Document:

<PAGE>   1
                                                                    EXHIBIT 10.7

                          REAL ESTATE MATTERS AGREEMENT

                                     BETWEEN

                             MERCURY AIR GROUP, INC.

                                       AND

                                 MERCFUEL, INC.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
ARTICLE I - PROPERTY....................................................................     1

        Section 1.1   Leased Property...................................................     1

        Section 1.2   Shared Properties.................................................     1

        Section 1.3   Change in Allocation or Term......................................     2

        Section 1.4   Obtaining the Lease Consents......................................     2

        Section 1.5   Occupation by MercFuel............................................     3

        Section 1.6   Obligation to Compete.............................................     4

        Section 1.7   Form of Transfer..................................................     5

        Section 1.8   Casualty; Lease Termination.......................................     6

        Section 1.9   Tenant's Fixtures and Fittings....................................     6

        Section 1.10  Costs.............................................................     6

ARTICLE II - MISCELLANEOUS..............................................................     6

        Section 2.1  Limitation of Liability............................................     6

        Section 2.2  Entire Agreement...................................................     7

        Section 2.3  Governing Law......................................................     7

        Section 2.4  Notices............................................................     7

        Section 2.5  Counterparts.......................................................     8

        Section 2.6  Binding Effect; Assignment.........................................     8

        Section 2.7  Severability.......................................................     8

        Section 2.8  Failure of Indulgence Not Waiver; Remedies Cumulative..............     8

        Section 2.9  Amendment..........................................................     8
</TABLE>

                                      -ii-

<PAGE>   3

<TABLE>
<S>                                                                                          <C>
        Section 2.10  Authority.........................................................     8

        Section 2.11  Interpretation....................................................     9

        Section 2.12  Disputes..........................................................     9

ARTICLE III - DEFINITIONS...............................................................     9
</TABLE>

                                     -iii-

<PAGE>   4

                          REAL ESTATE MATTERS AGREEMENT

        This Real Estate Matters Agreement (this "Agreement") is entered into as
of __________, 2001 and effective as of ___________ (the "Effective Date")
between Mercury Air Group, Inc., a Delaware corporation ("MAG"), and MercFuel,
Inc., a Delaware corporation ("MercFuel"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Distribution Agreement between MAG and MercFuel (the "Distribution Agreement").

                                    RECITALS

        WHEREAS, MAG has transferred to MercFuel effective as of the Separation
Date, substantially all of the business and assets of the MercFuel Business
owned by MAG, and

        WHEREAS, the parties desire to set forth certain agreements regarding
real estate matters.

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

                                    ARTICLE I
                                    PROPERTY

        Section 1.1 Leased Property

               (a) MAG shall assign or cause its applicable Subsidiary to
        assign, and MercFuel shall accept and assume, or cause its applicable
        Subsidiary to accept and assume, MAG's or its Subsidiary's interest in
        the Leased Properties, subject to the other provisions of this Agreement
        and (to the extent not inconsistent with the provisions of this
        Agreement) the terms of the Distribution Agreement and the other
        Ancillary Agreements. Such assignment shall be completed on the later
        of: (i) the Effective Date; or (ii) the earlier of (A) the fifth
        business day after the relevant Lease Consent has been granted, or (B)
        the date agreed upon by the parties in accordance with Section 1.6(a)
        below.

               (b) Subject to the completion of the assignment to MercFuel or
        its applicable Subsidiary of the relevant Leased Property, with respect
        to each Leased Property which is also a Shared Property, MercFuel shall
        grant or cause its applicable Subsidiary to grant to MAG or its
        applicable Subsidiary a license to occupy that part of the relevant
        Leased Property identified in Section A of Schedule 1 of this Agreement
        and MAG shall accept or cause its applicable Subsidiary to accept the
        same. Such license shall be completed immediately following completion
        of the transfer of the relevant Leased Property to MercFuel or its
        applicable Subsidiary, but no earlier than the Effective Date.

        Section 1.2 Shared Properties. MAG shall grant or cause its applicable
Subsidiary to grant to MercFuel or its applicable Subsidiary a license to occupy
those parts of the Shared

                                      -1-
<PAGE>   5

Properties identified in Section B of Schedule 1 of this Agreement and MercFuel
shall accept or cause its applicable Subsidiary to accept the same, subject to
the other provisions of this Agreement and (to the extent not inconsistent with
the provisions of this Agreement) the terms of the Distribution Agreement and
the other Ancillary Agreements. Such license shall be completed on the Effective
Date.

        Section 1.3 Change in Allocation or Term. The parties may, by mutual
agreement, modify the terms of each assignment, sublease or license that is
granted subject to the provisions of this Agreement. Such modifications shall be
of no force or effect unless set forth in writing.

        Section 1.4 Obtaining the Lease Consents

               (a) MAG confirms that, with respect to each Leased Property, an
        application has been made or will be made by the Effective Date to the
        relevant Landlord for the Lease Consents required with respect to the
        transactions contemplated by this Agreement.

               (b) MAG will use its reasonable commercial efforts to obtain the
        Lease Consents as to each Leased Property, but MAG shall not be required
        to commence judicial proceedings for a declaration that a Lease Consent
        has been unreasonably withheld or delayed, nor shall MAG be required to
        pay any consideration in excess of that required by the Relevant Lease
        or that which is typical in the open market to obtain the relevant Lease
        Consent. MercFuel shall cooperate as reasonably requested by MAG to
        obtain the Lease Consents.

               (c) MercFuel and MAG will promptly satisfy or cause their
        applicable Subsidiaries to satisfy the lawful requirements of the
        Landlord, and MercFuel will take or cause its applicable Subsidiary to
        take all steps to assist MAG in obtaining the Lease Consents as to each
        Leased Property, including, without limitation:

                      (i) if properly required by the Landlord, entering into an
               agreement with the relevant Landlord to observe and perform the
               tenant's obligations contained in the Relevant Lease throughout
               the remainder of the term of the Relevant Lease, subject to any
               statutory limitations of such liability;

                      (ii) if properly required by the Landlord, providing a
               guarantee, surety or other security (including, without
               limitation, a security deposit) for the obligations of MercFuel
               or its applicable Subsidiary as tenant under the Relevant Lease,
               and otherwise taking all steps which are reasonably necessary and
               which MercFuel or its applicable Subsidiary is reasonably capable
               of doing to meet the lawful requirements of the Landlord so as to
               ensure that the Lease Consents are obtained; and

                      (iii) using all reasonable commercial efforts to assist
               MAG with obtaining the Landlord's consent to the release of any
               guarantee, surety or other security which MAG or its Subsidiary
               may have previously provided to the Landlord and,

                                      -2-
<PAGE>   6

               if required, offering the same or equivalent security to the
               Landlord in order to obtain such release.

                      (iv) Notwithstanding the foregoing, (1) except with
               respect to guarantees, sureties or other security referenced in
               Section 1.4(c)(ii) above, MercFuel shall not be required to
               obtain a release of any obligation entered into by MAG or its
               Subsidiary with any Landlord or other third party with respect to
               any Property and (2) MercFuel shall not communicate or permit its
               applicable Subsidiary to communicate directly with any of the
               Landlords unless MercFuel can show MAG reasonable grounds for
               doing so.

               (d) If, with respect to any Leased Properties, MAG and MercFuel
        are unable to obtain a release by the Landlord of any guarantee, surety
        or other security which MAG or its Subsidiary has previously provided to
        the Landlord, MercFuel shall indemnify, defend, protect and hold
        harmless MAG and its Subsidiary from and after the Distribution Date
        against all losses, costs, claims, damages, or liabilities incurred by
        MAG or its Subsidiary as a result of MercFuel's occupancy of the Leased
        Property with respect to such guarantee, surety or other security.

        Section 1.5 Occupation by MercFuel

               (a) Subject to compliance with Section 1.5(b) below, in the event
        that the Actual Completion Date for any Leased Property does not occur
        on the Effective Date, MercFuel or its applicable Subsidiary shall,
        commencing on the Effective Date, be entitled to occupy the relevant
        Property (except to the extent that the same is a Retained Part) as a
        licensee upon the terms and conditions contained in MAG's Lease. Such
        license shall not be revocable prior to the date for completion as
        provided in Section 1.1(a) unless an enforcement action or forfeiture by
        the relevant Landlord due to MercFuel's or its applicable Subsidiary's
        occupation of the Property constituting a breach of MAG's Lease cannot,
        in the reasonable opinion of MAG, be avoided other than by requiring
        MercFuel or its applicable Subsidiary to immediately vacate the relevant
        Property, in which case MAG may by notice to MercFuel immediately
        require MercFuel or its applicable Subsidiary to vacate the relevant
        Property. MercFuel will be responsible for all costs, expenses and
        liabilities incurred by MAG or its applicable Subsidiary as a
        consequence of such occupation, except for any losses, claims, costs,
        demands and liabilities incurred by MAG or its Subsidiary as a result of
        any enforcement action taken by the Landlord against MAG or its
        Subsidiary with respect to any breach by MAG or its Subsidiary of the
        Relevant Lease in permitting MercFuel or its applicable Subsidiary to so
        occupy the Property without obtaining the required Lease Consent, for
        which MAG or its Subsidiary shall be solely responsible. Neither
        MercFuel nor its applicable Subsidiary shall be entitled to make any
        claim or demand against, or obtain reimbursement from, MAG or its
        applicable Subsidiary with respect to any costs, losses, claims,
        liabilities or damages incurred by MercFuel or its applicable Subsidiary
        as a consequence of being obliged to vacate the Property or in obtaining
        alternative premises, including, without limitation, any enforcement
        action which a Landlord may take against MercFuel or its applicable
        Subsidiary.

                                      -3-
<PAGE>   7

               (b) In the event that the Actual Completion Date for any Leased
        Property does not occur on the Effective Date, whether or not MercFuel
        or its applicable Subsidiary occupies a Property as licensee as provided
        in Section 1.5(a) above, MercFuel shall, effective as of the Effective
        Date, (i) pay or cause its applicable Subsidiary to pay MAG all rents,
        service charges, insurance premiums and other sums payable by MAG or its
        applicable Subsidiary under any Relevant Lease, (ii) observe or cause
        its applicable Subsidiary to observe the tenant's covenants, obligations
        and conditions contained in MAG's Lease and (iii) indemnify, defend,
        protect and hold harmless MAG and its applicable Subsidiary from and
        against all losses, costs, claims, damages and liabilities arising on
        account of any breach thereof by MercFuel or its applicable Subsidiary.

               (c) MAG shall supply promptly to MercFuel copies of all invoices,
        demands, notices and other communications received by MAG or its
        applicable Subsidiaries or agents in connection with any of the matters
        for which MercFuel or its applicable Subsidiary may be liable to make
        any payment or perform any obligation pursuant to Section 1.5(a) or (b),
        and shall, at MercFuel's cost, take any steps and pass on any objections
        which MercFuel or its applicable Subsidiary may have in connection with
        any such matters. MercFuel shall promptly supply to MAG any notices,
        demands, invoices and other communications received by MercFuel or its
        applicable Subsidiary or agents from any Landlord while MercFuel or its
        applicable Subsidiary occupies any Property without the relevant Lease
        Consent.

        Section 1.6 Obligation to Complete

               (a) If, with respect to any Leased Property, at any time the
        relevant Lease Consent is formally and unconditionally refused in
        writing, MAG and MercFuel shall commence good faith negotiations and use
        commercially reasonable efforts to determine how to allocate the
        applicable Property, based on the relative importance of the applicable
        Property to the operations of each party, the size of the applicable
        Property, the number of employees of each party at the applicable
        Property and the potential risk and liability to each party in the event
        an enforcement action is brought by the applicable Landlord. Such
        commercially reasonable efforts shall include consideration of alternate
        structures to accommodate the needs of both parties and the allocation
        of the costs thereof, including entering into amendments of the size,
        term or other terms of the Relevant Lease, restructuring a proposed
        lease assignment to be a sublease and relocating one party. If the
        parties are unable to agree upon an allocation of the Property within
        fifteen (15) days after commencement of negotiations between the parties
        as described above, then either party may, by delivering written notice
        to the other, require that the matter be referred to the Chief Financial
        Officers of both parties. In such event, the Chief Financial Officers
        shall use commercially reasonable efforts to determine the allocation of
        the Property, including having a meeting or telephone conference within
        ten (10) days thereafter. If the parties are unable to agree upon the
        allocation of an applicable Property within fifteen (15) days after the
        matter is referred to the Chief Financial Officers of the parties as
        described above, the disposition of the applicable Property and the
        risks

                                      -4-
<PAGE>   8

        associated therewith shall be allocated between the parties as set forth
        in subparts (b) and (c) of this section below.

               (b) If, with respect to any Leased Property, the parties are
        unable to agree upon the allocation of a Property as set forth in
        Section 1.6(a), MAG may by written notice to MercFuel elect to apply to
        the relevant Landlord for consent to sublease all of the relevant
        Property to MercFuel or its applicable Subsidiary for the remainder of
        the Relevant Lease term less three (3) days at a rent equal to the rent
        from time to time under the Relevant Lease, but otherwise on
        substantially the same terms and conditions as the Relevant Lease. If
        MAG makes such an election, until such time as the relevant Lease
        Consent is obtained and a sublease is completed, the provisions of
        Section 1.5 will apply and, on the grant of the Lease Consent required
        to sublease the Leased Property in question, MAG shall sublease or cause
        its applicable Subsidiary to sublease to MercFuel or its applicable
        Subsidiary the relevant Property which sublease shall be for the term
        and rent set forth in the Relevant Lease and otherwise on the terms of
        the Relevant Lease.

               (c) If the parties are unable to agree upon the allocation of a
        Property as set forth in Section 1.6(a) and MAG does not make an
        election pursuant to Section 1.6(b) above, MAG may elect by written
        notice to MercFuel to require MercFuel or its applicable Subsidiary to
        vacate the relevant Property immediately or by such other date as may be
        specified in the notice served by MAG (the "Notice Date"), in which case
        MercFuel shall vacate or cause its applicable Subsidiary to vacate the
        relevant Property on the Notice Date but shall indemnify MAG and its
        applicable Subsidiary from and against all costs, claims, losses,
        liabilities and damages in relation to the relevant Property arising
        from and including the Separation Date to and including the later of the
        Notice Date and date on which MercFuel or its applicable Subsidiary
        vacates the relevant Property, except for any costs, losses, damages,
        claims and liabilities incurred by MAG or its Subsidiary with respect to
        any enforcement action taken by the Landlord against MAG or its
        Subsidiary with respect to any breach by MAG or its Subsidiary of the
        Relevant Lease in permitting MercFuel or its applicable Subsidiary to so
        occupy the Property without obtaining the required Lease Consent.
        Neither MercFuel nor its applicable Subsidiary shall be entitled to make
        any claim or demand against or obtain reimbursement from MAG or its
        applicable Subsidiary with respect to any costs, losses, claims,
        liabilities or damages incurred by MercFuel or its applicable Subsidiary
        as a consequence of being obliged to vacate the Property or obtaining
        alternative premises, including, without limitation, any enforcement
        action which a Landlord may take against MercFuel or its applicable
        Subsidiary.

        Section 1.7 Form of Transfer

               (a) The assignment to MercFuel or its applicable Subsidiary of
        each relevant Leased Property shall be in substantially the form
        attached in Schedule 2, with such amendments which in the reasonable
        opinion of MAG are necessary with respect to a particular Property,
        including, without limitation, in all cases where a relevant Landlord
        has required a guarantor or surety to guarantee the obligations of
        MercFuel or its applicable Subsidiary contained in the relevant Lease
        Consent or any other document

                                      -5-
<PAGE>   9

        which MercFuel or its applicable Subsidiary is required to complete, the
        giving of such guarantee by a guarantor or surety, and the giving by
        MercFuel or its applicable Subsidiary and any guarantor or surety of
        MercFuel's or its applicable Subsidiary's obligations of direct
        obligations to MAG or third parties where required under the terms of
        any of the Lease Consent or any covenant, condition, restriction,
        easement, lease or other encumbrance to which the Property is subject.
        Such amendments shall be submitted to MercFuel for approval, which
        approval shall not be unreasonably withheld or delayed.

               (b) The licenses to be granted by MercFuel or its applicable
        Subsidiary to MAG or its applicable Subsidiary, and MAG or its
        applicable Subsidiary to MercFuel or its applicable Subsidiary, with
        respect to the Shared Properties shall be at a rental rate set forth in
        Schedule 5 hereof and be for a term of six (6) months, commencing as of
        _________________. Either party shall have the right to terminate the
        license as to any of the Properties upon thirty (30) days' prior notice.
        Rent shall be abated for the period from the Effective Date to
        ______________, 2001. The license shall be substantially in the form of
        the License Form, with such amendments as are, in the reasonable opinion
        of MAG, necessary with respect to a particular Property. Such amendments
        shall be submitted to MercFuel for approval, which approval shall not be
        unreasonably withheld.

        Section 1.8 Casualty; Lease Termination. The parties hereto shall grant
and accept assignments, leases, subleases or licenses of the Properties as
described in this Agreement, regardless of any casualty damage or other change
in the condition of the Properties. In addition, subject to MAG's obligations in
Section 4.6 of the Separation Agreement, in the event that MAG's Lease with
respect to a Leased Property or a Shared Property or MAG's interest in the
leased portion of the Headquarters Facility is terminated prior to the Effective
Date, (a) MAG or its applicable Subsidiary shall not be required to assign,
sublease or license such Property, (b) MercFuel or its applicable Subsidiary
shall not be required to accept an assignment, sublease or license of such
Property and (c) neither party shall have any further liability with respect to
such Property hereunder.

        Section 1.9 Tenant's Fixtures and Fittings. The provisions of the
Distribution Agreement and the other Ancillary Agreements shall apply to any
trade fixtures and personal property located at each Property. The lease and
sublease of the Leased Properties and the licenses as to the Shared Properties
shall include the rental of the furniture at such Properties.

        Section 1.10 Costs. MAG shall pay all reasonable costs and expenses
incurred in connection with obtaining the Lease Consents, including, without
limitation, Landlord's consent fees and attorneys' fees and any costs and
expenses relating to re-negotiation of MAG's Leases.

                                   ARTICLE II
                                  MISCELLANEOUS

        Section 2.1 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

                                      -6-
<PAGE>   10

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 TO
THIRD PARTIES AS SET FORTH IN THE INDEMNIFICATION AND INSURANCE MATTERS
AGREEMENT.

        Section 2.2 Entire Agreement. This Agreement, the Separation Agreement,
the other 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 shall supersede all prior written
and oral and all contemporaneous oral agreements and understandings with respect
to the subject matter hereof.

        Section 2.3 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 of the Separation Agreement. Notwithstanding the foregoing, the
applicable Property transfers shall be performed in accordance with the laws of
the state in which the applicable Property is located.

        Section 2.4 Notices. Notices, demands, 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:

<TABLE>
<S>                                                <C>
if to MAG:                                         Copy to:

Mercury Air Group, Inc.                            McBreen & Kopko
5456 McConnell Avenue                              20 North Wacker Drive, Suite 2520
Los Angeles, CA  90066                             Chicago, IL  60606
Attention:  Chief Executive Officer                Attention:  Frederick H. Kopko, Jr.
Fax:  (310) 827-0650                               Fax:  (312) 332-2657

if to MercFuel:                                    Copy to:

MercFuel, Inc.                                     McBreen & Kopko
5456 McConnell Avenue                              20 North Wacker Drive, Suite 2520
Los Angeles, CA  90066                             Chicago, IL  60606
Attention: Chief Executive Officer                 Attention:  Frederick H. Kopko, Jr.
Fax:  (310) 827-0650                               Fax:  (312) 332-2657
</TABLE>

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,

                                      -7-
<PAGE>   11

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.

        Section 2.5 Counterparts. This Agreement, including the Schedules and
Exhibits hereto, and the other documents referred to herein, 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.

        Section 2.6 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.

        Section 2.7 Severability. If any term or other provision of this
Agreement or the Schedules or Exhibits 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.

        Section 2.8 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.

        Section 2.9 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.

        Section 2.10 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 action, (c) it has duly and validly executed and

                                      -8-
<PAGE>   12

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.

        Section 2.11 Interpretation. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table or 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 Schedule or
Exhibit 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.

        Section 2.12 Disputes. Any Disputes that arise under this Agreement
shall be resolved in accordance with the provisions of Section 4.9 of the
Distribution Agreement.

                                   ARTICLE III
                                   DEFINITIONS

        The following terms, as used herein, shall have the following meanings:

        "Actual Completion Date" means, with respect to each Property, the date
upon which completion of the assignment, lease or sublease of that Property
actually takes place.

        "Landlord" means the landlord under MAG's Lease, and its successors and
assigns, and includes the holder of any other interest which is superior to the
interest of the landlord under MAG's Lease.

        "Lease Consents" means all consents, waivers or amendments required from
the Landlord or other third parties under the Relevant Leases to assign the
Relevant Leases to MercFuel or its applicable Subsidiary.

        "Leased Properties" means those Properties in Section A of Schedule 1 of
this Agreement.

        "License Form" means the form license attached hereto as Schedule 3.

        "Property" means the Leased Properties and the Shared Properties.

        "Relevant Leases" means those of MAG's Leases with respect to which the
Landlord's consent is required for assignment or sublease to a third party or
which prohibit assignments or subleases.

        "Retained Parts" means those parts of the Leased Properties which,
following assignment to MercFuel or its applicable Subsidiary, are intended to
be licensed to MAG or its applicable Subsidiary.

                                      -9-
<PAGE>   13

        "Shared Properties" means those Properties listed in (a) Section A of
Schedule 1 as a Property involving a license back to MAG and (b) Section B of
Schedule 1 of this Agreement.

        "MAG's Lease" means, in relation to each Property, the lease(s) or
sublease(s) or license(s) under which MAG or its applicable Subsidiary holds
such Property and any other supplemental document completed prior to the Actual
Completion Date.

                     [REST OF PAGE INTENTIONALLY LEFT BLANK]

                                      -10-
<PAGE>   14

        IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.

MERCURY AIR GROUP, INC.

By: __________________________
Title:

MERCFUEL, INC.

By: __________________________
Title:

                                      -11-<PAGE>   1

                                                                    EXHIBIT 10.8

                    MASTER CONFIDENTIAL DISCLOSURE AGREEMENT

                                     BETWEEN

                             MERCURY AIR GROUP, INC.

                                       AND

                                 MERCFUEL, INC.

                          EFFECTIVE AS OF ______, 2001

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               PAGE
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<S>                                                                                                            <C>
ARTICLE 1 - DEFINITIONS....................................................................................       1

         Section 1.1       Ancillary Agreements............................................................       1

         Section 1.2       Confidential Information........................................................       2

         Section 1.3       Confidentiality Period..........................................................       2

         Section 1.4       Disclosing Party................................................................       2

         Section 1.5       Distribution Date...............................................................       2

         Section 1.6       Highly Confidential Information.................................................       2

         Section 1.7       Master Separation and Distribution Agreement....................................       2

         Section 1.8       Person..........................................................................       2

         Section 1.9       Receiving Party.................................................................       3

         Section 1.10      Separation Date.................................................................       3

         Section 1.11      Subsidiary......................................................................       3

         Section 1.12      Third Party.....................................................................       3

         Section 1.13      Transaction Agreements..........................................................       3

ARTICLE 2 - CONFIDENTIALITY................................................................................       3

         Section 2.1       Confidentiality and Non-Use Obligations.........................................       3

         Section 2.2       Disclosure to Sublicenses.......................................................       3

         Section 2.3       Residuals.......................................................................       4

         Section 2.4       Compelled Disclosure............................................................       4

         Section 2.5       No Restriction on Disclosing Party..............................................       4

         Section 2.6       No Restriction on Reassignment..................................................       4

</TABLE>

                                       i
<PAGE>   3

<TABLE>
<S>                                                                                                            <C>
         Section 2.7       Third Party Restrictions......................................................         4

ARTICLE 3 - WARRANTY DISCLAIMER..........................................................................         4

ARTICLE 4 - ADDITIONAL OBLIGATIONS.......................................................................         5

ARTICLE 5 - TERMS AND TERMINATION........................................................................         5

         Section 5.1       Term..........................................................................         5

         Section 5.2       Survival......................................................................         5

ARTICLE 6 - DISPUTE RESOLUTION...........................................................................         5

         Section 6.1       Mediation.....................................................................         5

         Section 6.2       Arbitration...................................................................         6

         Section 6.3       Court Action..................................................................         6

         Section 6.4       Continuity of Service and Performance.........................................         6

ARTICLE 7 - MISCELLANEOUS PROVISIONS.....................................................................         6

         Section 7.1       Export Restrictions...........................................................         6

         Section 7.2       No Implied Licenses...........................................................         7

         Section 7.3       Infringement Suits............................................................         7

         Section 7.4       No Other Obligations..........................................................         7

         Section 7.5       Entire Agreement..............................................................         7

         Section 7.6       Governing Law.................................................................         7

         Section 7.7       Interpretation................................................................         7

         Section 7.8       Notices.......................................................................         8

         Section 7.9       Nonassignability..............................................................         8

         Section 7.10      Severability..................................................................         8

         Section 7.11      Failure or Indulgence Not Waiver; Remedies Cumulative.........................         9

         Section 7.12      Amendment.....................................................................         9

         Section 7.13      Counterparts..................................................................         9

</TABLE>

                                       ii
<PAGE>   4

                    MASTER CONFIDENTIAL DISCLOSURE AGREEMENT

     This Master Confidential Disclosure Agreement (the "Agreement") is
effective as of ________, 2001 (the "Effective Date"), between Mercury Air
Group, Inc., a Delaware corporation ("MAG"), having an office at 5456 McConnell
Avenue, Los Angeles, California, 90066 and MercFuel, Inc., a Delaware
corporation ("MercFuel"), having an office at 5456 McConnell Avenue, Los
Angeles, California, 90066.

     WHEREAS, the Board of Directors of MAG has determined that it is in the
best interest of MAG and its stockholders to separate MAG's existing businesses
into two independent businesses;

     WHEREAS, as part of the foregoing, MAG and MercFuel entered into a Master
Separation and Distribution Agreement (as defined below), which provides, among
other things, for the separation of certain MercFuel assets and MercFuel
liabilities, the distribution of MercFuel stock, and the execution and delivery
of certain other agreements in order to facilitate and provide for the
foregoing; and

     WHEREAS, also as part of the foregoing, the parties further desire to enter
into this Agreement to provide for the protection of their Confidential
Information (as defined below).

     NOW, THEREFORE, in consideration of the mutual promises of the parties, and
of good and valuable consideration, it is agreed by and between the parties as
follows:

                                    ARTICLE 1
                                   DEFINITIONS

     For the purpose of this Agreement the following capitalized terms are
defined in this Article 1 and shall have the meaning specified herein:

     Section 1.1 Ancillary Agreements. Ancillary Agreements means the items and
agreements listed in Section 2.1 of the Master Separation and Distribution
Agreement and all agreements and documents contemplated by such agreements.

     Section 1.2 Confidential Information.

          (a) Confidential Information means business information, technical
     data, know-how and other information which is not otherwise in the public
     domain and of which the owner actively undertakes to restrict or control
     the disclosure to Third Parties in a manner reasonably intended to maintain
     its confidentiality, and which (i) the Disclosing Party disclosed to the
     Receiving Party or the Receiving Party had access to on or before the
     Separation Date, (ii) is the subject of any Transaction Agreement and known
     to or in the possession of the Receiving Party as of the Separation Date or
     (iii) is disclosed to the Receiving Party pursuant to any Transaction
     Agreement for a period of

                                      -1-
<PAGE>   5

     one (1) year after the Effective Date. Confidential Information may include
     information relating to, by way of example, research, products, services,
     customers, markets, software, developments, inventions, processes, designs,
     drawings, engineering, marketing or finances, and may be in writing,
     disclosed orally or learned by inspection of computer programming code,
     equipment or facilities.

          (b) Confidential Information of Third Parties that is known to, in the
     possession of or acquired by a Receiving Party pursuant to a relationship
     with the Disclosing Party shall be deemed the Disclosing Party's
     Confidential Information for purposes herein.

          (c) Notwithstanding the foregoing provisions of this Section 1.2,
     Confidential Information shall exclude information that: (i) was in the
     Receiving Party's possession before receipt from the Disclosing Party and
     obtained from a source other than the Disclosing Party and other than
     through the prior relationship of the Disclosing Party and the Receiving
     Party before the Separation Date; (ii) is or becomes a matter of public
     knowledge through no fault of the Receiving Party; (iii) is rightfully
     received by the Receiving Party from a Third Party without a duty of
     confidentiality; (iv) is disclosed by the Disclosing Party to a Third Party
     without a duty of confidentiality on the Third Party; (v) is independently
     developed by the Receiving Party; or (vi) is disclosed by the Receiving
     Party with the Disclosing Party's prior written approval.

     Section 1.3 Confidentiality Period. Confidentiality Period means, (a) with
respect to Confidential Information that is not Highly Confidential Information,
five (5) years, and (b) with respect to Highly Confidential Information, in
perpetuity, after either (i) the Separation Date with respect to Confidential
Information of the Disclosing Party that is known to or in the possession of the
Receiving Party as of the Separation Date or (ii) the date of disclosure with
respect to Confidential Information that is disclosed by the Disclosing Party to
the Receiving Party after the Separation Date.

     Section 1.4 Disclosing Party. Disclosing Party means the party owning or
disclosing the relevant Confidential Information.

     Section 1.5 Distribution Date. Distribution Date has the meaning set forth
in the Master Separation and Distribution Agreement.

     Section 1.6 Highly Confidential Information. Highly Confidential
Information means Confidential Information that is integral to products that are
commercially released or for which substantial steps have been taken to
commercialization.

     Section 1.7 Master Separation and Distribution Agreement. Master Separation
and Distribution Agreement means that certain Master Separation and Distribution
Agreement between MAG and MercFuel.

     Section 1.8 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

                                      -2-
<PAGE>   6

unincorporated organization, and a governmental entity or any department, agency
or political subdivision thereof.

     Section 1.9 Receiving Party. Receiving Party means the non-owning party or
recipient of the relevant Confidential Information.

     Section 1.10 Separation Date. Separation Date means 12:01 a.m., Pacific
Time, _______________, 2001, or such other date as may be fixed by the Board of
Directors of MAG.

     Section 1.11 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. For purposes of this Agreement, MercFuel shall be deemed
not to be a subsidiary of MAG.

     Section 1.12 Third Party. Third Party means a Person other than MAG and its
Subsidiaries and MercFuel and its Subsidiaries.

     Section 1.13 Transaction Agreements. Transaction Agreements mean the Master
Separation and Distribution Agreement and the Ancillary Agreements.

                                    ARTICLE 2
                                 CONFIDENTIALITY

     Section 2.1 Confidentiality and Non-Use Obligations. During the
Confidentiality Period, the Receiving Party shall (i) protect the Confidential
Information of the Disclosing Party by using the same degree of care, but no
less than a reasonable degree of care, to prevent the unauthorized use,
dissemination, or publication of the Confidential Information as Receiving Party
uses to protect its own confidential information of a like nature, (ii) not use
such Confidential Information in violation of any use restriction in any
Transaction Agreement, and (iii) not disclose such Confidential Information to
any Third Party, except as expressly permitted under this Agreement, in the
Transaction Agreements or in any other agreements entered into between the
parties in writing, without prior written consent of the Disclosing Party.

     Section 2.2 Disclosure to Sublicensees. The Receiving Party has the right
to disclose to its sublicensees permitted under a Transaction Agreement portions
of Confidential Information as reasonably necessary in the exercise of the
Receiving Party's sublicense rights under such Transaction Agreement, subject to
the sublicensee's agreement in writing to

                                      -3-
<PAGE>   7

confidentiality and non-use terms at least as protective of the Disclosing Party
as the provisions of this Agreement.

     Section 2.3 Residuals. Notwithstanding any other provision of this
Agreement, the Receiving Party shall be free, and the Disclosing Party hereby
grants to the Receiving Party, except as otherwise provided in this Section 2.3,
the right, to use or exploit for any purpose and without restriction the
Residuals resulting from access to or work with the Confidential Information of
the Disclosing Party. "Residuals" means information retained in the unaided
memory of an individual who has had access to Confidential Information. The
Receiving Party shall have no obligation to pay royalties for any use of
Residuals. However, this Section 2.3 does not grant the Receiving Party any
rights under any patents or copyrights of the Disclosing Party.

     Section 2.4 Compelled Disclosure. If the Receiving Party or any of its
respective Subsidiaries believes that it will be compelled by a court or other
authority to disclose Confidential Information of the Disclosing Party, it shall
(i) give the Disclosing Party prompt written notice so that the Disclosing Party
may take steps to oppose such disclosure, and (ii) cooperate with the Disclosing
Party in its attempts to oppose such disclosure. If the Receiving Party complies
with the above, it shall not be prohibited from complying with such requirement
to disclose, but shall take all reasonable steps to make such disclosure subject
to a suitable protective order or otherwise prevent unrestricted or public
disclosure.

     Section 2.5 No Restriction on Disclosing Party. Nothing in this Agreement
shall restrict the Disclosing Party from using, disclosing, or disseminating its
own Confidential Information in any way.

     Section 2.6 No Restriction on Reassignment. This Agreement shall not
restrict reassignment of the Receiving Party's employees.

     Section 2.7 Third Party Restrictions. Nothing in the Agreement supersedes
any restriction imposed by Third Parties on their Confidential Information, and
there is no obligation on the Disclosing Party to conform Third Party agreements
to the terms of this Agreement.

                                    ARTICLE 3
                               WARRANTY DISCLAIMER

     EACH PARTY ACKNOWLEDGES AND AGREES THAT ALL CONFIDENTIAL INFORMATION IS
PROVIDED ON AN "AS IS, WHERE IS" BASIS AND THAT NEITHER PARTY NOR ANY OF ITS
SUBSIDIARIES HAS MADE OR WILL MAKE ANY WARRANTY WHATSOEVER, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, ENFORCEABILITY OR
NON-INFRINGEMENT.

                                      -4-
<PAGE>   8

                                    ARTICLE 4
                          CONFIDENTIALITY OF AGREEMENT

     Each party agrees that the terms and conditions of the Transaction
Agreements marked as confidential shall be treated as Confidential Information
and that neither party will disclose such terms or conditions to any Third Party
without the prior written consent of the other party, provided, however, that
each party may disclose such terms and conditions of such agreements marked as
confidential:

     (a)  as required by any court or other governmental body (subject to
          Section 2.4);

     (b)  as otherwise required by law (subject to Section 2.4);

     (c)  in confidence, to legal counsel of the parties, accountants, and other
          professional advisors;

     (d)  in confidence to banks, investors and other financing sources and
          their advisors;

     (e)  in connection with the enforcement of this Agreement or rights under
          this Agreement; or

     (f)  in confidence, in connection with an actual or prospective merger or
          acquisition or similar transaction.

                                    ARTICLE 5
                              TERM AND TERMINATION

     Section 5.1 Term. This Agreement shall remain in full force and effect
unless and until terminated by the mutual written agreement of the parties.

     Section 5.2 Survival. Articles 2 (with respect to Confidential Information
acquired or disclosed prior to the date of termination), 3, 4, 6, 7 and 8 shall
survive any termination of this Agreement.

                                    ARTICLE 6
                               DISPUTE RESOLUTION

     Section 6.1 Mediation. If a dispute, controversy or claim ("Dispute")
arises between the parties relating to the interpretation or performance of this
Agreement or the grounds for the termination hereof, appropriate senior
executives (e.g. director or V.P. level) 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

                                      -5-
<PAGE>   9

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 pursuant to the mediation
rules of JAMS/Endispute 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.

     Section 6.2 Arbitration. 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.

     Section 6.3 Court Action. 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.

     Section 6.4 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 Article 6 with respect
to all matters not subject to such dispute, controversy or claim.

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

     Section 7.1 Export Restrictions. Both parties shall adhere to all
applicable laws, regulations and rules relating to the export of technical data,
and shall not export or reexport any technical data, any products received from
Disclosing Party, or the direct product of such

                                      -6-
<PAGE>   10

technical data, to any proscribed country listed in such applicable laws,
regulations and rules unless properly authorized.

     Section 7.2 No Implied Licenses. Nothing contained in this Agreement shall
be construed as conferring any rights by implication, estoppel or otherwise,
under any intellectual property right, other than the rights expressly granted
in this Agreement with respect to Confidential Information. Neither party is
required hereunder to furnish or disclose to the other any technical or other
information.

     Section 7.3 Infringement Suits. Neither party shall have any obligation
hereunder to institute any action or suit against Third Parties for
misappropriation of any of its Confidential Information or to defend any action
or suit brought by a Third Party that alleges infringement of any intellectual
property rights by the Receiving Party's authorized use of the Disclosing
Party's Confidential Information.

     Section 7.4 No Other Obligations. NEITHER PARTY ASSUMES ANY
RESPONSIBILITIES OR OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND
OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT OR A SEPARATE WRITTEN
AGREEMENT BETWEEN THE PARTIES.

     Section 7.5 Entire Agreement. This Agreement, the Master Separation and
Distribution Agreement and the other 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. Notwithstanding the foregoing, the parties agree that any agreements
entered into between them on or after the Separation Date for the protection of
specific Confidential Information shall supersede the terms of this Agreement
with respect to such Confidential Information.

     Section 7.6 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 Central
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 6 above.

     Section 7.7 Interpretation. The headings contained in this Agreement, in
any Exhibit 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 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 or an Exhibit, such reference shall be to an Article or Section of, or
an Exhibit to, this Agreement unless otherwise indicated.

                                      -7-
<PAGE>   11

     Section 7.8 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:                                Copy to:

Mercury Air Group, Inc.                   McBreen & Kopko
5456 McConnell Avenue                     20 North Wacker Drive, Suite 2520
Los Angeles, California 90066             Chicago, Illinois  60606
Attention:  Chief Executive Officer       Attention:  Frederick H. Kopko, Jr.
Fax: (310) 827-0650                       Fax:  (312) 332-2657

if to MercFuel:                           Copy to:

MercFuel, Inc.                            McBreen & Kopko
5456 McConnell Avenue                     20 North Wacker Drive, Suite 2520
Los Angeles, California 90066             Chicago, Illinois  60606
Attention:  Chief Executive Officer       Attention:  Frederick H. Kopko, Jr.
Fax:  (310) 827-0650                      Fax:  (312) 332-2657

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.

     Section 7.9 Nonassignability. Neither party may, directly or indirectly, in
whole or in part, whether by operation of law or otherwise, assign or transfer
this Agreement, without the other party's prior written consent, and any
attempted assignment, transfer or delegation without such prior written consent
shall be voidable at the sole option of such other party. Notwithstanding the
foregoing, each party (or its permitted successive assignees or transferees
hereunder) may assign or transfer this Agreement as a whole without consent to a
Person that succeeds to all or substantially all of the business or assets of
such party as long as such Person agrees to accept all the terms and conditions
set forth herein. Without limiting the foregoing, this Agreement will be binding
upon and inure to the benefit of the parties and their permitted successors and
assigns.

     Section 7.10 Severability. If any term or other provision of this Agreement
or the Exhibits 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

                                      -8-
<PAGE>   12

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.

     Section 7.11 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 attached hereto are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

     Section 7.12 Amendment. No change or amendment will be made to this
Agreement or the Exhibits attached hereto except by an instrument in writing
signed on behalf of each of the parties to such agreement.

     Section 7.13 Counterparts. This Agreement, including the Ancillary
Agreements 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.

                    [REST OF PAGE INTENTIONALLY LEFT BLANK.]

                                      -9-
<PAGE>   13

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

MERCURY AIR GROUP, INC.,
a Delaware corporation

By:
   -----------------------------------------
Its:

MERCFUEL, INC.,
a Delaware corporation

By:
   -----------------------------------------
Its:

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