SEC Filing | Mercury Systems, Inc.

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Elected a
Director

Principal Occupation

Class I Directors—Serving a Term Ending in 2016:

James K. Bass

Mr. Bass has served as a director of TTM Technologies, Inc., a publicly-traded global printed circuit board manufacturer, since September 2000, and as a director of Tigrent, Inc., a publicly-traded provider of information for real estate and financial investing, since May 2010. From September 2005 to June 2009, Mr. Bass served as the Chief Executive Officer and a director of Piper Aircraft, Inc., a general aviation manufacturing company. He served as the Chief Executive Officer and a director of Suntron Corporation, a provider of high mix electronic manufacturing services, from its incorporation in May 2001 until May 2005, and as Chief Executive Officer of EFTC Corporation, a subsidiary of Suntron Corporation, from July 2000 until April 2001. From 1992 to July 2000, Mr. Bass was a Senior Vice President of Sony Corporation. Prior to that, Mr. Bass spent 15 years in various manufacturing management positions at the aerospace group of the General Electric Company. Mr. Bass is one of our “audit committee financial experts.” Mr. Bass’ qualifications to serve on our Board of Directors include his extensive experience in the technology marketplace, his executive and operational experience as the Chief Executive Officer of a public company, and his broad experience with accounting and audit matters for publicly-traded companies.

Michael A. Daniels

Mr. Daniels served as Chairman of the Board of Mobile 365, Inc. from May 2005 to November 2006 and served as its Chief Executive Officer from December 2005 to August 2006. Sybase acquired Mobile 365, Inc. in November 2006 and renamed it Sybase 365, Inc. Mr. Daniels was a director of Sybase, a publicly-traded global enterprise software and services company, from 2007 until its acquisition by SAP in 2010. From December 1986 to May 2004, Mr. Daniels served in a number of senior executive positions at Science Applications International Corporation (SAIC), a publicly-traded scientific, technical, and professional services firm, including Sector Vice President from February 1994 to May 2004. Mr. Daniels served as Chairman and Chief Executive Officer of Network Solutions, Inc., an internet company, from March 1995 to June 2000 when Verisign purchased Network Solutions. From June 2007 to July 2009, Mr. Daniels served on the Board of Directors of Luna Innovations, a high technology manufacturer. In May 2013, Mr. Daniels joined the Board of Directors of CACI International, a provider of information solutions and services in support of national security missions. In October 2014, Mr. Daniels joined the Board of Directors of Blackberry Limited, a global mobile communications company. Mr. Daniels’ qualifications to serve on our Board of Directors include his extensive executive experience in the technology industry and experience serving as a director of public companies, including software and technology companies.

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DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant ý Filed by a Party other than the Registrant ¨

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Pursuant to §240.14a-12

Mercury Systems, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý No fee required.

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.


(1)	Title of each class of securities to which transaction applies:


(2)	Aggregate number of securities to which transaction applies:


(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


(4)	Proposed maximum aggregate value of transaction:


(5)	Total fee paid:

¨ Fee paid previously with preliminary materials:

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.


(1)	Amount previously paid:


(2)	Form, Schedule or Registration Statement No.:


(3)	Filing Party:


(4)	Date Filed:

October 23, 2015

Dear Shareholder:

We will hold our Annual Meeting of Shareholders on December 8, 2015, beginning at 10:00 a.m., local time, at our offices at 201 Riverneck Road, Chelmsford, Massachusetts 01824. We look forward to your attending the meeting either in person or by proxy, but please note that due to security procedures you will be required to show a form of picture identification to gain access to our offices. The enclosed notice of meeting, proxy statement, and proxy card describe the proposals to be acted upon at the meeting.

Please refer to the enclosed proxy statement for detailed information on each of the proposals. Your vote is important. Whether or not you expect to attend the meeting, your shares should be represented. Therefore, we urge you to complete, sign, date, and promptly return the enclosed proxy card.

On behalf of the Board of Directors, we would like to express our appreciation for your continued interest in our company.



	Sincerely yours,

	Mark Aslett, President, Chief Executive Officer, and Director

MERCURY SYSTEMS, INC.

201 RIVERNECK ROAD

CHELMSFORD, MA 01824

(978) 256-1300

Notice of Annual Meeting of Shareholders

To Be Held on December 8, 2015

The Annual Meeting of Shareholders of MERCURY SYSTEMS, INC. will be held on December 8, 2015, at 10:00 a.m., local time, at our offices at 201 Riverneck Road, Chelmsford, Massachusetts 01824, for the following purposes:


1.	To elect three Class III directors nominated by the Board of Directors, each to serve for a three-year term and until his successor has been duly elected and qualified.

2. To approve an amendment to our 2005 Stock Incentive Plan.

3. To approve an amendment to our 1997 Employee Stock Purchase Plan.

4. To hold an advisory vote on the compensation of our named executive officers (the “say-on-pay” vote).

5. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2016.

6. To consider and act upon any other business that may properly come before the meeting or any adjournment or postponement of the meeting.

Proposal Number One relates solely to the election of three Class III directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including, without limitation, the election of directors nominated by any Mercury shareholder.

The Board of Directors has fixed the close of business on October 20, 2015 as the record date for the meeting. All shareholders of record on that date are entitled to notice of and to vote at the meeting.

YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON. IF YOU ATTEND THE MEETING, YOU MAY CONTINUE TO HAVE YOUR SHARES VOTED AS INSTRUCTED IN THE PROXY CARD OR YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on December 8, 2015: This proxy statement and Annual Report and Form 10-K for our fiscal year ended June 30, 2015 are available at www.edocumentview.com/MRCY.



	By Order of the Board of Directors

	GERALD M. HAINES II Secretary

Chelmsford, Massachusetts

October 23, 2015

TABLE OF CONTENTS




	Page
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING	1
PROPOSAL 1: ELECTION OF CLASS III DIRECTORS	3
CORPORATE GOVERNANCE	7
DIRECTOR COMPENSATION	14
EQUITY COMPENSATION PLANS	16
PROPOSAL 2: APPROVAL OF AMENDMENT TO 2005 STOCK INCENTIVE PLAN	17
PROPOSAL 3: APPROVAL OF AMENDMENT TO 1997 EMPLOYEE STOCK PURCHASE PLAN	20
PROPOSAL 4: ADVISORY VOTE ON EXUCTIVE COMPENSATION ("SAY-ON-PAY")	22
PROPOSAL 5: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	22
VOTING SECURITIES	23
EXECUTIVE OFFICERS	25
COMPENSATION DISCUSSION AND ANALYSIS	26
REPORT OF THE COMPENSATION COMMITTEE	49
REPORT OF THE AUDIT COMMITTEE	50
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	51
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	52
SHAREHOLDER PROPOSALS FOR THE 2016 ANNUAL MEETING	52
OTHER MATTERS	52
ANNUAL REPORT ON FORM 10-K	53

Appendix A — Amended and Restated 2005 Stock Incentive Plan
Appendix B — Amended and Restated 1997 Employee Stock Purchase Plan

MERCURY SYSTEMS, INC.

201 RIVERNECK ROAD

CHELMSFORD, MA 01824

(978) 256-1300

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these materials?

We are mailing this proxy statement, with the accompanying proxy card, to you on or about October 23, 2015 in connection with the solicitation of proxies by the Board of Directors of Mercury Systems, Inc. (“Mercury”) for the annual meeting of shareholders to be held on December 8, 2015, and any adjournment or postponement of that meeting. The meeting will be held on December 8, 2015, beginning at 10:00 a.m., local time, at our offices, 201 Riverneck Road, Chelmsford, Massachusetts 01824. You are invited to attend the meeting, and we request that you vote on the proposals described in this proxy statement. You do not need to attend the meeting in person to vote your shares. You may simply complete, sign, date, and return your proxy card in order to have your shares voted at the meeting on your behalf.

What am I voting on?

There are five matters scheduled for a vote:


•	election of three Class III directors, each to serve for a three-year term and until his successor has been duly elected and qualified;


•	approval of an amendment to our 2005 Stock Incentive Plan (the “2005 Plan”);


•	approval of an amendment to our 1997 Employee Stock Purchase Plan (the "1997 Plan");


•	an advisory vote on the compensation of our named executive officers (the “say-on-pay” vote); and


•	ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2016.

Who can attend and vote at the meeting?

Shareholders of record at the close of business on October 20, 2015 are entitled to attend and vote at the meeting. Each share of our common stock is entitled to one vote on all matters to be voted on at the meeting, and can be voted only if the record owner is present to vote or is represented by proxy. The proxy card provided with this proxy statement indicates the number of shares of common stock that you own and are entitled to vote at the meeting.

What constitutes a quorum at the meeting?

The presence at the meeting, in person or represented by proxy, of the holders of a majority of our common stock outstanding on October 20, 2015, the record date, will constitute a quorum for purposes of the meeting. On the record date, 34,698,632 shares of our common stock were outstanding. For purposes of determining whether a quorum exists, proxies received but marked “abstain” and so-called “broker non-votes” (described below) will be counted as present.

How do I vote by proxy?

If you properly fill in your proxy card and our transfer agent receives it in time to vote at the meeting, your “proxy” (one of the individuals named on your proxy card) will vote your shares as you have directed. No postage is required if your proxy card is mailed in the United States in the return envelope that has been enclosed with this proxy statement.

If you sign, date, and return the proxy card but do not specify how your shares are to be voted, then your proxy will vote your shares as follows:


•	FOR the election of the nominees for Class III director named below under “Proposal 1: Election of Class III Directors;”


•	FOR the approval of an amendment to our 2005 Stock Incentive Plan;


•	FOR the approval of an amendment to our 1997 Employee Stock Purchase Plan;


•	FOR the approval of, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement; and


•	FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2016; and


•	in the proxy’s discretion as to any other business which may properly come before the meeting or any adjournment or postponement of the meeting.

How do I vote if my shares are held by my broker?

If your shares are held by your broker in “street name,” you will need to instruct your broker concerning how to vote your shares in the manner provided by your broker. If your shares are held in “street name” and you wish to vote them in person at the meeting, you must obtain from your broker a properly executed legal proxy identifying you as a Mercury shareholder, authorizing you to act on behalf of the broker at the meeting, and specifying the number of shares with respect to which the authorization is granted.

What discretion does my broker have to vote my shares held in “street name”?

A broker holding your shares in “street name” must vote those shares according to any specific instructions it receives from you. If specific instructions are not received, your broker may vote your shares in its discretion, depending on the type of proposal involved. Under applicable rules, there are certain matters on which brokers may not vote without specific instructions from you, such as the election of directors, the approval of our equity plans, and the advisory vote on say-on-pay. If such matters come before the meeting and you have not specifically instructed your broker how to vote your shares, your shares will not be voted on those matters, giving rise to what is called a “broker non-vote.” Shares represented by broker non-votes will be counted for purposes of determining the existence of a quorum for the transaction of business, but for purposes of determining the number of shares voting on a particular proposal, broker non-votes will not be counted as votes cast or shares voting.

Can I change my vote after I return my proxy card?

Yes. You may change your vote at any time before your proxy is exercised. To change your vote, you may:


•	deliver to our Secretary a written notice revoking your earlier vote;


•	deliver to our transfer agent a properly completed and signed proxy card with a later date; or


•	vote in person at the meeting.

Your attendance at the meeting will not be deemed to revoke a previously delivered proxy unless you clearly indicate at the meeting that you intend to revoke your proxy and vote in person.

How are votes counted?


•	Election of directors. The election of a nominee for director will be decided by a plurality of the votes cast. If you do not vote for a particular nominee, or you withhold authority for one or all nominees, your vote will have no effect on the outcome of the election.


•	All other proposals. All of the other proposals at the meeting require the favorable vote of a majority of the votes cast on the matter. Abstentions and broker non-votes, which are described above, will have no effect on the outcome of voting on these matters.

How is Mercury soliciting proxies?

We bear the cost of preparing, assembling, and mailing the proxy material relating to the solicitation of proxies by the Board of Directors for the meeting. In addition to the use of the mails, certain of our officers and regular employees may, without additional compensation, solicit proxies in person, by telephone, or by other means of communication. We will also request brokerage houses, custodians, nominees, and fiduciaries to forward copies of the proxy material to those persons for whom they hold shares, and will reimburse those record holders for their reasonable expenses in transmitting this material. We have also retained Alliance Advisors, L.L.C. to assist in soliciting proxies by mail, telephone, and personal interview for a fee of $8,500, plus expenses.

PROPOSAL 1: ELECTION OF CLASS III DIRECTORS

Who sits on the Board of Directors?

Our by-laws provide for a Board of Directors of not fewer than three nor more than fifteen directors. Pursuant to Massachusetts law, the Board of Directors is divided into three classes, with each class consisting, as nearly as may be possible, of one-third of the whole number of the Board of Directors. The Board of Directors currently consists of seven members, with James K. Bass and Michael A. Daniels serving as Class I directors, Mark Aslett and William K. O’Brien serving as Class II directors, and George K. Muellner, Mark S. Newman and Vincent Vitto serving as Class III directors.

The terms of the Class I, Class II, and Class III directors expire in 2016, 2017, and 2015, respectively. With the expiration of its respective term, each class is nominated for election for a subsequent three-year term. We are proposing that the Class III nominees listed below, which consist of three incumbent directors, George K. Muellner, Mark S. Newman, and Vincent Vitto, be elected to serve terms of three years and in each case until their successors are duly elected and qualified or until they sooner die, resign, or are removed.

Directors’ Qualifications and Diversity

The Board of Directors believes that the Board, as a whole, should possess a combination of skills, professional experience, and backgrounds necessary to oversee the Company’s business. In addition, the Board of Directors believes that there are certain attributes that every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board of Directors and the Nominating and Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board of Directors’ overall composition and the Company’s current and future needs.

The Nominating and Governance Committee is responsible for developing and recommending Board of Director membership criteria to the Board for approval. The criteria include independent and sound judgment, integrity, the ability to commit sufficient time and attention to Board of Director activities, and the absence of conflicts with the Company’s interests. In addition, the Nominating and Governance Committee periodically evaluates the composition of the Board of Directors to assess the skills and experience that are currently represented on the Board of Directors as well as the skills and experience that the Board of Directors will find valuable in the future, given the Company’s current situation and strategic plans. While the Nominating and Governance Committee does not have an explicit policy with respect to diversity, it may consider the Board’s diversity of qualifications in terms of industry experience, functional skills, age, governance service on other boards, prior work experience, educational background, and other important considerations. The Nominating and Governance Committee believes that it is important that Board of Director members represent diverse viewpoints and perspectives in their application of judgment to Company matters.

In evaluating director candidates, and considering incumbent directors for renomination to the Board of Directors, the Nominating and Governance Committee considers, among other things, each nominee’s independence, financial literacy, personal and professional accomplishments, and experience.

Recommendation

The Board of Directors recommends a vote “FOR” the election of the nominees listed below.

Information about the Directors

The persons named as proxies in the accompanying proxy card will vote, unless authority is withheld, for the election of the three Class III nominees named below. We have no reason to believe that any of the nominees will be unavailable for election. However, if any one of them becomes unavailable, the persons named as proxies in the accompanying proxy card have discretionary authority to vote for a substitute chosen by the Board. Any vacancies not filled at the meeting may be filled by the Board.

The following information was provided by each of the incumbent directors whose term will continue after the meeting.



Name	Age	Year First Elected a Director	Principal Occupation
Class III Directors—Nominated for a Term Ending in 2018:
Vincent Vitto	74	2006	Mr. Vitto served as President and Chief Executive Officer of The Charles Stark Draper Laboratory, Inc., a research and development laboratory, from 1997 to his retirement in 2006. Prior to that, he spent 32 years of increasing responsibility at MIT Lincoln Laboratory, a research and development laboratory, rising to Assistant Director for Surface Surveillance and Communications. Mr. Vitto’s qualifications to serve on our Board of Directors include his exceptional understanding of defense technology, particularly related to surveillance and communications, and experience managing major defense research laboratories.
George K. Muellner	72	2010	Mr. Muellner served as the President of Advanced Systems for the Integrated Defense Systems business unit of The Boeing Company, responsible for developing advanced cross-cutting concepts and technologies, and executing new programs, until his retirement in February 2008. Prior to this assignment, he was Vice President-General Manager of Air Force Systems at Boeing since July 2002. He joined Boeing in 1998. Prior to that, he served 31 years in the U.S. Air Force, retiring as a Lieutenant General from the position of Principal Deputy for the Office of the Assistant Secretary of the Air Force for Acquisition in Washington, D.C. A highly decorated veteran, Mr. Muellner spent most of his career as a fighter pilot and fighter weapons instructor, test pilot, and commander. Mr. Muellner’s qualifications to serve on our Board of Directors include his executive experience with defense contracting, his military experience in the Company’s target defense market, and his knowledge of defense and aerospace technology.
Mark S. Newman	65	2015	Mr. Newman was the Chairman and Chief Executive Officer of DRS Technologies, Inc., a publicly-traded defense electronics company, until his retirement in January 2012. He joined the DRS in 1973, four years after its founding, and became President and CEO in 1994, after serving many years as the company’s Chief Financial Officer. He was named a director in 1988, and in 1995, was elected Chairman of the Board of DRS. Mr. Newman is also a director on the board of American Biltrite, Inc. Mr. Newman is one of our “audit committee financial experts.” Mr. Newman’s qualifications to serve on our Board of Directors include his extensive experience in defense electronics, his executive and operational experience as the Chief Executive Officer of a public company, and his broad experience with accounting and audit matters for publicly-traded companies.

CORPORATE GOVERNANCE

Independence

The Board of Directors has determined that a majority of the members of the Board should consist of “independent directors,” determined in accordance with the applicable listing standards of the NASDAQ Global Select Market as in effect from time to time. Directors who are also Mercury employees are not considered to be independent for this purpose. For a non-employee director to be considered independent, he or she must not have any direct or indirect material relationship with Mercury. A material relationship is one which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In determining whether a material relationship exists, the Board considers, among other things, the circumstances of any direct compensation received by a director or a member of a director’s immediate family from Mercury, any professional relationship between a director or a member of a director’s immediate family and Mercury’s outside auditors, any participation by a Mercury executive officer in the compensation decisions of other companies employing a director or a member of a director’s immediate family as an executive officer, and commercial relationships between Mercury and other entities with which a director is affiliated (as an executive officer, partner, or controlling shareholder). In addition, the Board has determined that directors who serve on the Audit Committee must qualify as independent under the applicable rules of the Securities and Exchange Commission (“SEC”), which limit the types of compensation an Audit Committee member may receive directly or indirectly from Mercury and require that Audit Committee members not be “affiliated persons” of Mercury or its subsidiaries.

Consistent with these considerations, the Board has determined that all of the members of the Board are independent directors, except Mr. Aslett, who is also a Mercury executive officer.

How are nominees for the Board selected?

Our Nominating and Governance Committee is responsible for identifying and recommending nominees for election to the Board. The committee will consider nominees recommended by a shareholder if the shareholder submits the nomination in compliance with applicable requirements. The committee did not receive any shareholder nominations for election of directors at this year’s meeting. With respect to the nominees for Class III director standing for election at the meeting, Messrs. Muellner and Vitto were each most recently elected as a Class III director at 2012 Annual Meeting of Shareholders and Mr. Newman was elected as a Class III director by the Board of Directors in June 2015.

When considering a potential candidate for membership on the Board, the Nominating and Governance Committee will consider any criteria it deems appropriate, including, among other things, the experience and qualifications of any particular candidate as well as such candidate’s past or anticipated contributions to the Board and its committees. At a minimum, each nominee is expected to have high personal and professional integrity and demonstrated ability and judgment, and to be effective, with the other directors, in collectively serving the long-term interests of our shareholders. In addition to these minimum qualifications, when considering potential candidates for the Board, the committee seeks to ensure that the Board is comprised of a majority of independent directors and that the committees of the Board are comprised entirely of independent directors. The committee may also consider any other standards that it deems appropriate, including whether a potential candidate has direct experience in our industry and whether such candidate, if elected, would assist in achieving a mix of directors that represents a diversity of backgrounds and experiences. In practice, the committee generally will evaluate and consider all candidates recommended by our directors, officers, and shareholders. The committee intends to consider shareholder recommendations for directors using the same criteria that would be used with potential nominees recommended by members of the committee or others.

Shareholders who wish to submit director candidates for consideration should send such recommendations to our Secretary at our executive offices not less than, unless a lesser time period is required by applicable law, 120 days nor more than 150 days prior to the anniversary date of the immediately preceding annual meeting of stockholders or special meeting in lieu of an annual meeting. Such recommendations must include the following information as to each person whom the shareholder proposes to nominate for election or reelection as a director:


•	the name and address of the shareholder and each of his or her nominees;


•	a description of all arrangements or understandings between the shareholder and each such nominee;


•	such other information as would be required to be included in a proxy statement soliciting proxies for the election of the nominees of such shareholder; and


•	the consent of each nominee to serve as a Director if so elected.

In addition, such recommendations must include the following information as to each shareholder giving the notice:


•	the number of all shares of Mercury stock held of record, owned beneficially (directly or indirectly) and represented by proxy by such shareholder as of the date of such notice and as of one year prior to the date of such notice;


•	a description of all arrangements or understandings between such shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder;


•	a description of any derivative position held or beneficially held (directly or indirectly) by such shareholder with respect to Mercury stock;


•	a description of any proxy, contract, arrangement, understanding, or relationship between such shareholder and any other person or persons (including their names and addresses) in connection with the nomination or nominations to be made by such shareholder or pursuant to which such shareholder has a right to vote any Mercury stock; and


•	a description of any proportionate interest in Mercury stock or derivative positions with respect to Mercury held, directly or indirectly, by a general or limited partnership in which such shareholder is a general partner or, directly or indirectly, beneficially owns an interest in such a general partner.

We may require any proposed nominee to furnish such other information as may reasonably be required by us to determine the eligibility of such proposed nominee to serve as a director. Shareholders must also submit any other information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to SEC rules. See also the information contained elsewhere in this proxy statement under the heading “Shareholder Proposals for the 2016 Annual Meeting.”

Can I communicate with Mercury’s directors?

Yes. Shareholders who wish to communicate with the Board or with a particular director may send a letter to Mercury Systems, Inc., 201 Riverneck Road, Chelmsford, Massachusetts 01824, attention: Secretary. The mailing envelope should contain a clear notation that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication.” All such letters should clearly state whether the intended recipients are all members of the Board or certain specified individual directors. Our Secretary will make copies of all such letters and circulate them to the appropriate director or directors.

What committees has the Board established?

The Board of Directors has standing Audit, Compensation, and Nominating and Governance Committees. As described above under the heading “Independence,” all of the members of the Audit, Compensation, and Nominating and Governance Committees are deemed to be independent directors. Each of these committees acts under a written charter, copies of which can be found on our website at www.mrcy.com on the “Investor Relations” page (which appears under the heading “About Us”) under “Corporate Governance.”

In addition, during fiscal 2011, the Board established an ad hoc M&A Review Committee consisting of independent directors. The ad hoc M&A Review Committee does not have a written charter but meets on an as needed basis to review potential M&A transactions and make a recommendation to the Board regarding potential transactions.

Audit Committee

The Audit Committee assists the Board in its oversight of management’s conduct of our accounting and financial reporting processes, including by providing oversight with respect to the financial reports and other financial information provided by our systems of internal accounting and financial controls, and the annual audit of our financial statements. The Audit Committee also reviews the qualifications, independence, and performance of our independent registered public accounting firm, pre-approves all audit and non-audit services provided by such firm and its fees, and discusses with management and our independent registered public accounting firm the quality and adequacy of our internal control over financial reporting. The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the work of our independent registered public accounting firm, which reports directly to the Audit Committee. The Audit Committee also is responsible for reviewing and approving related-person transactions in accordance with our Code of Business Conduct and Ethics and the Audit Committee charter.

Compensation Committee

The Compensation Committee is responsible for:


•	setting the compensation of our executive officers;


•	reviewing and approving employment agreements, consulting arrangements, severance or retirement arrangements, and change-in-control arrangements or provisions covering any of our current or former executive officers;


•	overseeing the administration of our equity-based and other long-term incentive plans;


•	exercising any fiduciary, administrative, or other function assigned to the committee under any of our health, benefit, or welfare plans, including our 401(k) retirement savings plan; and


•	reviewing the compensation and benefits for non-employee directors and making recommendations for any changes to our Board.

All of the independent directors on the Board annually review and approve our CEO’s corporate financial and individual management-by-results (“MBR”) performance objectives, and evaluate the CEO’s performance in light of those goals and objectives. Based on the foregoing, the Compensation Committee sets the CEO’s compensation, including salary, target bonus, bonus and over-achievement payouts, and equity-based compensation, and any other special or supplemental benefits, which is then subject to ratification by a majority of the independent directors on our Board. Our CEO annually evaluates the contribution and performance of our other executive officers and provides input to the Compensation Committee, and the Compensation Committee sets their compensation. Our head of human resources and the Compensation Committee’s independent compensation consultant also make recommendations to the Compensation Committee regarding compensation for our executives.

The Compensation Committee may delegate to the CEO the authority to grant equity awards under the 2005 Plan to individuals who are not subject to the reporting and other requirements of Section 16 of the Exchange Act or “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee may also delegate the administration of the health, benefit, and welfare plans within the scope of its oversight to our human resources and finance departments and to outside service providers, as appropriate.

Our head of human resources and the Compensation Committee’s independent compensation consultant provide input to the Compensation Committee regarding compensation for non-employee directors. The Compensation Committee then recommends any changes in the compensation and benefits for non-employee directors to the full Board for its consideration and approval.

The Compensation Committee is authorized to obtain advice and assistance from independent compensation consultants, outside legal counsel, and other advisors as it deems appropriate, at our expense. The Compensation Committee has engaged Aon Consulting/Radford (“Radford”) since 2005 to assist the committee in applying our compensation philosophy for our executive officers and non-employee directors, analyzing current compensation conditions in the marketplace generally and among our peers specifically, and assessing the competitiveness and appropriateness of compensation levels for our executive officers. Representatives of Radford periodically attend meetings of the Compensation Committee, both with and without members of management present, and interact with members of our human resources department with respect to its assessment of the compensation for our executive officers. In addition, at the direction of the Compensation Committee, Radford may assist management in analyzing the compensation of our non-executive employees. For fiscal 2015, Radford’s services included providing compensation survey data for non-employee directors, executives, and non-executive employees.

Nominating and Governance Committee

The Nominating and Governance Committee assists the Board in identifying individuals qualified to become Board members, and recommends to the Board persons to be nominated for election as directors by the shareholders at the annual meeting of shareholders or by the Board to fill vacancies. The committee has recommended the nominees for election at the annual meeting. In addition, the committee oversees the process by which the Board assesses its effectiveness.

Ad Hoc M&A Review Committee

The ad hoc M&A Review Committee was created during fiscal 2011 to assist the Board in reviewing M&A transactions. The committee does not have a written charter but meets on an as needed basis to review potential M&A transactions and make a recommendation to the Board regarding potential transactions.

How often did the Board and Committees meet during fiscal 2015?

The Board of Directors met four times during fiscal 2015. The table below reports information about the committees during fiscal 2015:



Name	Audit Committee(1)	Compensation Committee	Nominating and Governance Committee	Ad Hoc M&A Review Committee
James K. Bass	X			Alternate
George W. Chamillard (2)		X
Michael A. Daniels		Chairman	X	X
George K. Muellner		X		Chairman
Mark S. Newman (3)	X
William K. O’Brien	Chairman		X	X
Vincent Vitto	X		Chairman
Number of Meetings During Fiscal 2015	10	5	3	6


(1)	The Board has determined that each of Messrs. Bass, Newman and O’Brien qualifies as an “audit committee financial expert” under SEC rules.


(2)	Mr. Chamillard retired from the Board at the Annual Meeting of Shareholders in October 2014.


(3)	Mr. Newman was elected to the Board in June 2015.

All of the directors attended at least 75% of the meetings of the Board of Directors and committees of the Board on which they served.

Our independent directors regularly meet in executive sessions outside the presence of management. The independent directors met four times during the last fiscal year in executive session without management present. All meetings, or portions of meetings, of the Board at which only independent directors were present were presided over by Mr. Vitto, our Chairman of the Board.

Does Mercury have a policy regarding director attendance at annual meetings of the shareholders?

Directors are encouraged to attend the annual meeting of shareholders, or special meeting in lieu thereof; however, we do not have a formal policy with respect to attendance at shareholder meetings. All of the directors then in office attended the 2014 annual meeting of shareholders.

Does Mercury have stock ownership guidelines for directors?

Each non-employee director is expected to own or control, directly or indirectly, shares of the Company's common stock equal to five times the value of the annual director cash retainer within five years of first becoming a non-employee director, or within five years of April 22, 2014, whichever is later. Each non-employee director is expected to retain such investment in the Company as long as he or she is a non-employee director. Exceptions to this stock ownership guideline may be approved from time to time by the Board as it deems necessary to address individual circumstances.

Does Mercury have stock ownership guidelines for its Chief Executive Officer?

The CEO is expected to own or control, directly or indirectly, shares of Mercury common stock with a value of at least five times the CEO’s base salary. The CEO is expected to meet this guideline within five years of first becoming CEO, or within five years of April 22, 2014, whichever is later, and is expected to retain such investment in the Company as long as he or she is the CEO. Exceptions to this stock ownership guideline may be approved from time to time by the Board as it deems necessary to address individual circumstances.

Does Mercury have a Code of Business Conduct and Ethics?

Yes. We have adopted a Code of Business Conduct and Ethics applicable to our officers, directors, and employees. This code is posted on our website at www.mrcy.com on the “Investor Relations” page under “Corporate Governance.” We intend to satisfy our disclosure requirements regarding any amendment to, or waiver of, a provision of our Code of Business Conduct and Ethics by disclosing such matters on our website. Shareholders may request a copy of our Code of Business Conduct and

Ethics free of charge by writing to Mercury Systems, Inc., 201 Riverneck Road, Chelmsford, Massachusetts 01824, attention: Secretary.

Does Mercury have a written policy governing related-person transactions?

Yes. We have adopted a written policy which provides for the review and approval by the Audit Committee of transactions involving Mercury in which a related person is known to have a direct or indirect interest and that are required to be reported under Item 404(a) of Regulation S-K promulgated by the SEC. For purposes of this policy, a related person includes: (1) any of our directors, director nominees, or executive officers; (2) any known beneficial owner of more than 5% of any class of our voting securities; or (3) any immediate family member of any of the foregoing. In situations where it is impractical to wait until the next regularly scheduled meeting of the committee or to convene a special meeting of the committee, the chairman of the committee has been delegated authority to review and approve related-person transactions. Transactions subject to this policy may be pursued only if the Audit Committee (or the chairman of the committee acting pursuant to delegated authority) determines in good faith that, based on all the facts and circumstances available, the transactions are in, or are not inconsistent with, the best interests of Mercury and our shareholders.

Does Mercury have a clawback policy?

Yes. We have adopted a clawback policy applicable to our executive officers. This policy is posted on our website at www.mrcy.com on the “Investor Relations” page under “Corporate Governance.” Pursuant to our policy, the Board of Directors shall, in all appropriate circumstances, require reimbursement of any annual incentive payment or long-term incentive payment to an executive officer where: (1) the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of Company financial statements filed with the Securities and Exchange Commission; (2) the Board determines the executive engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and (3) a lower payment would have been made to the executive based upon the restated financial results.

Does Mercury have a short sale and hedging policy?

Yes. Pursuant to our insider trading policy, no executive officer or director may at any time sell any securities of Mercury that are not owned by such person at the time of the sale. Also, no such executive officer or director may buy or sell puts, calls, or other derivative securities of Mercury at any time, except with the prior approval of the Chief Financial Officer or, in the case of directors, the Audit Committee of the Board of Directors. In addition, no such executive officer or director may hold Mercury securities in a brokerage margin account.

Does Mercury have a shareholder rights agreement?

No. In connection with its annual corporate governance review during fiscal 2015, the Nominating and Governance Committee reviewed our shareholder rights plan. Upon the recommendation of the Nominating and Governance Committee, the Board of Directors approved an amendment, effective June 30, 2015, to our Shareholder Rights Agreement (the “Rights Agreement”) terminating the Rights Agreement and the associated rights.

How Does the Board of Directors Exercise Its Oversight of Risk?

Our Chief Executive Officer and senior management are principally responsible for risk identification, management, and mitigation. Our senior management engages in an enterprise risk management (“ERM”) process each fiscal year, which process consists of an annual assessment of risks and an ongoing review of risk mitigation efforts and assessment of new risk developments. At regularly scheduled Board meetings, our Director of Internal Audit reviews the key risks identified in the ERM process and management’s plans for mitigating such risks. Our directors have the opportunity to evaluate such risks and mitigation plans, to ask questions of management regarding those risks and plans, and to offer their ideas and insights to management as to these and other perceived risks and the implementation of risk mitigation plans.

In addition to discussions at regular Board meetings, the Audit Committee focuses on risks related to accounting, internal controls, financial and tax reporting, and related-party transactions; the Compensation Committee focuses on risks associated with our executive compensation policies and practices; the Nominating and Governance Committee focuses on risks associated with non-compliance with SEC and NASDAQ requirements for director independence and the implementation of our corporate governance policies; and the ad hoc M&A Review Committee focuses on risks related to our acquisition activities.

How is the Leadership of the Board of Directors Structured and How Does this Leadership Structure Impact Risk Oversight?

Our Board Policy provides that the Chairman of the Board will be elected from among the independent directors, barring the Board’s specific determination otherwise. If, in its judgment the Board determines that election of a non-independent Chairman would best serve the Company at a particular time, such a Chairman would be excluded from executive sessions of the independent directors. In such case, a Lead Independent Director, as appointed from time to time, would preside over executive sessions and would perform such other duties as might be determined from time to time by the Board.

The Board has determined that having a separate Chairman and Chief Executive Officer is the most appropriate leadership structure for the Board of Directors at this time. However, the roles of Chairman and CEO may be filled by the same or different individuals. This allows the Board of Directors flexibility to determine whether the two roles should be combined in the future based upon the Company’s needs and the Board of Directors’ assessment of the Company’s leadership from time to time.

As discussed above, our Chief Executive Officer and senior management are principally responsible for risk identification, management, and mitigation through our ERM process. Our Chairman of the Board is responsible for providing leadership for the Board, including the Board’s evaluation of management’s ERM process.

Do Our Compensation Programs Create a Reasonable Likelihood of Material Adverse Effects for the Company?

Our general employee compensation programs are substantially less weighted towards incentive compensation and equity awards than those for our executive officers. While managers below the executive officers do have incentive compensation tied to Company performance, and do receive equity awards in the form of restricted stock, the relative weight of their fixed salary compensation is much greater than for the executive officers. While some sales personnel are heavily dependent on sales-based commissions, the terms on which they may make sales are controlled by business unit managers and corporate-level revenue recognition procedures.

Although any compensation program can create incentives that may prove to be inappropriate to future circumstances, or that may encourage behavior that proves to be risky for the organization, the Compensation Committee believes that our programs, for both executives and other employees, do not create a reasonable likelihood of material adverse effects for the Company. In reaching this conclusion, the Compensation Committee has considered the following:

•

Our compensation program consists of both fixed and variable components. The fixed portion (i.e., base salary) provides a steady income to our employees regardless of the performance of our company or stock price. The variable portion (i.e., bonus and equity awards) is based upon company and stock price performance. This mix of compensation is designed to motivate our employees, including our executive officers, to produce superior short- and long-term corporate performance without taking unnecessary or excessive risks to the detriment of important business metrics.

•

For the variable portion of compensation, the executive bonus program is focused on profitability while the executive equity program awards have a mix of time-based and performance-based vesting. We believe that these programs provide a check on excessive risk taking because to inappropriately benefit one would be a detriment to the other. In addition, we prohibit all our executive officers from short selling Mercury stock or from buying or selling puts, calls, or other derivative securities related to Mercury stock. By prohibiting such hedging transactions our executives cannot insulate themselves from the effects of poor stock performance.

•

In order for any employee, including our executive officers, to be eligible for the corporate financial performance element of our bonus program, we must first achieve a certain level of profitability that is established annually by the Compensation Committee (we refer to this metric as “adjusted EBITDA”). We believe that focusing on profitability rather than other measures encourages a balanced approach to company performance and emphasizes consistent behavior across the organization.

•

Our executive bonus program is capped, which we believe mitigates excessive risk taking by limiting bonus payouts even if our company dramatically exceeds its adjusted EBITDA target. In addition, 50% of over-achievement awards (an element of the corporate financial performance bonus) are banked and paid out over a multi-year period, with the executive forfeiting his banked award if he is not an employee of the Company on the date the award is scheduled to be paid unless he dies, leaves for good reason (as defined in the plan), or leaves as part of a planned retirement.


•	Our bonus program has been structured around attaining a certain level of profitability for several years and we have seen no evidence that it encourages unnecessary or excessive risk taking.

The calculation of our adjusted EBITDA for the executive bonus program is defined annually by our Compensation Committee and is designed to keep it from being susceptible to manipulation by any employee, including our named executive officers.

DIRECTOR COMPENSATION

How are the directors compensated?

The Compensation Committee performs an annual review of non-employee director compensation. Our director compensation philosophy is to provide our non-employee directors with competitive compensation. Our compensation philosophy is intended to offer compensation that attracts highly qualified non-employee directors and retain the leadership and skills necessary to build long-term shareholder value. We target non-employee director compensation at the 75^th percentile compared to our peer group.

Cash Compensation for Non-Employee Directors

Directors who are also our employees receive no additional compensation for serving on the Board of Directors. During fiscal 2015, our non-employee directors received an annual cash retainer of $55,000 and the following positions received additional cash retainers:



Independent Chairman of the Board	$	45,000	per annum
Chairman of the Audit Committee	19,000		per annum
Chairman of the Compensation Committee	15,000		per annum
Chairman of the Nominating and Governance Committee	10,500		per annum

All of these retainers are paid in cash in quarterly installments. Directors are also reimbursed for their reasonable expenses incurred in connection with attendance at Board and committee meetings.

Equity Compensation for Non-Employee Directors

New non-employee directors are granted restricted stock awards in connection with their first election to the Board. These awards are granted by the Board of Directors and consist of the number of shares of common stock with a value equal to three times the annual cash retainer for non-employee directors divided by the average closing price of the Company’s common stock during the 30 calendar days prior to the date of grant. These awards will vest as to 50% of the covered shares on each of the first two anniversaries of the date of grant.

Non-employee directors may also receive annual restricted stock awards for the number of shares of common stock equal to $100,000 divided by the average closing price of the Company’s common stock during the 30 calendar days prior to the date of grant. These awards will vest as to 50% of the covered shares on the date of grant and as to the remaining covered shares on the first anniversary of the date of grant.

Non-employee directors will not be eligible to receive an annual restricted stock award for the fiscal year in which they are first elected. Non-employee directors who are first elected to the Board during the first half of Company’s fiscal year will be eligible to receive an annual restricted stock award for the next fiscal year; otherwise, non-employee directors will not be eligible to receive their first annual restricted stock award until the second fiscal year following the fiscal year in which they are first elected to the Board.

How were the non-employee directors compensated for fiscal 2015?

The compensation paid to the non-employee members of the Board of Directors with respect to fiscal 2015 was as follows:

Non-Employee Director Compensation—Fiscal 2015



Name	Fees Earned		Restricted Stock Awards ($)(1)		Total
James K. Bass	$	55,000	$	107,759	$	162,759
George W. Chamillard (2)	27,500		—		27,500
Michael A. Daniels	70,000		107,759		177,759
George K. Muellner	55,000		107,759		162,759
Mark S. Newman (3)	13,750		166,935		180,685
William K. O’Brien	74,000		107,759		181,759
Vincent Vitto	110,500		107,759		218,259

(1)

This column represents the grant date fair value of restricted stock awards for fiscal 2015 in accordance with FASB ASC Topic 718. The grant date fair value of the restricted stock awards granted to non-employee directors in fiscal 2015 has been calculated by multiplying the number of shares granted by the closing price of our common stock as reported on the NASDAQ Global Select Market on the date of grant.


(2)	Mr. Chamillard retired from the Board of Directors at the Annual Meeting of Shareholders in October 2014.


(3)	Mr. Newman was elected to the Board of Directors in June 2015.

EQUITY COMPENSATION PLANS

The following table sets forth information as of June 30, 2015 with respect to existing compensation plans under which our equity securities are authorized for issuance.



Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	(1)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in the first column)
Equity compensation plans approved by shareholders (2)	830,359	(3)	$	13.428	3,733,492	(4)
Equity compensation plans not approved by shareholders	—		—		—
TOTAL	830,359		$	13.428	3,733,492


(1)	Does not include outstanding unvested restricted stock awards.


(2)	Consists of our 1997 equity plan, the 2005 Plan, and the 1997 Employee Stock Purchase Plan (“ESPP”).


(3)	Does not include purchase rights under the ESPP, as the purchase price and number of shares to be purchased is not determined until the end of the relevant purchase period.


(4)	Includes 85,390 shares available for future issuance under the ESPP and 3,648,102 shares available for future issuance under the 2005 Plan. We are no longer permitted to grant awards under our 1997 equity plan.

PROPOSAL 2: APPROVAL OF AMENDMENT TO 2005 SOCK INCENTIVE PLAN

At a meeting on January 20, 2015, the Board adopted, subject to the approval of our shareholders, an amendment to our 2005 Stock Incentive Plan (the “2005 Plan”) to permit the net exercise of stock options.

Summary of Changes

We have amended the 2005 Plan to allow holders of stock options to exercise their options by net exercise, in addition to the other methods of exercise as permitted by the plan, in order to align with current best practices for equity plans.

Summary of the Amended 2005 Plan

The following is a summary of certain major features of the 2005 Plan. This summary is subject to the specific provisions contained in the full text of the 2005 Plan, which is attached as Appendix A to this proxy statement.

Plan Administration. The Compensation Committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2005 Plan. The Compensation Committee may delegate to our CEO or any other executive officers the authority to grant awards at fair market value to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act.

Eligibility and Limitations on Grants. Persons eligible to participate in the 2005 Plan will be those full or part-time officers, employees, non-employee directors, and other key persons (including consultants and prospective officers) of Mercury and its subsidiaries as selected from time to time by the Compensation Committee. As of October 20, 2015, approximately 635 individuals were eligible to participate in the 2005 Plan.

The maximum award of stock options or stock appreciation rights granted to any one individual will not exceed 500,000 shares of common stock (subject to adjustment for stock splits and similar events) for any calendar year period. If any award of restricted stock or deferred stock granted to an individual is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, then the maximum award shall not exceed 300,000 shares of common stock (subject to adjustment for stock splits and similar events) to any one such individual in any performance cycle.

Effect of Grants. The grant of any award other than a stock option or a stock appreciation right will reduce the number of shares of common stock available for issuance under the 2005 Plan by 2.0 shares of common stock for each such share actually subject to the award and will be deemed as an award of 2.0 shares of common stock for each such share actually subject to the award. The grant of a stock option or a stock appreciation right will be deemed as an award of one share of common stock for each such share actually subject to the award.

Stock Options. The 2005 Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. Options granted under the 2005 Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on incentive stock options. Non-qualified options may be granted to any persons eligible to receive incentive options and to non-employee directors and key persons. The option exercise price of each option will be determined by the Compensation Committee but may not be less than 100% of the fair market value of the common stock on the date of grant. The 2005 Plan provides for 10,792,264 shares that can be granted in the form of incentive stock options.

The term of each option will be fixed by the Compensation Committee and may not exceed seven years from the date of grant. The Compensation Committee will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Compensation Committee. Options may be exercised in whole or in part with written notice to Mercury.

Upon exercise of options, the option exercise price must be paid in full (1) in cash, by certified or bank check, or other instrument acceptable to the Compensation Committee, (2) by delivery (or attestation to the ownership) of shares of common stock that are beneficially owned by the optionee, (3) subject to applicable law, by a broker pursuant to irrevocable instructions to the broker from the optionee, or (4) by net exercise.

To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options that first become exercisable by a participant in any one calendar year.

Stock Appreciation Rights. The Compensation Committee may award a stock appreciation right either as a freestanding award or in tandem with a stock option. The Compensation Committee may award stock appreciation rights

subject to such conditions and restrictions as the Compensation Committee may determine, provided that (1) upon exercise of a stock appreciation right granted in tandem with an option, the applicable portion of any related option shall be surrendered, and (2) stock appreciation rights granted in tandem with options are exercisable at such time or times and to the extent that the related stock options are exercisable. The term of each stock appreciation right may not exceed seven years.

Restricted Stock. The Compensation Committee may award shares of common stock to participants subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized below) and/or continued employment with Mercury through a specified restricted period. However, in the event awards made to employees have a performance-based goal, the restriction period will be at least one year, and in the event any awards made to employees have a time-based restriction, the restriction period will be at least three years, but vesting can occur incrementally over the three-year period.

Deferred Stock Awards. The Compensation Committee may award phantom stock units as deferred stock awards to participants. Deferred stock awards are ultimately payable in the form of shares of common stock and may be subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized below) and/or continued employment with Mercury through a specified vesting period. However, in the event awards made to employees have a performance-based goal, the restriction period will be at least one year, and in the event any awards have a time-based restriction, the restriction period will be at least three years, but vesting can occur incrementally over the three-year period. In the Compensation Committee’s sole discretion and subject to the participant’s compliance with the procedures established by the Compensation Committee and requirements of Section 409A of the Code, it may permit a participant to make an advance election to receive a portion of his or her future cash compensation otherwise due in the form of a deferred stock award.

Performance-Based Awards. To ensure that certain awards granted under the 2005 Plan, including awards of restricted stock and deferred stock, to a “covered employee” (as defined in the Code) qualify as “performance-based compensation” under Section 162(m) of the Code, the 2005 Plan provides that the Compensation Committee may require that the vesting of such awards be conditioned on the satisfaction of one or more of the performance criteria stated above. Subject to adjustments for stock splits and similar events, the maximum award of restricted stock or deferred stock (or combination thereof) granted to any one individual that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will not exceed 300,000 shares of common stock (subject to adjustments for stock splits and similar events) for any performance cycle.

Detrimental Activity. The Compensation Committee may cancel, rescind, suspend, or otherwise limit any award to a participant if the participant engages in detrimental activities, including rendering services to a competitor of Mercury, disclosing confidential information without permission, refusing to assign inventions to Mercury, soliciting employees or customers of Mercury, engaging in an activity that results in a termination for cause, materially violating any internal policies of Mercury, or being convicted of, or pleading guilty to, a crime.

Tax Withholding. Participants in the 2005 Plan are responsible for the payment of any federal, state, or local taxes that we are required by law to withhold upon any option exercise or vesting of other awards. Subject to approval by the Compensation Committee, participants may elect to have the minimum tax withholding obligations satisfied either by authorizing us to withhold shares of common stock to be issued pursuant to an option exercise or other award, or by transferring to us shares of common stock having a value equal to the amount of such taxes.

Change in Control Provisions. The 2005 Plan provides that, if there is a change in control of Mercury that is approved by the Board of Directors:


•	For awards with grant dates prior to November 17, 2008, if the grantee has a minimum of six months of service, 50% of such grantee’s unvested awards will become vested and immediately exercisable upon consummation of the change in control.

•

For awards with grant dates on or after November 17, 2008, if the grantee has a minimum of six months of service and within six months of the consummation of the change in control, the grantee’s employment is involuntarily terminated by us for reasons other than for “cause” or the grantee resigns for “good reason”, 50% of such grantee’s unvested awards will become vested and immediately exercisable. If, in connection with the change in control, awards granted under the 2005 Plan are cancelled or otherwise terminated upon consummation of the change in control, then instead of accelerated vesting, the grantee will receive a cash payment for 50% of the value of his or her unvested awards (determined based on the price of our common stock at the time of consummation of the change in control). The foregoing is conditioned on the grantee’s execution of

an effective release of claims if the value of the accelerated vesting or cash payment exceeds $25,000.

If there is a change of control that is not approved by the Board of Directors, all of the unvested awards under the 2005 Plan (regardless of the grant date) will become vested and immediately exercisable upon the change of control. Further, upon any change of control all outstanding awards held by non-employee directors will automatically become fully vested.

Amendments and Termination. The Board may at any time amend or discontinue the 2005 Plan, and the Compensation Committee may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent. Any amendments that materially change the terms of the 2005 Plan, including any amendments that increase the number of shares reserved for issuance under the 2005 Plan, expand the types of awards available under the 2005 Plan, materially expand the eligibility to participate in the 2005 Plan, materially extend the term of the 2005 Plan, or materially change the method of determining the fair market value of common stock, will be subject to approval by shareholders. Amendments shall also be subject to approval by our shareholders if and to the extent determined by the Compensation Committee to be required by the Code to preserve the qualified status of incentive options or to ensure that compensation earned under the 2005 Plan qualifies as performance-based compensation under Section 162(m) of the Code. In addition, except in connection with a reorganization or other similar change in the capital stock of Mercury or a merger or other transaction, without prior shareholder approval, the Compensation Committee may not reduce the exercise price of an outstanding stock option or stock appreciation right or effect repricing of an outstanding stock option or stock appreciation right through cancellation or regrants.

New Plan Benefits

It is not possible to state the persons who will receive options or awards under the 2005 Plan in the future or the amount of options or awards that will be granted under the 2005 Plan. The following table provides information with respect to awards granted under the 2005 Plan in the fiscal year ended June 30, 2015. This table does not include any grants made following the end of fiscal year 2015 as described in “Compensation Discussion and Analysis.”



	Stock Options					Restricted Stock
Name and Position	Dollar Value		Number	Average Exercise Price		Dollar Value(1)		Number
Mark Aslett, President and Chief Executive Officer	$	—	—	$	—	$	1,083,950	95,000
Gerald M. Haines II, EVP, Chief Financial Officer, Chief Legal Officer, and Secretary (2)		—	—		—		788,550	70,000
Didier M.C. Thibaud, President, Mercury Commercial Electronics		—	—		—		456,400	40,000
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer		—	—		—		114,100	10,000
All executive officers as a group		—	—		—		2,443,000	215,000
All non-employee directors as a group		—	—		—		705,732	56,656
Employees as a group (excluding executive officers)		—	—		—		6,629,366	542,400

(1) The dollar value of each restricted stock grant is estimated on the date of grant by multiplying the number of shares granted by the closing price of our common stock as reported on the NASDAQ Global Select Market on the date of grant.

(2) Mr. Haines was appointed Executive Vice President, Chief Financial Officer, and Treasurer in September 2014.

PROPOSAL 3: APPROVAL OF AMENDMENT TO 1997 EMPLOYEE STOCK PURCHASE PLAN

At a meeting on July 29, 2015, the Board adopted, subject to the approval of our shareholders, an amendment to our 1997 Employee Stock Purchase Plan (the “ESPP”).

Summary of Changes

We offer eligible employees the opportunity to purchase shares of our common stock on a regular basis through payroll deductions under the ESPP. The purpose of the ESPP is to encourage ownership of our common stock by our employees. The ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code").

The Board believes that the number of shares currently remaining available for issuance under the ESPP (85,390 shares) is not sufficient for future granting needs. In addition, the ESPP is currently set to expire by its terms in December 2016. We believe that continuing to offer eligible employees an opportunity to purchase shares of our common stock under the ESPP enables us to attract and retain key personnel, and helps to align employee and shareholder interests by encouraging employee stock ownership. Accordingly, our Board of Directors has adopted, and is seeking shareholder approval of, an amendment to the ESPP that would increase the aggregate number of shares of our common stock reserved and available for issuance under the ESPP by 400,000 shares, and would extend the end date of the term of the ESPP from December 31, 2016 to June 30, 2025. If the proposed amendment to the ESPP is not approved by shareholders, it is likely that all currently remaining shares available for issuance under the ESPP will be purchased and the ESPP will terminate on December 31, 2016.

Summary of the ESPP

The following is a summary of certain major features of the ESPP. This summary is subject to the specific provisions contained in the full text of the ESPP, which is attached as Appendix B to this proxy statement.

Term of the Plan. The ESPP will continue in effect until June 30, 2025. Our Board may terminate the ESPP at any time. The ESPP will terminate in any case when all or substantially all of the unissued shares of our common stock reserved for the purposes of the ESPP have been purchased.

Plan Administration. The Compensation Committee of our Board of Directors administers the ESPP and has full authority to make, administer, and interpret such equitable rules and regulations regarding the ESPP as it deems advisable.

Eligibility. Persons eligible to participate in the ESPP are full-time employees of Mercury or any of its subsidiaries designated as a participating employer who work at least 20 hours per week and more than five months per year, except for persons who are deemed for purposes of Section 423(b)(3) of the Code to own five percent or more of our voting stock. As of October 20, 2015, approximately 635 individuals were eligible to participate in the ESPP.

Purchase Periods; Exercise Price. The ESPP provides for two “purchase periods” within each calendar year, the first commencing on January 1 and ending on June 30, and the second commencing on July 1 and ending on December 31. Eligible employees may elect to become participants in the ESPP by enrolling prior to each semi-annual period. On the first day of each purchase period, subject to the terms of the ESPP, each eligible employee who is then a participant in the ESPP is granted an option to purchase on the last business day of the purchase period a number of shares of our common stock equal to (1) the aggregate payroll deductions in the purchase period authorized by the participant, divided by (2) the exercise price (as defined below). Shares are purchased through the accumulation of payroll deductions of not less than 1% nor more than 10% of each participant’s compensation, subject to an overall annual maximum of $25,000 per participant. The maximum number of shares that can be purchased by an individual participant in any purchase period is 833 shares (or such other number determined from time to time by the Compensation Committee).

The “exercise price” for each purchase period is equal to the lower of (1) 85% of the fair market value per share of our common stock on the first business day of the relevant purchase period, or (2) 85% of the fair market value per share of our common stock on the last business day of the relevant purchase period. As of October 20, 2015, the closing price per share of our common stock as reported by the NASDAQ Global Select Market was $16.60.

Options. Options granted under the ESPP are exercisable only by the participant during his or her lifetime and are not transferable by the participant. A participant may cancel his or her participation in the ESPP with respect to any purchase period so long as the participant’s notice of cancellation is received by us at least 10 days prior to the last business day of the purchase period. Participation in the ESPP automatically terminates upon a participant’s termination of employment for any reason. Upon any such cancellation or termination, all accumulated payroll deductions are refunded in cash.

Shares Subject to the Plan. Of the 1,400,000 shares of our common stock, par value $.01 per share, authorized for issuance under the ESPP, there are currently only 85,390 shares remaining available for issuance. If the proposed amendment to the ESPP is approved by shareholders, the aggregate number of shares reserved and available for issuance under the ESPP will be increased by 400,000 shares, and the total number of shares authorized for issuance under the ESPP from its inception will be increased from 1,400,000 shares to 1,800,000 shares. If our capital structure changes because of a stock dividend, stock split, or similar event, the number of shares that can be issued under the ESPP will be appropriately adjusted.

Amendments and Termination. Our Board of Directors may at any time amend or terminate the ESPP. However, any such termination by the Board will not affect options then outstanding under the ESPP, and any such amendment will not adversely affect any option then outstanding under the ESPP without the participant’s consent. Certain amendments, such as an increase in the number of shares available for issuance under the ESPP, will not be effective without the approval of our shareholders.

Federal Income Tax Considerations

The ESPP is intended to qualify as an “employee stock purchase plan” as defined in Section 423(b) of the Code, which provides that an employee participating in the plan is not required to pay any federal income tax when joining the plan or when purchasing the shares of common stock at the end of the purchase period. The employee is, however, required to pay federal income tax on the difference, if any, between the price at which he or she sells the shares and the price he or she paid for them.

If shares acquired under the ESPP are sold more than two years after the first day of the purchase period pursuant to which the shares were purchased, no taxable income results if the sale price is less than the price paid for the shares, and the employee will recognize a long-term capital loss for the difference between the sale price and the purchase price. If the proceeds of the sale are higher than the purchase price, the employee will recognize ordinary income for the year in which the sale occurs equal to the lesser of (a) fifteen percent (15%) of the fair market value of the common stock on the first day of the purchase period in which the shares were purchased, or (b) the excess of the amount actually received for the shares over the amount paid. In addition, the employee will recognize a long-term capital gain in an amount equal to the difference between the proceeds of the sale and the employee’s basis in the shares (i.e., the employee’s purchase price plus the amount taxed to the employee as ordinary income). No deduction is allowed to Mercury.

If shares acquired under the ESPP are sold within two years of the first day of the purchase period pursuant to which the shares were purchased, the employee will recognize ordinary income equal to the difference between the fair market value of the shares on the last business day of the purchase period in which the shares were purchased and the employee’s purchase price. This amount is reportable as ordinary income even if no profit was realized on the sale of shares or the shares were sold at a loss. Long-term or short-term (depending on the holding period for the shares) capital gain or loss will be recognized in an amount equal to the difference between the proceeds of sale and the employee’s basis in the shares (i.e., the fair market value of the shares on the last business day of the purchase period in which the shares were purchased). The amount reportable as ordinary income for a sale made within two years of the first day of the purchase period pursuant to which the shares were purchased will generally be allowed as a tax deduction to Mercury.

New Plan Benefits

Since participation in the ESPP is voluntary, the benefits or amounts that will be received by or allocated to any individual or group of individuals under the amended and restated ESPP are not determinable.

Required Vote

Approval of the ESPP requires the affirmative “FOR” vote of a majority of the votes cast on the proposal. Unless marked to the contrary, proxies received will be voted “FOR” approval of the ESPP.

Recommendation

The Board of Directors recommends a vote FOR the amendment and restatement of the ESPP.

PROPOSAL 4: ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)

Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, we provide our shareholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.

As described in greater detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of our named executive officers with the interests of our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.

Required Vote

This vote is advisory, which means that the vote on executive compensation is not binding on the company, our Board of Directors, or the Compensation Committee of the Board of Directors. The vote on this resolution is not intended to address any specific element of compensation, but rather relates to the overall compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission. To the extent there is a significant vote against our named executive officer compensation as disclosed in this proxy statement, the Compensation Committee will evaluate whether any actions are necessary to address our shareholders’ concerns.

The affirmative vote of a majority of the shares present or represented and entitled to vote either in person or by proxy is required to approve this Proposal 4.

Accordingly, we ask our shareholders to vote on the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure.”

Recommendation

The Board of Directors recommends a vote “FOR” the approval of the compensation of our named executive officers, as disclosed in this proxy statement.

PROPOSAL 5: RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed KPMG LLP (“KPMG”) as our independent registered public accounting firm for the fiscal year ending June 30, 2016. We are asking shareholders to ratify this appointment. Although ratification by shareholders is not required by law or by our by-laws, the Audit Committee believes that submission of its selection to shareholders is a matter of good corporate governance. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if the Audit Committee believes that such a change would be in the best interests of Mercury and our shareholders. If our shareholders do not ratify the selection of KPMG, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its next selection of an independent registered public accounting firm.

Representatives of KPMG will attend the annual meeting, where they will have the opportunity to make a statement if they wish to do so and will be available to answer questions from shareholders.

Required Vote

Approval of the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2016 requires the affirmative “FOR” vote of a majority of the votes cast on the proposal. Unless marked to the contrary, proxies received will be voted “FOR” approval of the ratification of the appointment.

Recommendation

The Board of Directors recommends a vote “FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2016.

VOTING SECURITIES

Who owns more than 5% of our stock?

On October 20, 2015, there were 34,698,632 shares of our common stock outstanding. On that date, to our knowledge, there were five shareholders who owned beneficially more than 5% of our common stock. The table below contains information, as of the dates noted below, regarding the beneficial ownership of these persons or entities. The “Percent of Class” was calculated using the number of shares of our common stock outstanding as of October 20, 2015. Unless otherwise indicated, we believe that each of the persons or entities listed below has sole voting and investment power with respect to all of the shares of common stock indicated.



Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Class
BlackRock, Inc. (1)	3,103,789	8.9	%
Royce & Associates LLC (2)	2,619,337	7.5
Barrow, Hanley, Mewhinney & Strauss, LLC (3)	2,532,329	7.3
Trigran Investments, Inc. (4)	2,184,877	6.3
The Vanguard Group (5)	2,125,385	6.1


(1)	Based on a Schedule 13G/A filed by Black Rock, Inc. with the SEC on January 12, 2015, reporting beneficial ownership as of December 31, 2014. The reporting entity’s address is 55 East 52^nd Street, New York, New York 10022.


(2)	Based on a Schedule 13G/A filed by Royce & Associates LLC with the SEC on January 15, 2015, reporting beneficial ownership as of December 31, 2014. The reporting entity’s address is 745 Fifth Avenue, New York, New York 10151.


(3)	Based on a Schedule 13G filed by Barrow, Hanley, Mewhinney & Strauss, LLC with the SEC on February 10, 2015, reporting beneficial ownership as of December 31, 2014. The reporting entity’s address is 2200 Ross Avenue, 31^st Floor, Dallas, Texas 75201.


(4)	Based on a Schedule 13G filed by Trigran Investments, Inc. with the SEC on February 13, 2015, reporting beneficial ownership as of December 31, 2014. The reporting entity's address is 630 Dundee Road, Suite 230, Northbrook, IL 60062.


(5)	Based on a Schedule 13G/A filed by Vanguard Group, Inc. with the SEC on February 9, 2015, reporting beneficial ownership as of December 31, 2014. The reporting entity’s address is 100 Vanguard Boulevard, Malvern, PA 19355.

How much stock does each of Mercury’s directors and executive officers own?

The following information is furnished as of October 20, 2015, with respect to common stock beneficially owned by: (1) our directors (including our chief executive officer); (2) our chief financial officer and the three most highly compensated executive officers other than the chief executive officer and the chief financial officer; and (3) all directors and executive officers as a group. Unless otherwise indicated, the individuals named below held sole voting and investment power over the shares listed.



Name and Address of Beneficial Owner*	Number of Shares Beneficially Owned (1)	Percent of Class (1)
Mark Aslett (2)	840,456	2.4	%
James K. Bass (3)	62,002	**
Michael A. Daniels (4)	62,002	**
George K. Muellner (5)	62,002	**
Mark S. Newman (6)	11,831	**
William K. O’Brien (7)	93,668	**
Vincent Vitto (8)	125,668	**
Gerald M. Haines II (9)	231,434	**
Charles A. Speicher (10)	56,969	**
Didier M.C. Thibaud (11)	456,112	1.3
All directors and executive officers as a group (10 persons) (12)	2,002,144	5.7

* The address for each director and executive officer is c/o Mercury Systems, Inc., 201 Riverneck Road, Chelmsford, Massachusetts 01824.

** Less than 1.0%.


(1)	The number and percent of the shares of common stock with respect to each beneficial owner are calculated by assuming that all shares which may be acquired by such person within 60 days of October 20, 2015 are outstanding.


(2)	Includes (a) 338,263 shares owned by Mr. Aslett individually; (b) 200,000 shares which may be acquired by Mr. Aslett within 60 days of October 20, 2015 through the exercise of stock options; and (c) 302,193 restricted shares awarded to Mr. Aslett under our stock-based plans (as to which Mr. Aslett has sole voting power, but which are subject to restrictions on transfer).


(3)	Includes (a) 42,520 shares owned by Mr. Bass individually; (b)15,000 shares which may be acquired by Mr. Bass within 60 days of October 20, 2015 through the exercise of stock options; and (c) 4,482 restricted shares awarded to Mr. Bass under our stock-based plans (as to which Mr. Bass has sole voting power, but which are subject to restrictions on transfer).


(4)	Includes (a) 42,250 shares owned by Mr. Daniels individually; (b) 15,000 shares which may be acquired by Mr. Daniels within 60 days of October 20, 2015 through the exercise of stock options; and (c) 4,482 restricted shares awarded to Mr. Daniels under our stock-based plans (as to which Mr. Daniels has sole voting power, but which are subject to restrictions on transfer).


(5)	Includes (a) 42,250 shares owned by Mr. Muellner individually; (b) 15,000 shares which may be acquired by Mr. Muellner within 60 days of October 20, 2015 through the exercise of stock options; and (c) 4,482 restricted shares awarded to Mr. Muellner under our stock-based plans (as to which Mr. Muellner has sole voting power, but which are subject to restrictions on transfer).


(6)	Includes 11,831 restricted shares awarded to Mr. Newman under our stock-based plans (as to which Mr. Newman has sole voting power, but which are subject to restrictions on transfer).


(7)	Includes (a) 43,186 shares owned by a family trust controlled by Mr. O’Brien; (b) 46,000 shares which may be acquired by Mr. O’Brien within 60 days of October 20, 2015 through the exercise of stock options; and (c) 4,482 restricted shares awarded to Mr. O’Brien under our stock-based plans (as to which Mr. O’Brien has sole voting power, but which are subject to restrictions on transfer).


(8)	Includes (a) 43,186 shares owned by Mr. Vitto individually; (b) 78,000 shares which may be acquired by Mr. Vitto within 60 days of October 20, 2015 through the exercise of stock options; and (c) 4,482 restricted shares awarded to Mr. Vitto under our stock-based plans (as to which Mr. Vitto has sole voting power, but which are subject to restrictions on transfer).


(9)	Includes (a) 114,638 shares owned by Mr. Haines individually; and (b) 116,796 restricted shares awarded to Mr. Haines under our stock-based plans (as to which Mr. Haines has sole voting power, but which are subject to restrictions on transfer).


(10)	Includes (a) 23,801 shares owned by Mr. Speicher individually; and (b) 33,168 restricted shares awarded to Mr. Speicher under our stock-based plans (as to which Mr. Speicher has sole voting power, but which are subject to restrictions on transfer).


(11)	Includes (a) 216,774 shares owned by Mr. Thibaud individually; (b) 107,000 shares which may be acquired by Mr. Thibaud within 60 days of October 20, 2015 through the exercise of stock options; and (c) 132,338 restricted shares awarded to Mr. Thibaud under our stock-based plans (as to which Mr. Thibaud has sole voting power, but which are subject to restrictions on transfer).

(12)

Includes (a) 907,408 shares owned by directors and executive officers individually; (b) 476,000 shares which may be acquired within 60 days of October 20, 2015 through the exercise of stock options; and (c) 618,736 restricted shares awarded to the directors and executive officers under our stock-based plans (as to which each has sole voting power, but which are subject to restrictions on transfer).

EXECUTIVE OFFICERS

Who are Mercury’s executive officers?

As of October 20, 2015, the following persons are our executive officers:



Name		Position
Mark Aslett		President and Chief Executive Officer
Gerald M. Haines II		Executive Vice President, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary
Didier M.C. Thibaud		President, Mercury Commercial Electronics
Charles A. Speicher		Vice President, Controller, Chief Accounting Officer, and Assistant Treasurer

Our executive officers are appointed to office by the Board of Directors at the first board meeting following the Annual Meeting of Shareholders or at other board meetings as appropriate, and hold office until the first board meeting following the next Annual Meeting of Shareholders and until a successor is chosen, subject to prior death, resignation or removal. Information regarding our executive officers as of the date of filing of this proxy statement is presented below.

Mark Aslett, age 47, joined Mercury in 2007 and has served as the President and Chief Executive Officer since that date, and served as a member of the Board since 2007. Prior to joining Mercury, he was Chief Operating Officer and Chief Executive Officer of Enterasys Networks from 2003 to 2006, and held various positions with Marconi plc and its affiliated companies, including Executive Vice President of Marketing, Vice President of Portfolio Management, and President of Marconi Communications-North America, from 1998 to 2002. Mr. Aslett has also held positions at GEC Plessey Telecommunications, as well as other telecommunications-related technology firms.

Gerald M. Haines II, age 52, joined Mercury in 2010 and in September 2014, Mercury appointed Mr. Haines as Executive Vice President, Chief Financial Officer, and Treasurer. Mr. Haines is responsible for the Company's financial and treasury functions. He also oversees Mercury’s legal, security, and various compliance and risk management functions. Prior to joining Mercury in 2010, he served as Executive Vice President at Verenium Corporation, a publicly traded company engaged in the development and commercialization of biofuels and high-performance specialty enzymes, where he played a key role in various corporate development, corporate finance, and joint venturing activities. Previously, Mr. Haines served as Executive Vice President of Strategic Affairs of Enterasys Networks, Inc., a publicly traded network communications company, Senior Vice President of Cabletron Systems, Inc., the predecessor of Enterasys Networks, and Vice President of Applied Extrusion Technologies, a large manufacturer of plastic films and packaging. He began his career at J.P. Morgan. Mr. Haines holds a bachelor's degree in Business Administration, magna cum laude, from Boston University, and a law degree from Cornell Law School.

Didier M.C. Thibaud, age 54, joined Mercury in 1995, and has served as President of our Mercury Commercial Electronics business unit since 2012. Prior to that, he was President of our Advanced Computing Solutions business unit since 2007. Prior to that, he was Senior Vice President, Defense & Commercial Businesses from 2005 to June 2007 and Vice President and General Manager, Imaging and Visualization Solutions Group, from 2000 to 2005 and served in various capacities in sales and marketing from 1995 to 2000.

Charles A. Speicher, age 56, joined Mercury in 2010 as Vice President, Controller, and Chief Accounting Officer. Prior to joining Mercury, Mr. Speicher held various positions at Virtusa Corporation from 2001 to 2010, including Vice President of Global Accounting Operations and Corporate Controller. Mr. Speicher was Corporate Controller at Cerulean Technologies Inc., from 1996 to 2001 prior to its sale to Aether Systems Inc. Mr. Speicher has also held positions with Wyman-Gordon Company, Wang Laboratories and Arthur Andersen & Company, LLP. Mr. Speicher is a CPA licensed in Massachusetts.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Fiscal 2015 Business Review

Fiscal 2015 was another strong year for Mercury Systems. Bookings and backlog reached record levels for the second year in a row, growing 9 percent and 19 percent respectively. Total revenue increased 13 percent from fiscal 2014 to $235 million. Reflecting Mercury’s improved operating leverage as a result of our integration efforts, adjusted EBITDA for fiscal 2015 rose 89% year-over-year, and at 19% of revenue, was in line with our target business model. Mercury generated $32.2 million in cash from operations, compared with $14.2 million in fiscal 2014, and our year-end cash balance grew by more than $30 million to $77.6 million.

Executive Bonus Program

In July 2014, the Compensation Committee established our fiscal 2015 executive bonus program in conjunction with

the Board of Directors approving our fiscal 2015 strategic operating plan. For fiscal 2015, the Compensation Committee targeted total cash compensation (i.e., base salary plus cash bonus opportunity) around the 50th percentile of a composite index of data from our peer group and the Radford Global Technology Survey. For our fiscal 2015 executive bonus program, 80% of the total value is based on achieving corporate financial performance objectives and 20% is for achieving individual management-by-results ("MBR") performance objectives. The corporate financial performance portion of our fiscal 2015 executive bonus plan was split into two halves, with specific financial performance targets addressing the first half and the second half of the fiscal year. Based on the level of performance achieved relative to our fiscal 2015 targets, we paid 100% of the corporate financial performance portion of our executive bonuses for the first half of fiscal 2015 and 98.6% for the second half of fiscal 2015. For the full fiscal year 2015, our adjusted EBITDA nearly doubled compared with fiscal 2014, yielding a payout of 99.3% of the executives' potential payout under the corporate financial performance element of our executive bonus program.

In addition, our executives earned the MBR portion of their annual bonus based upon their individual results measured against their individual goals established by the Compensation Committee. For fiscal 2015, our named executive officers achieved between 91% and 99% of their individual MBR performance goals for fiscal 2015.

Executive Equity Awards

In July 2014, the Compensation Committee approved our fiscal 2015 restricted stock awards. The fiscal 2015 restricted stock awards granted to our named executive officers approximated the 50th percentile of a market composite consensus. Half of our fiscal 2015 executive equity awards were in the form of performance-based restricted shares, with executives earning the awards based on achieving target levels of a ratio of adjusted EBITDA to revenue. For the time-based vesting half of the fiscal 2015 awards, one-third vests on each of the first three anniversaries of the grant date. For the performance-based vesting half of the fiscal 2015 awards, one-third vest or forfeit based on achieving financial goals for the one-year period ending June 30, 2015, one-third vest or forfeit based on achieving financial goals for the two-year period ending June 30, 2016, and one-third vest or forfeit based on achieving a financial goals for the three-year period ending June 30, 2017. The ratio of adjusted EBITDA to revenue for fiscal 2015 was 19%, in line with our target business model and yielding 100% vesting of the 1/3rd of the performance-based restricted stock award that was subject to vest or forfeit based upon the one-year performance period ended on June 30, 2015.

Subsequent to fiscal 2015, we granted restricted stock awards to our named executive officers. The fiscal 2016 restricted stock awards granted to our named executive officers approximated the 50th percentile of a market composite consensus. Each fiscal 2016 restricted stock award for our named executive officers is 50% performance-based vesting and 50% time-based vesting. Two-thirds of these performance-based awards vest or forfeit based on achieving financial goals for the two-year period ending June 30, 2017, and one-third of these awards vest or forfeit based on achieving financial goals for the three-year period ending June 30, 2018. In an effort to address short, medium, and long-term performance objectives and to create an orderly transition toward increased emphasis on multi-year objectives, we are phasing in the use of three-year cliff vesting for performance-based awards and ultimately intend to only use three-year cliff vesting for performance equity starting with the fiscal 2017 performance-based restricted stock award. For the time-based vesting half of the fiscal 2016 awards, one-third vests on each of the first three anniversaries of the grant date.

Compensation Philosophy and Objectives

We use a pay-for-performance system that measures corporate financial and individual management-by results performance and rewards contributions toward our success.

Our executive compensation philosophy is to provide our executives with competitive pay opportunities with actual pay heavily influenced by the attainment of corporate financial and individual management-by-results (“MBR”) performance objectives. Our compensation philosophy is intended to meet the following objectives:


•	offer compensation opportunities that attract highly qualified executives, reward exceptional initiative and achievement, and retain the leadership and skills necessary to build long-term shareholder value; and


•	achieve our short-term and long-term strategic goals and values by aligning compensation with business objectives and individual MBR performance objectives.

To accomplish these objectives, our executive compensation programs are designed to maintain a significant portion of an executive’s total compensation at risk tied to our annual and long-term financial performance.

Our objective is to implement strategies for delivering compensation that are well structured, are competitive with the technology and defense industries, apply pay-for-performance principles, are appropriately aligned with Mercury’s financial goals, and are aligned with our shareholders’ objectives.

We benchmark executive compensation around the 50th percentile compared to peer companies and the Radford Global Technology Survey.

How We Determine Executive Compensation

The Compensation Committee has responsibility for our executive compensation philosophy and the overall design of our executive compensation programs. The Compensation Committee is primarily responsible for setting executive compensation, which in the case of our CEO, is subject to ratification by a majority of the independent directors on the Board. Information about the Compensation Committee, including its composition, responsibilities, and processes, can be found earlier in this proxy statement under “Corporate Governance—What committees has the Board established? – Compensation Committee.”

The compensation of our executive officers is reviewed and approved by the Compensation Committee (with ratification of the CEO’s compensation by a majority of the independent directors on the Board). The Compensation Committee analyzes all elements of compensation separately and in the aggregate. In addition to evaluating our executives’ contribution and performance in light of corporate financial and individual MBR performance objectives, we also base our compensation decisions on market considerations. The Compensation Committee benchmarks our cash and equity incentive compensation against programs available to employees in comparable roles at peer companies and the Radford Global Technology Survey.

The Compensation Committee has engaged the services of Radford, an Aon Consulting company, as an independent compensation consultant. Radford assists the Compensation Committee in, among other things, applying our compensation philosophy for our executive officers and non-employee directors, analyzing current compensation conditions in the marketplace generally and among our peers specifically, and assessing the competitiveness and appropriateness of compensation levels for our executive officers. Representatives of Radford periodically attend meetings of the Compensation Committee, both with and without members of management present, and interact with members of our human resources department with respect to its assessment of the compensation for our executive officers. In addition, Radford may assist management in analyzing the compensation of our non-executive employees. For fiscal 2015, Radford’s services included providing compensation survey data for non-employee directors, executives, and non-executive employees. The Compensation Committee's expenditures for Radford were $57,953 for fiscal 2015. For fiscal 2015, the Company's human resources department expended $22,525 for Radford market surveys for non-executive employees and selected job match to market requests. For non-executive employees, management also uses a second compensation consultant to provide market compensation data.

In connection with its benchmarking efforts, the Compensation Committee uses data included in the Radford Global Technology Survey and also specific peer group data. The Compensation Committee annually reviews the companies included in the peer group and adds or removes companies as necessary to ensure that the peer group comparisons are meaningful.

The Compensation Committee used the following peer group in its determination of total compensation for fiscal 2015:



Aeroflex Holding Corp.	Comtech Telecommunications Corp.	KEYW Holdings Corporation
AeroVironment, Inc.	Cray, Inc.	KVH Industries, Inc.
American Science and Engineering	Digital Globe, Inc.	NCI, Inc.
Analogic Corporation	Ducommun Incorporated	Radisys Corporation
Anaren, Inc.	Electro Scientific Industries, Inc.	Sonus Networks, Inc.
API Technologies Corp.	Globecomm Systems Inc.	Symmetricom, Inc.
CalAmp Corp.	iRobot Corporation

During fiscal 2015, Radford assisted us in reviewing our peer group. We retained the same peer group with the following exceptions:


•	we removed Aeroflex Holding Corp., Anaren, Inc., Globecomm Systems Inc., and Symmetricom, Inc. from our peer group due to M&A transactions by those companies; and


•	we added Digi International Inc. and M/A-COM Technology Solutions Holdings, Inc. to our peer group.

Data with respect to the updated peer group listed below and the Radford Global Technology Survey was considered by the Compensation Committee in determining the equity awards for August 2015 (fiscal 2016).



AeroVironment, Inc.	Cray, Inc.	KEYW Holdings Corporation
American Science and Engineering	Digi International, Inc.	KVH Industries, Inc.
Analogic Corporation	Digital Globe, Inc.	M/A-COM Technology Solutions Holdings, Inc.
API Technologies Corp.	Ducommun Incorporated	NCI, Inc.
CalAmp Corp.	Electro Scientific Industries, Inc.	Radisys Corporation
Comtech Telecommunications Corp.	iRobot Corporation	Sonus Networks, Inc.

In selecting our peer group, the Compensation Committee focused on company size (as indicated by revenue, number of employees, and market capitalization) and on industries similar to Mercury’s target markets.

In particular, the Compensation Committee reviewed the following elements of compensation against the benchmarking data:


•	base salary;


•	target bonus;


•	total target cash compensation (i.e., base salary plus target bonus);


•	target long-term incentive compensation, which consists of equity awards; and


•	target total direct compensation (i.e., target cash plus target long-term incentive compensation).

Each such element of compensation was compared to peer group data at the 25^th, 50^th, and 75^th percentiles. The peer group used for fiscal 2015 consisted of a blend of public technology and defense companies with revenues generally between $100 million and $400 million.

The Radford Global Technology Survey data and peer group data, as applicable, were reviewed together to form a final market data point. All forms of compensation were then evaluated relative to the market median. Individual compensation pay levels may vary based on individual performance and other considerations, including an executive’s relative experience in a new position, the initial compensation levels required to attract qualified new hires, and the compensation levels required to retain highly qualified executives.

The Compensation Committee evaluated the benchmarking data in connection with its determination of compensation levels for fiscal 2015. The data from this benchmarking indicated that each of base salary, target bonus as a percentage of base salary, total target cash compensation, target long-term incentive compensation, and total target direct compensation for our named executive officers was generally positioned at the market 50th percentile.

We base our total compensation program not only on the application of corporate financial and individual MBR performance considerations and competitive positioning against our peer group, but also through the application of CEO and Compensation Committee judgment. Our Board of Directors reserves the right to determine payouts under the portion of the CEO’s annual

executive bonus tied to individual MBR performance objectives without regard to previously-established goals if changes in Mercury’s business or strategy or other extenuating circumstances warrant such decision in the Board’s judgment. The CEO is afforded similar discretion in recommending bonus payouts tied to individual MBR performance objectives for our other executive officers.

Our Elements of Total Compensation

Our total compensation program consists of fixed elements, such as base salary and benefits, and variable performance-based elements, such as annual and long-term incentives. Our fixed compensation elements are designed to provide a stable source of income and financial security to our executives. Our variable performance-based elements are designed to reward performance at two levels: (1) individual MBR performance; and (2) corporate financial performance compared to business goals.

We compensate our executives principally through base salary, performance-based cash bonuses, and time and performance-based equity awards. The objective of this approach is to remain competitive with other companies in the same market for executive talent, while ensuring that our executives are given the appropriate incentives to deliver financial results. The Compensation Committee has chosen to put a substantial portion of each executive’s total compensation at risk, contingent upon the achievement of our annual strategic operating plan for performance-based cash bonuses and our long term business model for performance-based equity awards.

Base salaries, target bonuses, and equity awards for our executive officers (other than the CEO) are set by the Compensation Committee following its review and approval of recommendations from the CEO. For the CEO, these elements of compensation are set by the Compensation Committee, and are subject to ratification by a majority of independent directors on the Board.

Base Salary

The Compensation Committee targets base salaries around the 50th percentile of a composite index of data from our peer group and the Radford Global Technology Survey. In addition, when the Compensation Committee annually considers executive base salaries, it takes into account each executive’s role and level of responsibility.

For fiscal 2015, effective October 1, 2014, we increased the base salaries for each of our named executive officers by 3%. For fiscal 2016, effective, October 1, 2015, we increased the base salaries for each of our named executive officers by 3%. These increases were consistent with market conditions.

A portion of Mr. Thibaud’s salary is paid in Euros. The salary column in the Summary Compensation Table reflects the conversion of each monthly payment from Euros into U.S. Dollars (USD) based on the average conversion rate between Euros and USD for such month.

Executive Bonus Program

The Compensation Committee targets total cash compensation (i.e., base salary plus cash bonus opportunity) around the 50th percentile of a composite index of data from our peer group and the Radford Global Technology Survey. Our executive bonus program is a variable performance-based element of our overall compensation program. This bonus program provides the potential for additional cash compensation for our executive officers based on achieving the corporate financial performance goals contained in the annual strategic operating plan that is approved by our Board of Directors in the first month of the fiscal year, as well as individual MBR performance goals. Participants in the program are senior executives who have a strategic function and are recommended by the CEO to the Compensation Committee for participation in the program. In general, executives with the highest level and amount of responsibility have the highest percentage of their total target compensation at risk. This program consists of two elements: (1) target bonuses; and (2) potential over-achievement awards. Each executive officer’s target bonus is determined based on position, responsibilities, and total target cash compensation, and may be subject to change from year to year. In addition, each executive officer’s over-achievement award is determined based on actual adjusted EBITDA (defined below) exceeding budgeted adjusted EBITDA for the fiscal year and the Company meeting or exceeding a threshold revenue target for the fiscal year.

Adjusted EBITDA is a non-GAAP measure and all references to actual adjusted EBITDA in this Compensation Discussion and Analysis refer to such non-GAAP measure. As used in the executive bonus plan, adjusted EBITDA includes net income (loss) (prior to the impact, if any, of a payout of any potential overachievement award) and is adjusted for the following: interest income and expense; income taxes; depreciation; amortization of acquired intangible assets; restructuring and other charges; impairment of long-lived assets; acquisition and financing costs; fair value adjustments from purchase accounting; and stock-based compensation expense. Because the executive bonus plan calls for a comparison of actual adjusted EBITDA to budgeted adjusted EBITDA for the fiscal year, the operating impact of one or more acquisitions occurring during a fiscal year (which may not have been included in the budget) may be included in the calculation of actual adjusted EBITDA only if all costs related to such acquisition(s) are included as well. In this way, plan participants cannot benefit from acquisition activities by excluding the transaction-related costs associated

with the acquisition, and are also not penalized by an acquisition occurring part way through a fiscal year when the partial-year operating results of the acquisition may not be sufficient to cover such transaction-related costs.

The following table indicates for fiscal 2015: (1) the target bonus for each named executive officer as a percentage of his base salary; (2) the percentage of the target bonus tied to corporate financial performance objectives; and (3) the percentage of the target bonus tied to individual MBR performance objectives.



Named Executive Officer and Title	Target Bonus as a Percentage of Base Salary		Portion Related to Corporate Financial Performance Objectives		Portion Related to Individual MBR Performance Objectives
Mark Aslett, President and Chief Executive Officer	100	%	80	%	20	%
Gerald M. Haines II, EVP, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary	60		80		20
Didier M.C. Thibaud, President, Mercury Commercial Electronics	60		80		20
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	40		80		20

For all of our named executive officers, we allocate a majority of their bonus potential to the achievement of overall corporate financial performance objectives, which are based on the achievement of an adjusted EBITDA target in our strategic operating plan for the fiscal year as well as meeting or exceeding a revenue threshold target for over-achievement awards.

Corporate Financial Performance Objectives

As part of our fiscal 2015 strategic operating plan, we set the financial portion of our executive bonus plan for fiscal 2015 at the July 2014 meeting of the Board of Directors. Payouts for corporate financial performance for fiscal 2015 were based on objectives for the fiscal year broken into the first and second half of the year and were subject to the following payout formulas:

Fiscal 2015 First Half Payout Formula

(July 1, 2014 - December 31, 2014)



Adjusted EBITDA Target (for first half of fiscal year)	Percentage to be Paid for Bonus	Threshold, Target, and Maximum
$15.734 million (base financial plan)	75%	Threshold
Greater than $15.734 million but less than $17.96 million	Proportionate % between 75% and 100%	—
$17.96 million (probable financial plan)	100%	Target
Greater than $17.96 million	100%	Maximum

Fiscal 2015 Second Half Payout Formula

(January 1, 2015 - June 30, 2015)



Adjusted EBITDA Target (for second half of fiscal year)	Percentage to be Paid for Bonus	Threshold, Target, and Maximum
$20.873 million (base financial plan)	75%	Threshold
Greater than $20.873 million but less than $27.052 million	Proportionate % between 75% and 100%	—
$27.052 million (probable financial plan)	100%	Target
Greater than $27.052 million	100%	Maximum

The Compensation Committee reserves the right to vary from year to year the percentages of the target corporate bonus earned upon achievement of the threshold, target, and maximum adjusted EBITDA objectives.

Our executive officers earned payouts at 100% and 98.6%, respectively, of their first half and second half target corporate financial performance bonuses for fiscal 2015, yielding a 99.3% average corporate financial performance bonus payout for full year fiscal 2015.

Over-Achievement Awards

Each executive officer’s potential over-achievement award for fiscal 2015 was based on the executive’s share of any over-achievement award pool. The percentage of the over-achievement award pool granted to an executive is the same percentage as the individual executive’s participation in the executive bonus program relative to the total size of the executive bonus program for the fiscal year. The size of any over-achievement award pool is determined based on the amount by which actual adjusted EBITDA exceeded budgeted adjusted EBITDA of $45.012 million. The potential over-achievement award pool for fiscal 2015 was 25% of the amount, if any, by which actual adjusted EBITDA exceeded $45.012 million.

In order to earn an over-achievement award in fiscal 2015, the Company had to satisfy a $240.0 million revenue target and actual adjusted EBITDA had to exceed $45.012 million. Because actual revenue and adjusted EBITDA did not exceed their respective targets, there was no over-achievement award pool for fiscal 2015.

To aid executive retention, 50% of any over-achievement award earned is banked and paid out annually over a three-year period. Banked over-achievement awards are forfeited if the executive is terminated for cause or resigns without good reason and are paid if the executive is terminated without cause, resigns for good reason, leaves pursuant to a planned retirement, or dies.

Individual MBR Performance Objectives

Individual MBR performance objectives for our executive officers (other than the CEO) are initially recommended by our CEO after consultation with the affected executive officers and reviewed and approved by the Compensation Committee. These individual MBR performance objectives are intended to focus the executive’s actions for the following fiscal year in line with our strategic operating plan. At the end of the fiscal year, the CEO measures individual achievement for an executive officer by comparing actual performance of the executive to the previously established goals. The CEO is permitted to change an executive officer’s individual MBR performance objectives, or recommend a payout without regard to previously-established goals, if changes in Mercury’s business or strategy or other extenuating circumstances warrant such decision in the CEO’s judgment. No such changes were made during fiscal 2015 for our named executive officers, other than for Mr. Haines, whose MBR performance objectives were amended in connection with his appointment as Chief Financial Officer during fiscal 2015. At the end of the fiscal year, the CEO reports to the Compensation Committee on the executive officers’ achievement of individual MBR performance objectives, and the Compensation Committee reviews and approves the payout of the individual MBR performance objective bonuses to our executive officers (other than the CEO), based on the CEO’s recommendation.

Individual MBR performance objectives for our CEO are established by the independent directors on the Board of Directors upon the recommendation of the Compensation Committee. At the end of the fiscal year, all of the independent directors evaluate the CEO’s performance in light of the previously-established goals, and based on that review, the Compensation Committee approves the payout of the CEO’s individual MBR performance objective bonus, which is subject to ratification by a majority of the independent directors on our Board.

Set forth below are the specific individual MBR performance objectives for our named executive officers for fiscal 2015.

Mark Aslett, President and Chief Executive Officer. The individual MBR performance objectives for Mr. Aslett established by the independent directors on the Board of Directors, upon the recommendation of the Compensation Committee, were as follows:


•	Grow our defense business - increase total bookings, grow the value of new design wins, continue RF/microwave content expansion with prime defense contractors, drive growth in our electronic warfare business, and our grow secure processing business with prime defense contractors and the U.S. Department of Defense (20% of individual MBR bonus potential);


•	Prioritize innovation investments that matter - pursue innovation in OpenRFM architectures, expand product leadership in secure processing, deliver Filthy Buzzard DRFM, deliver SEWIP Block II content expansion opportunities, and deliver new electronic warfare products (20% of individual MBR bonus potential);


•	Profitably grow and scale our services and systems capabilities - pursue continuous improvement in RF/microwave engineering and manufacturing processes, create a unified program management capability, enhance cost compliance systems, and enhance cyber security and insider threat detection (20% of individual MBR bonus potential);


•	Excel at customer intimacy and quality across the organization - continue deployment of strategic account sales model, improve executive sponsorship for key accounts, and build business development and raise awareness of our secure

processing and electronic warfare capabilities (20% of individual MBR bonus potential);


•	Evolve our organization model, develop people, and drive culture and values - recruit a Corporate Development Senior Vice President and successfully transition key leadership roles as and when appropriate (10% of individual MBR bonus potential); and


•	Drive shareholder value creation - maintain pace of investor conferences and non-deal roadshows, articulate our long term strategy and growth plan, increase the proportion of long-only investors, increase sell-side analyst coverage, and a file a new universal shelf registration statement with the U.S. Securities and Exchange Commission (10% of individual MBR bonus potential).

Gerald M. Haines II, Executive Vice President, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary. The individual MBR performance objectives for Mr. Haines approved by the Compensation Committee, upon the recommendation of the CEO, were as follows:

•

Finance and accounting - seamlessly transition to Chief Financial Officer function, divest our Mercury Intelligence Systems business unit, renew our universal shelf registration statement, recruit additional sell-side analysts, implement and integrate accounting systems and processes across all locations, structure and implement transaction financing as needed, and provide transaction support and execution as needed (30% of individual MBR bonus potential);


•	Managerial and cost compliance accounting - drive margin improvement program and implement enhanced protocols and infrastructure supporting cost accounting (30% of individual MBR bonus potential);


•	Trade compliance - establish protocols to address pending changes to export control regulatory structure, update trade compliance training, hire additional resource to supplement trade compliance capabilities, and maintain corporate center of excellence with hub and spoke model (20% of individual MBR bonus potential); and

•

Security program - shift emphasis of security program from tactical education and ratings improvement to more strategic, proactive integration with business, develop and roll out comprehensive updated systems and information security plan in collaboration with IT, institutionalize security ratings support across sites, update comprehensive security training program, and renew emphasis on counter-intelligence capabilities (20% of individual MBR bonus potential).

Didier M.C. Thibaud, President, Mercury Commercial Electronics. The individual MBR performance objectives for Mr. Thibaud approved by the Compensation Committee, upon the recommendation of the CEO, were as follows:


•	Growth: increase bookings on major programs - achieve our bookings growth plan, maintain our leadership position in radar, expand into battle management opportunities, and drive growth in secure processing (20% of individual MBR bonus potential);


•	Innovation: optimize R&D spending on major programs - pioneer the notion of a preferred supplier in secure processing, deliver a new OpenRFM product, and further penetrate electronic warfare and electronic attack markets (20% of individual MBR bonus potential);


•	Profitability: improve direct margin and gross margin - reduce direct cost and OCOGS, drive efficiency at the Advanced Microelectronics Center, enable RFMS growth, and drive enterprise wide improvements in inventory turns (20% of individual MBR bonus potential);


•	Excel at customer intimacy - maintain status with our top customers, achieve our on time delivery goals, and reinforce relationships with key customer contacts (20% of individual MBR bonus potential); and


•	Evolve our organization model and develop our people, culture, and values - establish new RF/microwave organization around key functions, develop our business development organization, hire key talent in integrated product security, move program management to manage the bid to delivery to support process, and develop and retain key talent (20% of individual MBR bonus potential).

Charles A. Speicher, Vice President, Controller, Chief Accounting Officer, and Assistant Treasurer. The individual MBR performance objectives for Mr. Speicher approved by the Compensation Committee, upon the recommendation of the CEO, were as follows:


•	Provide business systems integration support - support the migration to Oracle of remaining sites on legacy platform, start the systems migration to enhance cost accounting reporting, and support Sarbanes-Oxley controls updates for the above systems changes (30% of individual MBR bonus potential);


•	Provide support for divestiture of Mercury Intelligence Systems - provide accounting and financial support for planned divestiture of the Mercury Intelligence Systems business unit, including preparation of financial statements and forecasts and related disclosures (30% of individual MBR bonus potential);


•	Develop organizational plans to align functional and business unit priorities - align finance and operating management processes to achieve fiscal 2015 cash flow plan and roll out and conduct accounting training curriculum with emphasis on use of the Oracle toolset for relevant business unit personnel (20% of individual MBR bonus potential); and


•	Enhance the development of finance expertise and talent - complete R&D tax study to substantiate R&D tax credits and complete managerial training for personnel with expanding managerial responsibilities (20% of individual MBR bonus potential).

Our named executive officers satisfied their individual MBR performance objectives as follows: Mr. Aslett, 96%; Mr. Haines, 94%; Mr. Thibaud, 91%; and Mr. Speicher 99%.

Departure of Kevin M. Bisson During Fiscal 2015

Effective as of the close of business on September 3, 2014, Kevin M. Bisson vacated the position of Senior Vice President, Chief Financial Officer, and Treasurer. Mr. Bisson was entitled to the severance benefits under his letter agreement with the Company on the basis of an involuntary termination by the Company without cause as described in further detail below.

Appointment of Gerald M. Haines II as Executive Vice President and Chief Financial Officer During Fiscal 2015

Effective as of the close of business on September 3, 2014, we appointed Gerald M. Haines II as Executive Vice President, Chief Financial Officer, and Treasurer. In connection with the assumption of his new responsibilities, Mr. Haines received a restricted stock award for 35,000 shares under our 2005 Stock Incentive Plan. This restricted stock award has the same vesting characteristics as the Company’s fiscal 2015 annual grant for its named executive officers discussed below.

Executive Bonus Program for Fiscal 2016

For fiscal 2016, the target bonus as a percentage of base salary for the CEO under the executive bonus program will be 100%; for the President of Mercury Commercial Electronics and the Executive Vice President and Chief Financial Officer will be 60%; and for the Vice President, Controller, and Chief Accounting Officer will be 40%. Also, for fiscal 2016, to better align incentive compensation with specific, objective corporate performance measures, the bonus components for our executive officers will be 80% for corporate financial performance objectives and 20% for individual MBR performance objectives. As used in the fiscal 2016 executive bonus plan, adjusted EBITDA includes income (loss) from continuing operations (prior to the impact, if any, of a payout of any potential overachievement award) and is adjusted for the following: interest income and expense; income taxes; depreciation; amortization of acquired intangible assets; restructuring and other charges; impairment of long-lived assets; acquisition and financing costs; fair value adjustments from purchase accounting; and stock-based compensation expense.

Equity Compensation

We believe that compensation in the form of Mercury stock should be a significant portion of our executive officers’ total compensation. Equity compensation creates a unique link between the creation of shareholder value and an executive’s long-term wealth accumulation opportunity. Our 2005 Plan allows for several types of equity instruments, including stock options, stock appreciation rights, restricted stock, and deferred stock awards. The Compensation Committee determines which instruments to use on a grant-by-grant basis. When approving equity awards for an executive officer, the Compensation Committee considers the executive’s current contribution to Mercury, the anticipated contribution to meeting Mercury’s long-term strategic performance goals, and industry practices and norms. Long-term incentives granted in prior years, existing levels of stock ownership by executive officers, and aggregate grants to all executive officers are also taken into consideration.

In considering the executive’s current contribution to Mercury, the Compensation Committee reviews the executive’s role within Mercury, the contribution that the executive is currently making to Mercury, the results achieved by the executive, and input

from the CEO with respect to executive officers other than the CEO. In general, executives with higher levels and amounts of responsibility receive larger equity awards. As a result, the CEO, CFO, and business unit leaders tend to have larger equity awards than our other executives.

In terms of the executive’s anticipated contribution to meeting long-term strategic performance goals, the Compensation Committee reviews the potential role of the executive in achieving the long-term strategic goals set forth in our strategic operating plan, again with input from the CEO with respect to executives other than the CEO. The Compensation Committee considers the incentive and retention value that equity awards may provide.

Finally, the Compensation Committee reviews proposed equity awards to executives against benchmarking and peer group data. The Compensation Committee believes that equity awards create an incentive in addition to the executive bonus program in order to attract and retain senior executives who would contribute to our future success. As a result, the Compensation Committee intends for equity awards to executives as part of their long-term incentive compensation to generally be in line with industry practices and norms, both in terms of the type of equity award (e.g., stock options versus restricted stock) and the amount of the award.

The Compensation Committee has adopted an equity compensation awards policy that describes how equity awards are granted. Awards are granted by the Compensation Committee, subject to the following:


•	any award granted to the CEO is subject to ratification by a majority of the independent directors on the Board; and


•	the Compensation Committee may delegate to the CEO the authority to grant awards to other employees (other than our executive officers or other persons deemed to be “covered employees” within the meaning of Section 162(m) of the Code), subject to guidelines that are included in any such delegation.

The equity compensation awards policy provides pre-established monthly grant dates for new hires, as well as quarterly grant dates. New-hire grants are made with an effective date of the 15^th of each month following the date of hire, or if not a business day, the next succeeding business day. Quarterly grants are made with an effective date of the 15^th of February, May, August, or November, or if not a business day, then the next succeeding business day. Awards are made on these pre-established dates regardless of whether the Compensation Committee, the Board, or the CEO is then in possession of material, non-public information. This policy is not intended to time the grant of equity awards in coordination with such information.

Under the equity compensation awards policy, the Compensation Committee may also grant equity awards having an effective date other than a pre-established new-hire or quarterly grant date if the committee determines in good faith that such award is advisable and in the best interests of Mercury and so long as the committee believes, in good faith, that neither the members of the committee nor the grantee is then in possession of material, non-public information concerning Mercury. Grants are made by the Compensation Committee only at a meeting of the committee, which must occur on or prior to (but not after) the grant date applicable to such awards. Grants to the CEO are ratified by the independent directors only at a meeting of the Board, which must occur on or prior to (but not after) the grant date applicable to such award. Grants made by the CEO pursuant to delegated authority are evidenced by a grant document that must be signed and dated by the CEO on or prior to (but not after) the grant date applicable to such awards.

Fiscal 2015 Equity Awards

The fiscal 2015 restricted stock awards granted to our named executive officers approximated the 50th percentile of a market composite consensus consisting of the Company's named peer group and compensation survey data from the Radford Global Technology Survey of public high technology companies with revenue levels generally between $100 million and $400 million.

The fiscal 2015 restricted stock awards to our named executive officers were: Mr. Aslett, 95,000 restricted shares; Mr. Haines, 35,000 restricted shares; Mr. Speicher, 10,000 restricted shares; and Mr. Thibaud, 40,000 restricted shares. In addition, Mr. Haines received a supplemental restricted stock award for 35,000 shares on September 3, 2014 in connection with his appointment to the position of Executive Vice President and Chief Financial Officer. For fiscal 2015, the Compensation Committee granted equity awards for a fixed number of shares (rather than a fixed dollar amount) for each individual grant. The grant date of the fiscal 2015 equity awards was August 15, 2014, other than the supplemental equity award to Mr. Haines which was granted on September 3, 2014.

Effective for fiscal 2015, we used a mix of performance-based equity and time-based equity as part of our overall effort to align incentive compensation with specific corporate performance metrics. Each fiscal 2015 restricted stock award for our named executive officers is 50% performance-based vesting and 50% time-based vesting. For the performance-based vesting half of each award, the executive earns the award based on achieving target levels of a ratio of adjusted EBITDA to revenue for the relevant performance period. Our performance-based equity awards use a different performance measure than our fiscal 2015 executive bonus program. One-third of the performance-based awards vest or forfeit based on achieving financial goals for the one-year period

ending June 30, 2015, one-third vest or forfeit based on achieving financial goals for the two-year period ending June 30, 2016, and one-third vest or forfeit based on achieving a financial goals for the three-year period ending June 30, 2017. For the time-based vesting half of the fiscal 2015 awards, one-third vests on each of the first three anniversaries of the grant date.

Fiscal 2015 Restricted Stock Awards



Named Executive Officer and Title	Performance-Based Restricted Shares (# of shares) (1)	Time-Based Restricted Shares (# of shares)	Total (# of shares)
Mark Aslett, President and Chief Executive Officer	47,500	47,500	95,000
Gerald M. Haines II, EVP, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary (2)	35,000	35,000	70,000
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	5,000	5,000	10,000
Didier M.C. Thibaud, President, Mercury Commercial Electronics	20,000	20,000	40,000

(1) The number of performance-based restricted shares in the table above reflects the maximum number of shares that the executive could earn for all performance periods. The actual shares earned could be zero or a fraction of these amounts; however, the executive cannot earn more than the amounts reflected above.

(2) The number of shares includes 35,000 shares granted to Mr. Haines on August 15, 2014 as an annual restricted stock award plus a supplemental 35,000 shares awarded to Mr. Haines on September 3, 2014 upon his appointment to the position of Executive Vice President, Chief Financial Officer, and Treasurer.

These equity grants were made based on the Compensation Committee’s assessment of both competitive annual grant levels and its determination of retention needs reflected by the pre-existing unvested long-term incentive awards previously granted to the executives.

Vesting for the first 1/3rd of the performance-based restricted shares granted in fiscal 2015 was subject to the following vesting formula:

Vesting Formula for Performance-Based Restricted Shares

with a Fiscal 2015 Performance Period



Ratio of Adjusted EBITDA/ Revenue for Fiscal 2015	Vesting %	Threshold, Target, and Maximum
Less than 12%	—%	Below Threshold
Equal to 12%	66.67%	Threshold
Between 12% and 18%	Straight line interpolation between 66.67% and 100%
Equal to 18%	100%	Target and Cap
Greater than 18%	100%	Capped at 100%

The ratio of adjusted EBITDA to revenue for fiscal 2015 was 19%, yielding 100% vesting of the 1/3rd of the performance-based restricted stock award that was subject to vest or forfeit on August 15, 2015.

Fiscal 2016 Equity Awards

Subsequent to fiscal 2015, we granted restricted stock awards to our named executive officers. The fiscal 2016 restricted stock awards granted to our named executive officers approximated the 50th percentile of a market composite consensus consisting of the Company's named peer group and compensation survey data from the Radford Global Technology Survey of public high technology companies with revenue levels generally between $100 million and $400 million.

The fiscal 2016 restricted stock awards to our named executive officers were: Mr. Aslett, 90,894 restricted shares; Mr. Haines, 27,268 restricted shares; Mr. Speicher, 13,634 restricted shares; and Mr. Thibaud, 27,268 restricted shares. Since these awards occurred during fiscal 2016, they are not reflected in the Outstanding Equity Awards at Fiscal Year-End Table for fiscal 2015 included in this proxy statement. The number of shares awarded for the executive grant effective as of August 17, 2015 for each named executive officer was determined by dividing the dollar value fixed for such executive grant by the average closing price of Mercury common stock during the 30 calendar days prior to August 17, 2015. The grant date of the fiscal 2016 equity awards was August 17, 2015.

Each fiscal 2016 restricted stock award for our named executive officers is 50% performance-based vesting and 50% time-based vesting. For the performance-based vesting half of each award, the executive earns the award based on achieving target levels of a ratio of adjusted EBITDA to revenue for the relevant performance period. Our performance-based equity awards use a different performance measure than our fiscal 2016 executive bonus program. Two-thirds of the performance-based awards vest or forfeit based on achieving financial goals for the two-year period ending June 30, 2017, and one-third of the award vests or forfeits based on achieving financial goals for the three-year period ending June 30, 2018. In an effort to address short, medium, and long-term performance objectives and to create an orderly transition toward increased emphasis on multi-year objectives, we are phasing in the use of three-year cliff vesting for performance-based awards and ultimately intend to only use three-year cliff vesting for performance equity starting with the fiscal 2017 performance-based restricted stock award. For the time-based vesting half of the fiscal 2016 awards, one-third vests on each of the first three anniversaries of the grant date.

Fiscal 2016 Restricted Stock Awards



Named Executive Officer and Title	Performance-Based Restricted Shares (# of shares) (1)	Time-Based Restricted Shares (# of shares)	Total (# of shares)
Mark Aslett, President and Chief Executive Officer	45,447	45,447	90,894
Gerald M. Haines II, EVP, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary	13,634	13,634	27,268
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	6,817	6,817	13,634
Didier M.C. Thibaud, President, Mercury Commercial Electronics	13,634	13,634	27,268

Fiscal Year 2015-2017 Equity Burn Rate Commitment

In connection with the approval by shareholders of the amendment and restatement of our 2005 Stock Incentive Plan at the 2014 Annual Meeting of Shareholders, our Board of Directors committed to our shareholders that for fiscal years 2015 through 2017, we will not grant during such three fiscal years a number of shares subject to options or stock awards to employees or non-employee directors, such that the average number of shares granted in each of such fiscal years over such three-year period is greater than 5.49% of the weighted average number of shares of our common stock that were outstanding at the end of each of such three fiscal years. This limitation does not apply to awards settled in cash as opposed to the delivery of shares of our common stock, awards under plans assumed in acquisitions, and issuances under tax-qualified employee stock purchase plans and certain other tax-qualified plans. For purposes of calculating the number of shares granted in a fiscal year with respect to this commitment, for full-value equity awards such as restricted stock grants, each full-value share granted counts as 2.0 stock option shares under our 2005 Stock Incentive Plan.

Employee Benefits

We offer employee benefit programs that are intended to provide financial protection and security for our employees and to reward them for the total commitment we expect from them in service to Mercury. All of our named executive officers are eligible to participate in these programs on the same basis as our other employees. These benefits include the following: (1) medical, dental, and vision insurance, with employees sharing a percentage of the cost that may be adjusted from year to year; (2) company-paid group life and accident insurance of one times base salary (up to $350,000); (3) employee-paid supplemental group life and accident insurance up to five times base salary (overall combined basic company-paid insurance plus supplemental insurance is $750,000); (4) short- and long-term disability insurance; (5) a qualified 401(k) retirement savings plan with a 50% company match up to 6% of base pay as contributed by the individual to the 401(k) plan (subject to IRS limits on contributions); and (6) an employee stock purchase plan, which entitles participants to purchase our common stock at a 15% discount.

Perquisites and Personal Benefits

We provide our executive officers with up to $2,000 annually for personal tax and financial planning services.

Employment and Severance Agreements

We have entered into an employment agreement with Mr. Aslett and severance agreements with Messrs. Bisson and Haines, each as described below. The Compensation Committee consulted with Radford regarding the market parameters of similar compensation arrangements for executive officers in connection with entering into these agreements.

We entered into an employment agreement with Mr. Aslett in connection with his appointment as CEO in November 2007. Given the highly competitive market for executive talent, we believe that it was appropriate to enter into this agreement with Mr. Aslett in order to induce him to join our company. The agreement is intended to provide Mr. Aslett with certainty regarding his compensation so that he can attend to his assigned duties without distraction, while also allowing us flexibility to design a compensation program for Mr. Aslett based on our “pay-for-performance” philosophy. The agreement provides for an 18-month term, with one-year renewal periods. The employment agreement provides that Mr. Aslett will receive an initial annual base salary of $500,000 (subject to annual review by the Board), and that he will be eligible to participate in our executive bonus program in an amount determined by the Board. The employment agreement also provides for termination and severance benefits in the case of a termination of Mr. Aslett’s employment by us without “cause” or by Mr. Aslett for “good reason.”

For more details, please refer to “Agreements with Named Executive Officers.”

Change in Control Severance Agreements

We recognize that Mercury, as a publicly-traded company, may become the target of a proposal which could result in a change in control, and that such possibility and the uncertainty and questions which such a proposal may raise among management could cause our executive officers to leave or could distract them in the performance of their duties, to the detriment of Mercury and our shareholders. Our named executive officers have agreements intended to reinforce and encourage the continued attention of our executives to their assigned duties without distraction and to ensure the continued availability to Mercury of each of our executives in the event of a proposed change in control transaction. We believe that these objectives are in the best interests of Mercury and our shareholders. Provisions of these agreements relating to termination and change in control are summarized under “Potential Payments to Named Executive Officers upon Termination of Employment Following a Change in Control.”

Tax Deductibility of Compensation

Section 162(m) of the Code limits the deduction a public company is permitted for compensation paid to the CEO and to the three most highly compensated executive officers other than the CEO and CFO. Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan which is performance related, is non-discretionary, and has been approved by our shareholders. In its deliberations, the Compensation Committee considers ways to maximize deductibility of executive compensation, but, other than as discussed below, retains the discretion to compensate executive officers at levels the Compensation Committee considers commensurate with their responsibilities and achievements. During fiscal year 2014, the Compensation Committee adopted, and our shareholders approved, our Executive Bonus Plan—Corporate Financial Performance that is designed to be Section 162(m) compliant. As such, payments under this plan, which are based on the achievement of objective corporate financial targets, should be excluded from the $1,000,000 limitation under Section 162(m). Effective for fiscal 2015, the performance-based restricted share awards should also be excluded from the $1,000,000 limitation under Section 162(m).

How were the executive officers compensated for fiscal 2013, 2014, and 2015?

The following table sets forth all compensation paid to our Chief Executive Officer, our Chief Financial Officer, and each of our other three most highly compensated executive officers, who are collectively referred to as the “named executive officers,” for the last three fiscal years.

Summary Compensation Table



Name and Principal Position	Fiscal Year	Salary		Bonus	Stock Awards (1)		Option Awards	Non-Equity Incentive Plan Compensation (2)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings (3)		All Other Compensation (4)		Total
Mark Aslett President and Chief Executive Officer	2015	$	510,962	—	$	1,083,950	—	$	503,847	$	—	$	10,100	$	2,108,859
	2014	500,000		—	1,131,146		—	391,375		—		9,800		2,032,321
	2013	500,000		—	3,003,604		—	275,875		—		7,500		3,786,979
Kevin M. Bisson (5) Former SVP, Chief Financial Officer, and Treasurer	2015	65,577		—	—		—	—		—		360,366		425,943
	2014	310,000		—	407,211		—	145,592		—		8,977		871,780
	2013	310,000		—	478,249		—	101,696		—		8,573		898,518
Gerald M. Haines II (6) EVP, Chief Financial Officer, Treasurer, Chief Legal Officer, and Secretary	2015	316,796		—	788,550		—	186,766		—		8,878		1,300,990
	2014	310,000		—	407,211		—	145,592		—		8,977		871,780
	2013	310,000		—	693,985		—	101,696		—		7,537		1,113,218
Charles A. Speicher VP, Controller, Chief Accounting Officer, and Assistant Treasurer	2015	219,750		—	114,100		—	87,292		—		10,344		431,486
	2014	215,000		—	135,737		—	58,902		—		10,187		419,826
	2013	215,000		—	166,388		—	41,143		—		9,277		431,808
Didier M.C. Thibaud (7) President, Mercury Commercial Electronics	2015	324,198		—	456,400		—	185,568		—		7,800		973,966
	2014	343,432		—	678,693		—	145,592		14,047		9,494		1,191,258
	2013	334,649		—	1,446,238		—	101,231		7,163		9,258		1,898,539

(1)

These columns represent the grant date fair value of stock and stock-based awards in accordance with FASB ASC Topic 718. For fiscal 2013, the restricted stock awards reflected two separate grants: (i) an annual grant; and (ii) a retention grant. For fiscal 2015 and 2014, there were only annual grants (other than the grant to Mr. Haines in fiscal 2015 for his appointment as Executive Vice President, Chief Financial Officer, and Treasurer).


(2)	The aggregate amounts in this column reflect payments under our executive bonus program. The table below shows the components of our executive bonus program earned for fiscal 2015:



Name	Corporate Financial Performance Bonus		MBR Bonus		Over- Achievement Award		Total Non-Equity Incentive Plan Compensation
Mark Aslett	$	406,198	$	97,649	$	—	$	503,847
Kevin M. Bisson (5)	—		—		—		—
Gerald M. Haines II	151,106		35,660		—		186,766
Charles A. Speicher	69,878		17,414		—		87,292
Didier M.C. Thibaud	151,106		34,462		—		185,568

(3) The amounts in this column reflect the aggregate change in the actuarial present value of Mr. Thibaud’s accumulated benefit under the retirement indemnities pension plan for our French national employees. Amounts under the plan are payable in Euros and the amounts listed in the table above have been converted to dollars using the exchange rate in effect at the end of the applicable fiscal year.

(4) The table below shows the components of this column for fiscal 2015:



Name	401(k) Plan Matching Contribution(a)		Perquisites and Other Personal Benefits(b)		Severance Benefits		Total All Other Compensation
Mark Aslett	$	8,100	$	2,000	$	—	$	10,100
Kevin M. Bisson (5)	1,673		—		358,693		360,366
Gerald M. Haines II	8,878		—		—		8,878
Charles A. Speicher	8,344		2,000		—		10,344
Didier M.C. Thibaud	7,800		—		—		7,800


(a)	The amounts in this column represent our matching contributions allocated to each of the named executive officers who participate in our 401(k) retirement savings plan (subject to IRS limits on contributions to the 401(k) plan). All such matching contributions vest based upon the same vesting schedule used for all other employees.


(b)	The amounts in this column include payments we made to or on behalf of the named executive officers for personal tax and financial planning.

(5) Mr. Bisson vacated the position of Senior Vice President, Chief Financial Officer, and Treasurer in September 2014 (fiscal 2015).

(6) Mr. Haines was appointed to the position of Executive Vice President, Chief Financial Officer, and Treasurer in September 2014 (fiscal 2015).


(7)	A portion of Mr. Thibaud’s salary in fiscal years 2013, 2014, and 2015 was paid in Euros. The salary column reflects the conversion of each monthly payment from Euros into U.S. Dollars (USD) based on the average conversion rate between Euros and USD for such month. The amounts in the “Non-Equity Incentive Plan Compensation” column were paid in USD.

Grants of Plan-Based Awards

The following table reflects: (i) the grant date fair value of equity awards granted to the named executive officers under the 2005 Plan during fiscal 2015; and (ii) the possible cash amounts that could have been earned under each element (i.e., corporate financial performance, individual MBRs, and over-achievement awards) of our executive bonus program for fiscal 2015. The actual payouts for fiscal 2015 under our annual executive bonus program are reflected in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

Grants of Plan-Based Awards—Fiscal 2015



Name	Grant Date			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/sh)	Grant Date Fair Value of Stock and Option Awards(1)
Name	Grant Date			Threshold ($)	Target ($)	Maximum ($)			Exercise or Base Price of Option Awards ($/sh)	Grant Date Fair Value of Stock and Option Awards(1)
Mark Aslett
Restricted Stock	8/15/2014	(2	)	—	—	—	47,500	—	—	$	541,975
Performance Stock	8/15/2014			—	—	—	47,500	—	—	541,975
Corporate Financial Performance Bonus	(3)			306,750	409,000	409,000	—	—	—	—
MBR Bonus	(4)			—	102,250	102,250	—	—	—	—
Over-Achievement Award	(5)			—	—	511,250	—	—	—	—
Gerald M. Haines II
Restricted Stock	8/15/2014	(2	)	—	—	—	17,500	—	—	194,600
Performance Stock	8/15/2014			—	—	—	17,500	—	—	194,600
Restricted Stock	9/3/2014	(2	)	—	—	—	17,500	—	—	199,675
Performance Stock	9/3/2014			—	—	—	17,500	—	—	199,675
Corporate Financial Performance Bonus	(3)			114,111	152,148	152,148	—	—	—	—
MBR Bonus	(4)			—	38,037	38,037	—	—	—	—
Over-Achievement Award	(5)			—	—	190,185	—	—	—	—
Charles A. Speicher
Restricted Stock	8/15/2014	(2	)	—	—	—	5,000	—	—	57,050
Performance Stock	8/15/2014			—	—	—	5,000	—	—	57,050
Corporate Financial Performance Bonus	(3)			52,770	70,360	70,360	—	—	—	—
MBR Bonus	(4)			—	17,590	17,590	—	—	—	—
Over-Achievement Award	(5)			—	—	87,950	—	—	—	—
Didier M.C. Thibaud(6)
Restricted Stock	8/15/2014	(2	)	—	—	—	20,000	—	—	228,200
Performance Stock	8/15/2014			—	—	—	20,000	—	—	228,200
Corporate Financial Performance Bonus	(3)			114,111	152,148	152,148	—	—	—	—
MBR Bonus	(4)			—	38,037	38,037	—	—	—	—
Over-Achievement Award	(5)			—	—	190,185	—	—	—	—

(1) The amounts shown in this column have been calculated in accordance with FASB ASC Topic 718.

(2) This restricted stock award was granted under the 2005 Plan. The grant date fair value of the restricted stock award has been calculated by multiplying the number of shares granted by the closing price of our common stock as reported on the NASDAQ Global Select Market on the date of grant.

(3) The amounts shown in these rows reflect the possible cash amounts that could have been earned under the corporate financial performance portion of our executive bonus program for fiscal 2015 upon achievement of the threshold, target, and maximum performance objectives for that program. Payouts for corporate financial performance for fiscal 2015 were subject to the payout formula included in the Compensation Discussion & Analysis. The actual payouts for fiscal 2015 are reflected in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.


(4)	The amounts shown in these rows reflect the possible cash amounts that could have been earned under the individual MBR performance portion of our executive bonus program for fiscal 2015. The actual payouts for fiscal 2015 are reflected in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

(5)

The amounts shown in these rows reflect the maximum cash amounts that could have been earned under the over-achievement portion of our executive bonus program for fiscal 2015. There are no minimum or target payouts under the over-achievement portion of our bonus program, and the over-achievement bonus pool is only funded for fiscal 2015 based on 25% of the amount by which actual adjusted EBITDA exceeded budgeted adjusted EBITDA and satisfaction of a revenue threshold. There were no payouts for fiscal 2015 as reflected in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

(6)

Mr. Thibaud’s threshold, target, and maximum performance targets under our executive bonus program for fiscal 2015 were based on a notional annual base salary of $319,300, and payments, if any, would have been made in USD. As explained in note 8 to the Summary Compensation Table, a portion of Mr. Thibaud’s salary is paid in Euros, and the amount of base salary reported in that table reflects fluctuations in the conversion rate between Euros and USD. These fluctuations are not taken into consideration in determining Mr. Thibaud’s target bonus or bonus payments.

Discussion of Summary Compensation and Grants of Plan-Based Awards Tables

Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and the Grants of Plan-Based Awards Table was paid or awarded, are described above under “Compensation Discussion and Analysis.”

Our total compensation program consists of fixed elements, such as base salary and benefits, and variable performance-based elements, such as annual incentives and performance-based restricted shares. The Summary Compensation Table sets forth the base salary for each named executive officer, the value of any stock or option awards, payouts under our executive bonus program (in the “Non-Equity Incentive Plan Compensation” column), and all other compensation payable to the named executive officer.

The potential payouts under our executive bonus program are set forth in the Grants of Plan-Based Awards Table. The corporate financial performance portion, the individual MBR performance portion, and the over-achievement portion of our executive bonus program are shown as separate line items as the threshold, target, and maximum amounts differ. The threshold targets for the corporate financial performance portion of the executive bonus program for fiscal 2015 were met, and corporate financial performance bonuses were paid under the terms of the program. For fiscal 2015, revenue and adjusted EBITDA were below their respective targets for the overachievement portion of our executive bonus program. Accordingly, no overachievement awards were payable for fiscal 2015.

Outstanding Equity Awards at 2015 Fiscal Year-End

The following table shows information on all outstanding stock options and unvested restricted stock awards held by the named executive officers at the end of the last fiscal year. The table also shows the market value of unvested restricted stock awards at the end of the last fiscal year. This represents the number of unvested restricted shares at fiscal year-end, multiplied by the $14.64 closing price of our common stock on the NASDAQ Global Select Market on June 30, 2015, the last trading day of fiscal 2015.

Outstanding Equity Awards at Fiscal Year-End 2015



	Option Awards(1)					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)
Mark Aslett	200,000	—	$	14.14	11/21/2017	9,375	(2)	$	137,250
	—	—	—		—	15,000	(3)	219,600
	—	—	—		—	158,250	(4)	2,316,780
	—	—	—		—	92,013	(5)	1,347,070
	—	—	—		—	47,500	(6)	695,400
	—	—	—		—	47,500	(7)	695,400
Gerald M. Haines II	—	—	—		—	3,750	(2)	54,900
	—	—	—		—	5,000	(3)	73,200
	—	—	—		—	36,564	(4)	535,297
	—	—	—		—	33,124	(5)	484,935
	—	—	—		—	17,500	(6)	256,200
	—	—	—		—	17,500	(7)	256,200
	—	—	—		—	17,500	(8)	256,200
	—	—	—		—	17,500	(9)	256,200
Charles A. Speicher	—	—	—		—	1,125	(2)	16,470
	—	—	—		—	2,250	(3)	32,940
	—	—	—		—	8,766	(4)	128,334
	—	—	—		—	11,041	(5)	161,640
	—	—	—		—	5,000	(6)	73,200
	—	—	—		—	5,000	(7)	73,200
Didier M.C. Thibaud	—	—	—		—	4,750	(2)	69,540
	77,000	—	16.36		6/1/2016	7,000	(3)	102,480
	30,000	—	13.07		6/5/2017	76,198	(4)	1,115,539
	—	—	—		—	55,208	(5)	808,245
	—	—	—		—	20,000	(6)	292,800
	—	—	—		—	20,000	(7)	292,800


(1)	Securities underlying stock options are shares of our common stock.


(2)	These restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date (August 15, 2011), contingent in each case on the executive remaining an employee as of each such date.

(3)

These restricted share awards were awarded on February 15, 2012; however, the Company and the executives agreed to amend the vesting date by delaying the vesting to start as if such awards had been granted on August 15, 2012. As amended, the restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date (August 15, 2012), contingent in each case on the executive remaining an employee as of each such date.


(4)	These restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date (August 15, 2012), contingent in each case on the executive remaining an employee as of each such date.


(5)	These restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date (August 15, 2013), contingent in each case on the executive remaining an employee as of each such date.


(6)	These restricted share awards vest in three equal installments on each of the first three anniversaries of the grant date (August 15, 2014), contingent in each case on the executive remaining an employee as of each such date.


(7)	These performance share awards fully vest, partially vest, or forfeit in installments based upon the achievement of performance objectives for the relevant performance periods.


(8)	These restricted share awards vest in three equal installments on each of the first three anniversaries of the grant date (September 3, 2014), contingent in each case on the executive remaining an employees as of each such date.


(9)	These performance share awards fully vest, partially vest, or forfeit in installments based upon the achievement of performance objectives for the relevant performance periods.

Options Exercised and Stock Vested

The following table shows stock option exercises by the named executive officers during the last fiscal year, including the aggregate value realized upon exercise. This represents the excess of the fair market value, at the time of exercise, of the common stock acquired at exercise over the exercise price of the options. In addition, the table shows the number of shares of restricted stock held by the named executive officers that vested during the last fiscal year, including the aggregate value realized upon vesting. This represents, as of each vesting date, the number of shares vesting on such date, multiplied by the closing price of our common stock on the NASDAQ Global Select Market on such date.

Option Exercises and Stock Vested—Fiscal 2015



	Option Awards			Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Mark Aslett	94,726	$	515,309	147,922	$	1,687,790
Kevin M. Bisson	—	—		38,641	440,894
Gerald M. Haines II	—	—		49,324	565,812
Charles A. Speicher	—	—		17,189	195,258
Didier M.C. Thibaud	31,000	153,816		77,252	881,445

Pension Benefits

The following table shows the actuarial present value of the pension benefit for the named executive officers as of June 30, 2015, the measurement date used for financial statement reporting purposes with respect to our audited financial statements for fiscal 2015. The retirement indemnities pension plan covers eligible French national employees as required by French law. During fiscal 2015, Mr. Thibaud was the only named executive officer to participate in the plan.

Pension Benefits—Fiscal 2015



Name	Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefit(1)		Payments During Fiscal 2015
Didier M.C. Thibaud	Retirement Indemnities Pension Plan	17.9	$	64,303	$	—


(1)	The actuarial present value of Mr. Thibaud’s pension benefit as of June 30, 2015, is calculated in Euros. The dollar amount set forth above reflects the exchange rate at June 30, 2015. The actuarial present value assumes a 2.6% discount rate and an age of retirement of 64 years.

Potential Payments upon Termination of Employment or Change in Control

Potential Payments to Mr. Aslett upon Termination of Employment

In connection with his appointment as President and Chief Executive Officer in 2007, we entered into an employment agreement with Mr. Aslett, a description of which can be found under the heading “Agreements with Named Executive Officers” below. Mr. Aslett’s employment agreement provides for termination and severance benefits in the case of a termination of Mr. Aslett’s employment by us without “cause” or by Mr. Aslett for “good reason.”

“Cause” is defined in the employment agreement to include: (1) conduct constituting a material act of willful misconduct in connection with the performance of Mr. Aslett’s duties, including, without limitation, misappropriation of funds or property of Mercury; (2) conviction of, or plea of “guilty” or “no contest” to, any felony or any conduct by Mr. Aslett that would reasonably be expected to result in material injury to Mercury if he were retained in his position; (3) continued, willful, and deliberate non-performance by Mr. Aslett of his duties under the agreement which continues for 30 days following notice; (4) breach by Mr. Aslett of certain non-competition and non-disclosure covenants; (5) a violation by Mr. Aslett of Mercury’s employment policies which continues following written notice; or (6) willful failure to cooperate with a bona fide internal investigation or an investigation by

regulatory or law enforcement authorities, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation. For purposes of clauses (1), (3), and (6), no act, or failure to act, on Mr. Aslett’s part will be deemed “willful” unless done, or omitted to be done, by him without reasonable belief that his act or failure to act, was in the best interest of Mercury.

“Good Reason” is defined in the employment agreement to include: (1) a material diminution in Mr. Aslett’s responsibilities, authority, or duties; (2) a material diminution in Mr. Aslett’s base salary, except for across-the-board salary reductions based on our financial performance similarly affecting all or substantially all senior management employees of Mercury; (3) a material change in the geographic location at which Mr. Aslett provides services to Mercury; or (4) the material breach of the agreement by us. To terminate his employment for “good reason,” Mr. Aslett must follow a specified process described in the employment agreement.

Upon the termination of Mr. Aslett’s employment by us without “cause” or by him for “good reason,” Mr. Aslett will be entitled to receive an amount equal to the sum of his base salary and target bonus under our annual executive bonus program, payable over a 12-month period. In addition, Mr. Aslett is entitled to continue to participate in our group health, dental, and vision program for 18 months.

The following chart illustrates the benefits that would have been received by Mr. Aslett under his employment agreement on June 30, 2015 had his employment been terminated by us without “cause” or voluntarily terminated by him with “good reason.” These amounts are estimates only and do not necessarily reflect the actual amounts that would be payable to Mr. Aslett upon the occurrence of such events, which amounts would only be known at the time that Mr. Aslett became entitled to such benefits.



	Cash Severance		(1)	Health Benefits		(2)	Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason	$	1,030,000		$	26,724		$	1,056,724


(1)	This amount represents the aggregate amount of Mr. Aslett’s annual base salary and target bonus under our executive bonus program for fiscal 2015.


(2)	The value of health, dental, and vision insurance benefits is based on the type of coverage we carried for Mr. Aslett as of June 30, 2015, and the costs associated with such coverage on that date.

Potential Payments to Mr. Haines upon Termination of Employment

In connection with his joining the Company in 2010, we agreed to provide certain severance benefits to Mr. Haines, a description of which agreement can be found under the heading “Agreements with Named Executive Officers” below. Mr. Haines’ agreement provides for termination and severance benefits in the case of a termination of Mr. Haines’ employment by us without “cause” or by Mr. Haines for “good reason.”

“Cause” is defined to include: (1) the willful and continued failure by Mr. Haines to perform substantially the duties and responsibilities of his position with Mercury after written demand; (2) the conviction of Mr. Haines by a court of competent jurisdiction for felony criminal conduct or a plea of nolo contendere to a felony; or (3) the willful engaging by Mr. Haines in fraud, dishonesty, or other misconduct which is demonstrably and materially injurious to Mercury or our reputation, monetarily, or otherwise. No act, or failure to act, on Mr. Haines’ part will be deemed “willful” unless committed or omitted by Mr. Haines in bad faith and without reasonable belief that his act or failure to act was in, or not opposed to, the best interest of Mercury.

“Good Reason” is defined in the agreement to include: (1) a material diminution in Mr. Haines’ responsibilities, authority, or duties as in effect on the date of the agreement; (2) a material diminution in Mr. Haines’ annual base salary, except for across-the-board salary reductions based on our financial performance similarly affecting all or substantially all senior management employees of Mercury; or (3) a material change in the geographic location at which Mr. Haines provides services to Mercury.

Under the agreement, if we terminate Mr. Haines’ employment without “cause” or Mr. Haines terminates his employment for “good reason,” then we will pay Mr. Haines a severance amount equal to one times his annual base salary. In such event, we also will pay for certain insurance benefits and outplacement services.

The following chart illustrates the benefits that would have been received by Mr. Haines under his agreement on June 30, 2015 had either his employment been terminated by us without “cause” or by him with “good reason.” These amounts are estimates only and do not necessarily reflect the actual amounts that would be payable to Mr. Haines upon the occurrence of such events, which amounts would only be known at the time that Mr. Haines became entitled to such benefits.



	Cash Severance		Health Benefits		(1)	Outplacement Services		Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason	$	319,300	$	18,693		$	30,000	$	367,993


(1)	The value of health, dental, and vision insurance benefits is based on the type of coverage we carried for Mr. Haines as of June 30, 2015, and the costs associated with such coverage on that date.

Potential Payments to Mr. Bisson upon Termination of Employment

In connection with his joining the Company in 2012, we agreed to provide certain severance benefits to Mr. Bisson, a description of which agreement can be found under the heading “Agreements with Named Executive Officers” below. Mr. Bisson’s agreement provides for termination and severance benefits in the case of a termination of Mr. Bisson’s employment by us without “cause” or by Mr. Bisson for “good reason.”

“Cause” is defined to include: (1) the willful and continued failure by Mr. Bisson to perform substantially the duties and responsibilities of his position with Mercury after written demand; (2) the conviction of Mr. Bisson by a court of competent jurisdiction for felony criminal conduct or a plea of nolo contendere to a felony; or (3) the willful engaging by Mr. Bisson in fraud, dishonesty, or other misconduct which is demonstrably and materially injurious to Mercury or our reputation, monetarily, or otherwise. No act, or failure to act, on Mr. Bisson’s part will be deemed “willful” unless committed or omitted by Mr. Bisson in bad faith and without reasonable belief that his act or failure to act was in, or not opposed to, the best interest of Mercury.

“Good Reason” is defined in the agreement to include: (1) a material diminution in Mr. Bisson’s responsibilities, authority, or duties as in effect on the date of the agreement; (2) a material diminution in Mr. Bisson’s annual base salary, except for across-the-board salary reductions based on our financial performance similarly affecting all or substantially all senior management employees of Mercury; or (3) a material change in the geographic location at which Mr. Bisson provides services to Mercury.

Under the agreement, if we terminate Mr. Bisson’s employment without “cause” or Mr. Bisson terminates his employment for “good reason,” then we will pay Mr. Bisson a severance amount equal to one times his annual base salary. In such event, we also will pay for certain insurance benefits and outplacement services.

The following chart illustrates the benefits that Mr. Bisson was entitled to receive upon his departure from the Company in September 2014.



	Cash Severance		Health Benefits		(1)	Outplacement Services		Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason (2)	$	310,000	$	18,693		$	30,000	$	358,693


(1)	The value of health, dental, and vision insurance benefits is based on the type of coverage we carried for Mr. Bisson as of June 30, 2014, and the costs associated with such coverage on that date.


(2)	Mr. Bisson left the Company in September 2014 and his severance was based on an involuntary termination without cause under his letter agreement with the Company.

Potential Payments to Named Executive Officers upon Termination of Employment following a Change in Control

We have entered into change in control severance agreements with our CEO and certain of our other executive officers. For fiscal 2015, we had such agreements in effect with the following named executive officers: Mr. Aslett; Mr. Haines; Mr. Speicher; and Mr. Thibaud.

A change in control includes, among other events and subject to certain exceptions, the acquisition by any person of beneficial ownership of 30% or more of our outstanding common stock. If a tender offer or exchange offer is made for more than 30% of our outstanding common stock, the executive has agreed not to leave our employ, except in the case of disability or retirement and certain other circumstances, and to continue to render services to Mercury until such offer has been abandoned or terminated or a change in control has occurred.

The Compensation Committee worked with Radford as compensation consultant to provide market data and analysis of market practices for such agreements in the period of time since Mercury’s prior forms of such agreements were adopted.

Chief Executive Officer

The CEO is entitled to severance benefits if, within 24 months after a change in control of Mercury (or during a potential change in control period provided that a change in control takes place within 24 months thereafter), the CEO’s employment is

terminated (1) by us other than for “cause” or disability or (2) by the CEO for “good reason.” “Cause” is defined in the agreement to include the CEO’s willful failure to perform his duties, conviction of the executive for a felony, and the CEO’s willful engaging in fraud, dishonesty, or other conduct demonstrably and materially injurious to Mercury. “Good Reason” is defined in the agreement to include an adverse change in the CEO’s status or position with Mercury, a reduction in base salary or annual target bonus, failure to maintain the CEO’s participation in existing or at least equivalent health and benefit plans, and a significant relocation of the CEO’s principal office.

Severance benefits under the agreement include the following, in addition to the payment of any earned or accrued but unpaid compensation for services previously rendered:


•	a lump sum cash payment equal to two times (2x) the sum of the CEO’s then current annualized base salary and bonus target under our annual executive bonus plan (excluding any over-achievement awards);


•	payment of the cost of providing the executive with outplacement services up to a maximum of $45,000; and


•	payment of the cost of providing the CEO with health and dental insurance up to 24 months following such termination on the same basis as though the CEO had remained an active employee.


•	In addition, if the CEO’s employment is terminated within 24 months after a change in control (or during a potential change in control period provided that a change in control takes place within 24 months thereafter), vesting of all his then outstanding stock options and other stock-based awards immediately accelerates and all such awards become exercisable or non-forfeitable.

Payment of the above-described severance benefits is subject to the CEO releasing all claims against Mercury other than claims that arise from Mercury’s obligations under the severance agreement. In addition, if the CEO is party to an employment agreement with Mercury providing for change in control payments or benefits, the CEO will receive the benefits payable under this agreement and not under the employment agreement.

The agreement provides for a reduction of payments and benefits payable under the agreement to a level where the CEO would not be subject to the excise tax pursuant to section 4999 of the Code, but only if such reduction would put the CEO in a better after-tax position than if the payments and benefits were paid in full. In addition, the agreement provides for the payment by Mercury of the CEO’s legal fees and expenses incurred in connection with good faith disputes under the agreement.

The agreement continues in effect through June 30, 2014, subject to automatic one-year extensions thereafter unless notice is given of our or the CEO’s intention not to extend the term of the agreement; provided, however, that the agreement continues in effect for not less than 24 months following a change in control that occurs during the term of the agreement. Except as otherwise provided in the agreement, we and the CEO may terminate the CEO’s employment at any time.

Non-CEO Executives

The executive is entitled to severance benefits if, within 18 months after a change in control of Mercury (or during a potential change in control period provided that a change in control takes place within 18 months thereafter), the executive’s employment is terminated (1) by us other than for “cause” or disability or (2) by the executive for “good reason.” “Cause” is defined in each agreement to include the executive’s willful failure to perform his duties, conviction of the executive for a felony, and the executive’s willful engaging in fraud, dishonesty, or other conduct demonstrably and materially injurious to Mercury. “Good Reason” is defined in each agreement to include an adverse change in the executive’s status or position with Mercury, a reduction in base salary or annual target bonus, failure to maintain the executive’s participation in existing or at least equivalent health and benefit plans, and a significant relocation of the executive’s principal office.

Severance benefits under each agreement include the following, in addition to the payment of any earned or accrued compensation for services previously rendered:


•	a lump sum cash payment equal to one and one-half times (1.5x) the sum of the executive’s then current annualized base salary and bonus target under our annual executive bonus plan (excluding any over-achievement awards);


•	payment of the cost of providing the executive with outplacement services up to a maximum of $45,000; and


•	payment of the cost of providing the executive with health and dental insurance up to 18 months following such termination on the same basis as though the executive had remained an active employee.


•	In addition, if the executive’s employment is terminated within 18 months after a change in control (or during a potential change in control period provided that a change in control takes place within 18 months thereafter), vesting of all his then outstanding stock options and other stock-based awards immediately accelerates and all such awards become exercisable or non-forfeitable.

Payment of the above-described severance benefits is subject to the executive releasing all claims against Mercury other than claims that arise from Mercury’s obligations under the severance agreement. In addition, if the executive is party to an employment agreement with Mercury providing for change in control payments or benefits, the executive will receive the benefits payable under this agreement and not under the employment agreement.

Each agreement provides for a reduction of payments and benefits payable under the agreement to a level where the executive would not be subject to the excise tax pursuant to section 4999 of the Code, but only if such reduction would put the executive in a better after-tax position than if the payments and benefits were paid in full. In addition, each agreement provides for the payment by Mercury of the executive’s legal fees and expenses incurred in connection with good faith disputes under the agreement.

The agreements continue in effect through June 30, 2016, subject to automatic one-year extensions thereafter unless notice is given of our or the executive’s intention not to extend the term of the agreement; provided, however, that the agreement continues in effect for not less than 18 months following a change in control that occurs during the term of the agreement. Except as otherwise provided in the agreement, we and each executive may terminate the executive’s employment at any time.

The following table sets forth an estimate of the aggregate severance benefits for each of our named executive officers assuming the triggering event occurred on June 30, 2015, all pursuant to the terms of each executive’s change in control severance agreement as described above:



Name	Salary/Bonus Lump Sum		Stock Option Acceleration (1)		Restricted Stock Acceleration (2)		Outplacement Services (3)		Health Benefits (4)		Total
Mark Aslett	$	1,030,000	$	—	$	5,411,500	$	45,000	$	35,633	$	6,522,133
Gerald M. Haines II	478,950		—		2,173,132		45,000		28,040		2,725,122
Charles A. Speicher	332,250		—		485,784		45,000		28,040		891,074
Didier M.C. Thibaud	478,950		—		2,681,404		45,000		18,510		3,223,864

(1)

The amounts shown in this column represent the difference between the closing price of our common stock on the NASDAQ Global Select Market on June 30, 2015 ($14.64) and the exercise price of any in-the-money unvested stock option which would have become exercisable upon the occurrence of a change in control, multiplied in each case by the number of shares subject to such option. At June 30, 2015, none of our named executive officers had any unvested stock options.


(2)	The amounts shown in this column represent the closing price of our common stock on the NASDAQ Global Select Market on June 30, 2015 ($14.64) multiplied by the number of restricted shares that would have vested upon the occurrence of a change in control.


(3)	This amount represents the maximum amount of outplacement services to which the executive is entitled under the agreement.


(4)	The value of health and dental insurance benefits is based on the type of coverage we carried for the named executive officer as of June 30, 2015 and the costs associated with such coverage on such date.

Agreements with Named Executive Officers

Employment Agreement with Mr. Aslett

On November 19, 2007, we entered into an employment agreement with Mr. Aslett. The agreement provides for an 18-month term, but will automatically renew for additional one-year periods unless an advance notice of non-renewal is provided by either party to the other at least 180 days prior to the expiration of the then-current term.

Under the employment agreement, Mr. Aslett’s annual base salary will be $500,000, subject to annual review by the Board in our first fiscal quarter. On September 14, 2009, we amended Mr. Aslett’s employment agreement to reflect that we terminated the Long Term Incentive Plan and that he is entitled to participate in our annual executive bonus program in an amount determined by the Board in accordance with the terms of the program.

The employment agreement provides for termination and severance benefits in the case of a termination of Mr. Aslett’s employment by us without “cause” or by Mr. Aslett for “good reason.” A description of these benefits can be found above under the heading “Potential Payments upon Termination or Change in Control—Potential Payments to Mr. Aslett upon Termination of Employment.”

Severance Agreement with Mr. Bisson

In connection with his offer to join the Company, we agreed to provide Mr. Bisson with certain severance benefits. Under the terms of the offer letter to Mr. Bisson, if we terminate his employment without “cause” or Mr. Bisson terminates his employment for “good reason,” then we will pay Mr. Bisson a severance amount equal to one times his annual base pay. In such event, we also will pay for certain insurance benefits and outplacement services. A description of these benefits can be found above under the heading “Potential Payments upon Termination or Change in Control—Potential Payments to Mr. Bisson upon Termination of Employment.” Mr. Bisson left the Company in September 2014.

Severance Agreement with Mr. Haines

In connection with his offer to join the Company, we agreed to provide Mr. Haines with certain severance benefits. Under the terms of the offer letter to Mr. Haines, if we terminate his employment without “cause” or Mr. Haines terminates his employment for “good reason,” then we will pay Mr. Haines a severance amount equal to one times his annual base pay. In such event, we also will pay for certain insurance benefits and outplacement services. A description of these benefits can be found above under the heading “Potential Payments upon Termination or Change in Control—Potential Payments to Mr. Haines upon Termination of Employment.”

Change-in-Control Agreements

We also have entered into agreements with each named executive officer providing for certain benefits in the event of a change in control of Mercury. A description of these benefits can be found above under the heading “Potential Payments upon Termination or Change in Control—Potential Payments to Named Executive Officers upon Termination of Employment following a Change in Control.”

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement, and based on such review and discussion, the Compensation Committee recommended to Mercury’s Board that the Compensation Discussion and Analysis be included in this proxy statement and be incorporated by reference into Mercury’s annual report on Form 10-K for the fiscal year ended June 30, 2015.

By the Compensation Committee of the Board of

Directors of Mercury Systems, Inc.

Michael A. Daniels, Chairman

George K. Muellner

Vincent Vitto

REPORT OF THE AUDIT COMMITTEE

The following is the report of the Audit Committee of the Board of Directors of Mercury with respect to Mercury’s audited consolidated financial statements for the fiscal year ended June 30, 2015. Management is responsible for Mercury’s internal controls and financial reporting. Mercury’s independent registered public accounting firm is responsible for performing an audit of Mercury’s consolidated financial statements, expressing an opinion as to their conformity with U.S. generally accepted accounting principles and expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee is responsible for monitoring and overseeing these processes.

The Audit Committee reviewed Mercury’s audited consolidated financial statements for the fiscal year ended June 30, 2015, and discussed these consolidated financial statements with Mercury’s management. Management represented to the Audit Committee that Mercury’s consolidated financial statements had been prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee also reviewed and discussed the audited consolidated financial statements and the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board, with Mercury’s independent registered public accounting firm. The Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence. Further, the Audit Committee has discussed with the independent registered public accounting firm its independence.

Based on its review and the discussions with management and the independent registered public accounting firm described above, and its review of the information provided by management and the independent registered public accounting firm, the Audit Committee recommended to Mercury’s Board that the audited consolidated financial statements be included in Mercury’s annual report on Form 10-K for the fiscal year ended June 30, 2015.

By the Audit Committee of the Board of

Directors of Mercury Systems, Inc.

William K. O’Brien, Chairman

James K. Bass

Mark S. Newman

Vincent Vitto

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm to audit Mercury’s consolidated financial statements for the fiscal year ending June 30, 2016. KPMG served as our independent registered public accounting firm for the fiscal years ended June 30, 2015 and 2014. A representative of KPMG is expected to be present at the annual meeting of shareholders and will have the opportunity to make a statement if he or she desires and to respond to appropriate questions.

What were the fees of our independent registered public accounting firm for services rendered to us during the last two fiscal years?

The aggregate fees for professional services rendered to us by KPMG, our independent registered public accounting firm, for the fiscal years ended June 30, 2015 and 2014 were as follows:



	Fiscal 2015		Fiscal 2014
Audit	$	1,153,631	$	1,249,028
Audit-Related	4,000		9,000
Tax	538,288		141,400
All Other	—