time specified herein, the Option shall terminate,
       and the Shares covered by such Option shall revert to the Plan.

              (e) Buyout Provisions. The Administrator may at any time offer to
       buy our for a payment in cash or Shares an Option previously granted
       based on such terms and conditions as the Administrator shall establish
       and communicate to the Optionee as the time that such offer is made.

       11. Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. If the Administrator makes an
Option transferable, such Option shall contain such additional terms and
conditions as the Administrator deems appropriate.

       12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

              (a) Changes in Capitalization. Subject to any required action by
       the shareholders of the Company, the number of shares of Common Stock
       which have been authorized for issuance under the Plan, including Shares
       as to which no Options have yet been granted or which have been returned
       to the Plan upon cancellation or expiration of an Option and the number
       of shares of Common Stock covered by each outstanding Option as well as
       the price per share of Common Stock covered by each such outstanding
       Option, shall be proportionately adjusted for any increase or decrease in
       the number of issued shares of Common Stock resulting from a stock split,
       reverse stock split, stock dividend, combination or reclassification of
       the Common Stock, or any other increase or decrease in the number of
       issued shares of Common Stock effected without receipt of

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       consideration by the Company; provided, however, that conversion of any
       convertible securities of the Company shall not be deemed to have been
       "effected without receipt of consideration". Such adjustment shall be
       made by the Board, whose determination in that respect shall be final,
       binding and conclusive. Except as expressly provided herein, no issuance
       by the Company of shares of stock of any class, or securities convertible
       into shares of stock of any class, shall affect, and no adjustment by
       reason thereof shall be made with respect to, the number or price of
       shares of Common Stock subject to an Option.

              (b) Dissolution or Liquidation. In the event of the proposed
       dissolution or liquidation of the Company, the Administrator shall notify
       each Optionee as soon as practicable prior to the effective date of such
       proposed transaction. The Administrator in its discretion may provide for
       an Optionee to have the right to exercise his or her Option until ten
       (10) days prior to such transaction as to all of the Optioned Stock
       covered thereby, including Shares as to which the Option would not
       otherwise be exercisable. In addition, the Administrator may provide that
       any Company repurchase option applicable to any Shares purchased upon
       exercise of an Option shall lapse as to all such Shares, provided the
       proposed dissolution or liquidation takes place at the time and in the
       manner contemplated. To the extent it has not been previously exercised,
       an Option will terminate immediately prior tot he consummation of such
       proposed action.

              (c) Merger or Asset Sale. In the event of a merger of the Company
       into or with another corporation, or the sale of substantially all of the
       assets of the Company, each outstanding Option shall be assumed or an
       equivalent option or right substituted by the successor corporation or a
       Parent or Subsidiary of the successor corporation. In the event that the
       successor corporation refuses to assume or substitute for the Option, the
       Optionee shall fully vest in and have the right to exercise the Option as
       to all of the Optioned Stock, including Shares as to which it would not
       otherwise be vested or exercisable. If an Option becomes fully vested and
       exercisable in lieu of assumption or substitution in the event of a
       merger or sale of assets, the Administrator shall notify the Optionee in
       writing or electronically that the Option shall be fully vested and
       exercisable for a period of fifteen (15) days from the date of such
       notice, and the Option shall terminate upon the expiration of such
       period. For the purposes of this paragraph, the Option shall be
       considered assumed if, following the merger or sale of assets, the option
       or right confers the right to purchase or receive, for each Share of
       Optioned Stock subject to the Option immediately prior to the merger or
       sale of assets, the consideration (whether stock, cash, or other
       securities or property) received in the merger or sale of assets by
       holders of Common Stock for each Share held on the effective date of the
       transaction (and if holders were offered a choice of consideration, the
       type of consideration chosen by the holders of a majority of the
       outstanding Shares); provided, however, that if such consideration
       received in the merger or sale of assets is not solely common stock of
       the successor corporation or its Parent, the Administrator may, with the
       consent of the successor corporation, provide for the consideration to be
       received upon the exercise of the Option, for each Share of Optioned
       Stock subject to the Option, to be solely common stock of the successor
       corporation to its Parent equal in fair market value to the per share
       consideration received by holders of Common Sock in the merger or sale of
       assets.

                                       11
<PAGE>   12

       Notwithstanding the foregoing, if an Optionee's status as a Service
Provider is terminated for reasons other than Cause within twelve (12) months
following a Change of Control, then the vesting and exercisability of each of
the Optionee's outstanding Options and Stock Purchase Rights shall partially
accelerate upon such termination with respect to fifty percent (50%) of the then
unvested Shares subject to or acquired under each such Option.

       13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

       14. Amendment and Termination of the Plan.

              (a) Amendment and Termination. The Board may at any time amend,
       alter, suspend or terminate the Plan.

              (b) Shareholder Approval. The Company shall obtain shareholder
       approval of any Plan amendment to the extent necessary and desirable to
       comply with Applicable Laws.

              (c) Effect of Amendment or Termination. No amendment, alteration,
       suspension or termination of the Plan shall impair the rights of any
       Optionee, unless mutually agreed otherwise between the Optionee and the
       Administrator, which agreement must be in writing and signed by the
       Optionee and the Company. Termination of the Plan shall not affect the
       Administrator's ability to exercise the powers granted to it hereunder
       with respect to Options granted under the Plan prior to the date of such
       termination.

       15. Conditions Upon Issuance of Shares.

              (a) Legal Compliance. Shares shall not be issued pursuant to the
       exercise or an Option unless the exercise of such Option and the issuance
       and delivery of such Shares shall comply with Applicable Laws and shall
       be further subject to the approval of counsel for the Company with
       respect to such compliance.

              (b) Investment Representations. As a condition to the exercise of
       an Option, the Company may require the person exercising such Option to
       represent and warrant at the time of any such exercise that the Shares
       are being purchased only for investment and without any present intention
       to sell or distribute such Shares if, in the opinion of counsel for the
       Company, such a representation is required.

       16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

                                       12
<PAGE>   13

       17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

       18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

                                       13<PAGE>   1
                                                                    EXHIBIT 10.2

                          MASTER DISTRIBUTION AGREEMENT

                                     BETWEEN

                             MERCURY AIR GROUP, INC.

                                       AND

                                 MERCFUEL, INC.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                              ----
<S>                                                                                           <C>
ARTICLE I - DOCUMENTS AND ITEMS TO BE DELIVERED ON THE EFFECTIVE DATE..................          1

        1.1  Documents to be Delivered by MAG..........................................          1
        1.2  Documents to be Delivered by MercFuel.....................................          2

ARTICLE II - THE DISTRIBUTION..........................................................          2

        2.1  The Distribution..........................................................          2
        2.2  Actions Prior to the Distribution.........................................          3
        2.3  Sole Discretion of MAG....................................................          3
        2.4  Conditions Precedent to Distribution......................................          4
        2.5  Fractional................................................................          4

ARTICLE III - COVENANTS AND OTHER MATTERS..............................................          5

        3.1  Other Agreements..........................................................          5
        3.2  Further Instruments.......................................................          5
        3.3  Additional Transitional Services Agreements...............................          6
        3.4  Agreement for Exchange of Information.....................................          6
        3.5  Auditors and Audits; Annual and Quarterly Statements and Accounting.......          7
        3.6  Consistency with Past Practices...........................................          9
        3.7  Payment of Expenses.......................................................          9
        3.8  Foreign Subsidiaries......................................................          9
        3.9  Dispute Resolution........................................................         10
        3.10  Governmental Approvals...................................................         11
        3.11  No Representation or Warranty............................................         11
        3.12  Non-Solicitation of Employees............................................         11
        3.13  Employee Agreements Definition...........................................         11
        3.14  Cooperation in Obtaining New Agreements..................................         13

ARTICLE IV - MISCELLANEOUS.............................................................         14

        4.1  Limitation of Liability...................................................         14
        4.2  Entire Agreement..........................................................         14
        4.3  Governing Law.............................................................         14
        4.4  Termination...............................................................         14
        4.5  Notices...................................................................         14
        4.6  Counterparts..............................................................         15
        4.7  Binding Effect; Assignment................................................         15
        4.8  Severability..............................................................         15
        4.9  Failure or Indulgence Not Waiver; Remedies Cumulative.....................         15
</TABLE>

                                      -ii-

<PAGE>   3

<TABLE>
<S>                                                                                             <C>
        4.10  Amendment................................................................         15
        4.11  Authority................................................................         16
        4.12  Interpretation...........................................................         16
        4.13  Conflicting Agreements...................................................         16

ARTICLE V - DEFINITIONS................................................................         16

        5.1   Affiliated Company.......................................................         16
        5.2   Governmental Approvals...................................................         16
        5.3   Governmental Authority...................................................         16
        5.4   Information..............................................................         16
        5.5   MAG Group................................................................         17
        5.6   MAG'S Auditors...........................................................         17
        5.7   MercFuel's Assets........................................................         17
        5.8   MercFuel Group...........................................................         17
        5.9   MercFuel's Auditors......................................................         17
        5.10  Person...................................................................         17
        5.11  Record Date..............................................................         17
        5.12  Subsidiary...............................................................         17
</TABLE>

                                     -iii-

<PAGE>   4

                          MASTER DISTRIBUTION AGREEMENT

        This Master Distribution Agreement (this "Agreement") is entered into as
of ___________, 2001, between Mercury Air Group, Inc., ("MAG") a Delaware
corporation, and MercFuel, Inc. ("MercFuel"), a Delaware corporation.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in Article VII hereof.

                                    RECITALS

        WHEREAS, MAG currently owns all of the issued and outstanding common
stock of MercFuel;

        WHEREAS, MercFuel is engaged in the business of fuel sales and related
fuel management services (the "MercFuel Business");

        WHEREAS, on January 1, 2001 (the "Separation Date"), MAG contributed and
transferred to MercFuel, and MercFuel received and assumed assets and
liabilities which were held by MAG and associated with the MercFuel Business
(the "Separation");

        WHEREAS, MAG and MercFuel currently contemplate that MercFuel will make
an initial public offering ("IPO") of an amount of its common stock pursuant to
a registration statement on Form S-1 pursuant to the Securities Act of 1933, as
amended (the "IPO Registration Statement"), that will reduce MAG's ownership of
MercFuel to not less than 80.1%.

        WHEREAS, MAG currently contemplates that, no later than 6 months
following the IPO, MAG will distribute, pro rata, to the holders of its common
stock, $0.01 par value, all of the shares of MercFuel common stock owned by MAG
(the "Distribution");

        WHEREAS, MAG and MercFuel intend that the Separation and the
Distribution will qualify as a tax-free reorganization under Sections
368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that this Agreement is intended to be, and is hereby adopted as, a
plan of reorganization under Section 368 of the Code; and

        WHEREAS, the parties intend in this Agreement, including the Exhibits
hereto, to set forth the principal arrangements between them regarding the
separation of the MercFuel Business.

        NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

                                    ARTICLE I
            DOCUMENTS AND ITEMS TO BE DELIVERED ON THE EFFECTIVE DATE

        1.1 Documents to Be Delivered by MAG. On the date of the effectiveness
of the IPO (the "Effective Date"), MAG will deliver, or will cause its
appropriate Subsidiaries to deliver, to

                                      -1-
<PAGE>   5

MercFuel all of the following items and agreements (collectively, together with
all agreements and documents contemplated by such agreements, the "Ancillary
Agreements"):

        (a) A duly executed Master Technology Ownership and License Agreement
substantially in the form attached hereto as Exhibit A;

        (b) A duly executed Employee Matters Agreement substantially in the form
attached hereto as Exhibit B;

        (c) A duly executed Tax Sharing Agreement substantially in the form
attached hereto as Exhibit C;

        (d) A duly executed Master Transitional Services Agreement substantially
in the form attached hereto as Exhibit D;

        (e) A duly executed Real Estate Matters Agreement substantially in the
form attached hereto as Exhibit E;

        (f) A duly executed Master Confidential Disclosure Agreement
substantially in the form attached hereto as Exhibit F;

        (g) A duly executed Indemnification and Insurance Matters Agreement
substantially in the form attached hereto as Exhibit G;

        (h) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes hereof.

        1.2 Documents to Be Delivered by MercFuel. As of the Effective Date,
MercFuel will deliver to MAG the following:

In each case where MercFuel is a party to any agreement or instrument referred
to in Section 1.1, a duly executed counterpart of such agreement or instrument.

                                   ARTICLE II
                                THE DISTRIBUTION

        2.1 The Distribution.

        (a) Delivery of Shares for Distribution. Subject to Section 2.4 hereof,
on or prior to the date the Distribution is effective (the "Distribution Date"),
MAG will deliver to the distribution agent (the "Distribution Agent") to be
appointed by MAG to distribute to the stockholders of MAG the shares of common
stock of MercFuel held by MAG pursuant to the Distribution for the benefit of
holders of record of common stock of MAG on the Record Date, a single stock
certificate, endorsed by MAG, representing all of the outstanding shares of
common stock of MercFuel then owned by MAG, and shall cause the transfer agent
for the shares of common stock of MAG to instruct the Distribution Agent to
distribute on the Distribution Date

                                      -2-
<PAGE>   6

the appropriate number of such shares of common stock of MercFuel to each such
holder or designated transferee or transferees of such holder.

        (b) Shares Received. Subject to Sections 3.4 and 3.5, each holder of
common stock of MAG on the Record Date (or such holder's designated transferee
or transferees) will be entitled to receive in the Distribution a number of
shares of common stock of MercFuel equal to the number of shares of common stock
of MAG held by such holder on the Record Date.

        (c) Obligation to Provide Information. MercFuel and MAG, as the case may
be, will provide to the Distribution Agent all share certificates and any
information required in order to complete the Distribution on the basis
specified above.

        2.2 Actions Prior to the Distribution.

        (a) Information Statement. MAG and MercFuel shall prepare and mail,
prior to the Distribution Date, to the holders of common stock of MAG, such
information concerning MercFuel and the Distribution and such other matters as
MAG shall reasonably determine are necessary and as may be required by law. MAG
and MercFuel will prepare, and to the extent required under applicable law, file
with the Commission the Form 10 Registration Statement and any other
documentation which MAG and MercFuel determine is necessary or desirable to
effectuate the Distribution, and MAG and MercFuel shall each use its reasonable
commercial efforts to obtain all necessary approvals from the Commission with
respect thereto as soon as practicable.

        (b) Blue Sky. MAG and MercFuel shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.

        (c) Amex Listing. MercFuel shall prepare and file, and shall use its
reasonable commercial efforts to have approved, an application for the listing
of the common stock of MercFuel to be distributed in the Distribution on the
American Stock Exchange, subject to official notice of distribution.

        (d) Conditions. MAG and MercFuel shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 2.4 to be
satisfied and to effect the Distribution on the Distribution Date.

        2.3 Sole Discretion of MAG. MAG currently intends to complete the
Distribution in no event before the later of six months following the IPO, and
receipt of approval of MAG's lenders. MAG shall, in its sole and absolute
discretion, determine the date of the consummation of the Distribution and all
terms of the Distribution, including, without limitation, the form, structure
and terms of any transaction(s) and/or offering(s) to effect the Distribution
and the timing of and conditions to the consummation of the Distribution. In
addition, MAG may at any time and from time to time until the completion of the
Distribution, modify or change the terms of the Distribution, including, without
limitation, by accelerating or delaying the timing of the consummation of all or
part of the Distribution. MercFuel shall cooperate with MAG in all

                                      -3-
<PAGE>   7

respects to accomplish the Distribution and shall, at MAG's direction, promptly
take any and all actions necessary or desirable to effect the Distribution,
including, without limitation, the registration under the Securities Act of the
common stock of MercFuel on an appropriate registration form or forms to be
designated by MAG. MAG shall select any investment banker(s) and manager(s) in
connection with the Distribution, as well as any financial printer, solicitation
and/or exchange agent and outside counsel for MAG; provided, however, that
nothing herein shall prohibit MercFuel from engaging (at its own expense) its
own financial, legal, accounting and other advisors in connection with the
Distribution.

        2.4 Conditions Precedent to Distribution. The following are conditions
that must take place prior to the consummation of the Distribution. The
conditions are for the sole benefit of MAG and shall not give rise to or create
any duty on the part of MAG or the MAG Board of Directors to waive or not waive
any such condition.

        (a) Tax Opinion. MAG shall have obtained a tax opinion from Baker &
McKenzie in form and substance satisfactory to MAG (in its sole discretion), to
the effect that (i) the transfer by the MAG Group to the MercFuel Group of the
property, subject to liabilities, held by MAG of the MercFuel Business, and
MercFuel's assumption of liabilities held by MAG related to the MercFuel
Business, followed by the distribution by MAG of all of its MercFuel stock to
the stockholders of MAG, should qualify as a reorganization under Sections
368(a)(1)(D) and 355 of the Code; (ii) no gain or loss should be recognized by
MAG on its transfer of property of the MercFuel Business to MercFuel; (iii) no
gain or loss should be recognized by MercFuel on its receipt of property of the
MercFuel Business from MAG; and (iv) no gain or loss should be recognized by
(and no amount will otherwise be included in the income of) the stockholders of
MAG upon their receipt of MercFuel common stock pursuant to the Distribution.

        (b) Government Approvals. Any material governmental approvals and
consents necessary to consummate the Distribution shall have been obtained and
be in full force and effect;

        (c) No Legal Restraints. No order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event outside the control of MAG shall have occurred or failed to
occur that prevents the consummation of the Distribution;

        (d) Required Consents. Acceptable bank financing must be in effect; and

        (e) No Material Adverse Effect. No other events or developments shall
have occurred that, in the judgment of the Board of Directors of MAG, would
result in the Distribution having a material adverse effect on MAG or on the
stockholders of MAG.

        2.5 Fractional Shares. As soon as practicable after the Distribution
Date, MAG shall direct the Distribution Agent to determine the number of whole
shares and fractional shares of common stock of MercFuel allocable to each
holder of record or beneficial owner of common stock of MAG as of the Record
Date, to aggregate all such fractional shares and sell the whole shares obtained
thereby at the direction of MAG, in open market transactions, at then prevailing
trading prices, and to cause to be distributed to each such holder or for the
benefit of each such

                                      -4-
<PAGE>   8

beneficial owner to which a fractional share shall be allocable such holder's or
owner's ratable share of the proceeds of such sale, after making appropriate
deductions of the amount required to be withheld for federal income tax purposes
and after deducting an amount equal to all brokerage charges, commissions and
transfer taxes attributed to such sale. MAG and the Distribution Agent shall use
their reasonable commercial efforts to aggregate the shares of common stock of
MAG that may be held by any beneficial owner thereof through more than one
account in determining the fractional share allocable to such beneficial owner.

                                   ARTICLE III
                           COVENANTS AND OTHER MATTERS

        3.1 Other Agreements. MAG and MercFuel agree to execute or cause to be
executed by the appropriate parties and deliver, as appropriate, such other
agreements, instruments and other documents as may be necessary or desirable in
order to effect the purposes of this Agreement and the Ancillary Agreements. MAG
and MercFuel further agree to take such other actions as the parties hereto may,
based upon the advice of counsel, reasonably request to be taken prior to: (i)
an initial public offering of shares of common stock of MercFuel, and (ii) any
other registration statement with respect to shares of common stock of MercFuel,
in order to assure the successful completion of the initial public offering or
other registration statement.

        3.2 Further Instruments. At the request of MercFuel, and without further
consideration, MAG will execute and deliver, and will cause its applicable
Subsidiaries to execute and deliver, to MercFuel and its Subsidiaries such other
instruments of transfer, conveyance, assignment, substitution and confirmation
and take such action as MercFuel may reasonably deem necessary or desirable in
order to more effectively transfer, convey and assign to MercFuel and its
Subsidiaries and confirm MercFuel's and its Subsidiaries' title to all of the
assets, rights and other things of value transferred pursuant to the Separation
or contemplated to be transferred to MercFuel and its Subsidiaries pursuant to
this Agreement, the Ancillary Agreements, and any documents referred to therein,
to put MercFuel and its Subsidiaries in actual possession and operating control
thereof and to permit MercFuel and its Subsidiaries to exercise all rights with
respect thereto (including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer thereof
shall not have previously been obtained). At the request of MAG and without
further consideration, MercFuel will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to MAG and its Subsidiaries all
instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as MAG may reasonably deem necessary or
desirable in order to have MercFuel fully and unconditionally assume and
discharge the liabilities assumed or contemplated to be assumed by MercFuel
under this Agreement or any document in connection herewith and to relieve the
MAG Group of any liability or obligation with respect thereto and evidence the
same to third parties. Neither MAG nor MercFuel shall be obligated, in
connection with the foregoing, to expend money other than reasonable out-of-
pocket expenses, attorneys' fees and recording or similar fees. Furthermore,
each party, at the request of the other party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.

                                      -5-
<PAGE>   9

        3.3 Additional Transitional Services Agreements. MAG and its
Subsidiaries and MercFuel and its Subsidiaries will enter into transitional
services agreements covering the provision of various transitional services,
including financial, legal, accounting, real estate and site services, sales,
customer support, human resources, supply chain services and information
technology services by MAG (and its Subsidiaries) to MercFuel (and its
Subsidiaries) or, in certain circumstances, vice versa. Such services will
generally be provided for a fee equal to $70,000 per month. The transitional
services agreements will generally provide for a term of one (1) year or less.
However, some transitional services agreements may be extended beyond the
initial one (1) year term, in which case the fee for such services shall be
direct costs incurred plus 10%.

        3.4 Agreement for Exchange of Information.

        (a) Generally. Each of MAG and MercFuel agrees to provide, or cause to
be provided, to each other, at any time before or after the Distribution Date,
as soon as reasonably practicable after written request therefor, any
Information in the possession or under the control of such party that the
requesting party reasonably needs (i) to comply with reporting, disclosure,
filing or other requirements imposed on the requesting party (including under
applicable securities laws) by a Governmental Authority having jurisdiction over
the requesting party, (ii) for use in any other judicial, regulatory,
administrative or other proceeding or in order to satisfy audit, accounting,
claims, regulatory, litigation or other similar requirements, (iii) to comply
with its obligations under this Agreement or any Ancillary Agreement or (iv) in
connection with the ongoing businesses of MAG or MercFuel, as the case may be;
provided, however, that in the event that any party determines that any such
provision of Information could be commercially detrimental, violate any law or
agreement, or waive any attorney-client privilege, the parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.

        (b) Internal Accounting Controls; Financial Information. After the
Effective Date, (i) each party shall maintain in effect at its own cost and
expense adequate systems and controls for its business to the extent necessary
to enable the other party to satisfy its reporting, accounting, audit and other
obligations, and (ii) each party shall provide, or cause to be provided, to the
other party and its Subsidiaries in such form as such requesting party shall
request, at no charge to the requesting party, all financial and other data and
information as the requesting party determines necessary or advisable in order
to prepare its financial statements and reports or filings with any Governmental
Authority.

        (c) Ownership of Information. Any Information owned by a party that is
provided to a requesting party pursuant to this Section 3.4 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.

        (d) Record Retention. To facilitate the possible exchange of Information
pursuant to this Section 3.4 and other provisions of this Agreement after the
Distribution Date, each party agrees to use its reasonable commercial efforts to
retain all Information in its respective

                                      -6-
<PAGE>   10

possession or control on the Distribution Date substantially in accordance with
the policies of MAG as in effect on the Separation Date. However, except as set
forth in the Tax Sharing Agreement, at any time after the Distribution Date,
each party may amend its respective record retention policies at such party's
discretion; provided, however, that if a party desires to effect the amendment
within three (3) years after the Distribution Date, the amending party must give
thirty (30) days prior written notice of such change in the policy to the other
party to this Agreement.

               (i) No party will destroy, or permit any of its Subsidiaries to
        destroy, any Information that exists on the Separation Date (other than
        Information that is permitted to be destroyed under the current record
        retention policies of MAG) and that falls under the categories listed in
        Section 4.4(a), without first using its reasonable commercial efforts to
        notify the other party of the proposed destruction and giving the other
        party the opportunity to take possession of such Information prior to
        such destruction.

        (e) Limitation of Liability. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Section 3.4 is found to be inaccurate, in the absence of gross negligence
or willful misconduct by the party providing such Information. No party shall
have any liability to any other party if any Information is destroyed or lost
after reasonable commercial efforts by such party to comply with the provisions
of Section 3.4(d).

        (f) Other Agreements Providing for Exchange of Information. The rights
and obligations granted under this Section 3.4 are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in this Agreement and any
Ancillary Agreement.

        (g) Production of Witnesses; Records; Cooperation. After the
Distribution Date, except in the case of a legal or other proceeding by one
party against another party (which shall be governed by such discovery rules as
may be applicable under Section 3.9 or otherwise), each party hereto shall use
its reasonable commercial efforts to make available to each other party, upon
written request, the former, current and future directors, officers, employees,
other personnel and agents of such party as witnesses and any books, records or
other documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents) or
books, records or other documents may reasonably be required in connection with
any legal, administrative or other proceeding in which the requesting party may
from time to time be involved, regardless of whether such legal, administrative
or other proceeding is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses in
connection therewith.

        3.5 Auditors and Audits; Annual and Quarterly Statements and Accounting.
Each party agrees that, for so long as MAG is required in accordance with United
States generally accepted accounting principles to consolidate MercFuel's
results of operations and financial position:

                                      -7-
<PAGE>   11

        (a) Selection of Auditors. MercFuel shall not select a different
accounting firm from that used by MAG to serve as its (and its Subsidiaries')
independent certified public accountants ("MercFuel's Auditors") for purposes of
providing an opinion on its consolidated financial statements without MAG's
prior written consent (which shall not be unreasonably withheld).

        (b) Date of Auditors' Opinion and Quarterly Reviews. MercFuel shall use
its reasonable commercial efforts to enable the MercFuel Auditors to complete
their audit such that they will date their opinion on MercFuel's audited annual
financial statements on the same date that MAG's independent certified public
accountants ("MAG's Auditors") date their opinion on MAG's audited annual
financial statements, and to enable MAG to meet its timetable for the printing,
filing and public dissemination of MAG's annual financial statements. MercFuel
shall use its reasonable commercial efforts to enable the MercFuel Auditors to
complete their quarterly review procedures such that they will provide clearance
on MercFuel's quarterly financial statements on the same date that MAG's
Auditors provide clearance on MAG's quarterly financial statements.

        (c) Annual and Quarterly Financial Statements. MercFuel shall provide to
MAG on a timely basis all Information that MAG reasonably requires to meet its
schedule for the preparation, printing, filing, and public dissemination of
MAG's annual and quarterly financial statements. Without limiting the generality
of the foregoing, MercFuel will provide all required financial Information with
respect to MercFuel and its Subsidiaries to MercFuel's Auditors in a sufficient
and reasonable time and in sufficient detail to permit MercFuel's Auditors to
take all steps and perform all reviews necessary to provide sufficient
assistance to MAG's Auditors with respect to financial Information to be
included or contained in MAG's annual and quarterly financial statements.
Similarly, MAG shall provide to MercFuel on a timely basis all financial
Information that MercFuel reasonably requires to meet its schedule for the
preparation, printing, filing, and public dissemination of MercFuel's annual and
quarterly financial statements. Without limiting the generality of the
foregoing, MAG will provide all required financial Information with respect to
MAG and its Subsidiaries to MAG's Auditors in a sufficient and reasonable time
and in sufficient detail to permit MAG's Auditors to take all steps and perform
all reviews necessary to provide sufficient assistance to MercFuel's Auditors
with respect to Information to be included or contained in MercFuel's annual and
quarterly financial statements.

        (d) Identity of Personnel Performing the Annual Audit and Quarterly
Reviews. MercFuel shall authorize MercFuel's Auditors to make available to MAG's
Auditors both the personnel who performed or will perform the annual audits and
quarterly reviews of MercFuel and work papers related to the annual audits and
quarterly reviews of MercFuel, in all cases within a reasonable time prior to
MercFuel's Auditors' opinion date, so that MAG's Auditors are able to perform
the procedures they consider necessary to take responsibility for the work of
MercFuel's Auditors as it relates to MAG's Auditors' report on MAG's financial
statements, all within sufficient time to enable MAG to meet its timetable for
the printing, filing and public dissemination of MAG's annual and quarterly
statements. Similarly, MAG shall authorize MAG's Auditors to make available to
MercFuel's Auditors both the personnel who performed or will perform the annual
audits and quarterly reviews of MAG and work papers related to the annual audits
and quarterly reviews of MAG, in all cases within a reasonable time prior to
MAG's Auditors' opinion date, so that MercFuel's Auditors are able to perform
the procedures

                                      -8-
<PAGE>   12

they consider necessary to take responsibility for the work of MAG's Auditors as
it relates to MercFuel's Auditors' report on MercFuel's statements, all within
sufficient time to enable MercFuel to meet its timetable for the printing,
filing and public dissemination of MercFuel's annual and quarterly financial
statements.

        (e) Access to Books and Records. MercFuel shall provide MAG's internal
auditors and their designees access to MercFuel's and its Subsidiaries' books
and records so that MAG may conduct reasonable audits relating to the financial
statements provided by MercFuel pursuant hereto as well as to the internal
accounting controls and operations of MercFuel and its Subsidiaries. Similarly,
MAG shall provide MercFuel's internal auditors and their designees access to
MAG's and its Subsidiaries' books and records so that MercFuel may conduct
reasonable audits relating to the financial statements provided by MAG pursuant
hereto as well as to the internal accounting controls and operations of MAG and
its Subsidiaries.

        (f) Notice of Change in Accounting Principles. MercFuel shall give MAG
as much prior notice as reasonably practical of any proposed determination of,
or any significant changes in, its accounting estimates or accounting principles
from those in effect on the Separation Date. MercFuel will consult with MAG and,
if requested by MAG, MercFuel will consult with MAG's independent public
accountants with respect thereto. MAG shall give MercFuel as much prior notice
as reasonably practical of any proposed determination of, or any significant
changes in, its accounting estimates or accounting principles from those in
effect on the Separation Date.

        (g) Conflict with Third-Party Agreements. Nothing in Sections 3.4 and
3.5 shall require MercFuel to violate any agreement with any third party
regarding the confidentiality of confidential and proprietary information
relating to that third party or its business; provided, however, that in the
event that MercFuel is required under Sections 3.4 and 3.5 to disclose any such
Information, MercFuel shall use all commercially reasonable efforts to seek to
obtain such third party's consent to the disclosure of such information.

        3.6 Consistency with Past Practices. At all times, MercFuel will conduct
the MercFuel Business before the Distribution Date in the ordinary course,
consistent with past practices.

        3.7 Payment of Expenses. Except as otherwise provided in this Agreement,
the Ancillary Agreements or any other agreement between the parties relating to
the Separation, the IPO or the Distribution, all costs and expenses of the
parties hereto in connection with the Separation, the IPO (including
underwriting discounts and commissions), and the Distribution and costs and
expenses of the parties hereto in connection with the Separation shall be
allocated between MercFuel and MAG. MercFuel and MAG shall each be responsible
for their own internal fees, costs and expenses incurred in connection with the
Separation, the IPO, and the Distribution.

        3.8 Foreign Subsidiaries. MAG and MercFuel shall cause each of their
foreign subsidiaries to execute such local transfer agreements, assignments,
assumptions, novations and other documents as shall be necessary to effect the
purposes of this Agreement with respect to their respective operations outside
the United States.

                                      -9-
<PAGE>   13

        3.9 Dispute Resolution.

        (a) If a dispute, controversy or claim ("Dispute") arises between the
parties relating to the interpretation or performance of this Agreement or the
Ancillary Agreements, or the grounds for the termination hereof, appropriate
senior executives of each party who shall have the authority to resolve the
matter shall meet to attempt in good faith to negotiate a resolution of the
Dispute prior to pursuing other available remedies. The initial meeting between
the appropriate senior executives shall be referred to herein as the "Dispute
Resolution Commencement Date". Discussions and correspondence relating to trying
to resolve such Dispute shall be treated as confidential information developed
for the purpose of settlement and shall be exempt from discovery or production
and shall not be admissible. If the senior executives are unable to resolve the
Dispute within thirty (30) days from the Dispute Resolution Commencement Date,
and either party wishes to pursue its rights relating to such Dispute, then the
Dispute will be mediated by a mutually acceptable mediator appointed within
thirty (30) days after written notice by one party to the other demanding
non-binding mediation. Neither party may unreasonably withhold consent to the
selection of a mediator or the location of the mediation. Both parties will
share the costs of the mediation equally, except that each party shall bear its
own costs and expenses, including attorney's fees, witness fees, travel
expenses, and preparation costs. The parties may also agree to replace mediation
with some other form of non-binding or binding ADR.

        (b) Any Dispute which the parties cannot resolve through mediation
within ninety (90) days of the Dispute Resolution Commencement Date, unless
otherwise mutually agreed, shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by three (3) arbitrators in Los Angeles County, California.
Such arbitrators shall be selected by the mutual agreement of the parties or,
failing such agreement, shall be selected according to the aforesaid AAA rules.
The arbitrators will be instructed to prepare and deliver a written, reasoned
opinion stating their decision within thirty (30) days of the completion of the
arbitration. The prevailing party in such arbitration shall be entitled to
expenses, including costs and reasonable attorneys' and other professional fees,
incurred in connection with the arbitration (but excluding any costs and fees
associated with prior negotiation or mediation). The decision of the arbitrator
shall be final and non-appealable and may be enforced in any court of competent
jurisdiction. The use of any ADR procedures will not be construed under the
doctrine of laches, waiver or estoppel to adversely affect the rights of either
party.

        (c) Any Dispute regarding the following is not required to be
negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality;
infringement, misappropriation, or misuse of any intellectual property right;
any other claim where interim relief from the court is sought to prevent serious
and irreparable injury to one of the parties or to others. However, the parties
to the Dispute shall make a good faith effort to negotiate and mediate such
Dispute, according to the above procedures, while such court action is pending.

                                      -10-
<PAGE>   14

        (d) Continuity of Service and Performance. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Section 4.9 with
respect to all matters not subject to such dispute, controversy or claim.

        3.10 Governmental Approvals. To the extent that the Separation requires
any Governmental Approvals, the parties will use their reasonable commercial
efforts to obtain any such Governmental Approvals.

        3.11 No Representation or Warranty. MAG does not, in this Agreement or
any other agreement, instrument or document contemplated by this Agreement, make
any representation as to, warranty of or covenant with respect to:

        (a) the value of any asset or thing of value to be transferred to
MercFuel;

        (b) the freedom from encumbrance of any asset or thing of value to be
transferred to MercFuel;

        (c) the absence of defenses or freedom from counterclaims with respect
to any claim to be transferred to MercFuel; or

        (d) the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any asset or thing of value upon its
execution, delivery and filing.

        Except as may expressly be set forth herein or in any Ancillary
Agreement, all assets transferred or to be transferred to MercFuel have been and
shall be transferred "AS IS, WHERE IS" and MercFuel shall bear the economic and
legal risk that any conveyance shall prove to be insufficient to vest in
MercFuel good and marketable title, free and clear of any lien, claim, equity or
other encumbrance.

        3.12 Non-Solicitation of Employees. MAG and MercFuel each agree not to
solicit or recruit, without the other party's express written consent, the other
party's employees for a period of two (2) years following the Distribution Date.
Notwithstanding the foregoing, this prohibition on solicitation does not apply
to actions taken by a party either: (a) solely as a result of an employee's
affirmative response to a general recruitment effort carried out through a
public solicitation or general solicitation, or (b) as a result of an employee's
initiative.

        3.13 Employee Agreements. Definition. As used in this Section 3.13,
"Employee Agreement" means the Invention and Nondisclosure Agreement, the
Non-Competition and Non-Solicitation Agreement and corresponding agreements in
foreign countries executed by each MAG employee.

        (a) Survival of MAG Employee Agreement Obligations and MAG's Common Law
Rights. The MAG Employee Agreements of all former MAG employees transferred to
MercFuel as of the Distribution Date shall remain in full force and effect
according to their terms; provided, however, that none of the following acts
committed by former MAG employees

                                      -11-
<PAGE>   15

within the scope of their MercFuel employment shall constitute a breach of such
MAG Employee Agreements: (i) the use or disclosure of Confidential Information
(as that term is defined in the former MAG employee's MAG Employee Agreement)
for or on behalf of MercFuel, if such disclosure is consistent with the rights
granted to MercFuel and restrictions imposed on MercFuel under this Agreement,
any Ancillary Agreement or any other agreement between the parties; (ii) the
disclosure and assignment to MercFuel of rights in proprietary developments
authored or conceived by the former MAG employee after the Separation Date and
resulting from the use of, or based upon intellectual property (whether patented
or not) which is retained by MAG; provided, however, that in no event shall such
disclosure and assignment be regarded as assigning the underlying intellectual
property to MercFuel; (iii) the rendering of any services, directly or
indirectly, to MercFuel to the extent such services are consistent with the
assignment or license of rights granted to MercFuel and the restrictions imposed
on MercFuel under this Agreement, any Ancillary Agreement or any other agreement
between the parties; and (iv) solicitation of the employees of one party by the
other party prior to the Distribution Date (so long as such solicitation does
not violate Section 4.12 hereof). Further, MAG retains any rights it has under
statute or common law with respect to actions by its former employees to the
extent such actions are inconsistent with the rights granted to MercFuel and
restrictions imposed on MercFuel under this Agreement, any Ancillary Agreement
or any other agreement between the parties.

        (b) Assignment, Cooperation for Compliance and Enforcement.

               (i) MAG retains all rights under the MAG Employee Agreements of
        all former MAG employees necessary to permit MAG to protect the rights
        and interests of MAG, but hereby transfers and assigns to MercFuel its
        rights under the MAG Employee Agreements of all former MAG employees to
        the extent required to permit MercFuel to enjoin, restrain, recover
        damages from or obtain specific performance of the MAG Employee
        Agreements or obtain other remedies against any employee who breaches
        his/her MAG Employee Agreement.

               (ii) MAG and MercFuel agree, at their own respective cost and
        expense, to use their reasonable efforts to cooperate as follows: (A)
        MercFuel shall advise MAG of: (1) any violation(s) of the MAG Employee
        Agreement by former MAG employees, and (2) any violation(s) of the
        MercFuel Employee Agreement which affect MAG's rights; and (B) MAG shall
        advise MercFuel of any violations of the MAG Employee Agreement by
        current or former MAG employees which affect MercFuel's rights;
        provided, however, that the foregoing obligations shall only apply to
        violations which become known to an attorney within the legal department
        of the party obligated to provide notice thereof.

               (iii) MAG and MercFuel each may separately enforce the MAG
        Employee Agreements of former MAG employees to the extent necessary to
        reasonably protect their respective interests, provided, however, that
        (i) MercFuel shall not commence any legal action relating thereto
        without first consulting with MAG's General Counsel or his/her designee
        and (ii) MAG shall not commence any legal action relating thereto
        against any former MAG employee who is at the time an MercFuel employee
        without first consulting with MercFuel's General Counsel or his/her
        designee. If either party, in

                                      -12-
<PAGE>   16

        seeking to enforce any MAG Employee Agreement, notifies the other party
        that it requires, or desires, such party to join in such action, then
        the other party shall do so. In addition, if either party commences or
        becomes a party to any action to enforce a MAG Employee Agreement of a
        former MAG employee, the other party shall, whether or not it becomes a
        party to the action, cooperate with the other party by making available
        its files and employees who have information or knowledge relevant to
        the dispute, subject to appropriate measures to protect the
        confidentiality of any proprietary or confidential information that may
        be disclosed in the course of such cooperation or action and subject to
        any relevant privacy laws and regulations. Any such action shall be
        conducted at the expense of the party bringing the action and the
        parties shall agree on a case by case basis on compensation, if any, of
        the other party for the value of the time of such other party's
        employees as reasonably required in connection with the action.

               (iv) MAG and MercFuel understand and acknowledge that matters
        relating to the making, performance, enforcement, assignment and
        termination of employee agreements are typically governed by the laws
        and regulations of the national, federal, state or local governmental
        unit where an employee resides, or where an employee's services are
        rendered, and that such laws and regulations may supersede or limit the
        applicability or enforceability of this Section 3.13. In such
        circumstances, MAG and MercFuel agree to take action with respect to the
        employee agreements that best accomplishes the parties' objectives as
        set forth in this Section 3.13 and that is consistent with applicable
        law.

        3.14 Cooperation in Obtaining New Agreements. MAG understands that,
prior to the Separation Date, MercFuel derived benefits under certain agreements
and relationships between MAG and third parties, which agreements and
relationships have not been and are not being assigned or transferred to
MercFuel in connection with the Separation. Upon the request of MercFuel, MAG
agrees to make introductions of appropriate MercFuel personnel to MAG's contacts
at such third parties, and agrees to provide reasonable assistance to MercFuel,
at MAG's own expense, so that MercFuel may enter into agreements or
relationships with such third parties under substantially equivalent terms and
conditions, including financial terms and conditions, that apply to MAG. Such
assistance may include, but is not limited to, (a) requesting and encouraging
such third parties to enter into such agreements or relationships with MercFuel,
(b) attending meetings and negotiating sessions with MercFuel and such third
parties, and (c) participating in buying consortiums with MercFuel. MAG also
understands that certain agreements between MAG and third parties which are
being assigned to MercFuel in connection with the Separation may require the
consent of the applicable third party. MAG shall assist MercFuel in seeking and
obtaining the consent of such third parties to such assignment. The parties
expect that the activities contemplated by this Section 4.14 will be
substantially completed by the Distribution Date, but in no event will MAG have
any obligations hereunder after the first anniversary of the Distribution Date.

                                      -13-
<PAGE>   17

                                   ARTICLE IV
                                  MISCELLANEOUS

        4.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY MEMBER OF THE MAG
GROUP OR MERCFUEL GROUP BE LIABLE TO ANY OTHER MEMBER OF THE MAG GROUP OR
MERCFUEL GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED,
HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S
INDEMNIFICATION OBLIGATIONS FOR LIABILITIES AS SET FORTH IN THE INDEMNIFICATION
AND INSURANCE MATTERS AGREEMENT.

        4.2 Entire Agreement. This Agreement, the Ancillary Agreements and the
Exhibits and Schedules referenced or attached hereto and thereto, constitute the
entire agreement between the parties with respect to the subject matter hereof
and thereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof and thereof.

        4.3 Governing Law. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior Court
of Los Angeles County and/or the United States District Court for the Southern
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to Section 4.9 above.

        4.4 Termination. This Agreement may be terminated at any time before the
Distribution Date by mutual consent of MAG and MercFuel. In the event of
termination pursuant to this Section 5.4, no party shall have any liability of
any kind to the other party.

        4.5 Notices. Notices, offers, requests or other communications required
or permitted to be given by either party pursuant to the terms of this Agreement
shall be given in writing to the respective parties to the following addresses:

        if to MAG :        Mercury Air Group, Inc.
                           5456 McConnell Avenue
                           Los Angeles, CA  90066
                           Attention: Joseph A. Czyzyk, Chief Executive Officer

        if to MercFuel:    MercFuel, Inc.
                           5456 McConnell Avenue
                           Los Angeles, CA  90066
                           Attention: Joseph A. Czyzyk, Chief Executive Officer

                                      -14-
<PAGE>   18

or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed by first class mail. All notices shall be deemed to have
been given and received on the earlier of actual delivery or three (3) days from
the date of postmark.

        4.6 Counterparts. This Agreement, including the Ancillary Agreement and
the Exhibits and Schedules hereto and thereto and the other documents referred
to herein or therein, may be executed in counterparts, each of which shall be
deemed to be an original but all of which shall constitute one and the same
agreement.

        4.7 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced separately by each member of the MAG Group and each member of the
MercFuel Group. Neither party may assign this Agreement or any rights or
obligations hereunder, without the prior written consent of the other party, and
any such assignment shall be void; provided, however, either party may assign
this Agreement to a successor entity in conjunction with such party's
reincorporation.

        4.8 Severability. If any term or other provision of this Agreement or
the Exhibits or Schedules attached hereto is determined by a court,
administrative agency or arbitrator to be invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to either party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible.

        4.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of either party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement or the Exhibits or Schedules attached hereto are cumulative to, and
not exclusive of, any rights or remedies otherwise available.

        4.10 Amendment. No change or amendment will be made to this Agreement or
the Exhibits or Schedules attached hereto except by an instrument in writing
signed on behalf of each of the parties to such agreement.

                                      -15-
<PAGE>   19

        4.11 Authority. Each of the parties hereto represents to the other that
(a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other actions, (c) it has duly and validly executed and delivered this
Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.

        4.12 Interpretation. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Exhibit or
Schedule but not otherwise defined therein, shall have the meaning assigned to
such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, Exhibit or Schedule, such reference shall be to an Article
or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.

        4.13 Conflicting Agreements. In the event of conflict between this
Agreement and any Ancillary Agreement or other agreement executed in connection
herewith, the provisions of such other agreement shall prevail.

                                    ARTICLE V
                                   DEFINITIONS

        5.1 Affiliated Company. "Affiliated Company" of any Person means any
entity that controls, is controlled by, or is under common control with such
Person. As used herein, "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity, whether through ownership of voting securities or other interests,
by contract or otherwise.

        5.2 Governmental Approvals. "Governmental Approvals" means any notices,
reports or other filings to be made, or any consents, registrations, approvals,
permits or authorizations to be obtained from, any Governmental Authority.

        5.3 Governmental Authority. "Governmental Authority" shall mean any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.

        5.4 Information. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials

                                      -16-
<PAGE>   20

prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, employee or business information or
data.

        5.5 MAG Group. "MAG Group" means MAG, each Subsidiary and Affiliated
Company of MAG (other than any member of the MercFuel Group) immediately after
the Separation Date and each Person that becomes a Subsidiary or Affiliate
Company of MAG after the Separation Date.

        5.6 MAG's Auditors. "MAG's Auditors" means MAG's independent certified
public accountants.

        5.7 MercFuel Assets. "MercFuel Assets" has the meaning set forth in
Section 1.2 of the Assignment Agreement.

        5.8 MercFuel Group. "MercFuel Group" means MercFuel, each Subsidiary and
Affiliated Company of MercFuel immediately after the Separation Date or that is
contemplated to be a Subsidiary or Affiliated Company of MercFuel and each
Person that becomes a Subsidiary or Affiliate Company of MercFuel after the
Separation Date.

        5.9 MercFuel's Auditors. "MercFuel's Auditors" means MercFuel's
independent certified public accountants.

        5.10 Person. "Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.

        5.11 Record Date. "Record Date" means the close of business on the date
to be determined by the Board of Directors of MAG as the record date for
determining the stockholders of MAG entitled to receive shares of common stock
of MercFuel in the Distribution.

        5.12 Subsidiary. "Subsidiary" of any Person means a corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by the terms thereof ordinary voting power
to elect at least a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however, that no Person that is not directly or indirectly
wholly-owned by any other Person shall be a Subsidiary of such other Person
unless such other Person controls, or has the right, power or ability to
control, that Person.

                                      -17-
<PAGE>   21

        WHEREFORE, the parties have signed this Master Distribution Agreement
effective as of the date first set forth above.

                                  MERCURY AIR GROUP, INC.

                                  By: __________________________________________
                                        Joseph Czyzyk, Chief Executive Officer

                                  MERCFUEL, INC.

                                  By: __________________________________________
                                        Joseph Czyzyk, Chief Executive Officer

                                      -18-
<PAGE>   22

                                    EXHIBITS

Exhibit A     Master Technology Ownership and License Agreement

Exhibit B     Employee Matters Agreement

Exhibit C     Tax Sharing Agreement

Exhibit D     Master Transitional Services Agreement

Exhibit E     Real Estate Matters Agreement

Exhibit F     Master Confidential Disclosure Agreement

Exhibit G     Indemnification and Insurance Matters Agreement

                                      -19-

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