UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 29, 2023
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Emerging growth company ☐
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Chief Financial Officer
On June 29, 2023, Mercury Systems, Inc. (the “Company”) announced that David E. Farnsworth will be joining the Company as Executive Vice President, Chief Financial Officer, and Treasurer, on July 17, 2023.
Mr. Farnsworth, age 62, most recently served as the Chief Financial Officer of HawkEye 360, a radio frequency data analytics company from 2020 to 2023. Before joining HawkEye 360, Mr. Farnsworth was Vice President and Chief Financial Officer for Integrated Defense Systems of Raytheon Company from 2018 to 2020, where he had oversight of the financial activities for the $6 billion business unit. Before that, he was CFO for the Intelligence, Information and Services segment of Raytheon.
There are no family relationships between Mr. Farnsworth and any director or executive officer of the Company, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
The Company and Mr. Farnsworth are parties to an offer letter (the “Letter Agreement”), a copy of which is filed as exhibit 10.1 hereto. Pursuant to the Letter Agreement, Mr. Farnsworth’s annual compensation will consist of a base salary of $450,000, a target bonus opportunity under the Company’s annual incentive plan of 110% of base salary, and grants of long-term incentive awards with a target grant date value of $1,500,000 (commencing with the annual grants to be made in August 2023).
In connection with his joining the Company, Mr. Farnsworth will also receive a sign-on bonus of $200,000, subject to a 24-month payback obligation if he resigns or is terminated for cause, as well as new-hire long-term incentive awards under the Company’s 2018 Stock Incentive Plan with an aggregate value of $3,000,000, which are intended to compensate Mr. Farnsworth for long-term incentive awards that he will forfeit upon his resignation from his current employer. The number of shares covered by the new hire awards (the “New Hire Shares”) will be determined by dividing $3,000,000 by the average closing price of the Company’s common stock during the 30 calendar days prior to the grant date in August 2023. Such awards shall vest as follows: (i) one half will use time-based vesting in equal installments on each of the first three anniversaries of the grant date; and (ii) one half will use performance-based vesting, with an applicable portion of the performance-based shares vesting or forfeiting on the third anniversary of the grant date based on the achievement of specified performance criteria. In the event that Mr. Farnsworth is terminated without cause and such termination is not in connection with a change in control, 100% of the New Hire Shares shall automatically vest if his termination occurs within eight months after his start date, with such vesting amount reduced to 75% for terminations within 12 months thereafter (in each case, net of any New Hire Shares previously vested and assuming target performance in the case of performance-based shares) and any remaining portion of the New Hire Shares shall be forfeited.
In addition to Mr. Farnsworth’s annual and new-hire compensation under the Letter Agreement, the Company will enter into separate agreements with Mr. Farnsworth on his start date with respect to both change in control and non-change in control severance consistent with terms that are currently in effect for the Company’s other Executive Vice Presidents. Mr. Farnsworth will also be provided with a $12,000 annual allowance for personal tax and financial planning services on the same terms as are provided to all other executives.
Effective with Mr. Farnsworth joining the Company, Michelle M. McCarthy will cease her interim duties as Chief Financial Officer and Treasurer while continuing in her role as the Company’s Senior Vice President, Chief Accounting Officer. For her extended service as interim Chief Financial Officer and Treasurer, the Human Capital and Compensation Committee has approved a cash payment in the amount of $215,000 and a $200,000 restricted stock award to be granted in mid July 2023 subject to time-based vesting in equal annual installments during the four years following the grant date, with the number of shares covered by such award to be determined by dividing $200,000 by the average closing price of the Company’s common stock during the 30 calendar days prior the grant date.
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Board of Directors Appointment
The Board of Directors has appointed Roger A. Krone, former Chairman and CEO of Leidos, as an independent director in Class II of the Board, effective June 28, 2023, for a term expiring at the 2023 annual meeting of shareholders (the “2023 Annual Meeting”). The Board has determined that Mr. Krone is independent under the listing standards of The Nasdaq Stock Market. With the addition of Mr. Krone, the size of the Board has expanded to ten members, four of which have joined in the last year.
Effective June 30, 2023, Mr. Krone will be granted a restricted stock award pursuant to the Company’s Compensation Policy for Non-Employee Directors. Pursuant to the policy, new non-employee directors are granted equity awards in connection with their first election to the Board. This award consists of shares of restricted stock with a value equal to $225,000 divided by the average closing price of the Company’s common stock during the 30 calendar days prior to the date of grant. This award vests as to 50% of the covered shares on each of the first two anniversaries of the date of grant. Non-employee directors also receive a cash retainer of $65,000 per year, paid quarterly in arrears.
Mr. Krone does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Item 7.01 Regulation FD Disclosure.
In a press release dated June 29, 2023, furnished as exhibit 99.1 hereto, the Company announced that David E. Farnsworth will be joining the Company as Executive Vice President, Chief Financial Officer, and Treasurer, starting on July 17, 2023, and that the Company has appointed Roger A. Krone, former Chairman and CEO of Leidos, as a Class II director to stand for re-election at the 2023 Annual Meeting.
The press release is furnished as exhibit 99.1 hereto. The information provided in Item 7.01 of this Current Report on Form 8-K and the attached exhibit 99.1 shall not be deemed ‘filed’ for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
On June 28, 2023, the Company’s Board of Directors updated the composition of the Board committees in connection with the recent appointments of Gerard J. DeMuro and Roger A. Krone to the Board. The committees of the Board are constituted as follows:
Audit Committee: Barry R. Nearhos (Chair), Gerard J. DeMuro, Lisa S. Disbrow, William K. O’Brien, and Debora A. Plunkett
Human Capital and Compensation Committee: Mary Louise Krakauer (Chair), Orlando P. Carvalho, Lisa S. Disbrow, Howard L. Lance, and Debora A. Plunkett
Government Relations Committee: Lisa S. Disbrow (Chair), Mary Louis Krakauer, Howard L. Lance, and Debora A. Plunkett
M&A and Finance Committee: Orlando P. Carvalho (Chair), Roger A. Krone, Howard L. Lance, Barry R. Nearhos, and William K. O’Brien
Nominating and Governance Committee: William K. O’Brien (Chair), Orlando P. Carvalho, Roger A. Krone, Howard L. Lance, and Barry R. Nearhos
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No. Description
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: June 29, 2023 | MERCURY SYSTEMS, INC. | |||||||||||||||||||
| By: | /s/ Christopher C. Cambria | |||||||||||||||||||
| Christopher C. Cambria | ||||||||||||||||||||
| Executive Vice President, General Counsel, and Secretary | ||||||||||||||||||||
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Mercury Systems Announces Appointments of Chief Financial Officer and Independent Director Finance and Technology Leader, David Farnsworth, Named CFO Former Chairman and CEO of Leidos, Roger Krone, Appointed to Board ANDOVER, Mass. – June 29, 2023 – Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), a technology company that delivers processing power for the most demanding aerospace and defense missions, today announced the continuation of its previously announced Board of Directors and leadership refreshment process, with the appointments of: David Farnsworth as Chief Financial Officer, effective July 17, 2023. Mr. Farnsworth brings decades of experience as a financial expert within the technology defense industry. He was previously the CFO of HawkEye 360, and prior to that, Vice President and CFO of Raytheon’s Integrated Defense Systems business and its Intelligence, Information and Services segment. Roger Krone, former Chairman and Chief Executive Officer of Leidos, as an independent director, effective June 28, 2023. He will also serve as a member of the Board’s Nominating and Governance Committee. Mr. Krone is an experienced public company director, currently serving on the Board of Lear Corporation and previously serving on the Boards of BorgWarner and United Launch Alliance. William K. O’Brien, Chairman of the Board, said, “Roger’s appointment, coupled with the recent addition of Jerry DeMuro, brings immense industry expertise and proven track records of strategic oversight and growth to our boardroom. As the Board continues to oversee the refinement and implementation of the Company’s strategy, Jerry and Roger’s respective experience will be invaluable to our efforts.” Bill Ballhaus, Interim President and Chief Executive Officer, said, “David is a standout leader with deep program knowledge and insight, and a successful track record that demonstrates his ability to deliver results while leading sophisticated financial operations. We are excited for him to bring his passion for the customer to Mercury as we enhance our focus on operational excellence and execution of our strategy. The Board, leadership team and I are greatly appreciative of the support provided by Michelle McCarthy in recent months as she seamlessly stepped into the role of Interim CFO, and we look forward to continuing to work closely with her.”
Mr. Farnsworth said, “Mercury is embarking on an important and exciting next chapter, and I am pleased to join the team. The Company has a unique position in the market, and I am ready to get to work alongside Bill and the leadership team to advance the efforts already underway to get closer to our customers and deliver value for all stakeholders.” As previously announced, Michelle McCarthy, who has served as Interim CFO since January 2023, will remain in her role as Senior Vice President and Chief Accounting Officer. About David Farnsworth Mr. Farnsworth most recently served as Chief Financial Officer of HawkEye 360, a radio frequency data analytics company operating a first-of-its-kind commercial satellite constellation. He previously held several roles within Raytheon, including as Vice President and CFO of its Integrated Defense Systems business, CFO of its Intelligence, Information and Services segment, CFO of its Technical Services business and at Raytheon Corporate headquarters, where he worked directly with the CEO and COO to spearhead strategic initiatives. Mr. Farnsworth currently serves on the Board of Directors of Merrimack Valley Credit Union, a state- chartered community credit union, and on the Board of USA Diving, the national governing body for the sport of diving. He previously served on the Board of Thales-Raytheon Systems Company, an aerospace and defense company. Mr. Farnsworth holds a bachelor’s degree from the Wharton School at the University of Pennsylvania and a master’s degree in business administration from Boston University. About Roger Krone Mr. Krone previously served as the Chairman and CEO at Leidos, a leading Fortune 500 science and technology company focused on the software, hardware, and complex integrated system solutions of large- and small-scale defense, civil and health applications, from 2014 until his retirement earlier in 2023. Mr. Krone spent over 15 years at Boeing, where he served in several leadership positions, including President of its Network & Space Systems business, and was previously a Vice President at McDonnell Douglas Corporation, which was later acquired by Boeing. Mr. Krone began his career at General Dynamics Corporation. Mr. Krone currently serves on the Board of Directors of Lear Corporation. He previously served on the Board of Directors of BorgWarner and United Launch Alliance. Mr. Krone holds a Bachelor of Science in aerospace engineering from the Georgia Institute of Technology, a Master of Science in aerospace engineering from the University of Texas at Arlington and a Master’s in Business Administration from the Harvard School of Business.
Mercury Systems – Innovation that Matters® by and for People Who Matter Mercury Systems is a technology company that pushes processing power to the tactical edge, making the latest commercial technologies profoundly more accessible for today’s most challenging aerospace and defense missions. From silicon to system scale, Mercury enables customers to accelerate innovation and turn data into decision superiority. Mercury is headquartered in Andover, Massachusetts, and has 24 locations worldwide. To learn more, visit mrcy.com. (Nasdaq: MRCY) Forward-Looking Safe Harbor Statement This press release contains certain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including those relating to the Company’s focus on enhanced execution of the strategic plan under a refreshed Board and leadership team. You can identify these statements by the words “may,” “will,” “could,” “should,” “would,” “plans,” “expects,” “anticipates,” “continue,” “estimate,” “project,” “intend,” “likely,” “forecast,” “probable,” “potential,” and similar expressions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but are not limited to, continued funding of defense programs, the timing and amounts of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, inflation, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in, or in the U.S. government’s interpretation of, federal export control or procurement rules and regulations, changes in, or in the interpretation or enforcement of, environmental rules and regulations, market acceptance of the Company's products, shortages in or delays in receiving components, supply chain delays or volatility for critical components such as semiconductors, production delays or unanticipated expenses including due to performance quality issues or manufacturing execution issues, the impact of the COVID-19 pandemic and supply chain disruption, inflation and labor shortages, among other things, on program execution and the resulting effect on customer satisfaction, inability to fully realize the expected benefits from acquisitions, restructurings, and value creation initiatives such as 1MPACT, or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, effects of shareholder activism, increases in interest rates, changes to industrial security and cyber-security regulations and requirements and impacts from any cyber or insider threat events, changes in tax rates or tax regulations, such as the deductibility of internal research and development, changes to interest rate swaps or other cash flow hedging arrangements, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, which difficulties may be impacted by the termination of the Company’s announced strategic review initiative, unanticipated challenges with the transition of the Company’s Chief Executive Officer and Chief Financial Officer roles, unanticipated costs under fixed-price service and system integration engagements, and various other factors beyond our control. These risks and uncertainties also include such additional risk factors as are discussed in the
Company's filings with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended July 1, 2022 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. INVESTOR CONTACT Nelson Erickson Senior Vice President, Strategy and Corporate Development Nelson.Erickson@mrcy.com MEDIA CONTACT Turner Brinton Senior Director of Corporate Communications Turner.Brinton@mrcy.com