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. )~~

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Mercury Systems, Inc.

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~~August 30, 2013~~September 20, 2016

Dear Shareholder:

We will hold our Annual Meeting of Shareholders on October ~~22, 2013,~~19, 2016, 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 October ~~22, 2013~~19, 2016

The Annual Meeting of Shareholders of MERCURY SYSTEMS, INC. will be held on October ~~22, 2013,~~19, 2016, at 10:00 a.m., local time, at our offices at 201 Riverneck Road, Chelmsford, Massachusetts 01824, for the following purposes:


1.	To elect two Class I 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 ~~Executive Bonus Plan - Corporate Financial Performance.~~2005 Stock Incentive Plan.

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

4. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal ~~2014.~~2017.

5. 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 two Class I 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 August ~~21, 2013~~12, 2016 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 October ~~22, 2013:~~19, 2016: This proxy statement and Annual Report and Form 10-K for our fiscal year ended June 30, ~~2013~~2016 are available at www.edocumentview.com/MRCY.



	By Order of the Board of Directors

	~~GERALD M. HAINES II~~Christopher C. Cambria Secretary

Chelmsford, Massachusetts

~~August 30, 2013~~September 20, 2016

TABLE OF CONTENTS




	Page
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING	1
PROPOSAL 1: ELECTION OF CLASS II DIRECTORS	3
CORPORATE GOVERNANCE	7
DIRECTOR COMPENSATION	13
EQUITY COMPENSATION PLANS	15
PROPOSAL 2: APPROVAL OF ~~EXECUTIVE BONUS~~AMENDMENT TO 2005 STOCK INCENTIVE PLAN ~~- CORPORATE FINANCIAL PERFORMANCE~~	16
PROPOSAL 3: ADVISORY VOTE ON ~~EXECUTIVE~~EXUCTIVE COMPENSATION ~~(“SAY-ON-PAY”~~("SAY-ON-PAY")	20
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	20
VOTING SECURITIES	21
EXECUTIVE OFFICERS	23
~~EXECUTIVE~~ COMPENSATION DISCUSSION AND ANALYSIS	24 25
REPORT OF THE COMPENSATION COMMITTEE	49 50
REPORT OF THE AUDIT COMMITTEE	50 51
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	51 52
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION	51 53
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	52 53
SHAREHOLDER PROPOSALS FOR THE ~~2014~~2017 ANNUAL MEETING	52 53
OTHER MATTERS	52 53
ANNUAL REPORT ON FORM 10-K	53 54

Appendix ~~A—Executive Bonus~~A — Amended and Restated 2005 Stock Incentive Plan ~~- Corporate Financial Performance~~
Appendix B — Reconciliation between adjusted EBITDA and GAAP

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 ~~August 30, 2013~~September 20, 2016 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 October ~~22, 2013,~~19, 2016, and any adjournment or postponement of that meeting. The meeting will be held on October ~~22, 2013,~~19, 2016, 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 four matters scheduled for a vote:

election of two Class I 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 ~~Executive Bonus~~2005 Stock Incentive Plan ~~- Corporate Financial Performance~~ (the ~~“CFP Bonus~~“2005 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 ~~2014.~~2017.

Who can attend and vote at the meeting?

Shareholders of record at the close of business on August ~~21, 2013~~12, 2016 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 August ~~21, 2013,~~12, 2016, the record date, will constitute a quorum for purposes of the meeting. On the record date, ~~33,224,065~~40,363,864 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 I director named below under “Proposal 1: Election of Class I Directors;”

FOR the approval of an amendment to our ~~CFP Bonus~~2005 Stock Incentive 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 ~~2014;~~2017; 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 ~~CFP Bonus Plan,~~equity plan, 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 $8,000, plus expenses.~~

PROPOSAL 1: ELECTION OF CLASS I 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 ~~eight~~seven members, with James K. Bass and Michael A. Daniels ~~and Lee C. Steele~~ serving as Class I directors, Mark Aslett ~~George W. Chamillard,~~ 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 ~~2013, 2014,~~2016, 2017, and ~~2015,~~2018, 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 I nominees listed below, which consist of two incumbent directors, James K. Bass and Michael A. Daniels, 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. ~~Lee C. Steele is retiring from the Board of Directors effective upon the expiration of his current term at the 2013 Annual Meeting of Shareholders.~~

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~~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 two Class I 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 I Directors—Nominated for a Term Ending in 2016:
James K. Bass 56 2010 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 General Electric Corporation. 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 67 2010 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. 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.

Name Age
Year First
Elected a
Director
Principal Occupation
Class II Directors—Serving a Term Ending in 2014:
Mark Aslett 45 2007 Mr. Aslett has served as our President and Chief Executive Officer since November 2007. Prior to that, he was Chief Operating Officer and Chief Executive Officer of Enterasys Networks, a public technology company, 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 served on the Board of Directors of Enterasys Networks from 2004 to 2006. He has also held positions at GEC Plessey Telecommunications, as well as other telecommunications-related technology firms. Mr. Aslett provides an insider’s perspective in Board discussions about the business and strategic direction of the Company with his detailed knowledge of the Company’s employees, customers, suppliers, business prospects, and markets.
George W. Chamillard 74 2004 Mr. Chamillard served as Chairman of the Board of Directors of Teradyne, Inc., a public company supplying automatic test equipment, from 2000 to his retirement in 2006, and as a member of the Board of Directors of Teradyne from 1996 until 2006. Mr. Chamillard served as Chief Executive Officer of Teradyne from 1997 to 2004, and as President of Teradyne from 1996 to 2003. Prior to being named as President of Teradyne, Mr. Chamillard served in various executive capacities at Teradyne. Mr. Chamillard’s qualifications to serve on our Board of Directors include his years of executive experience in the technology industry, including being the Chairman and Chief Executive Officer of a public technology company.
William K. O’Brien 69 2008 Mr. O’Brien served as Executive Chairman at Enterasys Networks, a public technology company, from 2003 until his retirement in 2006. He served as Chief Executive Officer of Enterasys from 2002 to 2004, and as a member of the Board of Directors of Enterasys from 2002 to 2006. Prior to working at Enterasys, he worked for PricewaterhouseCoopers where he held several different senior management positions. Mr. O’Brien had over 33 years of experience in auditing and professional services while at PricewaterhouseCoopers. He has been a director of Virtusa Corporation, a publicly-traded company, since 2008. Mr. O’Brien is one of our “audit committee financial experts.” Mr. O’Brien’s qualifications to serve on our Board of Directors include his executive experience in the technology industry, including being the Chairman and Chief Executive Officer of a public technology company, and his strong accounting and financial expertise.

Name Age
Year First
Elected a
Director
Principal Occupation
Class III Directors—Serving a Term Ending in 2015:
Vincent Vitto 72 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 70 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.



Name	Age	Year First Elected a Director	Principal Occupation
Class III Directors—Serving a Term Ending in 2018:
Vincent Vitto	75	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	73	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	66	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 I director standing for election at the meeting, Messrs. Bass and Daniels were each most recently elected as a Class I director at ~~2010~~2013 Annual Meeting of Shareholders.

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 ~~2014~~2017 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~~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 ~~2013,~~2016, 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 ~~2013?~~2016?

The Board of Directors met ~~four~~eight times during fiscal ~~2013.~~2016. The table below reports information about the committees during fiscal ~~2013:~~2016:

Name

Audit

Committee(1)

Compensation

Committee

Nominating

and Governance

Committee

Ad Hoc

M&A Review

Committee

Audit

Committee(1)

Compensation

Committee

Nominating

and Governance

Committee

Ad Hoc

M&A Review

Committee

James K. Bass

Alternate

George W. Chamillard

Michael A. Daniels

Chairman

George K. Muellner

Chairman

Mark S. Newman

William K. O’Brien

Chairman

Lee C. Steele

Vincent Vitto

Chairman

Number of Meetings During Fiscal 2013

—

Number of Meetings During Fiscal 2016


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

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~~One of the directors then in office attended the ~~2012~~2015 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 ~~three~~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 ~~July 31, 2013,~~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 and holding requirements 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 ~~three~~five times the CEO’s base salary. The CEO is expected to meet this guideline within ~~four~~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. Prior to meeting the five times holding requirement per this guideline, after applicable tax withholding on the vesting of an equity award, the CEO is required to retain 50% of the net, after tax award until he or she is in compliance with the stock ownership guideline. 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 ~~(which appears under the heading “About Us”)~~ 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, Mercury does not have a shareholder rights agreement or other "poison pill".

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.

Prior to his retirement from the Board in 2008, the founder of our Company served as the Chairman of the Board and an independent director served as a Lead Director to preside over executive sessions of the independent directors. Following the founder’s retirement as Chairman in 2008, the Board has elected an independent director as Chairman. 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 ~~an annual program that is~~ focused on profitability while the executive equity program ~~grants~~ awards ~~that~~ have a ~~four year service-based vesting period~~mix of time-based and ~~is focused on stock price performance.~~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 ~~annual~~ bonus program, ~~our company~~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 ~~annual~~executive bonus program is capped, which we believe mitigates excessive risk taking by limiting bonus payouts even if our company dramatically exceeds its ~~operating income~~adjusted EBITDA target. In addition, 50% of over-achievement awards (an element of the ~~annual~~ 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 ~~annual~~ 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 ~~annual~~ executive bonus ~~plan~~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 ~~2013, each~~2016, our non-employee ~~director~~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 ~~equity~~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 ~~restricted~~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 ~~2013?~~2016?

The compensation paid to the non-employee members of the Board of Directors with respect to fiscal ~~2013~~2016 was as follows:

Non-Employee Director Compensation—Fiscal ~~2013~~2016


Name	Fees Earned		Restricted Stock Awards ($)(1)		Total		Fees Earned		Restricted Stock Awards ($)(1)		Total
James K. Bass	$	55,000	$	93,459	$	148,459	$	55,000	$	104,954	$	159,954
George W. Chamillard	62,500		93,459		155,959
Michael A. Daniels	66,250		93,459		159,709		70,000		104,954		174,954
George K. Muellner							55,000		104,954		159,954
Mark S. Newman (2)							55,000		—		55,000
William K. O’Brien	74,000		93,459		167,459		74,000		104,954		178,954
George K. Muellner	55,000		93,459		148,459
Lee C. Steele	55,000		93,459		148,459
Vincent Vitto	110,500		93,459		203,959		110,500		104,954		215,454

(1)

This column represents the grant date fair value of restricted stock awards for fiscal ~~2013~~2016 in accordance with FASB ASC Topic 718. The grant date fair value of the restricted stock awards granted to non-employee directors in fiscal ~~2013~~2016 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. Newman was elected to the Board of Directors in June 2015 and accordingly received a new director restrict stock award in fiscal 2015. Non-employee directors who are first elected to the Board during the second half of Company’s fiscal year are 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.

EQUITY COMPENSATION PLANS

The following table sets forth information as of June 30, ~~2013~~2016 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)		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)	2,069,565	(3)	$	13.435	2,484,323	(4)	258,003	(3)	$	13.340	3,208,558	(4)
Equity compensation plans not approved by shareholders	—		—		—		—		—		—
TOTAL	2,069,565		$	13.435	2,484,323		258,003		$	13.340	3,208,558


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


(2)	Consists of our ~~1997~~2005 Stock Incentive Plan ("2005 Plan") and ~~1998 equity plans, the 2005 Plan, and the~~our 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 ~~255,579~~397,688 shares available for future issuance under the ESPP and ~~2,228,744~~2,810,870 shares available for future issuance under the 2005 Plan. ~~We are no longer permitted to grant awards under our 1997 and 1998 equity plans.~~

PROPOSAL 2: APPROVAL OF ~~EXECUTIVE BOUNS~~AMENDMENT TO 2005 STOCK INCENTIVE PLAN -

~~CORPORATE FINANCIAL PERFORMANCE~~

~~We have~~In September 2016, the Board adopted, ~~a new Executive Bonus Plan - Corporate Financial Performance (the “CFP Bonus Plan”),~~ subject to the approval of our shareholders, an amendment and

restatement of our 2005 Stock Incentive Plan (the “2005 Plan”). The amendment and restatement increases the ~~shareholders at~~aggregate

number of shares authorized for issuance under the ~~meeting Our new CFP Bonus~~2005 Plan ~~has the same terms~~by 1,100,000 shares and ~~conditions~~includes such other changes as the annual bonus plan approved by shareholders at our 2009 annual meeting with the exception that our new plan includes performance periods to earn a bonus of partial-years, full-years, and multi-year periods. Our prior annual bonus plan only provided for performance periods of one fiscal year.are summarized below.

~~We are asking~~Summary of Changes

As of August 19, 2016, there were 1,146,800 shares available for future grants under the 2005 Plan. Also as of that date, there were options to purchase a total of 251,753 shares outstanding under our equity compensation plans, with a weighted average exercise price of $13.35 and a weighted remaining contractual term of 0.92 years. In addition, as of August 19, 2016, 1,893,207 restricted stock awards were outstanding.

In order to be able to make anticipated grants, the Board has amended the 2005 Plan to increase the number of shares

authorized for issuance under the 2005 Plan by an additional 1,100,000 shares. Based solely on the closing price of our common stock as reported on the NASDAQ Global Select Market on August 19, 2016, the maximum aggregate market value of the additional 1,100,000 shares that could potentially be issued under the 2005 Plan is $25.5 million. If the shareholders to approve the ~~adoption~~proposed amendment and restatement of the ~~CFP Bonus~~2005 Plan, ~~so that we may use~~ the ~~CFP Bonus Plan~~additional shares to ~~achieve our goal of increasing shareholder value and also receive a federal income tax deduction for certain compensation paid~~be issued under the ~~CFP Bonus Plan. If shareholders do not ratify~~2005 Plan will be authorized but unissued shares.

In addition, we have revised the ~~adoption~~2005 Plan language regarding minimum vesting requirements for restricted stock awards and deferred stock awards to clarify that no portion of any such awards granted to employees may vest prior to the first anniversary of the ~~CFP Bonus Plan, it will not become effective and we will remain under our prior annual bonus plan approved by shareholders in 2009.~~grant date.

Burn Rate Disclosure



Fiscal Year	Stock Options Granted	Time-Based Awards Granted (1)	Performance-Based Awards Earned	Total Granted/Earned	Weighted Average Common Shares Outstanding	Burn rate (2)
2016	0	402,152	55,837	457,989	34,241,000	2.68%
2015	0	656,566	NA	656,566	32,114,000	4.09%
2014	0	952,469	NA	952,469	31,000,000	6.14%

(1) Excludes 114,669 time-based restricted shares which constitute substitute equity awards to former Microsemi employees who joined Mercury in the fiscal 2016 acquisition of the Microsemi Carve-Out Business.

(2) The burn rate calculation treats each restricted share (both time-based grants and earned performance-based awards) as two option shares for purposes of the burn rate calculation.

Summary of the Amended 2005 Plan

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

~~Purpose~~

~~The purpose of the CFP Bonus~~ Plan is to increase shareholder value and our success by motivating key executives to perform to the best of their abilities and to achieve our objectives. The CFP Bonus Plan accomplishes this purpose by paying bonuses and over-achievement awards only after the achievement of pre-established performance goals.

~~Eligibility to Participate~~

Administration.The Compensation Committee ~~selects~~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 ~~who will be eligible~~as selected from time to receive bonuses and over-achievement awards under the CFP Bonus Plan. The actual number of employees who will be eligible to receive a bonus and over-achievement award during any particular year cannot be determined in advance because the Compensation Committee has discretion to select the participants.

~~Target Bonuses, Target Over-Achievement Awards, and Performance Goals~~

The Compensation Committee assigns to each participant a target bonus and a target over-achievement award. The Compensation Committee also determines the applicable performance goal or goals that must be achieved in each performance period before an actual bonus and actual over-achievement award will be paid to the participant for such performance period. A participant's target bonus is expressed as a percentage of his or her base salary earned during the applicable performance period.

A participant's target over-achievement award that may be earned during a performance period is expressed as a percentage of an over-achievement award pool. The Compensation Committee establishes a formula for determining the size of the over-achievement award pool. The size of the over-achievement award pool is determined by reference to the amount of actual adjusted EBITDA for the performance period in excess of the budgeted adjusted EBITDA for such performance period. Actual adjusted EBITDA, as used under the CFP Bonus Plan, is a non-GAAP measure and all references in this summary to actual adjusted EBITDA refer to such non-GAAP measure. Each over-achievement award is subject to a cap of 100% of (a) the participant's target bonus under the CFP Bonus Plan, plus (b) the participant's target bonus for management-by-results performance under a separate annual bonus plan for individual management-by-results performance goals.

The performance goals require the achievement of objectives for one or more of the following: (a) cash position; (b) controllable profits; (c) days sales outstanding; (d) earnings per share; (e) adjusted EBITDA; (f) free cash flow; (g) inventory reduction; (h) net income; (i) new orders; (j) operating cash flow; (k) operating income; (l) return on assets; (m) return on equity; (n) return on sales; (o) revenue; and (p) total shareholder return. Each of these measures is defined in the CFP Bonus Plan. Performance goals may differ from participant to participant, from performance period to performance period, and from award to award.

~~The Compensation Committee may choose to set target goals: (a) in absolute terms; (b) in relative terms (including, but not limited to, the passage of~~ time and/or against other companies or financial metrics); (c) on a per-share and/or per-capita basis; (d) against the performance of Mercury as a whole or against particular segments of Mercury; (e) on a pre-tax or after-tax basis; and/or (f) on a GAAP or non-GAAP basis. The Compensation Committee also will determine whether any elements will be included in or excluded from the calculations. Performance periods may be partial-years, full-years, or multi-year periods.

~~Actual Bonuses~~

After the performance period ends, the Compensation Committee must certify in writing the extent to which the pre-established performance goals were achieved before approving the actual bonus that is payable to a participant. The Compensation Committee has discretion to reduce or eliminate any actual bonus under the CFP Bonus Plan. Actual bonuses are paid in cash no later than 75 days after the performance period ends.

~~Actual Over-Achievement Awards~~

After the performance period ends, the Compensation Committee must certify in writing the extent to which actual adjusted EBITDA exceeded budgeted adjusted EBITDA for the performance period and determine the size of the over-achievement award pool. The Compensation Committee may include adjusted EBITDA from acquisitions completed during the performance period in the adjusted EBITDA for such performance period only if the following criteria are satisfied: (a) the acquisition is in line with our core business strategy as determined by the Board in its sole discretion; (b) we satisfy our organic revenue target for the performance period without including revenue derived from the acquisition; and (c) the acquisition is accretive to our adjusted EBITDA for the performance period. If the adjusted EBITDA for a performance period includes adjusted EBITDA derived from an acquisition, such adjusted EBITDA may not exclude fees and other expenses, including without limitation financing, accounting, legal, and other fees incurred in connection with the acquisition during the related performance period, which would be included in such adjusted EBITDA under generally accepted accounting principles.

~~The actual over-achievement award that is payable to a participant is determined using a formula determined~~ by the Compensation Committee. As of August 19, 2016, 2016, approximately 958 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 ~~a participant ceases~~any award of restricted stock or deferred stock granted to ~~be employed by Mercury or~~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 ~~its subsidiaries during the performance period,~~Grants. The grant of any award other than ~~in limited circumstances set forth in~~a stock option or a stock appreciation right will reduce the ~~CFP Bonus~~number of shares of common stock available for issuance under the 2005 Plan by 2.0 shares of common stock for each such participant's over-achievement award is forfeited to Mercury (i.e., a participant leaving the bonus pool is not a windfall for the other participants who remain in the pool). Over-achievement awards areshare actually subject to the ~~cap discussed above.~~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 ~~Compensation Committee has discretion~~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 ~~reduce or eliminate any actual over-achievement award~~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 ~~CFP Bonus Plan. A portion,~~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 ~~at the beginning~~but may not be less than 100% of the ~~performance period,~~fair market value of ~~an actual over-achievement award is~~the common stock on the date of grant. The 2005 Plan provides for 11,892,264 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, ~~no later than 75 days after~~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 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 ~~ends~~will be at least one year, and in the ~~remaining~~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. No portion ~~is banked~~of any restricted stock award granted to employees may vest prior to the first anniversary of the grant date.

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 ~~paid out~~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 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 ~~equal installments~~years, but vesting can occur incrementally over athe three-year ~~period~~period. No portion of any deferred stock award granted to employees may vest prior to the first anniversary of the grant date. In the Compensation Committee’s sole discretion and subject to the ~~continued employment of~~participant’s compliance with the ~~participant, unless otherwise determined~~procedures established by the Compensation ~~Committee.~~

~~Maximum Payment~~

~~The CFP Bonus Plan limits the actual payment to any participant in respect~~Committee and requirements of ~~any fiscal year to $2,000,000 even if the pre-established formula otherwise indicates a larger payment.~~

~~Administration~~

~~The Compensation Committee administers the CFP Bonus Plan. Members~~Section 409A of the ~~Compensation Committee must~~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 ~~outside directors~~“performance-based compensation” under Section 162(m) of the ~~Code.~~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. 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 ~~CFP Bonus~~2005 Plan, including any amendments that increase the ~~Compensation Committee:~~

~~selects~~number of shares reserved for issuance under the ~~employees who will be eligible~~2005 Plan, expand the types of awards available under the 2005 Plan, materially expand the eligibility to participate in the ~~CFP Bonus Plan;~~

~~assigns~~2005 Plan, materially extend the ~~target bonus and over-achievement award for each participant;~~

~~establishes the performance goals that must be achieved before any actual bonuses or over-achievement awards are paid;~~

~~approves a payout formula to provide for an actual bonus or over-achievement award; and~~

~~interprets the provisions~~term of the ~~CFP Bonus Plan.~~

~~Performance-Based~~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

~~The CFP Bonus~~ 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 ~~is designed to qualify~~qualifies as ~~“performance-based”~~performance-based compensation under Section 162(m) of the Code. ~~Under Section 162(m), we may not receive~~In addition, except in connection with a ~~federal income tax deduction for compensation paid to~~reorganization or other similar change in the ~~named executive officers to the extent that any~~capital stock of ~~these persons receives more than $1,000,000 in any one year. However, if we pay~~

~~compensation that is “performance-based” under Section 162(m), we can receive~~Mercury or a federal income tax deduction for the compensation even if it is more than $1,000,000 during a single year. The CFP Bonus Plan allows us to pay incentive compensation that is performance-based and, therefore, fully tax deductible on our federal income tax return.

~~Amendment and Termination of the CFP Bonus Plan~~

~~The Board and~~merger or other transaction, without prior shareholder approval, the Compensation Committee may ~~amend~~not reduce the exercise price of an outstanding stock option or ~~terminate~~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 ~~CFP Bonus Plan at any time and for any reason. However, the amendment, suspension,~~persons who will receive options or termination of the CFP Bonus Plan shall not, without the consent of the participant, alter or impair any rights or obligations under any target bonus or over-achievement award granted to such participant or actual bonus or over-achievement award earned by such participant.

~~Bonuses and Over-Achievement Awards to Be Paid to Certain Individuals and Groups~~

~~Bonuses and over-achievement~~ awards under the ~~CFP Bonus~~2005 Plan ~~are determined based on actual~~in the future ~~performance. As a result, future actual bonuses and over-achievement~~or the amount of options or awards ~~cannot now~~that will be ~~determined.~~granted under the 2005 Plan. The following table ~~sets forth the maximum amounts for bonuses and over-achievement~~provides information with respect to awards ~~payable~~granted under the ~~CFP Bonus~~2005 Plan ~~which~~in the ~~Compensation Committee has approved for~~ fiscal year ~~2014, subject to shareholder approval~~ended June 30, 2016. This table does not include any grants made following the end of ~~the CFP Bonus Plan. Actual bonuses and over-achievement awards paid, if any, under the CFP Bonus Plan for~~ fiscal year ~~2014 will be calculated based on actual performance pursuant to the goals established by the~~ 2016 as described in “Compensation ~~Committee. For the fiscal 2014 performance period, the Compensation Committee selected performance goals based on our budgeted adjusted EBITDA~~Discussion and revenue. The over-achievement award pool for fiscal year 2014 will be 25% of the amount, if any, by which actual adjusted EBITDA exceeds budgeted adjusted EBITDA and is subject to meeting a minimum revenue target. Because our executive officers are eligible to receive bonuses and over-achievement awards under the CFP Bonus Plan, our executive officers have an interest in this proposal.Analysis.”

Name of Individual or Group Maximum Bonus Maximum Over-Achievement Award (1) Maximum Total (Bonus + Over-Achievement Award)
Mark Aslett $375,000 $500,000 $875,000
Kevin M. Bisson 139,500 186,000 325,500
Gerald M. Haines II 139,500 186,000 325,500
Didier M.C. Thibaud 139,500 186,000 325,500
Charles A. Speicher 56,438 75,250 131,688
All executive officers, as a group (2) 849,938 1,133,250 1,983,188
All directors who are not executive officers, as a group (3) — — —
All employees who are not executive officers, as a group (4) 278,100 370,800 648,900



	Stock Options					Restricted Stock
Name and Position	Dollar Value		Number	Average Exercise Price		Dollar Value(1)		Number
Mark Aslett, President and Chief Executive Officer	$	—	—	$	—	$	1,431,581	90,894
Gerald M. Haines II, EVP, Chief Financial Officer, and Treasurer		—	—		—		429,471	27,268
Didier M.C. Thibaud, EVP, Chief Operating Officer		—	—		—		429,471	27,268
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer		—	—		—		214,736	13,634
All executive officers as a group		—	—		—		2,505,258	159,064
All non-employee directors as a group		—	—		—		524,768	31,125
Employees as a group (excluding executive officers)		—	—		—		6,021,088	366,542


~~(1)~~	This is the cap on the payment of over-achievement awards. Given that the over-achievement award pool is only funded based on a percentage of the amount by which actual adjusted EBITDA exceeds budgeted adjusted EBITDA, actual over-achievement awards are likely to be substantially lower than the cap.


~~(2)~~	~~This group consists of the five individual named executive officers listed in the table above.~~


~~(3)~~	~~This group is not eligible to participate in the CFP Bonus Plan.~~


~~(4)~~	~~This group includes four members of senior management that participate in the CFP Bonus Plan but are not executive officers pursuant to Rule 3b-7 under the Exchange Act.~~

(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.

There can be no assurance that any bonuses or over-achievement awards will be paid. We believe it is unlikely that over-achievement award payouts will be at or near the maximum payment since the size of the over-achievement award pool is determined based on actual adjusted EBITDA exceeding budgeted adjusted EBITDA, and the payment of an over-achievement award reflects stretch achievements. For example, in fiscal years 2012 and 2013, executives did not earn any over-achievement awards. The actual bonus paid, if any, may be lower than the maximum bonus depending on actual performance compared to the performance goals associated with the maximum payout. The Compensation Committee also has discretion to further decrease, but not increase, the bonuses and over-achievement awards otherwise indicated under the pre-established formula.

~~Required Vote~~

Approval of the CFP Bonus Plan 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 CFP Bonus Plan.

~~Recommendation~~

We believe that the approval of the CFP Bonus Plan is essential to our continued success. Our executives are one of our most valuable assets. The bonuses and over-achievement awards provided under the CFP Bonus Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. For the reasons stated above the shareholders are being asked to approve the CFP Bonus Plan.

~~The Board of Directors recommends a vote FOR the proposal to approve the CFP Bonus Plan.~~

PROPOSAL 3: 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 3.

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 ~~2013~~ 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 4: 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, ~~2014.~~2017. 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 ~~2014~~2017 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 ~~2014.~~2017.

VOTING SECURITIES

Who owns more than 5% of our stock?

On August ~~21, 2013,~~12, 2016, there were ~~33,224,065~~40,363,864 shares of our common stock outstanding. On that date, to our knowledge, there were ~~five~~four 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 August ~~21, 2013.~~12, 2016. 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
Barrow, Hanley, Mewhinney & Strauss, Inc.(1) 2,580,442
7.8 %
Black Rock, Inc.(2) 2,450,007
7.4
Royce & Associates LLC (3) 2,058,446
6.2
Baron Capital Group, Inc.(4) 1,750,000
5.3
Vanguard Group Inc. (5) 1,744,914
5.3



Name of Beneficial Owner	Number of Shares Beneficially Owned	Percent of Class
BlackRock, Inc. (1)	3,209,628	8.0	%
Royce & Associates LLC (2)	2,155,546	5.3
Barrow, Hanley, Mewhinney & Strauss, LLC (3)	2,449,409	6.1
The Vanguard Group (4)	2,431,928	6.0


(1)	Based on a Schedule ~~13G~~13G/A filed by Black Rock, Inc. with the SEC on ~~February 11, 2013,~~January 26, 2016, reporting beneficial ownership as of December 31, ~~2012.~~2015. 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 19, 2016, reporting beneficial ownership as of December 31, 2015. 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 2, 2016, reporting beneficial ownership as of December 31, 2015. The reporting entity’s address is 2200 Ross Avenue, 31^st Floor, Dallas, Texas 75201.


~~(2)~~	~~Based on a Schedule 13G/A filed by Black Rock, Inc. with the SEC on February 8, 2013, reporting beneficial ownership as of December 31, 2012. The reporting entity’s address is 40 East 52~~^nd ~~Street, New York, New York 10022.~~


~~(3)~~	Based on a Schedule 13G/A filed by Royce & Associates LLC with the SEC on January 15, 2013, reporting beneficial ownership as of December 31, 2012. The reporting entity’s address is 745 Fifth Avenue, New York, New York 10151.


(4)	~~Based on a Schedule 13G/A filed by Baron Capital Group, Inc. with the SEC on February 14, 2013, reporting beneficial ownership as of December 31, 2012. The reporting entity’s address is 767 5~~^th ~~Avenue, 49~~^th ~~Floor, New York, New York 10153.~~


~~(5)~~	Based on a Schedule 13G/A filed by Vanguard Group, Inc. with the SEC on February ~~12, 2013,~~10, 2016, reporting beneficial ownership as of December 31, ~~2012.~~2015. 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 August ~~21, 2013,~~12, 2016, with respect to common stock beneficially owned by: (1) our directors (including our chief executive officer) ~~and director nominees;~~; (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 ~~director nominees,~~ 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) 934,249
2.8 %
James K. Bass(3) 42,537
**
George W. Chamillard(4) 129,203
**
Michael A. Daniels(5) 42,537
**
George K. Muellner(6) 42,537
**
William K. O’Brien(7) 74,203
**
Lee C. Steele(8) 133,203
**
Vincent Vitto(9) 106,203
**
Kevin M. Bisson(10) 142,030
**
Gerald M. Haines II(11) 173,702
**
Charles A. Speicher(12) 59,749
**
Didier M.C. Thibaud(13) 511,834
1.5
All directors, director nominees, and executive officers as a group (12 persons)(14) 2,391,987
7.0 %



Name and Address of Beneficial Owner*	Number of Shares Beneficially Owned (1)	Percent of Class (1)
Mark Aslett (2)	665,390	1.6	%
James K. Bass (3)	68,227	**
Michael A. Daniels (4)	68,227	**
George K. Muellner (5)	68,227	**
Mark S. Newman (6)	11,831	**
William K. O’Brien (7)	91,375	**
Vincent Vitto (8)	115,892	**
Christopher C. Cambria (9)	—	**
Gerald M. Haines II (10)	232,591	**
Charles A. Speicher (11)	56,969	**
Didier M.C. Thibaud (12)	379,112	0.9
All directors and executive officers as a group (11 persons) (13)	1,757,841	4.3

* 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 August ~~21, 2013~~12, 2016 are outstanding.


(2)	Includes (a) ~~216,963~~363,197 shares owned by Mr. Aslett individually; and (b) ~~294,726 shares which may be acquired by Mr. Aslett within 60 days of August 21, 2013 through the exercise of stock options; and (c) 422,560~~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) ~~22,374~~50,115 shares owned by Mr. Bass individually; (b) 15,000 shares which may be acquired by Mr. Bass within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~5,163~~3,112 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) 33,040 shares owned by Mr. Chamillard individually; (b) 91,000 shares which may be acquired by Mr. Chamillard within 60 days of August 21, 2013 through the exercise of stock options; and (c) 5,163 restricted shares awarded to Mr. Chamillard under our stock-based plans (as to which Mr. Chamillard has sole voting power, but which are subject to restrictions on transfer).

~~(5)~~

~~Includes (a) 22,374~~50,115 shares owned by Mr. Daniels individually; (b) 15,000 shares which may be acquired by Mr. Daniels within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~5,163~~3,112 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).

~~(6)~~(5)

Includes (a) ~~22,374~~50,115 shares owned by Mr. Muellner individually; (b) 15,000 shares which may be acquired by Mr. Muellner within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~5,163~~3,112 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 (a) 5,916 shares owned by Mr. Newman individually; and (b) 5,915 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) ~~23,040~~72,263 shares owned by Mr. O’Brien individually; (b) ~~46,000~~16,000 shares which may be acquired by Mr. O’Brien within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~5,163~~3,112 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) 40,040 shares owned by Mr. Steele individually; (b) 88,000 shares which may be acquired by Mr. Steele within 60 days of August 21, 2013 through the exercise of stock options; and (c) 5,163 restricted shares awarded to Mr. Steele under our stock-based plans (as to which Mr. Steele has sole voting power, but which are subject to restrictions on transfer).

~~(9)~~

~~Includes (a) 23,040~~50,780 shares owned by Mr. Vitto individually; (b) ~~78,000~~62,000 shares which may be acquired by Mr. Vitto within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~5,163~~3,112 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).

~~(10)~~(9)

~~Includes (a) 15,068 shares owned by~~ Mr. ~~Bisson individually;~~Cambria joined the company on August 1, 2016; however, his restricted stock award was granted effective as of August 15, 2016 and ~~(b) 126,962 restricted shares awarded to Mr. Bisson under our stock-based plans (as to which Mr. Bisson has sole voting power, but which are subject to restrictions on transfer).~~is therefore not reflected in the table.


~~(11)~~(10)	Includes (a) ~~45,940~~115,795 shares owned by Mr. Haines individually; and (b) ~~127,762~~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).


~~(12)~~(11)	Includes (a) ~~12,503~~23,801 shares owned by Mr. Speicher individually; and (b) ~~47,246~~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).

~~(13)~~(12)

Includes (a) ~~133,426~~216,774 shares owned by Mr. Thibaud individually; (b) ~~158,000~~30,000 shares which may be acquired by Mr. Thibaud within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~220,408~~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).

~~(14)~~(13)

Includes (a) ~~610,182~~998,871 shares owned by directors and executive officers individually; (b) ~~800,726~~153,000 shares which may be acquired within 60 days of August ~~21, 2013~~12, 2016 through the exercise of stock options; and (c) ~~981,079~~605,970 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?

The following persons are our executive ~~officers as of August 30, 2013:~~officers:



Name		Position
Mark Aslett		President and Chief Executive Officer
~~Kevin M. Bisson~~Christopher C. Cambria		Senior Vice President, ~~Chief Financial Officer,~~General Counsel, and ~~Treasurer~~Secretary
Gerald M. Haines II		~~Senior~~Executive Vice President, ~~Corporate Development,~~ Chief ~~Legal~~Financial Officer, and ~~Secretary~~
~~Didier M.C. Thibaud~~		~~President, Mercury Commercial Electronics~~Treasurer
Charles A. Speicher		Vice President, Controller, ~~and~~ Chief Accounting Officer, and Assistant Treasurer
Didier M.C. Thibaud		Executive Vice President, Chief Operating Officer

~~Where can I obtain more information about Mercury’s~~Our executive ~~officers?~~

~~Biographical information concerning~~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 ~~and their ages can be found in Item 4.1 titled “Executive Officers~~as of the ~~Registrant” in our annual report on Form 10-K for the fiscal year ended June 30, 2013, which item is incorporated by reference into~~date of filing of this proxy ~~statement.~~statement is presented below.

Mark Aslett, age 48, joined Mercury in 2007 and has served as the President and Chief Executive Officer since then, 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.

Christopher C. Cambria, age 58, joined Mercury in August 2016 as Senior Vice President, General Counsel and Secretary. Prior to joining Mercury, he was Vice President, General Counsel, and Secretary of Aerojet Rocketdyne Holdings, Inc. from 2012 to 2016 and Vice President, General Counsel from 2011 to 2012. He was with L-3 Communications Holdings, Inc. from 1997 through 2009 serving as Senior Vice President and Senior Counsel, Mergers and Acquisitions from 2006 to 2009, Senior Vice President, Secretary and General Counsel from 2001 to 2006, and Vice President, General Counsel and Secretary from 1997 to 2001. Prior to L-3, Mr. Cambria was an Associate with Fried, Frank, Harris, Shriver & Jacobson from 1994 to 1997.

Gerald M. Haines II, age 53, joined as Senior Vice President of Corporate Development and in 2014 was appointed Executive Vice President, CFO and Treasurer. Prior to Mercury, from 2008 to 2010 he served as Executive Vice President at Verenium Corporation, a publicly traded company engaged in the development and commercialization of biofuels and specialty enzymes, where he oversaw 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.

Charles A. Speicher, age 57, joined Mercury in 2010 as Vice President, Controller, and Chief Accounting Officer. Prior to joining Mercury, Mr. Speicher held various positions at Virtusa Corporation, a publicly-traded global IT services company, including Vice President of Global Accounting Operations and Corporate Controller from 2001 to 2009. Mr. Speicher was Corporate Controller at Cerulean Technologies Inc., a private software product company, from 1996 to 2000 prior to its sale to Aether Systems Inc. where he served as Division Controller of Aether Mobile Government from 2000 to 2001. Prior to joining Cerulean Technology, Mr. Speicher held positions with Wyman-Gordon Company, Wang Laboratories and Arthur Andersen & Company, LLP. Mr. Speicher is a CPA licensed in Massachusetts.

Didier M.C. Thibaud, age 55, joined Mercury in 1995, and has served as our Executive Vice President, Chief Operating Officer since January 2016. Prior to that he was 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.

~~EXECUTIVE~~ COMPENSATION DISCUSSION AND ANALYSIS

~~Compensation Discussion and Analysis~~

Executive Summary

Fiscal ~~2013~~2016 Business Review

~~Fiscal 2013 was~~

Mercury concluded a ~~challenging year for the defense industry and for Mercury. Constraints on U.S. defense spending and uncertainties surrounding sequestration and the future defense budget lead to~~strong fiscal 2016 with a very challenging industry environment. The resulting slowdowns in funding and defense contracting activity had a more significant impact on our first-quarter business than we initially anticipated in our strategic operating plan for the year.busy fourth quarter. During the first quarter we proactively responded to this difficult industry environment by implementing aggressive expense reduction actions that included reducing the size of our workforce by 142 positions. This first quarter restructuring, other cost control initiatives, and a 17 position workforce reduction completed during the fourth quarter were designed to result in approximately $22 million of annualized savings. We were careful to retain key engineering and middle management talent - and hence Mercury's unique capabilities and differentiation and our ability to regenerate scale in the future - during this process in order to preserve the intrinsic value of the business. Taking a cautious and conservative stance, we focused on managing revenue primarily from backlog, while relying less on book and ship, in an effort to minimize working capital, preserve liquidity, and reduce risk.

In the second quarter, budgetary constraints on U.S. defense spending, coupled with the then impending expiration of the Congressional continuing resolution and the potential for sequestration, resulted in an ongoing industry slowdown, that in turn affected our financial results and revenue visibility. Nonetheless, our core compute business posted a strong bookings quarter, as did our recently acquired Micronetics business.

During the third quarter, although conditions in the defense industry remained very challenging, the enactment in March 2013 of a defense appropriations bill for government fiscal year 2013 was a positive step, and we made substantial progress on our two most important defense programs -- Aegis and SEWIP. Our core compute business performed well and delivered improved results on a sequential basis. There was clearly greater stability in our business during the third quarter; although, challenges in the industry remained. There appeared to be greater potential for the near-term reprogramming of funds from the Department of Defense ("DoD") investment accounts in order to adhere to the sequester budget limits, and longer term there also remained uncertainty about the DoD's 2014 fiscal year budget. These dynamics continued to cloud our visibility regarding future bookings and revenues. Consequently, we continued to manage revenue and expense levels conservatively with a focus on maximizing our cash and building backlog.

In the fourth quarter we closed ~~fiscal 2013 with a very strong quarter for bookings. In addition, we made good progress on~~ our ~~most important ongoing programs,~~$300 million acquisition of the embedded security, radio frequency and ~~design wins were up substantially compared with~~microwave, and custom microelectronics businesses of the ~~sequential third quarter. Our results for~~Power and Microelectronics Group of Microsemi Corporation (the "Carve-Out Business"), the ~~fourth quarter exceeded our guidance across all key metrics,~~largest acquisition in Mercury's history, and we ~~concluded~~successfully completed a debt financing and follow-on common stock offering to support this acquisition and future strategic initiatives. For fiscal ~~2013 with positive momentum and record backlog, despite a year of challenging conditions in~~2016, including the defense industry. Our Mercury Commercial Electronics core compute business delivered improved bookings on a sequential basis. Bookings for the Navy's Aegis Ballistic Missile Defense System were up more than 100% from the third quarter and nearly 250% year-over-year. This was another strong bookings quarter for the Navy's Surface Electronic Warfare Improvement Program (SEWIP) Block 2, and we were pleased to receive an initial small order for U.S. Army Patriot Missile upgrades. We concluded fiscal 2013 with our total backlog up 34% and defense backlog up 15%, year-over-year, each at all- time Company record levels.

During the fourth quarter we signed a lease for a 70,000 square foot microelectronics manufacturing center in Hudson, NH. Operating as our Advanced Microelectronics Center (AMC), this new plant will allow us to consolidate our current Hudson, NH operation and our existing Salem, NH facility. Our New Hampshire AMC will ultimately provide us with a world-class, scalable, redundant design and manufacturing facility - something we know is a very important consideration for our customers in their decision-making.

~~We were encouraged to see Mercury's performance improve substantially in the second half of fiscal 2013. Bookings were up 12 percent from the first six months~~results of the ~~year, total revenue~~Carve-Out Business, Mercury's revenues grew ~~10 percent,~~15% year-over-year. GAAP income from continuing operations increased 37%, and adjusted EBITDA rose 242 percent. In addition, we generated $6.5 million in positive cash from operations in the second half, compared with $8.4 million of cash used for operations in the first six months of the year. These improvements suggest to us that our business has stabilizedwas up 29%. Bookings increased 11% and ~~that looking forward we are poised for stronger results.~~

We believe that, on balance, our technology, capabilities, and ongoing programs and platforms align well with the Defense Department's new roles and missions. Looking ahead into fiscal 2014, we have the opportunity for a number of major new design wins and programs should our customers be down selected by the Department of Defense. We are confident that, given our strategy

~~and positioning, the defense industry's ultimate recovery will lead~~year-end backlog increased 38% to a ~~significant improvement in our profitability, cash flow generation, and enterprise value over time.~~

new Company record of $288 million. Our 12-month forward revenue coverage remains strong, positioning us well for fiscal 2017.

Fiscal ~~2013 Annual~~ 2016 was also a strong year organically. We continued to scale the core business while delivering well above industry-average growth and profitability, in line with our target business model. Organic revenue for fiscal 2016 grew 8% year-over-year, exceeding the top end of our guidance. Organic backlog grew 9% year-over-year. Adjusted EBITDA increased 18% organically, exceeding guidance.

Executive Bonus Program

In July ~~2012,~~2015, the Compensation Committee established our fiscal ~~2013 annual~~2016 executive bonus program in conjunction with

the Board of Directors approving our fiscal ~~2013~~2016 strategic operating plan. ~~Given~~For fiscal 2016, the ~~uncertainty in~~Compensation Committee targeted total cash compensation (i.e., base salary plus cash bonus opportunity) around the ~~defense industry,~~50th percentile of a composite index of data from our peer group and the Radford Global Technology Survey. For our fiscal ~~2013 annual~~2016 executive bonus program, 80% of the total value was based on achieving corporate financial performance objectives and 20% was for achieving individual management-by-results ("MBR") performance objectives. The corporate financial performance portion of our fiscal 2016 executive bonus plan ~~had~~was split into two halves, with ~~the~~specific financial performance targets ~~split between~~addressing the first half and the second half of the fiscal year. ~~The executive bonus~~We use two semi-annual performance periods with two different performance targets in order to align our cash incentive program was designed to take into account the likelihood of a continuing budget resolution for government fiscal year 2013, the potential for budget sequestration, and the anticipated closing of our acquisition of Micronetics. Our fiscal 2013 strategic operating plan reflected three budgeted scenarios for financial performance during the year: a base financial plan; a probable financial plan; and a possible financial plan. The executive bonus program was set to payout bonuses at the 25% level for our base financial plan ($26.2 million of adjusted EBITDA), the 70% level for our probable financial plan ($50.9 million of adjusted EBITDA), and the 100% level for our possible financial plan ($55.6 million of adjusted EBITDA). For financial performance above our possible financial plan ($55.6 million of adjusted EBITDA), executives were eligible for over-achievement cash bonus awards up to an additional 100% bonus depending upon the level of financial performance in excess of our possible financial plan. For the first half of fiscal 2013, macroeconomic events happening outside the control of the Company impacted our results much more significantly than we had anticipated for the period when we preparedwith our strategic operating plan ~~in July 2012. No bonuses were earned for~~("SOP") review and midyear SOP update. We determine the ~~first half of fiscal 2013.~~

Due to the impact of defense budget sequestration on our business during the first half of fiscal 2013 and the increasing possibility that the Department of Defense could be forced to operate under defense budget sequestration for the remainderpotential total size of the ~~year, we revised our fiscal 2013 strategic operating plan halfway through~~annual cash incentive bonuses at the year. Our revised fiscal 2013 strategic operating plan, and the related amended executive bonus program, were approved by the Board of Directors in January 2013. The Board of Directors was concerned about executive and key employee retention and incentives given the substantial challenges facing the industry, that no bonuses were paid for the first halfbeginning of the fiscal year as well as set the first half financial performance target, and ~~that it was highly probable that no bonuses would be paid for~~then set the second half performance target in connection with our midyear SOP update. Over-achievement awards, if any, are based on exceeding a total annual revenue target and also exceeding the sum of the year. In view of the foregoing, the Board of Directors amended the plan by lowering the second half and full fiscal year financial targets, while also generally lowering the potential payouts for executives under the plan for the remainder of the fiscal year. Under our amended fiscal 2013 annual executive bonus program, bonus payouts were set at the 33% level for our revised base financial plan ($7.0 million of adjusted EBITDA), the 50% level for our revised probable financial plan ($15.0 million of adjusted EBITDA), and the 75% level for our revised possible financial plan ($22.0 million of adjusted EBITDA). For over-achievement cash bonus awards, we retained the original targets set in July 2012 with over-achievement awards being earned based upontwo half-year corporate financial performance ~~in excess of our original possible financial plan ($55.6 million of adjusted EBITDA and at least $310.6 million of revenue).~~

objectives. Based on the level of performance achieved relative to our fiscal ~~2013~~2016 targets, we paid ~~42.9%~~100% of the corporate financial performance portion of our executive bonuses for both the first and second halves of fiscal ~~2013.~~ 2016. While our fiscal 2016 adjusted EBITDA was above the threshold to begin to earn over-achievement awards, we did not reach the minimum organic revenue threshold for the payment of over-achievement awards under our fiscal 2016 bonus plan, and accordingly no over-achievement awards were earned.

In addition, our executives earned the ~~management-by-results ("MBR")~~MBR portion of their annual bonus based upon their individual results measured against their individual goals established by the Compensation Committee. For fiscal ~~2013,~~2016, our named executive officers achieved between 89% and ~~92%~~99% of their individual MBR performance goals for fiscal ~~2013.~~2016.

~~Fiscal 2013~~

Subsequent to fiscal 2016, we implemented our fiscal 2017 executive bonus program. For fiscal 2017, 100% of the total value of executive bonuses will be based on achieving corporate financial performance objectives.

Executive Equity Awards

~~At its~~In July ~~2012 meeting,~~2015, the Compensation Committee ~~granted annual~~approved our fiscal 2016 restricted stock awards. The fiscal 2016 restricted stock awards ~~effective August 15, 2012~~granted to our named executive officers ~~that~~ approximated the ~~75th~~50th percentile of a market composite consensus. Half of our fiscal 2016 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 2016 awards, one-third vests on each of the first three anniversaries of the grant date. As part of the transition to a full three-year cliff vesting performance cycle for the fiscal 2017 awards, for the performance-based vesting half of the fiscal 2016 awards, up to two-thirds vest based on achieving financial goals for the two-year period ending June 30, 2017 and up to one-third vest based on achieving financial goals for the three-year period ending June 30, 2018.

~~With the significant macroeconomic headwinds facing the defense industry and its potential impact on the Company, along with the improvement in the commercial technology market~~

consensus. Each fiscal 2017 annual restricted stock award for ~~executive talent, management and the Compensation Committee analyzed the potential risk of individual~~our named executive officers ~~leaving~~is 50% performance-based vesting and 50% time-based vesting. For the Company along with the hole in the organization that would be created if the individual left. As a result, in addition to the annual grant, at its July 2012 meeting, the Compensation Committee granted retention restricted stock awards to certaintime-based vesting half of ~~our named executive officers. The retention equity awards, combined with~~ the fiscal ~~2013~~2017 annual ~~equity~~ awards, ~~were designed~~one-third vests on each of the first three anniversaries of the grant date. The performance-based annual awards cliff-vest based on relative performance to ~~increase~~our peer group for the ~~retention "glue" that~~three-year period ending June 30, 2019. For fiscal 2017, we are using two new relative performance metrics for the ~~Company had on the individual named executive officers. The level of "glue" was determined as~~performance-based awards: (i) a ratio ~~for each named executive officer, with the ratio being the NEO's total value~~ of ~~all unvested equity awards compared~~adjusted EBITDA to the value of that NEO's typical annual equity award. The "glue" ratios were calculated and recommended by Radford, the Compensation Committee's independent compensation consultant, based on an industryrevenue percentile ranked relative to our peer group ~~review,~~(75% weighting); and (ii) revenue growth percentage percentile ranked relative to our peer group (25% weighting). The target value for the ~~targeted ratios were in the range of 2x to 4x depending on the potential risk and hole in the organization from the potential loss of the individual.~~

~~For~~ fiscal ~~2014, at its July 2013 meeting, the Compensation Committee approved~~2017 annual restricted stock awards ~~effective August 15, 2013. There were no retention~~is the market median of a market composite consensus, with upside potential if we outperform our peer group on the relative performance metrics discussed above. Historically, we have relied on short term, absolute performance metrics based on our internal performance targets to determine vesting of our performance equity ~~grants~~awards. We are transitioning to the use of longer term relative performance metrics for our performance restricted stock awards as we believe that our relative financial performance compared with a group of peer companies with similar attributes is an important factor in the creation of long term value for the Company and its shareholders.

For fiscal ~~2014.~~2017, we also granted a special, non-recurring acquisition integration incentive restricted stock award for our Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer. This special, non-recurring grant related specifically to the Company's recent large acquisition does not represent the Company's regular recurring grant practices and is designed to create incentives for the rapid and successful integration of our recently acquired Carve-Out Business leading to accelerated revenue growth. The specific objective is to achieve profitable revenue growth within the first year that is in excess of the average historical growth and profitability rates of companies in the primary market sector (defense) in which the Company operates. This integration incentive award is a 100% performance-based restricted stock award with fiscal 2017 as the performance period and is earned based on total revenue growth rate objectives, subject to minimum revenue and adjusted EBITDA thresholds. These goals specifically relate to the integration of the largest acquisition in the Company's history, with a focus on driving revenue growth without sacrificing profitability as well as aligning with the Company's Carve-Out Business post-acquisition operating model.

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 ~~between~~around the 50th ~~and 75th percentiles~~percentile compared to peer companies and the Radford Global Technology ~~Survey, with cash compensation nearer to the 50th percentile and long-term incentive compensation (i.e., equity awards) nearer to the 75th percentile.~~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 ~~2013,~~2016, 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 ~~$78,334~~$96,005 for fiscal ~~2013.~~2016. For fiscal ~~2013,~~2016, the Company's human resources department expended ~~$15,800~~$23,475 for Radford market surveys for non-executive ~~employees.~~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 ~~2013:~~2016:



AeroVironment, Inc.	Cray, Inc.	~~KVH Industries, Inc.~~KEYW Holdings Corporation
American Science and Engineering	Digi International, Inc.	KVH Industries, Inc.
Analogic Corporation	Digital Globe, Inc.	~~NCI,~~M/A-COM Technology Solutions Holdings, Inc.
~~Analogic Corporation~~API Technologies Corp.	Ducommun Incorporated	~~Radisys Corporation~~NCI, Inc.
~~Anaren, Inc.~~CalAmp Corp.	Electro Scientific Industries, Inc.	~~Satcon Technology~~Radisys Corporation
~~API Technologies Corp.~~	~~GeoEye, Inc.~~	~~Sonus Networks, Inc.~~
~~Cognex Corporation~~	~~Globecomm Systems Inc.~~	~~Stratasys, Inc.~~
Comtech Telecommunications Corp.	~~IRobot~~iRobot Corporation	~~Symmetricom,~~Sonus Networks, Inc.
~~CPI International, Inc.~~	~~KEYW Holdings Corporation~~

~~During~~Since establishing the fiscal ~~2013,~~2016 peer group, two of the peer companies have been acquired and are no longer publicly traded. Beginning in late fiscal 2016, Radford assisted us in reviewing our peer ~~group. We retained~~group going forward, particularly in light of the ~~same~~changes in the existing peer group, our employee headcount growth and business evolution with our recent acquisition of the ~~following exceptions:~~

~~CPI International, Inc., GeoEye, Inc.,~~Carve-Out Business and ~~Satcon Technology Corporation were all acquired~~the significant increase in our market capitalization. Mercury is a high-technology commercial company. Its primary market is the aerospace and ~~are no longer public companies; and~~

~~Digital Globe, Inc., which acquired GeoEye~~defense sector. Radford assisted us in ~~February 2013, will cease~~expanding the scope of additional companies to ~~be in~~consider for our peer group because we typically compete with high-technology companies, not defense or aerospace companies, for ~~reporting periods after such acquisition because the size of the combined company exceeds the parameters for our peer group.~~managerial and technical talent.

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 ~~annual~~base compensation, bonus targets and the equity awards for August ~~2013~~2016 (fiscal ~~2014).~~2017), again with the philosophy of targeting compensation around the 50th percentile.



ADTRAN, Inc.	Ducommun Incorporated	Netgear Inc.
AeroVironment, Inc.	~~Cray,~~Gigamon, Inc.	~~KVH Industries, Inc.~~
~~American Science and Engineering, Inc.~~	~~Digital Globe, Inc.~~	~~NCI,~~NetScout Systems, Inc.
Analogic Corporation	~~Ducommun Incorporated~~Novanta Inc. (fka GSI Group Inc.)	~~Radisys~~Progress Software Corporation
~~Anaren,~~Astronics Corporation	Infinera Corporation	Qualys, Inc.
Brooks Automation, Inc.	~~Electro Scientific Industries,~~InvenSense, Inc.	~~Sonus Networks,~~Ruckus Wireless, Inc.
~~API Technologies~~CalAmp Corp.	~~Globecomm Systems Inc.~~iRobot Corporation	~~Stratasys,~~Shore Tel, Inc.
Cognex Corporation	~~IRobot Corporation~~Ixia	~~Symmetricom,~~Sonus Networks, Inc.
Comtech Telecommunications Corp.	~~KEYW~~Kratos Defense & Security Solutions, Inc.	Sparton Corp.
Cray, Inc.	M/A-COM Technology Solutions Holdings, ~~Corporation~~Inc.	Vicor Corp.
Digi International Inc.	MKS Instruments, 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~~technologies similar to those utilized in 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 ~~2013~~2016 consisted of a blend of public technology and defense companies with revenues generally between $100 million and ~~$400~~$500 million, ~~(median~~with a median revenue ~~$222 million).~~of $235 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 ~~2013.~~2016. 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 ~~between~~positioned at the market 50th ~~and 75th percentiles, with cash compensation nearer to the 50th percentile and long-term incentive compensation (i.e., equity awards) nearer to the 75th~~ percentile.

~~We base~~For fiscal 2016, we based 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~~For fiscal 2016, our variable performance-based elements ~~are~~were designed to reward performance at two levels: (1) ~~individual MBR performance; and (2)~~ corporate financial performance compared to ~~annual~~ business ~~goals.~~goals; and (2) individual MBR performance.

We compensate our executives principally through base salary, performance-based ~~annual~~ 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 ~~budgeted adjusted EBITDA and revenue targets.~~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 ~~between~~around the 50^th ~~and 75~~^th ~~percentiles~~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 ~~2013,~~2016, effective, October 1, 2015, we ~~made no changes in~~increased the base salaries for each of our named executive ~~officers. Holding executive base salaries at prior-year levels was~~officers by 3%. These increases were consistent with market ~~conditions during fiscal 2013.~~conditions.

In January 2016, Mr. Aslett recommended to the Compensation Committee that Mr. Thibaud be promoted to the new position of Executive Vice President, Chief Operating Officer. In connection with this promotion, Committee approved that effective as of

January 2016, Mr. Thibaud’s base salary be increased to $350,000 per year and his bonus as a percentage of base salary be increased to 75%.

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.

~~Annual~~ For fiscal 2017, effective October 1, 2016, we increased the base salaries for our named executive officers as follows:



Named Executive Officer and Title	Fiscal 2017 Salary (effective October 1, 2016)
Mark Aslett, President and Chief Executive Officer	$	560,000
Gerald M. Haines II, EVP, Chief Financial Officer, and Treasurer	345,000
Didier M.C. Thibaud, EVP, Chief Operating Officer	375,000
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	250,000

These increases were consistent with market conditions and the change in Mercury's financial profile from our recent acquisition of the Carve-Out Business and organic growth.

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 ~~annual~~ executive bonus program is ~~the~~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 ~~and, where applicable, operational~~performance goals contained in the annual strategic operating plan that is approved by our Board of Directors ~~around~~in the ~~beginning~~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,~~For fiscal 2016, 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 ~~annual~~ executive bonus plan, adjusted EBITDA includes net income ~~from continuing operations~~(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;~~restructuring and other charges; impairment of long-lived assets; acquisition ~~costs~~ and ~~other related expenses;~~financing costs; fair value adjustments from purchase accounting; litigation and settlement expenses and stock-based compensation expense. Because the ~~annual~~ 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. ~~Actual~~

A reconciliation between adjusted EBITDA ~~for fiscal 2013 includes~~and the most directly comparable GAAP financial ~~results from Micronetics, Inc. from the date of the acquisition on August 8, 2012~~measure is included as Appendix B to June 30, 2013. Since the acquisition of Micronetics was early in our fiscal year which began on July 1, 2012, our fiscal 2013 strategic operating plan approved by the Board of Directors in July 2012 already included Micronetics in the strategic plan for the year. As such, our reported fiscal 2013 adjusted EBITDA of $11.7 million is the same measure used to calculate financial performance for purposes of the annual executive bonus program.this proxy statement.

The following table indicates for fiscal ~~2013:~~2016: (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 % 75 % 25 %
Kevin M. Bisson, SVP, Chief Financial Officer, and Treasurer
60
75
25
Gerald M. Haines II, SVP, Corporate Development, Chief Legal Officer, and Secretary
60
75
25
Didier M.C. Thibaud, President, Mercury Commercial Electronics
60
75
25
Charles A. Speicher, VP, Controller, and Chief Accounting Officer
35
75
25



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, and Treasurer	60		80		20
Didier M.C. Thibaud, EVP, Chief Operating Officer	75		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

~~Original Fiscal 2013 Financial Performance Targets~~

As part of our fiscal ~~2013~~2016 strategic operating plan, we set the financial portion of our ~~annual~~ executive bonus plan for the first half of fiscal ~~2013~~2016 at the July ~~2012~~2015 meeting of the Board of Directors. ~~The original corporate~~We set the the financial ~~performance~~ portion of our ~~annual~~ executive bonus ~~program would become fully payable only if our actual adjusted EBITDA~~plan for the second half of fiscal ~~2013 was $55.6 million. Achieving actual adjusted EBITDA of $26.2 million would yield a payout of 25%~~2016 at the January 2016 meeting of the ~~corporate financial performance bonus, and below this threshold level, no payout would occur.~~Board of Directors as part of our mid-year strategic operating plan review. Payouts for corporate financial performance for fiscal ~~2013~~2016 were based on objectives for the fiscal year broken into the first and second half of the year and were subject to the following ~~original~~ payout formulas:

~~Original~~ Fiscal ~~2013~~2016 First Half Payout Formula

(July 1, ~~2012~~2015 - December 31, ~~2012)~~2015)



Adjusted EBITDA Target (for first half of fiscal year)	Percentage to be Paid for Bonus	Threshold, Target, and Maximum
Less than ~~$9.3~~$20.837 million	—%	Below Threshold
~~9.3~~$20.837 million ~~(base financial plan)~~	~~25%~~75%	Threshold
Greater than ~~$9.3~~$20.837 million but less than ~~$18.4~~$23.2 million	Proportionate % between ~~25%~~ 75% and ~~70%~~ 100%	—
$~~18.4~~23.2 million ~~(probable financial plan)~~	~~70%~~100%	Target
Greater than ~~$18.4 million but less than $19.3 million~~	~~Proportionate % between~~ ~~70% and 100%~~	—
~~$19.3 million (possible financial plan)~~	~~100%~~	—
~~Greater than $19.3~~$23.2 million	100%	Maximum

~~Original~~ Fiscal ~~2013~~2016 Second Half Payout Formula

(January 1, ~~2013~~2016 - June 30, ~~2013)~~2016)



Adjusted EBITDA Target (for second half of fiscal year)	Percentage to be Paid for Bonus	Threshold, Target, and Maximum
Less than ~~$16.9~~$21.174 million	—%	Below Threshold
~~16.9~~$21.174 million ~~(base financial plan)~~	~~25%~~75%	Threshold
Greater than ~~$16.9~~$21.174 million but less than ~~$32.5~~$26.8 million	Proportionate % between ~~25%~~ 75% and ~~70%~~ 100%	—
$~~32.5~~26.8 million ~~(probable financial plan)~~	~~70%~~100%	Target
Greater than ~~$32.5 million but less than $36.3~~$26.8 million	~~Proportionate % between~~ ~~70% and~~ 100%	—
~~$36.3 million (possible financial plan)~~	~~100%~~	—
~~Greater than $36.3 million~~	~~100%~~	~~Maximum~~

~~Amended Fiscal 2013 Financial Performance Targets~~

Due to the greater than anticipated impact of potential budget sequestration on our financial results for the first half of fiscal 2013, as discussed in detail above in the Executive Summary, at the January 2013 Board of Directors meeting, as part of the midyear update on our strategic operating plan, the Board of Directors approved an amended strategic operating plan for fiscal 2013. Under the amended corporate financial performance portion of our annual executive bonus program, no maximum (100%) payout was permitted, the highest level of cash bonus payout was set to pay 75% of the target bonus on a possible business case ($22.0 million of adjusted EBITDA), the median level of cash bonus payout was set to pay 50% of the target bonus on the probable business case ($15.0 million of adjusted EBITDA), and a threshold level of cash bonus payout was set to pay 33% of the target bonus on the base business case ($7.0 million of adjusted EBITDA). Below the $7.0 million adjusted EBITDA threshold level, no payout would occur. Payouts for corporate financial performance for fiscal 2013 were subject to the following amended payout formula:

~~Amended Fiscal 2013 Full Year Payout Formula~~

~~(July 1, 2012 - June 30, 2013)~~



~~Adjusted EBITDA Target~~	~~Percentage to be Paid for Bonus~~	~~Threshold, Target,~~ ~~and Maximum~~
~~Less than $7.0 million~~	—%	~~Below Threshold~~
~~7.0 million (base financial plan)~~	~~33%~~	~~Threshold~~
~~Greater than $7.0 million but less than $15.0 million~~	~~Proportionate % between~~ ~~33% and 50%~~	—
~~$15.0 million (probable financial plan)~~	~~50%~~	~~Target~~
~~Greater than $15.0 million but less than $22.0 million~~	~~Proportionate % between~~ ~~50% and 75%~~	—
~~$22.0 million (possible financial plan)~~	~~75%~~	—
~~Greater than $22.0 million~~	~~75%~~	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.

~~Fiscal 2013 actual adjusted EBITDA for purposes~~

Our executive officers earned payouts at 100% of ~~the annual executive bonus program was $11.7 million, yielding a payout at 42.9% of the amended~~both their first half and second half target corporate financial performance ~~bonus.~~bonuses for fiscal 2016. Fiscal 2016 actual adjusted EBITDA was $24.4 million for the first half of the fiscal year and $32.9 million for the second half of the fiscal year.

Over-Achievement Awards

Each executive officer’s potential over-achievement award for fiscal ~~2013~~2016 was based on the executive’s share of ~~the~~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 ~~annual~~ executive bonus program relative to the total size of the executive bonus program for the fiscal year. The size of ~~the~~any over-achievement award pool is determined based on the amount by which actual adjusted EBITDA exceeded

budgeted adjusted ~~EBITDA.~~EBITDA of $50.0 million for the full fiscal year, which is equal to the sum of the first half and second half performance metrics. The potential over-achievement award pool for fiscal ~~2013~~2016 was ~~23.9%~~25% of the amount, if any, by which actual adjusted EBITDA exceeded ~~budgeted adjusted EBITDA.~~$50.0 million. In this way, the overachievement pool is self-funded through additional profitability.

InHowever, in order to earn an over-achievement award in fiscal ~~2013,~~2016, the Company also had to satisfy a ~~$310.6~~$256.0 million organic revenue target ~~and~~in addition to achieving actual adjusted EBITDA ~~had to~~in excess of $50.0 million. Because organic revenue did not exceed the original budgeted adjusted EBITDA of $55.6 million. The targets for over-achievement awards were kept the same in the Company's amended fiscal 2013 annual executive bonus program as the original targets for the fiscal year. For fiscal 2013, actual revenue and actual adjusted EBITDA were both below their respective targets. Accordingly,$256.0 million threshold, there was no over-achievement ~~awards were earned~~award pool for fiscal ~~2013.~~2016.

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~~In exceptional circumstance, 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 ~~2013~~2016 for our named executive ~~officers.~~officers, nor were any such changes made in the preceding two fiscal years. 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 ~~2013.~~2016.

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~~our defense business organically - 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 ~~Intelligence Business - arrange available debt capital to fund future acquisitions, acquire and integrate one company,~~our grow secure processing business with prime defense ~~bookings~~contractors and the ~~number and probable value~~U.S. Department of ~~design wins, expand Mercury Intelligence Systems for Big Data processing for the Intelligence Community, and re-brand Mercury and its business lines (30%~~Defense (20% of individual MBR bonus potential);

~~Deliver Commercially-Developed, Affordable Intelligence, Surveillance,~~

Scale our defense business through acquisition - acquire one or more embedded computing or RFM businesses, raise debt and/or equity for M&A, implement appropriate capital structure post acquisition, and ~~Reconnaissance (ISR) Subsystems~~plan acquisition integration (20% of individual MBR bonus potential);

• Prioritize innovation investments that matter - expand product leadership in secure processing, deliver ~~differentiated~~3U and ATCA secure processing products, and deliver first production OpenRFM product (20% of individual MBR bonus potential);

• Profitably grow and ~~technology building blocks along the sensor processing chain~~scale our services and ~~drive OpenVPX RF standards initiative~~systems capabilities - pursue continuous improvement in RF/microwave

engineering and manufacturing processes, deploy an enterprise program management capability, enhance cost compliance

systems, and enhance cyber security and insider threat protection (10% of individual MBR bonus potential);

~~Profitably Grow~~• Excel at customer intimacy and ~~Scale a Services and Systems Business~~quality across the organization - integrate Micronetics divisions internally, prepare to merge Micronetics with our Salem location, outsource Huntsville location manufacturing to a contract manufacturer, and establish a unified manufacturing strategy for digital and microwave electronics (25%continue deployment of ~~individual MBR bonus potential)~~strategic account sales model,

~~Excel at Customer Intimacy Across Entire Organization - organize Mercury Commercial Electronics around the sensor processing chain, centralize engineering design services,~~

improve executive sponsorship for key accounts, begin AS9100 and ~~implement sales improvements to sell the entire product line (20% of individual MBR bonus potential); and~~

Evolve Our Organization Model and Develop Our People, Culture, and Values - complete chief marketing officer, chief information officer, and RF general manager recruitment and integration, establish three new divisions (Mercury Commercial Electronics, Mercury Defense Systems, and Mercury Intelligence Systems), establish functional matrix management, rollout performance management system, continue toDMEA certifications, improve ~~IT and physical security, continue to strengthen succession planning and people~~government research lab business development, and ~~continue the shareholder outreach program (15%~~raise market awareness of ~~individual MBR bonus potential).~~

~~Kevin M. Bisson,~~ ~~Senior Vice President, Chief Financial Officer,~~our secure processing and ~~Treasurer. The individual MBR performance objectives for Mr. Bisson approved by the Compensation Committee, upon the recommendation of the CEO, were as follows:~~

Acquisition Transaction Support - support the Company’s acquisition strategy by evaluating targets, ensuring adequate financing, and assisting with transaction structuring (15% of individual MBR bonus potential);

Debt Financing to Support Acquisitions and General Corporate Purposes - identify financing sources, evaluate financing proposals, structure financing terms, complete due diligence with financing sources, and execute definitive financing agreements (45%electronic warfare capabilities (10% of individual MBR bonus potential);

~~Shareholder Value Creation~~• Evolve our organization model, develop people, and drive culture and values - ~~accelerate~~rollout our new organizational management structure, improve pay for performance, and recruit a General Counsel and transition legal responsibilities from the pace of investor conferences and non-deal marketing road shows, initiate shareholder surveillance service to track investor movement between filing dates, increase sell side research coverage, and investigate ways to enhance shareholder value (20% of individual MBR bonus potential);

Develop Organizational Plans to Align Functions and Business Units - develop communication vehicle and cadence with business unit leaders to facilitate joint efforts on financial and operational matters and develop and deploy mechanisms to reduce working capitalCFO (10% of individual MBR bonus potential); and

~~Finance Organization Development~~• Drive shareholder value creation - ~~develop greater Defense Contract Audit Agency financial expertise, investigate potential tax planning strategies to reduce~~maintain pace of investor conferences and non-deal roadshows, articulate our ~~effective tax rate,~~long term

strategy and ~~identify high performer to lead Micronetics accounting integration~~growth plan, and increase sell-side analyst coverage (10% of individual MBR bonus potential).

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

~~Mergers~~Evolve our organizational model - transition and ~~Acquisitions - deliver corporate development~~integrate all financial planning functions into a single unit, integrate financial organization with operations, emphasizing business analytics and tools, recruit a General Counsel and transition the legal, ~~support for multiple M&A transactions, hire a corporate development associate, refine project tracking tool for entire process from target identification through integration, acquire companies,~~security, and ~~maintain a robust, flexible capital structure (50%~~trade compliance functions to the General Counsel (30% of individual MBR bonus potential);

~~People, Structure,~~Financial, managerial, and ~~Services~~DCAA accounting - ~~align~~develop and ~~organize groups~~implement key performance indicators with finance business ~~needs in target areas, establish clear~~partners across operational units, implement OCOGS reduction program, implement inventory reduction program, implement and automate new product and service pricing and invoicing protocols ~~to address government cost disclosure, data rights,~~ and ~~Federal Acquisition Regulation requirements as a commercial-item vendor, extend~~infrastructure, and integrate ~~knowledge of commercial-item contracting into M&A transactions and throughout the organization~~new business model protocols with commercial price list (30% of individual MBR bonus potential);

Corporate ~~Governance~~finance, M&A, and investor relations - ~~centralize oversight of contracts, risk management,~~structure and ~~compliance functions across all Mercury affiliates~~implement transaction financing as needed, retaining balance sheet flexibility, provide strategy, structure, negotiation, and ~~support Mercury’s Board~~execution for specific acquisition targets, increase sell-side analyst coverage, and ~~Committees through continuing education and robust self-evaluation tools, robust M&A review and approval process, and protocols in support of hybrid business model structure (10%~~update quarterly investor relations reporting package (30% of individual MBR bonus potential); and

~~Security~~Deepen performance culture - deepen Mercury's performance culture and Trade Compliance - extend security and trade compliance training and administration into newly acquired companies, strengthen integration with newly acquired companies, and emphasize counter-intelligence capabilitiesinitiate targeted staff development (10% of individual MBR bonus potential).

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

~~Grow Our Business Organically and Via Targeted Acquisitions~~• Growth - achieve our bookings growth plan, drive growth through new design wins, drive growth in electronic warfare and electronic attack, maintain our leadership position in radar, expand ~~value across the sensor processing chain, drive synergies with Micronetics acquisition, drive services design wins,~~into battle management and C4, and drive ~~expansion into the Intelligence Community (30%~~growth in secure processing (20% of individual MBR bonus potential);

~~Deliver Commercially Developed, Affordable ISR Subsystems~~• Innovation - establish a five year roadmap, develop secure processing solutions internal R&D to drive ~~open standards initiatives~~key product differentiators, deliver 3U secure product to key programs, deliver ATCA product line, finish and ~~products, including compute products, based~~deliver first OpenRFM product, drive design to cost process on ~~the latest switch fabric technology (10%~~new high volume product (20% of individual MBR bonus potential);

~~Transform Our Organization, Systems,~~• Profitability - reduce direct cost and ~~Processes to Profitably Grow~~OCOGS, meet our RF and ~~Scale a Services~~microwave business plan every quarter, and Systems Business - drive leverage and business value through a centralized packaging and design services organization, enable matrix organization, drive new microwave manufacturing plant, and drive working capital improvements (25%meet our inventory plan (20% of individual MBR bonus potential);

• Excel at ~~Customer Intimacy~~customer intimacy - ~~quality organization to~~maintain status with our top customers, achieve our on time delivery goals, and drive ~~system quality and strategic account~~content expansion across all programs through program management (20% of individual MBR bonus potential); and

• Evolve ~~Our Organization Model, Develop Our People,~~our organization model and ~~Drive Mercury's Culture~~develop our people, culture, and ~~Values~~values - ~~integrate Micronetics~~implement new organizational structure, drive accountability, deepen performance culture, and ~~then combine with our Salem location and engage in a new common communication and review strategy for~~develop key talent to scale the ~~new organization (15%~~business (20% of individual MBR bonus potential).

Charles A. Speicher, Vice President, Controller, ~~and~~ 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:

~~Acquisition Transaction Support~~Provide enterprise wide analytical support - ~~support~~integrate accounting, financial planning, and analysis capabilities and integrate with operations to emphasize business analytics capabilities and tools, develop a standard analytics dashboard with key performance indicators for each organizational unit, identify multiple potential operational improvements, and complete

operational improvements across the ~~Company’s acquisition strategy by performing due diligence~~business based on ~~targets and integration activities on targets and prior acquisitions (15%~~key performance indicators (30% of individual MBR bonus potential);

Develop ~~Organizational Plans~~organizational plans to ~~Align Functional and Business Unit Models~~align functional unit priorities - ~~facilitate joint~~align finance and ~~business unit efforts on financial~~operations management processes to improve inventory gross levels including multiple inventory key performance indicators, extend Oracle capabilities and establish and accounting subject matter expert to add leverage, repeatability, and dependability, identify and complete two operational ~~matters~~improvement activities recognized by the executive board, develop and update percentage of completion accounting training curriculum to be conducted across Mercury, and develop and ~~deploy mechanisms to reduce working capital requirements (20%~~update accounting training for relevant business personnel (25% of individual MBR bonus potential);

~~Financial System Integration~~Provide M&A support - ~~transform our organization, systems,~~evaluate transactions and ~~processes to profitably grow~~provide diligence support with internal and ~~scale a services~~external resources, provide deal structure and ~~systems business (30% of individual MBR bonus potential);~~

~~Excel at Customer Intimacy in All Areas of the Organization - develop systems~~tax planning, prepare for debt structure and ~~processes to enhance financial service levels~~covenant compliance reporting, support integration efforts, and ~~quality at each location (10%~~perform SEC reporting triggered by M&A transactions (25% of individual MBR bonus potential); and

~~Finance Organization~~ Development of finance expertise and talent and deepen the performance culture - ~~develop greater Defense Contract Audit Agency financial expertise, investigate potential tax planning strategies to reduce our effective tax rate,~~organize managerial training for accounting employees in line with increasing responsibilities and ~~identify high performer to lead Micronetics accounting integration (25%~~deepen Mercury's performance culture (20% of individual MBR bonus potential).

Our named executive officers satisfied their individual MBR performance objectives as follows: Mr. Aslett, ~~92%; Mr. Bisson,~~ 90%; Mr. Haines, ~~90%~~97%; Mr. Thibaud, 89%; and Mr. Speicher ~~90%~~99%.

~~Annual~~

Executive Bonus Program for Fiscal ~~2014~~2017

~~Consistent with~~For fiscal ~~2013, for fiscal 2014,~~2017, the target bonus as a percentage of base salary for the ~~CEO~~Chief Executive Officer under the ~~annual~~ executive bonus program will be 100%; for ~~Senior~~the Executive Vice ~~Presidents~~President, Chief Operating Officer will be 75%; for the Executive Vice President, Chief Financial Officer will be 60%; and for the Vice ~~Presidents~~President, Controller, and Chief Accounting Officer will be ~~35 to 50%~~40%. Also, for fiscal ~~2014,~~2017, to better align incentive compensation with specific, objective corporate performance measures, the bonus ~~components~~component for our executive officers will be ~~75%~~100% for corporate financial performance ~~objectives and 25% for individual MBR performance~~ objectives. ~~The over-achievement award pool for~~As used in the fiscal ~~2014 will be 25% of~~2017 executive bonus plan, adjusted EBITDA includes income (loss) from continuing operations (prior to the ~~amount,~~impact, if any, ~~by which actual~~of a payout of any potential overachievement award) and is adjusted ~~EBITDA exceeds budgeted adjusted EBITDA, subject to~~for the ~~Company meeting or exceeding a threshold revenue target for fiscal 2014.~~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; litigation and settlement expense; 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.~~compensation in order to align with shareholder interests. Equity compensation creates a unique link between the creation of shareholder value and an executive’s long-term wealth accumulation opportunity. Our 2005 Stock Incentive 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. The Compensation Committee also considers the other elements of incentive compensation available to the executive officers and the performance metrics associated with those incentives, with a view toward providing an appropriately diverse set of different performance criteria and objectives to incent different aspects of performance and avoid multiple forms of reward for the same achievement.

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,~~COO, and ~~business unit leaders~~CFO 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 ~~annual~~ 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., restricted stock ~~options~~ versus ~~restricted stock)~~stock options) 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 ~~2013~~2016 Equity Awards

The fiscal ~~2013 annual~~2016 restricted stock awards to our named executive officers were: Mr. Aslett, 126,502 restricted shares; Mr. Bisson, 50,395 restricted shares; Mr. Haines, 39,128 restricted shares; Mr. Speicher, 17,533 restricted shares; and Mr. Thibaud, 72,396 restricted shares. Each award is subject to four year time vesting, with 25% of each award vesting on the first four anniversaries of the grant date.

~~The number of shares~~ granted in the fiscal 2013 annual equity awards were larger than the prior year grants largely due to the stock price used to determine the fiscal 2013 annual equity awards being approximately 45% lower than the stock price used to determine the fiscal 2012 annual equity awards (fiscal 2013 $10.55 per share versus fiscal 2012 $19.05 per share). The total annual awards to our named executive officers plus seven other members of senior management was capped at 500,000 shares. The Compensation Committee approved the 500,000 share cap to limit the potential increase in number of shares granted in the event of a significant decline in our stock price. The number of shares granted for the annual award effective as of August 15, 2012 for each named executive officer was determined by dividing the dollar value fixed for such executive award by the average closing price of Mercury’s common stock during the 30 calendar days prior to August 15, 2012. Since such total awards would have exceeded the 500,000 share cap, each individual annual restricted stock award to our named executive officers was reduced by approximately 4.7% to fit within the share limit.

~~The annual restricted stock awards granted effective August 15, 2012~~ to our named executive officers approximated the ~~75th~~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 (median revenue $222 million).~~$500 million.

In addition, as discussed in detail above in the Executive Summary, we granted retention restricted stock awards to certain of our named executive officers and other members of senior management during fiscal 2013. These retention awards, which were granted effective as of August 15, 2012, were intended to create a greater retention value in light of the significant defense market headwinds facing the industry and Mercury in fiscal 2013. These retention awards to our named executive officers were: Mr. Aslett, 190,000 restricted shares; Mr. Haines, 34,000 restricted shares; and Mr. Thibaud, 80,000 restricted shares. These retention awards are subject to four year time vesting.

~~Fiscal 2014 Equity Awards~~

~~Subsequent to fiscal 2013, we granted annual restricted stock awards to our named executive officers.~~ The fiscal ~~2014 annual~~2016 restricted stock awards to our named executive officers were: Mr. Aslett, ~~122,684 restricted shares; Mr. Bisson, 44,166~~90,894 restricted shares; Mr. Haines, ~~44,166~~27,268 restricted shares; Mr. ~~Speicher, 14,722~~Thibaud, 27,268 restricted shares; and Mr. ~~Thibaud, 73,611~~Speicher, 13,634 restricted shares. Since these awards occurred during fiscal 2014, they are not reflected in the Outstanding Equity Awards at Fiscal Year-End Table for fiscal 2013 included in this proxy statement. We determined the value of the fiscal 2014 equity awards using compensation market data from our peer group and the Radford Global Technology Survey. For fiscal 2014, the Compensation Committee granted annual equity awards at the Committee’s July 2013 meeting with a fixed dollar value for each individual grant. The number of shares awarded for the ~~annual~~ executive grant effective as of August ~~15, 2013~~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’s~~Mercury common stock during the 30 calendar days prior to August ~~15, 2013.~~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 percentage levels of adjusted EBITDA (the ratio of adjusted EBITDA to revenue) for the relevant performance period based on the belief that this profitability ratio is the primary basis for valuation of the Company, and therefore a key means of enhancing shareholder value. Our performance-based equity awards use a different performance measure than our fiscal 2016 executive bonus program. Up to two-thirds of the performance-based awards vest based on achieving financial goals for the two-year period ending June 30, 2017, and up to one-third of the awards vest based on achieving financial goals for the three-year period ending June 30, 2018. Awards that do not vest during the original performance period are permanently forfeited. 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 with the intention of only using 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) (2)	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, and Treasurer	13,634	13,634	27,268
Didier M.C. Thibaud, EVP, Chief Operating Officer	13,634	13,634	27,268
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	6,817	6,817	13,634

(1) The number of performance-based restricted shares in the table above reflects both the probable and 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 performance metric provides for no vesting unless the Company achieves at least two-thirds of its targeted operating objective of at least 18% adjusted EBITDA as a percentage of revenue and full vesting if 18% or more is achieved. There is no upside component to these awards. The vesting formula for the fiscal 2016 performance-based restricted share award is as set forth in the table below for the fiscal 2015 awards but with the following performance periods and weightings: (i) up to two-thirds of the awards vest based on achieving financial goals for the two-year period ending June 30, 2017, and (ii) up to one-third of the awards vest based on achieving financial goals for the three-year period ending June 30, 2018.

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.

~~Amendment~~Vesting of Prior Fiscal Year Performance-Based Restricted Stock Awards

Vesting for the second 1/3rd of the performance-based restricted shares granted in fiscal 2015 was subject to ~~Fiscal 2012 Equity Awards~~the following vesting formula:

~~In fiscal 2012, the annual restricted stock awards to our named executive officers were split into two equal pieces,~~ Vesting Formula for Performance-Based Restricted Shares

with the first half being granted on August 15, 2011 and the second half being granted on February 15, 2012. Our equity granting practice prior to fiscal 2012 (and our current practice), was to grant annual restricted stock awards only on August 15th (or the next business day if August 15th falls on a weekend). Because the vesting of restricted stock triggers an automatic sale in the open market to cover the tax liability on vesting under the default election under our 2005 Plan and our Section 16 officers follow this election, and because such tax sales are not exempt transactions under the Section 16 regulations, our Section 16 officers have been effectively foreclosed from buying our shares on the open market since the February 15th awards started to vest on February 15, 2013. In order to provide our Section 16 officers with the opportunity to purchase our shares on the open market in compliance with the Section 16 regulations, at its July 31, 2013 meeting the Board of Directors approved, and our Section 16 executives subsequently accepted, an amendment to the February 15th grants to extend the vesting date out an additional six months to August 15th of the applicable year. Our Chief Financial Officer, Kevin Bisson, joined the Company in January 2012 and received his new hire restricted stock award on January 16, 2012. At its July 31, 2013 meeting the Board of Directors also amended, and Mr. Bisson subsequently accepted, a seven month extension of the vesting of his restricted stock award such that his new hire award will vest on August 15th of the applicable year. With these amendments, all of the equity awards granted to our Section 16 officers have a vesting date on or about August 15th. A summary of the amendments to our Section 16 officers' restricted stock awards is set forth below.

Fiscal 2015-2016 Performance Period



~~Name~~Ratio of Adjusted EBITDA/ Revenue for Fiscal 2015-2016	~~Number of Shares~~Vesting %	~~Original Vest Date~~	~~Amended Vest Date~~ Threshold, Target, and Maximum
~~Mark Aslett~~Less than 12%	~~7,500~~—%	~~February 15, 2014~~	~~August 15, 2014~~Below Threshold
Equal to 12%	~~7,500~~66.67%	~~February 15, 2015~~	~~August 15, 2015~~Threshold
Between 12% and 18%	~~7,500~~Straight line interpolation between 66.67% and 100%	~~February 15, 2016~~	~~August 15, 2016~~
~~Gerald M. Haines II~~18% or more	~~2,500~~100%	~~February 15, 2014~~	~~August 15, 2014~~
	~~2,500~~	~~February 15, 2015~~	~~August 15, 2015~~
	~~2,500~~	~~February 15, 2016~~	~~August 15, 2016~~
~~Charles A. Speicher~~	~~1,125~~	~~February 15, 2014~~	~~August 15, 2014~~
	~~1,125~~	~~February 15, 2015~~	~~August 15, 2015~~
	~~1,125~~	~~February 15, 2016~~	~~August 15, 2016~~
~~Didier M.C. Thibaud~~	~~3,500~~	~~February 15, 2014~~	~~August 15, 2014~~
	~~3,500~~	~~February 15, 2015~~	~~August 15, 2015~~
	~~3,500~~	~~February 15, 2016~~	~~August 15, 2016~~
~~Kevin M. Bisson~~	~~15,000~~	~~January 16, 2014~~	~~August 15, 2014~~
	~~15,000~~	~~January 16, 2015~~	~~August 15, 2015~~
	~~15,000~~	~~January 16, 2016~~	~~August 15, 2016~~Target (Capped)

The ratio of adjusted EBITDA to revenue for the two-year period ended June 30, 2016 was 20.1%, thus exceeding 18% and yielding 100% vesting of the 1/3rd of the performance-based restricted stock award that was subject to vest or forfeit on August 15, 2016.

For the fiscal 2016 performance-based restricted stock awards, the first performance period is the two-year period ending June 30, 2017 measured against the performance metrics set forth in the above table; accordingly, none of the fiscal 2016 performance equity awards was eligible for vesting for a performance period ending June 30, 2016.

35Fiscal 2017 Equity Awards

Subsequent to fiscal 2016, we introduced new performance-based elements for our executive equity program for fiscal 2017. The fiscal 2017 annual restricted stock awards granted to our named executive officers approximated the 50th percentile of a market composite consensus with median performance relative to our peer group yielding median pay based on such 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 annual revenue levels generally between $200 million and $1 billion with a median revenue of $420 million. The revenue range for the peer group was widened by virtue of Mercury's double-digit organic growth rate in recent years, coupled with Mercury's further growth via acquisitions, with the goal of less frequent changes to the peer

group over time as the Company grows. The peer group was also enlarged to mitigate the risk of shrinkage as peer group companies are acquired or merged and cease to be publicly-traded companies.

Since these awards occurred during fiscal 2017, they are not reflected in the Outstanding Equity Awards at Fiscal Year-End Table for fiscal 2016 included in this proxy statement. The target number of shares awarded for the executive grant effective as of August 15, 2016 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 15, 2016. The grant date of the fiscal 2017 equity awards was August 15, 2016.

Each fiscal 2017 annual restricted stock award for our named executive officers is 50% performance-based vesting and 50% time-based vesting. For the time-based vesting half of the fiscal 2017 annual awards, one-third vests on each of the first three anniversaries of the grant date. The annual performance-based awards vest based on relative performance to our peer group for the three-year period ending June 30, 2019. For the fiscal 2017 annual performance-based awards, we are using two new relative performance metrics: (i) a ratio of adjusted EBITDA to revenue percentile ranked relative to our peer group (75% weighting); and (ii) revenue growth percentage percentile ranked relative to our peer group (25% weighting). These metrics were chosen to incent strong relative long-term growth in revenue and profitability, with the emphasis on profitability as the primary metric the Compensation Committee believes is used to value the Company. The target value for the fiscal 2017 annual restricted stock awards is the median of a market composite consensus consisting of our named peer group and compensation survey data from the Radford Global Technology Survey of public high technology companies, with the award having upside potential if we outperform our peer group on the relative performance metrics discussed above.

For fiscal 2017, we also granted a one-time acquisition integration incentive restricted stock award for our Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer. During the fourth quarter of fiscal 2016, we closed our $300 million acquisition of the embedded security, radio frequency and microwave, and custom microelectronics businesses of the Power and Microelectronics Group of Microsemi Corporation (the "Carve-Out Business), the largest acquisition in Mercury's history. The integration incentive award is a 100% performance-based restricted stock award with fiscal 2017 as the performance period and is earned based on total revenue growth rate, subject to minimum revenue and adjusted EBITDA thresholds. This performance-based award is designed to drive the rapid and successful integration of our recently acquired Carve-Out Business and accelerate revenue growth to rates above the historical weighted average combined revenue growth rates for Mercury and the Carve-Out Business, subject to minimum levels of revenue and profitability.

Our fiscal 2017 total executive compensation program utilizes a diverse set of performance elements to drive different performance objectives over multiple time frames. Our fiscal 2017 executive cash bonus plan uses adjusted EBITDA to drive profitability for fiscal 2017 in line with our strategic operating plan for the year. Our fiscal 2017 annual performance equity grant uses a mix of the ratio of adjusted EBITDA to revenue percentile ranked relative to our peer group (75% weighting) and revenue growth percentile ranked relative to our peer group (25% weighting) as performance measures to drive revenue growth and profitability over a three-year period. This is different from the absolute profitability measure used for our fiscal 2017 annual executive cash bonus plan, which cash plan is aligned with our fiscal 2017 strategic operating plan, as our fiscal 2017 annual performance equity grant is aligned with relative performance compared with our peer group, an important factor in the creation of long term value for the Company and its shareholders. Our fiscal 2017 acquisition integration incentive award uses a revenue growth rate performance measure to drive revenue growth for fiscal 2017 to above the historical weighted average combined revenue growth rates for Mercury and the Carve-Out Business while also being subject to minimum revenue and profitability thresholds. If achieved, these metrics would provide growth in excess of not only the historical weighted average combined growth rates of the business, and also well in excess of the average historical growth and profitability rates of companies in the primary market sector (defense) in which the Company operates.

Fiscal 2017 Restricted Stock Awards



Named Executive Officer and Title	Annual Performance-Based Restricted Shares (# of shares) (1)	Annual Time-Based Restricted Shares (# of shares)	Integration Incentive Performance-Based Restricted Shares (# of shares) (2)	Total (# of shares)
Mark Aslett, President and Chief Executive Officer	40,119	40,119	80,238	160,476
Gerald M. Haines II, EVP, Chief Financial Officer, and Treasurer	14,042	14,042	28,083	56,167
Didier M.C. Thibaud, EVP, Chief Operating Officer	19,057	19,057	38,113	76,227
Charles A. Speicher, VP, Controller, Chief Accounting Officer, and Assistant Treasurer	4,815	4,815	-	9,630

(1) The number of annual performance-based restricted shares in the table above reflects the probable number of shares that the executive is expected to earn for the three-year performance period ending June 30, 2019. The maximum potential number of shares (assuming the highest level of performance achievement) that could be earned is: Mr. Aslett – 120,357 shares; Mr. Haines – 42,126 shares; Mr. Thibaud – 57,171 shares; and Mr. Speicher – 14,445 shares.

(2) The number of integration incentive performance-based restricted shares in the table above reflects both the probable and maximum number of shares that the executive is expected to earn for the one-year performance period ending June 30, 2017. The actual shares earned could be zero or a fraction of these amounts; however, the executive cannot earn more than the amounts reflected above for the integration incentive award.

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 ~~(up to $400,000)~~(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

While we do not generally enter into contractual commitments with our executive officers regarding their compensation, we do recognize that there are circumstances in which it is in the best interests of Mercury and our shareholders to do so. In this regard, weWe have entered into an employment agreement with Mr. Aslett and a severance ~~agreements~~agreement with ~~Messrs. Bisson,~~Mr. Haines, ~~and Thibaud,~~ 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 ~~annual~~ 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.”

We entered into a severance agreement with Mr. Thibaud in connection with his relocation to the United States. We believe that it was appropriate to enter into this agreement with Mr. Thibaud in order to provide him with certainty regarding his position so that he can attend to his assigned duties without distraction. Under the agreement, if at any time prior to July 1, 2013, we terminate Mr. Thibaud’s employment without “cause” or Mr. Thibaud terminates his employment for “good reason,” then we will pay Mr. Thibaud a severance amount equal to one times his annual base salary. In such event, we also will pay for certain insurance benefits, outplacement services and relocation expenses of Mr. Thibaud.

“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.~~

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.

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~~Considerations

~~Section 162(m) of the Code limits~~We generally structure incentive compensation arrangements with a view towards qualifying them as performance-based compensation exempt from the deduction limitations under Section 162(m), but we view the availability of a ~~public company~~tax deduction as only one relevant consideration in determining executive compensation. Further, the Compensation Committee believes that its primary responsibility is ~~permitted~~to provide a compensation program that attracts, retains and rewards the executive talent necessary for ~~compensation paid to~~Mercury's success. Accordingly, the ~~CEO and to the three most highly compensated executive officers other than the CEO and CFO. Generally, amounts paid~~Compensation Committee may authorize compensation 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 2010, the Compensation Committee adopted, and our shareholders approved, our Annual Executive Bonus Plan—Corporate Financial Performance$1 million 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~~not exempt from the ~~$1,000,000 limitation~~deduction limitations under Section 162(m). ~~However,~~

Does Mercury have stock ownership guidelines and holding requirements for ~~fiscal 2013, since we amended~~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 ~~corporate financial targets during~~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 ~~middle~~Company as long as he or she is the CEO. Prior to meeting the five times holding requirement per this guideline, after applicable tax withholding on the vesting of an equity award, the CEO is required to retain 50% of the ~~fiscal year due~~net, after tax award until he or she is in compliance with the stock ownership guideline. 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 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 ~~substantial headwinds facing~~executive based upon the ~~U.S. defense industry,~~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 ~~portion~~time of ~~our CEO's compensation under~~ the ~~annual~~sale. Also, no such executive ~~bonus program will not be excluded from~~officer or director may buy or sell puts, calls, or other derivative securities of Mercury at any time, except with the ~~162(m) limitation for fiscal 2013.~~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.

How were the executive officers compensated for fiscal ~~2011, 2012,~~2014, 2015, and ~~2013?~~2016?

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 (1)
Stock
Awards (2)
Option
Awards (2)
Non-Equity
Incentive Plan
Compensation (3)
Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings (4)
All Other
Compensation (5)
Total
Mark Aslett President and Chief Executive Officer
2013 $ 500,000 $ — $ 3,003,604 $ — $ 275,875 $ — $ 7,500 $ 3,786,979
2012 500,000 — 1,000,575 — 278,625 — 10,350 1,789,550
2011 500,000 — 934,150 — 991,250 — 7,350 2,432,750
Kevin M. Bisson (6) SVP, Chief Financial Officer, and Treasurer
2013 310,000 — 478,249 — 101,696 — 8,573 898,518
2012 140,692 100,000 801,000 — 53,219 — 3,577 1,098,488
Gerald M. Haines II (7) SVP, Corporate Development, Chief Legal Officer, and Secretary
2013 310,000 — 693,985 — 101,696 — 7,537 1,113,218
2012 298,462 — 371,950 — 104,223 — 7,613 782,248
2011 286,654 50,000 657,800 — 345,608 — 4,350 1,344,412
Charles A. Speicher (8) VP, Controller, and Chief Accounting Officer
2013 215,000 — 166,388 — 41,143 — 9,277 431,808
2012 215,000 — 132,795 — 43,626 — 7,350 398,771
2011 172,827 — 367,700 — 64,966 — 5,185 610,678
Didier M.C. Thibaud (9) President, Mercury Commercial Electronics
2013 334,649 — 1,446,238 — 101,231 7,163 9,258 1,898,539
2012 340,361 — 489,990 — 101,324 336 8,800 940,811
2011 340,778 — 549,500 — 368,745 10,436 8,500 1,277,959



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	2016	546,133	—	1,431,581	—	519,890	$	—	9,950	2,507,554
	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
Gerald M. Haines II (5) EVP, Chief Financial Officer, and Treasurer	2016	338,595	—	429,471	—	196,156	—		8,162	972,384
	2015	316,796	—	788,550	—	186,766	—		8,878	1,300,990
	2014	310,000	—	407,211	—	145,592	—		8,977	871,780
Charles A. Speicher VP, Controller, Chief Accounting Officer, and Assistant Treasurer	2016	234,842	—	214,736	—	91,058	—		10,145	550,781
	2015	219,750	—	114,100	—	87,292	—		10,344	431,486
	2014	215,000	—	135,737	—	58,902	—		10,187	419,826
Didier M.C. Thibaud (6) EVP, Chief Operating Officer	2016	338,989	—	429,471	—	256,725	—		10,020	1,035,205
	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

(1)

~~Mr. Haines received~~Represents the aggregate grant date fair value for equity awards made to our named executive officers in fiscal years 2014, 2015 and 2016. The amounts reported in this table do not reflect whether the named executive officer has actually realized a ~~$50,000 hiring bonus upon~~financial benefit from the ~~commencement~~award. Grant date fair value of ~~his employment during~~equity awards is computed in accordance with Accounting Standards Codification Topic 718 (ASC Topic 718). For a discussion of the assumptions and methodologies used to calculate grant date fair value in this proxy statement, please refer to Note B of the financial statements in our annual report on Form 10-K for the fiscal ~~2011. Mr. Bisson received a $100,000 hiring bonus upon the commencement of his employment during fiscal 2012.~~

~~(2)~~

~~These columns represent~~year ended June 30, 2016. For performance-based restricted stock awards, these amounts reflect the grant date fair value of ~~stock and stock-based~~such awards ~~in accordance with FASB ASC Topic 718. For fiscal 2013,~~based upon the probable outcome at the time of grant. The maximum potential value of the performance-based restricted stock awards ~~reflected two separate grants: (i) an annual grant;~~(assuming the highest level of performance achievement) that could have been earned in fiscal 2016 was: Mr. Aslett – $1,431,581; Mr. Haines – $429,471; Mr. Speicher – $214,736; and (ii) a retention grant. See the Compensation Discussion & Analysis section for a discussion of these grants. For fiscal 2011 and 2012, there were no retention grants. The fiscal 2013 annual grants and retention grants for our named executive officers were:Mr. Thibaud – $429,471.

Name Annual Grant (# of shares) Retention Grant (# of shares) Total (# of shares)
Mark Aslett 126,502
190,000
316,502
Kevin M. Bisson 50,395
—
50,395
Gerald M. Haines II 39,128
34,000
73,128
Charles A. Speicher 17,533
—
17,533
Didier M.C. Thibaud 72,396
80,000
152,396


~~(3)~~(2)	The aggregate amounts in this column reflect payments under our ~~annual~~ executive bonus program. The table below shows the components of our ~~annual~~ executive bonus program earned for fiscal ~~2013:~~2016:


Name	Corporate Financial Performance Bonus		MBR Bonus		Over- Achievement Award		Total Non-Equity Incentive Plan Compensation		Corporate Financial Performance Bonus		MBR Bonus		Over- Achievement Award		Total Non-Equity Incentive Plan Compensation
Mark Aslett	$	160,875	$	115,000	$	—	$	275,875	$	424,400	$	95,490	$	—	$	519,890
Kevin M. Bisson	59,846		41,850		—		101,696
Gerald M. Haines II	59,846		41,850		—		101,696		157,872		38,284		—		196,156
Charles A. Speicher	24,212		16,931		—		41,143		72,992		18,066		—		91,058
Didier M.C. Thibaud	59,846		41,385		—		101,231		210,000		46,725		—		256,725

~~(4)~~(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.


~~(5)~~	~~The table below shows the components of this column for fiscal 2013:~~

(4) The table below shows the components of this column for fiscal 2016:


Name	401(k) Plan Matching Contribution(a)		Perquisites and Other Personal Benefits(b)		Total All Other Compensation		401(k) Plan Matching Contribution(a)		Perquisites and Other Personal Benefits(b)		Total All Other Compensation
Mark Aslett	$	7,500	$	—	$	7,500	$	7,950	$	2,000	$	9,950
Kevin M. Bisson	8,573		—		8,573
Gerald M. Haines II	7,537		—		7,537		8,162		—		8,162
Charles A. Speicher	7,500		1,777		9,277		8,145		2,000		10,145
Didier M.C. Thibaud	7,500		1,758		9,258		9,002		1,018		10,020


(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.

~~(6) Mr. Bisson joined the Company in January 2012.~~

~~(7)~~(5) Mr. Haines ~~joined~~was appointed to the ~~Company in July 2010.~~

~~(8) Mr. Speicher joined the company~~position of Executive Vice President, Chief Financial Officer, and Treasurer in September ~~2010.~~

~~(9) A portion of~~2014 (fiscal 2015). The equity grant to Mr. ~~Thibaud’s salary~~Haines in fiscal ~~years 2011, 2012,~~2015 reflects both his annual grant and ~~2013~~his appointment as Executive Vice President, Chief Financial Officer, and Treasurer.


(6)	A portion of Mr. Thibaud’s salary in fiscal years 2014, 2015, and 2016 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 ~~2013;~~2016; 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 ~~annual~~ executive bonus program for fiscal ~~2013.~~2016. The actual payouts for fiscal ~~2013~~2016 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 ~~2013~~2016


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 ($/sh)	Grant Date Fair Value of Stock and Option Awards(1)			Estimated Possible Payouts Under Non-Equity Incentive Plan Awards			Estimated Possible Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/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)		Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold ($)	Target ($)	Maximum ($)			Exercise or Base Price of Option Awards ($/sh)	Grant Date Fair Value of Stock and Option Awards(1)
Mark Aslett
Restricted Stock	8/15/2012	(2	)				316,502			$	3,003,604
Restricted Stock (2)												8/17/15	—	—	—	—	—	—	45,447	—	—	$	715,790
Performance Stock (2)												8/17/15	—	—	—	30,298	45,447	45,447	—	—	—	715,790
Corporate Financial Performance Bonus	(3)			123,750	187,500	281,250	—	—	—	—		(3)	318,300	424,400	424,400	—	—	—	—	—	—	—
MBR Bonus	(4)			—	125,000	125,000	—	—	—	—		(4)	—	106,100	106,100	—	—	—	—	—	—	—
Over-Achievement Award	(5)			—	—	500,000	—	—	—	—		(5)	—	—	530,500	—	—	—	—	—	—	—
Gerald M. Haines II
Restricted Stock	8/15/2012	(2	)				73,128			693,985
Corporate Financial Performance Bonus	(3)			46,035	69,750	104,625	—	—	—	—
MBR Bonus	(4)			—	46,500	46,500	—	—	—	—
Over-Achievement Award	(5)			—	—	186,000	—	—	—	—
Kevin M. Bisson
Restricted Stock	8/15/2012	(2	)				50,395			478,249
Restricted Stock (2)												8/17/15	—	—	—	—	—	—	13,634	—	—	214,736
Performance Stock (2)												8/17/15	—	—	—	9,090	13,634	13,634	—	—	—	214,736
Corporate Financial Performance Bonus	(3)			46,035	69,750	104,625	—	—	—	—		(3)	118,404	157,872	157,872	—	—	—	—	—	—	—
MBR Bonus	(4)			—	46,500	46,500	—	—	—	—		(4)	—	39,468	39,468	—	—	—	—	—	—	—
Over-Achievement Award	(5)			—	—	186,000	—	—	—	—		(5)	—	—	197,340	—	—	—	—	—	—	—
Charles A. Speicher
Restricted Stock	8/15/2012	(2	)				17,533			166,388
Restricted Stock (2)												8/17/15	—	—	—	—	—	—	6,817	—	—	107,368
Performance Stock (2)												8/17/15	—	—	—	4,545	6,817	6,817	—	—	—	107,368
Corporate Financial Performance Bonus	(3)			18,624	28,219	42,328	—	—	—	—		(3)	54,744	72,992	72,992	—	—	—	—	—	—	—
MBR Bonus	(4)			—	18,813	18,813	—	—	—	—		(4)	—	18,248	18,248	—	—	—	—	—	—	—
Over-Achievement Award	(5)			—	—	75,250	—	—	—	—		(5)	—	—	91,240	—	—	—	—	—	—	—
Didier M.C. Thibaud(6)
Restricted Stock	8/15/2012	(2	)				152,396			1,446,238
Restricted Stock (2)												8/17/15	—	—	—	—	—	—	13,634	—	—	214,736
Performance Stock (2)												8/17/15	—	—	—	9,090	13,634	13,634	—	—	—	214,736
Corporate Financial Performance Bonus	(3)			46,035	69,750	104,625	—	—	—	—		(3)	157,500	210,000	210,000	—	—	—	—	—	—	—
MBR Bonus	(4)			—	46,500	46,500	—	—	—	—		(4)	—	52,500	52,500	—	—	—	—	—	—	—
Over-Achievement Award	(5)			—	—	186,000	—	—	—	—		(5)	—	—	262,500	—	—	—	—	—	—	—

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

(2) ~~This~~These time-based restricted stock ~~award was~~awards and performance restricted stock awards were granted under the 2005 ~~Plan.~~ Plan with an August 17, 2015 grant date. The time-based restricted share awards vest in three equal installments on each of the first three anniversaries of the grant date (August 17, 2015), contingent in each case on the executive remaining an employee as of each such date. For the performance restricted stock awards, the performance metric provides for no vesting unless the Company achieves at least two-thirds of its targeted operating objective of at least 18% adjusted EBITDA to revenue and full vesting if 18% or more is achieved. There is no upside component to the performance restricted stock awards. The vesting formula for the fiscal 2016 performance-based restricted share award is as set forth in the table below but with the following performance periods and weightings: (i) up to two-thirds of the awards vest based on achieving financial goals for the two-year period ending June 30, 2017, and (ii) up to one-third of the awards vest based on achieving financial goals for the three-year period ending June 30, 2018. As with the time-based awards, vesting for the performance awards is contingent in each case on the executive remaining an employee as of each vesting date.

Vesting Formula for the Fiscal 2016 Performance-Based Restricted Shares Awards



Ratio of Adjusted EBITDA/ Revenue for Performance Period	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%
18% or more	100%	Target (Capped)

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 ~~annual~~ executive bonus program for fiscal ~~2013~~2016 upon achievement of the threshold, target, and maximum performance objectives for that program. Payouts for corporate financial performance for fiscal ~~2013~~2016 were subject to the ~~following~~ payout ~~formula:~~



~~Adjusted EBITDA Attained~~	~~Percentage to be Paid for Bonus~~	~~Threshold, Target, and Maximum~~
~~Less than $7.0 million~~	—%	~~Below Threshold~~
~~$7.0 million~~	~~33%~~	~~Threshold~~
~~Greater than $7.0 million but less than $15.0 million~~	~~Proportionate % between~~ ~~33% and 50%~~	—
~~$15.0 million~~	~~50%~~	~~Target~~
~~Greater than $15.0 million but less than $22.0 million~~	~~Proportionate % between~~ ~~50% and 75%~~	—
~~$22.0 million~~	~~75%~~	—
~~Greater than $22.0 million~~	~~75%~~	~~Maximum~~

formula included in the Compensation Discussion & Analysis. The actual payouts for fiscal ~~2013~~2016 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 ~~annual~~ executive bonus program for fiscal ~~2013.~~2016. The actual payouts for fiscal ~~2013~~2016 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 ~~annual~~ executive bonus program for fiscal ~~2013.~~2016. 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 ~~2013~~2016 based on ~~23.9%~~25% of the amount by which actual adjusted EBITDA exceeded budgeted adjusted ~~EBITDA. The actual~~EBITDA and satisfaction of a revenue threshold. There were no payouts for fiscal ~~2013 are~~2016 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 ~~annual~~ executive bonus program for fiscal ~~2013~~2016 were based on a notional annual base salary of ~~$310,000,~~$350,000, and payments, if any, would have been made in USD. As explained in note 96 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.~~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 ~~annual~~ 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 ~~annual~~ 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 ~~annual~~ 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 ~~annual~~ executive bonus program for fiscal ~~2013~~2016 were met, and corporate financial performance bonuses were paid under the terms of the program. For fiscal ~~2013, actual adjusted EBITDA~~2016, revenue was below its target for the overachievement portion of our ~~budgeted adjusted EBITDA target.~~executive bonus program. Accordingly, no overachievement awards were payable for fiscal ~~2013.~~2016.

Outstanding Equity Awards at ~~2013~~2016 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 $24.86 closing price ~~($9.22)~~ of our common stock on the NASDAQ Global Select Market on June ~~28, 2013,~~30, 2016, the last trading day of fiscal ~~2013.~~2016.

Outstanding Equity Awards at Fiscal Year-End ~~2013~~2016


	Option Awards(1)						Stock Awards(1)				Option Awards(1)					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		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	—	(2)	$	14.14	11/21/2017	30,000	(3)	$	276,600	—	—	$	—	—	7,500	(2)	$	186,450
	94,726	—	(4)	8.26		8/21/2015	42,500	(5)	391,850		—	—	—		—	79,125	(3)	1,967,048
	—	—		—		—	28,125	(6)	259,313		—	—	—		—	61,342	(4)	1,524,962
	—	—		—		—	22,500	(7)	207,450		—	—	—		—	31,666	(5)	787,217
	—	—		—		—	316,502	(8)	2,918,148		—	—	—		—	31,666	(6)	787,217
Kevin M. Bisson	—	—		—		—	45,000	(9)	414,900
											—	—	—		—	45,447	(7)	1,129,812
	—	—		—		—	50,395	(8)	464,642		—	—	—		—	45,447	(6)	1,129,812
Gerald M. Haines II	—	—		—		—	27,500	(10)	253,550		—	—	—		—	2,500	(2)	62,150
	—	—		—		—	11,250	(6)	103,725		—	—	—		—	18,282	(3)	454,491
	—	—		—		—	7,500	(7)	69,150		—	—	—		—	22,082	(4)	548,959
	—	—		—		—	73,128	(8)	674,240		—	—	—		—	11,666	(5)	290,017
											—	—	—		—	11,666	(6)	290,017
											—	—	—		—	11,666	(7)	290,017
											—	—	—		—	11,666	(6)	290,017
											—	—	—		—	13,634	(8)	338,941
											—	—	—		—	13,634	(9)	338,941
Charles A. Speicher	—	—		—		—	12,500	(11)	115,250		—	—	—		—	1,125	(2)	27,968
											—	—	—		—	4,383	(3)	108,961
											—	—	—		—	7,360	(4)	182,970
	—	—		—		—	1,250	(12)	11,525		—	—	—		—	3,333	(5)	82,858
	—	—		—		—	3,375	(6)	31,118		—	—	—		—	3,333	(6)	82,858
	—	—		—		—	3,375	(7)	31,118		—	—	—		—	6,817	(7)	169,471
	—	—		—		—	17,533	(8)	161,654		—	—	—		—	6,817	(6)	169,471
Didier M.C. Thibaud	15,000	—	(13)	19.03		7/28/2013	23,125	(3)	213,213		—	—	—		—	3,500	(2)	87,010
	20,000	—	(14)	23.46		7/28/2014	25,000	(5)	230,500		—	—	—		—	38,099	(3)	947,141
	77,000	—	(15)	16.36		6/1/2016	14,250	(6)	131,385		30,000	—	13.07		6/5/2017	36,805	(4)	914,972
	30.000	—	(16)	13.07		6/5/2017	10,500	(7)	96,810		—	—	—		—	13,333	(5)	331,458
	31,000	—	(17)	8.62		6/10/2015	152,396	(8)	1,405,091		—	—	—		—	13,333	(6)	331,458
											—	—	—		—	13,634	(7)	338,941
											—	—	—		—	13,634	(6)	338,941


(1)	~~All option and stock awards are subject to time-based vesting. Accordingly, there are no unearned option or stock awards outstanding.~~ Securities underlying stock options are shares of our common stock.


(2)	These stock option awards vest in four equal installments on each of the first four anniversaries of the grant date (November 21, 2007), contingent in each case on the executive remaining an employee as of each such date.

~~(3)~~

~~These~~ restricted share awards ~~vest in four equal installments~~were awarded on ~~each of~~February 15, 2012; however, the ~~first four anniversaries of~~Company and the ~~grant~~executives agreed to amend the vesting date ~~(August 17, 2009), contingent in each case~~by delaying the vesting to start as if such awards had been granted on August 15, 2012. As amended, the ~~executive remaining an employee as of each such date.~~


~~(4)~~	These stock option awards vest in four equal installments on each of the first four anniversaries of the grant date (August 21, 2008), 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 16, 2010), contingent in each case on the executive remaining an employee as of each such date.


~~(6)~~	~~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.~~


~~(7)~~	~~These restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date (February 15,~~ 2012), contingent in each case on the executive remaining an employee as of each such date.


~~(8)~~(3)	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.


~~(9)~~(4)	These restricted share awards vest in four equal installments on each of the first four anniversaries of the grant date ~~(January 16, 2012)~~(August 15, 2013), contingent in each case on the executive remaining an employee as of each such date.


~~(10)~~(5)	These restricted share awards vest in ~~four~~three equal installments on each of the first ~~four~~three anniversaries of the grant date ~~(July~~(August 15, ~~2010)~~2014), contingent in each case on the executive remaining an employee as of each such date.

~~(11)~~(6)

For these performance restricted stock awards, the performance metric provides for no vesting unless the Company achieves at least two-thirds of its targeted operating objective of at least 18% adjusted EBITDA to revenue and full vesting if 18% or more is achieved. There is no upside component to the performance restricted stock awards. The vesting formula for the fiscal 2015 performance-based restricted share award is as set forth in the table below but with the following performance periods and weightings: (i) up to one-third of the awards vest based on achieving financial goals for the one-year period ending June 30, 2015, (ii) up to one-third of the awards vest based on achieving financial goals for the two-year period ending June 30, 2016, and (iii) up to one-third of the awards vest based on achieving financial goals for the three-year period ending June 30, 2017. As with the time-based awards, vesting for the performance awards is contingent in each case on the executive remaining an employee as of each vesting date.

Vesting Formula for the Fiscal 2015 Performance-Based Restricted Shares Awards



Ratio of Adjusted EBITDA/ Revenue for Performance Period	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%
18% or more	100%	Target (Capped)


(7)	These restricted share awards vest in ~~four~~three equal installments on each of the first ~~four~~three anniversaries of the grant date ~~(September 15, 2010)~~(August 17, 2015), contingent in each case on the executive remaining an employee as of each such date.

~~(12)~~(8)

~~These shares~~For these performance restricted stock awards, the performance metric provides for no vesting unless the Company achieves at least two-thirds of its targeted operating objective of at least 18% adjusted EBITDA to revenue and full vesting if 18% or more is achieved. There is no upside component to the performance restricted stock awards. The vesting formula for the fiscal 2016 performance-based restricted share award is as set forth in the table below but with the following performance periods and weightings: (i) up to two-thirds of the awards vest ~~in four equal installments~~based on ~~each~~achieving financial goals for the two-year period ending June 30, 2017, and (ii) up to one-third of the ~~first four anniversaries of~~awards vest based on achieving financial goals for the ~~grant date (May 16, 2011),~~three-year period ending June 30, 2018. As with the time-based awards, vesting for the performance awards is contingent in each case on the executive remaining an employee as of each ~~such~~vesting date.

Vesting Formula for the Fiscal 2016 Performance-Based Restricted Shares Awards



Ratio of Adjusted EBITDA/ Revenue for Performance Period	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%
18% or more	100%	Target (Capped)


~~(13)~~(9)	These ~~stock option~~restricted share awards vest in ~~four~~three equal installments on each of the first ~~four~~three anniversaries of the grant date ~~(July 28, 2003), contingent in each case on the executive remaining an employee as of each such date.~~


~~(14)~~	These stock option awards vest in four equal installments on each of the first four anniversaries of the grant date (July 28, 2004), contingent in each case on the executive remaining an employee as of each such date.


~~(15)~~	~~These stock option awards vest in full on the third anniversary of the grant date (June 1, 2006), contingent in each case on the executive remaining an employee as of such date.~~


~~(16)~~	These stock option awards vest in four equal installments on each of the first four anniversaries of the grant date (June 5, 2007), contingent in each case on the executive remaining an employee as of each such date.


~~(17)~~	~~These stock option awards vest in four equal installments on each of the first four anniversaries of the grant date (June 10, 2008)~~(September 3, 2014), contingent in each case on the executive remaining an employee as of each such date.

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 ~~2013~~2016


	Option Awards			Stock Awards			Option Awards			Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)		Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Mark Aslett	—	$	—	68,125	$	645,769	200,000	$	1,712,000	158,339	$	2,536,591
Kevin M. Bisson	—	—		15,000	118,800
Gerald M. Haines II.	—	—		20,000	227,025
Gerald M. Haines II							—	—		58,910	944,205
Charles A. Speicher	—	—		9,125	89,686		—	—		13,648	218,641
Didier M.C. Thibaud	—	—		43,875	420,091		77,000	322,360		78,086	1,250,938

Pension Benefits

The following table shows the actuarial present value of the pension benefit for the named executive officers as of June 30, ~~2013,~~2016, the measurement date used for financial statement reporting purposes with respect to our audited financial statements for fiscal ~~2013.~~2016. The retirement indemnities pension plan covers eligible French national employees as required by French law. During fiscal ~~2013,~~2016, Mr. Thibaud was the only named executive officer to participate in the plan.

Pension Benefits—Fiscal ~~2013~~2016


Name	Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefit(1)		Payments During Fiscal 2013		Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefit(1)		Payments During Fiscal 2016
Didier M.C. Thibaud	Retirement Indemnities Pension Plan	15.9	$	63,764	$	—	Retirement Indemnities Pension Plan	18.9	$	63,033	$	—


(1)	The actuarial present value of Mr. Thibaud’s pension benefit as of June 30, ~~2013,~~2016, is calculated in Euros. The dollar amount set forth above reflects the exchange rate at June ~~28, 2013.~~30, 2016. The actuarial present value assumes a ~~2.6%~~1.3% discount rate and an age of retirement of 63 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, ~~2013~~2016 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 $ 1,000,000 $ 23,061 $ 1,023,061



	Cash Severance		(1)	Health Benefits		(2)	Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason	$	1,061,000		$	27,575		$	1,088,575


(1)	This amount represents the aggregate amount of Mr. Aslett’s annual base salary and target bonus under our ~~annual~~ executive bonus program for fiscal ~~2013.~~2016.


(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, ~~2013,~~2016, and the costs associated with such coverage on that date.

~~Potential Payments to Mr. Thibaud upon Termination of Employment~~

We also entered into a severance agreement with Mr. Thibaud in fiscal year 2008 in connection with his relocation to the United States, a description of which agreement can be found under the heading “~~Agreements with Named Executive Officers~~” below. Mr. Thibaud’s agreement provides for termination and severance benefits in the case of a termination of Mr. Thibaud’s employment by us without “cause” or by Mr. Thibaud for “good reason.”

“Cause” is defined in the agreement to include: (1) the willful and continued failure by Mr. Thibaud to perform substantially the duties and responsibilities of his position with Mercury after written demand; (2) the conviction of Mr. Thibaud 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. Thibaud 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. Thibaud’s part will be deemed “willful” unless committed or omitted by Mr. Thibaud 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. Thibaud’s responsibilities, authority, or duties as in effect on the date of the agreement; (2) a material diminution in Mr. Thibaud’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. Thibaud provides services to Mercury. To terminate his employment for “good reason,” Mr. Thibaud must follow a specified process described in the agreement.

Under the agreement, if at any time prior to July 1, 2013, we terminate Mr. Thibaud’s employment without “cause” or Mr. Thibaud terminates his employment for “good reason,” then we will pay Mr. Thibaud a severance amount equal to one times his

annual base salary, payable over a 12-month period. In such event, we also will pay for certain insurance benefits, outplacement services, and relocation expenses of Mr. Thibaud. In addition, Mr. Thibaud will be entitled to receive a tax “gross-up” payment with respect to the reimbursement of his relocation expenses, such that the net amount retained by Mr. Thibaud, after deduction of applicable taxes on the reimbursed costs and the gross-up payment, would be equal to the reimbursed costs.

The following chart illustrates the benefits that would have been received by Mr. Thibaud under his agreement on June 30, 2013 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. Thibaud upon the occurrence of such events, which amounts would only be known at the time that Mr. Thibaud became entitled to such benefits.

Cash
Severance

Health
Benefits
(1)
Outplacement
Services

Reimbursement
of Relocation
Expenses
(2)
Tax
Gross-Up
Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason $ 310,000
$ 11,477 $ 30,000
$ 80,123 $ 49,004
$ 480,604


~~(1)~~	~~The value of health, dental, and vision insurance benefits is based on the type of coverage we carried for Mr. Thibaud as of June 30, 2013, and the costs associated with such coverage on that date.~~


~~(2)~~	~~This amount has been estimated based on the relocation expenses reimbursed by us during fiscal years 2008 and 2009 upon Mr. Thibaud’s relocation from France to the United States.~~

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, ~~2013~~2016 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 $ 310,000
$ 17,138 $ 30,000
$ 357,138



	Cash Severance		Health Benefits		(1)	Outplacement Services		Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason	$	328,900	$	19,015		$	30,000	$	377,915


(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, ~~2013, 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 would have been received by Mr. Bisson under his agreement on June 30, 2013 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. Bisson upon the occurrence of such events, which amounts would only be known at the time that Mr. Bisson became entitled to such benefits.

Cash
Severance

Health
Benefits
(1)
Outplacement
Services
Total
Involuntary Termination Without Cause or Voluntary Termination for Good Reason $ 310,000
$ 17,138 $ 30,000
$ 357,138


~~(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, 2013,~~2016, and the costs associated with such coverage on that date.

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 ~~2013,~~2016, we had such agreements in effect with the following named executive officers: Mr. Aslett; Mr. ~~Bisson;~~Haines; Mr. ~~Haines;~~Speicher; and Mr. Thibaud. ~~At its meeting in July 2013, the Compensation Committee approved a change in control severance agreement for Mr. Speicher which went into effect in fiscal 2014.~~

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, ~~2014,~~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, ~~2013,~~2016, all pursuant to the terms of each executive’s change in control severance agreement as described above:


Name ~~(1)~~	Salary/Bonus Lump Sum		Stock Option Acceleration		(2)	Restricted Stock Acceleration		(3)	Outplacement Services		(4)	Health Benefits		(5)	Total		Salary/Bonus Lump Sum		Restricted Stock Acceleration (1)		Outplacement Services (2)		Health Benefits (3)		Total
Mark Aslett	$	2,000,000	$	—		$	4,053,361		$	45,000		$	30,748		$	6,129,109	$	2,122,000	$	7,512,518	$	45,000	$	36,766	$	9,716,284
Kevin M. Bisson	744,000		—			879,542			45,000			25,707			1,694,249
Gerald M. Haines II	744,000		—			1,100,665			45,000			25,707			1,915,372		789,360		2,903,549		45,000		28,523		3,766,432
Charles A. Speicher																	479,010		824,556		45,000		28,523		1,377,089
Didier M.C. Thibaud	744,000		—			2,076,999			45,000			16,637			2,882,636		918,750		3,289,923		45,000		18,829		4,272,502


(1)	At its meeting in July 2013, the Compensation Committee approved a change in control severance agreement for Mr. Speicher. Mr. Speicher's agreement is in the form of the non-CEO CIC agreements summarized above. Since Mr. Speicher's agreement only became effective in fiscal 2014, it is not reflected in the table above.

~~(2)~~

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 28, 2013 ($9.22) 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, 2013, none of our named executive officers had any unvested stock options.


~~(3)~~	The amounts shown in this column represent the closing price of our common stock on the NASDAQ Global Select Market on June ~~28, 2013~~30, 2016 ($~~9.22)~~24.86) multiplied by the number of restricted shares that would have vested upon the occurrence of a change in control.


~~(4)~~(2)	This amount represents the maximum amount of outplacement services to which the executive is entitled under the agreement.


~~(5)~~(3)	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, ~~2013~~2016 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. Thibaud~~

On March 27, 2008, we entered into a severance agreement with Mr. Thibaud in connection with his relocation to the United States. Under the agreement, Mr. Thibaud is entitled to certain termination and severance benefits if at any time prior to July 1, 2013, we terminate his employment without “cause” or Mr. Thibaud terminates his employment 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. Thibaud upon Termination of Employment.~~”

~~Severance Agreement with Mr. Bisson~~

~~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.~~”

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, ~~2013.~~2016.

By the Compensation Committee of the Board of

Directors of Mercury Systems, Inc.

Michael A. Daniels, Chairman

George ~~W. Chamillard~~

~~George~~ K. Muellner

49Vincent 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, ~~2013.~~2016. 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, ~~2013,~~2016, 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 ~~Statement on~~ Auditing ~~Standards~~Standard No. ~~61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380),~~16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board, ~~in Rule 3200T,~~ with Mercury’s independent registered public accounting firm. ~~That Statement requires the independent registered public accounting firm to ensure that the Audit Committee received information regarding the scope and results of the audit. In addition, the~~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, ~~2013.~~2016.

By the Audit Committee of the Board of

Directors of Mercury Systems, Inc.

William K. O’Brien, Chairman

James K. Bass

~~Lee C. Steele~~Mark S. Newman

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, ~~2014.~~2017. KPMG served as our independent registered public accounting firm for the fiscal years ended June 30, ~~2013~~2016 and ~~2012.~~2015. 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, ~~2013~~2016 and ~~2012~~2015 were as follows:


	Fiscal 2013		Fiscal 2012		Fiscal 2016		Fiscal 2015
Audit	$	1,211,000	$	997,570	$	1,678,000	$	1,157,631
Audit-Related	12,000		4,000		1,007,861		—
Tax	280,000		109,000		149,220		538,288
All Other	—		260,000		—		—
	$	1,503,000	$	1,370,570	$	2,835,081	$	1,695,919

Audit fees for fiscal years ~~2013~~2016 and ~~2012~~2015 were for professional services provided for the audits of our consolidated financial statements and our internal control over financial reporting as well as reviews of the consolidated financial statements included in each of our quarterly reports on Form 10-Q.

~~Audit-related~~ Audit fees for fiscal years ~~2013~~2016 and ~~2012~~2015 also were for consents relating to registration statements in each fiscal ~~year.~~year and for the auditor comfort letter provided in connection with the Company's underwritten follow-on common stock offering in fiscal 2016.

For fiscal year 2016, audit-related fees included professional service fees related to the acquisition of the embedded security, RF and microwave, and custom microelectronics business of the Power and Microelectronics Group of Microsemi Corporation, the acquisition of Lewis Innovative Technologies, Inc., due diligence review of other potential acquisition candidates.

Tax fees for fiscal years ~~2013~~2016 and ~~2012~~2015 were for tax return preparation and related consulting, as well as miscellaneous tax advice regarding state income tax filings and potential business reorganizations. For fiscal 2013, tax fees also included preparation and filing of state tax returns and negotiation of voluntary disclosure agreements related to acquired businesses in certain jurisdictions in which such businesses had a state tax nexus but previously failed to file state tax returns.

~~All other fees for fiscal 2012 were for professional services related to the acquisitions of KOR Electronics and Micronetics, Inc.~~

What is the Audit Committee’s pre-approval policy?

The Audit Committee pre-approves all auditing services and the terms of non-audit services provided by our independent registered public accounting firm, but only to the extent that the non-audit services are not prohibited under applicable law and the committee determines that the non-audit services do not impair the independence of the independent registered public accounting firm.

In situations where it is impractical to wait until the next regularly scheduled quarterly meeting, the chairman of the committee has been delegated authority to approve audit and non-audit services to be provided by our independent registered public accounting firm. Fees payable to our independent registered public accounting firm for any specific, individual service approved by the chairman pursuant to the above-described delegation of authority may not exceed ~~$50,000,~~$100,000, and the chairman is required to report any such approvals to the full committee at its next scheduled meeting. In addition, the Audit Committee has pre-approved ~~the payment~~a list of acceptable services and fees payable to KPMG ~~of fees~~ in an aggregate amount of up to $25,000 per quarter for ~~general~~such services, including without limitation audit and allowable non audit, tax consulting, and M&A transactional services. This pre-approval is for small projects needing quick reaction and judged by ~~management~~the Audit Committee not to raise any independence issues with KPMG. ~~Management is~~Such projects and fees are required to ~~present the projects and fees~~be presented in detail at the next Audit Committee meeting.

The Audit Committee has considered and determined that the provision of the non-audit services described is compatible with maintaining the independence of our registered public accounting firm.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal ~~2013, George W. Chamillard,~~2016, Michael A. Daniels, ~~and~~ George K. Muellner, and Vincent Vitto served on the Compensation Committee for the entire fiscal year. No member of the committee is a present or former officer or employee of Mercury or any of its subsidiaries or had any business relationship or affiliation with Mercury or any of its subsidiaries (other than his service as a director) requiring disclosure in this proxy statement.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our officers and directors and persons beneficially owning more than 10% of our outstanding common stock to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Officers, directors, and beneficial owners of more than 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely on copies of such forms furnished as provided above, or written representations that no Forms 5 were required, we believe that during the fiscal year ended June 30, ~~2013,~~2016, all Section 16(a) filing requirements applicable to our officers, directors, and beneficial owners of greater than 10% of our common stock were complied with.

SHAREHOLDER PROPOSALS FOR THE ~~2014~~2017 ANNUAL MEETING

Under regulations adopted by the SEC, any shareholder proposal submitted for inclusion in Mercury’s proxy statement relating to the ~~2014~~2017 annual meeting of shareholders must be received at our principal executive offices on or before May ~~5, 2014.~~24, 2017. In addition to the SEC requirements regarding shareholder proposals, our by-laws contain provisions regarding matters to be brought before shareholder meetings. If shareholder proposals, including proposals relating to the election of directors, are to be considered at the ~~2014~~2017 annual meeting, notice of them, whether or not they are included in Mercury’s proxy statement and form of proxy, must be given by personal delivery or by United States mail, postage prepaid, to the Secretary no earlier than May ~~26, 2014~~23, 2017 and no later than June ~~25, 2014.~~22, 2017. The notice must include the information set forth in our by-laws. Proxies solicited by the Board will confer discretionary voting authority with respect to these proposals, subject to SEC rules governing the exercise of this authority.

It is suggested that any shareholder proposal be submitted by certified mail, return receipt requested.

OTHER MATTERS

We know of no matters which may properly be and are likely to be brought before the meeting other than the matters discussed in this proxy statement. However, if any other matters properly come before the meeting, the persons named in the accompanying proxy card will vote in accordance with their best judgment.

ANNUAL REPORT ON FORM 10-K

You may obtain a copy of our annual report on Form 10-K for the fiscal year ended June 30, ~~2013~~2016 (without exhibits) without charge by writing to: Investor Relations, Mercury Systems, Inc., 201 Riverneck Road, Chelmsford, Massachusetts 01824.

By Order of the Board of Directors

~~GERALD M. HAINES II~~Christopher C. Cambria

Secretary

Chelmsford, Massachusetts

~~August 30, 2013~~September 20, 2016

Appendix A

MERCURY SYSTEMS, INC.

~~EXECUTIVE BONUS~~AMENDED AND RESTATED

2005 STOCK INCENTIVE PLAN ~~- CORPORATE FINANCIAL PERFORMANCE~~


SECTION 1.	GENERAL PURPOSE OF THE PLAN; DEFINITIONS

~~SECTION 1~~

~~BACKGROUND, PURPOSE, AND DURATION~~

~~1.1~~ ~~Effective Date~~The name of the plan is the Mercury Systems, Inc. Amended and Restated 2005 Stock Incentive Plan (the “Plan”). The purpose of the Plan is ~~effective as~~to encourage and enable the officers, employees, Non-Employee Directors and other key persons (including consultants and prospective officers) of ~~July 31, 2013, subject~~Mercury Systems, Inc. (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to ~~ratification by an affirmative vote~~acquire a proprietary interest in the Company and to induce qualified individuals who have received offers of ~~a majority~~employment to become officers of the ~~Shares cast on~~Company to enter and remain in the ~~matter at the 2013 Annual Meeting of Shareholders~~employ of the Company.

~~1.2~~ ~~Purpose~~ It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of ~~the Plan. The Plan is intended to increase shareholder value and the success~~their interests with those of the Company ~~by motivating Participants~~and its shareholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to ~~(a) perform to the best of their abilities, and (b) achieve the Company's financial objectives. The Plan's goals are to be achieved by providing Participants~~remain with the ~~opportunity to earn incentive awards for the achievement and over-achievement of goals relating to the financial performance of the~~ Company. ~~The Plan is intended to permit the payment of bonuses that qualify as performance-based compensation under Section 162(m) of the Code.~~

~~SECTION 2~~

~~DEFINITIONS~~

The following ~~words and phrases~~terms shall ~~have the following meanings unless a different meaning is plainly required by the context:~~be defined as set forth below:

“Act”~~Actual Bonus~~” means the Securities Act of 1933, as ~~to any Performance Period,~~amended, and the actual bonus (if any) payable to a Participant for the Performance Period pursuant to Section 4.3(a). Each Actual Bonus is determined by the Payout Formula for the Performance Period, subject to the Committee's authority under Section 3.5 to eliminate or reduce the bonus otherwise determined by the Payout Formula.rules and regulations thereunder.

“Administrator”~~Affiliate” means any corporation or other entity controlled by the Company.~~

“~~Banked Portion~~” means a percentage of each Over-Achievement Award to be determined by the Committee prior to the Determination Date. The Banked Portion shall be paid on a delayed, multi-year basis following the Performance Period during which such portion was earned as provided is defined in Section ~~4.3(b)~~2(a).

“Award”~~Board~~ or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock Awards and Restricted Stock Awards.

“Board” means the Board of Directors of the Company.

“Code”~~Cash Position” means the Company's level of cash and cash equivalents as of a specified date, determined in accordance with generally accepted accounting principles.~~

“~~Cause~~” means (a) the willful and continued failure by the Participant (other than any such failure resulting from (i) the Participant's incapacity due to physical or mental illness, (ii) any such actual or anticipated failure after the issuance of a notice of termination by the Participant for Good Reason, or (iii) the Company's active or passive obstruction of the performance of the Participant's duties and responsibilities) to perform substantially the duties and responsibilities of the Participant's position with the Company after a written demand for substantial performance is delivered to the Participant by the Board, which demand specifically identifies the manner in which the Board believes that the Participant has not substantially performed such duties or responsibilities, (b) the conviction of the Participant by a court of competent jurisdiction for felony criminal conduct or a plea of ~~nolo contendere~~ to a felony, or (c) the willful engaging by the Participant in fraud, dishonesty, or other misconduct which is demonstrably and materially injurious to the Company or its reputation, monetarily or otherwise. No act, or failure to act, on the Participant's part shall be deemed “willful” unless committed or omitted by the Participant in bad faith and without a reasonable belief that the Participant's act or failure to act was in, or not opposed to, the best interest of the Company.

“~~Code~~” means the Internal Revenue Code of 1986, as ~~amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated thereunder,~~amended, and any ~~comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.~~successor Code, and related rules, regulations and interpretations.

“Committee”~~Committee~~” means the ~~Compensation Committee~~compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non‑Employee Directors who are independent.

“Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section 162(m) of the Code.

“Deferred Stock Award” means Awards granted pursuant to Section 8.

“Effective Date” means the date on which the Plan is approved by shareholders as set forth in Section 18.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Fair Market Value” of the Stock on any ~~successor committee~~given date means if the shares of Stock are listed on any national securities exchange, or traded on the National Association of Securities Dealers Automated Quotation System (“Nasdaq”) National Global Market or another national securities exchange, the closing price reported on Nasdaq or such other exchange on such date. If the market is closed on such date, the determination shall be made by reference to the ~~Compensation Committee.~~last date preceding such date for which the market is open. If the fair market value cannot be determined under the preceding two sentences, it shall be determined in good faith by the Administrator.

“Incentive Stock Option”~~Company~~ means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.

“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.

“Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more performance criteria will be measured for the purpose of determining a grantee’s right to and the payment of a Restricted Stock Award or Deferred Stock Award.

“Restricted Stock Award” means Awards granted pursuant to Section 7.

“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.

“Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3.

“Stock Appreciation Right” means any Award granted pursuant to Section 6.

“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has a controlling interest, either directly or indirectly.

“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.


SECTION 2.	ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

(a)Committee. The Plan shall be administered by the Committee (the “Administrator”).

(b)Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:


(i)	to select the individuals to whom Awards may from time to time be granted;


(ii)	to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards and Deferred Stock Awards, or any combination of the foregoing, granted to any one or more grantees;


(iii)	to determine the number of shares of Stock to be covered by any Award;


(iv)	to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the form of written instruments evidencing the Awards;


(v)	subject to the provisions of Sections 7(d) and 8(a), to accelerate at any time the exercisability or vesting of all or any portion of any Award;


(vi)	subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options and Stock Appreciation Rights may be exercised; and

(vii)

at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.

Notwithstanding the foregoing, the Administrator’s power and authority to make grants under the Plan shall be subject to the right of the Board, upon its request, to ratify Awards granted to the Chairman and other individuals specified by the Board, and in such event, the date of grant shall be the date of Board ratification.

(c)Delegation of Authority to Grant Awards. The Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company or any person designated by the Board as an “executive officer” as defined in Rule 3b-7 under the Exchange Act all or part of the Administrator’s authority and duties with respect to the granting of Awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act or “covered employees” within the meaning of Section 162(m) of the Code. Any such delegation by the Administrator shall include a limitation as to the amount of Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price of any Stock Option or Stock Appreciation Right, the conversion ratio or price of other Awards and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan.

(d)Detrimental Activity. Unless the award agreement specifies otherwise, the Administrator may cancel, rescind, suspend, withhold or otherwise limit or restrict any Award (whether vested or unvested, exercised or unexercised) at any time if the recipient is not in compliance with all applicable provisions of the award agreement and the Plan, or if the recipient engages in any “Detrimental Activity.” ~~means~~For purposes of this Section 2, “Detrimental Activity” shall include: (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (ii) the disclosure to anyone outside the Company, or the use in other than the Company’s business, without prior written authorization from the Company, of any confidential information or material, as defined in the Company’s Employee Confidentiality Agreement or such other agreement regarding confidential information and intellectual property that the recipient the Company may enter into (collectively, the “Confidentiality Agreement”), relating to the business of the Company, acquired by the recipient either during or after employment with the Company; (iii) the failure or refusal to disclose promptly and to assign to the Company, pursuant to the Confidentiality Agreement or otherwise, all right, title and interest in any invention or idea, patentable or not, made or conceived by the recipient during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company or the failure or refusal to do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in other countries; (iv) activity that results in termination of the recipient’s employment for cause; (v) a material violation of any rules, policies, procedures or guidelines of the Company; (vi) any attempt directly or indirectly to induce any employee of the Company to be employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company; or (vii) the recipient being convicted of, or entering a guilty plea with respect to, a crime, whether or not connected with the Company.

(e)Indemnification. Neither the Board nor the Committee, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.


SECTION 3.	STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

(a)Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 11,892,264 (which number represents 1,942,264 shares originally reserved under the Plan, plus an additional 650,000 shares reserved upon the 2008 amendment and restatement of the Plan, plus an additional 1,500,000 shares reserved upon the 2009 amendment and restatement of the Plan, plus an additional 1,000,000 shares reserved upon the 2010 amendment and restatement of the Plan, plus an additional 1,000,000 shares upon the 2011 amendment and restatement of the Plan, plus an additional 1,500,000 shares upon the 2012 amendment and restatement of the Plan, plus an additional 3,200,000 shares upon the 2014 amendment and restatement of the Plan, plus and additional 1,100,000 shares), subject to adjustment as provided in Section 3(c). For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, are canceled, expire or are terminated (other than by exercise) under (i) this Plan or (ii) from and after November 14, 2005, the Mercury Systems, Inc. 1997 Stock Option Plan (the “1997 Plan”) shall be added to the shares of Stock available for issuance under the Plan. Shares tendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall not be available for future issuance under the Plan. In addition, upon exercise of Stock Appreciation Rights, the gross number of shares exercised shall be deducted from the total number of shares remaining available for issuance under the Plan. Subject to such overall limitations and Section 3(c), shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that Stock Options or Stock Appreciation Rights with respect to no more than 500,000 shares of Stock may be granted to any one individual grantee during any one calendar year period and provided, further, that in no event may Incentive Stock Options granted under the Plan exceed 11,892,264 shares of Stock. The

shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.

(b)Effect of Awards. The grant of any full value Award (i.e., an Award other than an Option or a ~~Massachusetts corporation,~~Stock Appreciation Right) shall be deemed, for purposes of determining the number of shares available for issuance under Section 3(a), as an Award of two (2.0) shares of Stock for each such share actually subject to the Award. The grant of an Option or a Stock Appreciation Right shall be deemed, for purposes of determining the number of shares available for issuance under Section 3(a), as an Award of one share of Stock for each such share actually subject to the Award.

(c)Changes in Stock. Subject to Section 3(d) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for a different number or kind of securities of the Company or any successor ~~thereto.~~

“~~Controllable Profits” means,~~entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Incentive Stock Options, (ii) the number of Stock Options or Stock Appreciation Rights that can be granted to any one individual grantee and the maximum number of shares that may be granted under a Performance-based Award, (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share subject to each outstanding Restricted Stock Award, and (v) the price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any ~~Performance Period,~~other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a ~~business unit's Revenue minus~~cash payment in lieu of fractional shares.

(d)Mergers and Other Transactions. In the case of and subject to the consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for a different kind of securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, or (iv) the sale of all of the Stock of the Company to an unrelated person or entity (in each case, a “Sale Event”), the Plan and all outstanding Awards granted hereunder shall terminate, unless provision is made in connection with the Sale Event in the sole discretion of the parties thereto for the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into account any acceleration hereunder). In the event of such termination, each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding vested and exercisable Options and Stock Appreciation Rights held by such grantee.

Notwithstanding anything to the contrary in this Section 3(d), in the event of a Sale Event pursuant to which holders of the Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the Sale Event, the Company shall have the right, but not the obligation, to make or provide for a cash payment to the grantees holding vested and exercisable Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the value as determined by the Administrator of the consideration payable per share of Stock pursuant to the Sale Event (the “Sale Price”) times the number of shares of Stock subject to such outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights.

(e)Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with the merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 3(a).


SECTION 4.	ELIGIBILITY

Grantees under the Plan will be such full or part-time officers and other employees, Non-Employee Directors and key persons (including consultants and qualified individuals who have received offers of employment to become officers of the Company) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.


SECTION 5.	STOCK OPTIONS

(a)Grant of Stock Options. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

Stock Options granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.

(b)Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5(a) shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant.

(c)Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than seven years after the date the Stock Option is granted.

(d)Exercisability; Rights of a Shareholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a shareholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

(e)Method of Exercise. Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased; provided, however, that no Stock Option may be partially exercised with respect to fewer than 50 shares. Payment of the purchase price may be made by one or more of the following methods:


(i)	In cash, by certified or bank check or other instrument acceptable to the Administrator;


(ii)	Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or that are beneficially owned by the optionee and are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;


(iii)	By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; or


(iv)	By the optionee delivering to the Company a properly executed net exercise notice. Such shares withheld by the Company in the net exercise shall be valued at Fair Market Value on the exercise date.

Payment instruments will be received subject to collection. The transfer to the ~~extent deemed appropriate by~~optionee on the ~~Committee prior~~records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the ~~Determination Date: (a) cost~~exercise of sales; (b) research, development, and engineering expense; (c) marketing and sales expense; (d) general and administrative expense; (e) extended receivables expense; and (f) shipping requirement deviation expense for such business unit,a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in ~~each case determined~~his stead in accordance with ~~generally accepted accounting principles.~~the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award agreement or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.

(f)Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.


SECTION 6.	STOCK APPRECIATION RIGHTS

“(a)~~Current Portion~~Nature of Stock Appreciation Rights~~” means~~. A Stock Appreciation Right is an Award entitling the recipient to receive shares of Stock having a ~~percentage~~value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right, which price shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant (or more than the option exercise price per share, if the Stock Appreciation Right was granted in tandem with a Stock Option) multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.

(b)Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator in tandem with, or independently of, any Stock Option granted pursuant to Section 5 of the Plan. In the case of a Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option, such Stock Appreciation Right may be granted either at or after the time of the grant of such Option. In the case of a Stock Appreciation Right granted in tandem with an Incentive Stock Option, such Stock Appreciation Right may be granted only at the time of the grant of the Option.

A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Option.

(c)Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined from time to time by the Administrator, subject to the following:


(i)	Stock Appreciation Rights granted in tandem with Options shall be exercisable at such time or times and to the extent that the related Stock Options shall be exercisable; provided, however, that no Stock Appreciation Right may be partially exercised with respect to fewer than 50 shares.


(ii)	Upon exercise of a Stock Appreciation Right granted in tandem with an Option, the applicable portion of any related Option shall be surrendered.


(iii)	The term of a Stock Appreciation Right may not exceed seven years.


SECTION 7.	RESTRICTED STOCK AWARDS

(a)Nature of Restricted Stock Awards. A Restricted Stock Award is an Award entitling the recipient to acquire, at such purchase price (which may be zero) as determined by the Administrator, shares of Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant (“Restricted Stock”). Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. The grant of a Restricted Stock Award is contingent on the grantee executing the Restricted Stock Award agreement. The terms and conditions of each ~~Over-Achievement Award to~~such agreement shall be determined by the ~~Committee prior to~~Administrator, and such terms and conditions may differ among individual Awards and grantees.

(b)Rights as a Shareholder. Upon execution of a written instrument setting forth the ~~Determination Date. The Current Portion~~Restricted Stock Award and payment of any applicable purchase price, a grantee shall ~~be paid on~~have the rights of a ~~current basis following the Performance Period during which such portion was earned in accordance with Section 4.3(b).~~

“~~Days Sales Outstanding~~” means, as to any Performance Period, the average number of days that the Company or a business unit takes to collect revenue after a sale has been made, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculationshareholder with respect to ~~one or more Participants.~~

“~~Determination Date” means~~ the 90^th ~~day of a Performance Period (or within the first 25 percent~~voting of the ~~Performance Period if~~Restricted Stock, subject to such conditions contained in the ~~Performance Period is less than one year).~~

“~~Disability” means total and permanent disability as defined in Section 22(e)(3) of~~written instrument evidencing the ~~Code, provided that~~Restricted Stock Award. Unless the ~~Committee, in its sole discretion, may~~Administrator shall otherwise determine, ~~whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Company from time to time.~~

“~~Earnings Per Share” means, as to any Performance Period, the Company's Net Income, divided~~(i) uncertificated Restricted Stock shall be accompanied by a ~~weighted average number of~~notation on the combination of (a) common shares outstanding, and (b) dilutive common equivalent shares deemed outstanding, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~EBITDA~~” means, as to any Performance Period, the Company's or a business unit's earnings before interest, taxes, depreciation, and amortization determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Employee” means any employee~~records of the Company or ~~an Affiliate, whether~~the transfer agent to the effect that they are subject to forfeiture until such ~~employee~~Restricted Stock are vested as provided in Section 7(d) below, and (ii) certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is ~~so employed~~vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.

(c)Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award agreement. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 15 below, in writing after the Award agreement is issued, if any, if a grantee’s employment (or other service relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time ~~that the Plan is adopted or becomes so employed subsequent~~of termination shall automatically and without

any requirement of notice to ~~the adoption of the Plan.~~

“~~Free Cash Flow~~” means, as to any Performance Period, the Company's or a business unit's operating cash flows less capital expenditures determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such ~~calculation with respect to one or more Participants.~~

“~~Good Reason~~” for termination by the Participant of the Participant's employment means the Participant has complied with the Good Reason Process following the occurrence (without the Participant's express written consent) of any one of the following events:

a. a material adverse change in the Participant's status or position with the Company, including without limitation any adverse change in the Participant's status or position as a result of a material diminution of the Participant's duties or responsibilities, or the assignment to the Participant of any duties or responsibilities which are inconsistent with such status or position, or any removal of the Participantgrantee from or ~~any failure to reappoint~~other action by or ~~reelect the Participant to, such position;~~

~~b. a material reduction in the Participant's base salary; or~~

c. the Company requiring the Participant to be based at an office that is greater than fifty (50) miles from where the Participant's office is currently located, except for required travel on the Company's business to an extent substantially consistent with the business travel obligations that the Participant undertook on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other service relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a shareholder. Following such deemed reacquisition of unvested Restricted Stock that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration.

(d)Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or risk of forfeiture shall lapse. In the event that any such Restricted Stock granted to employees shall have a performance-based goal, the restriction period with respect to such shares shall not be less than one year, and in the event that any such Restricted Stock granted to employees shall have a time-based restriction, the total restriction period with respect to such shares shall not be less than three years; provided, however, that Restricted Stock granted to employees with a time-based restriction may become vested incrementally over such three-year period. No portion of any Restricted Stock granted to employee may vest prior to the first anniversary of the grant date. Subsequent to such ~~change~~date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the Administrator either in ~~office location.~~

If the ~~Participant has~~Award agreement or, subject to Section 15 below, in writing after the Award agreement is issued, a ~~change-in-control agreement~~grantee’s rights in any shares of Restricted Stock that have not vested shall automatically terminate upon the grantee’s termination of employment (or other service relationship) with the Company ~~Good Reason shall have the meaning assigned to~~and its Subsidiaries and such ~~term in the change-in-control agreement.~~

“~~Good Reason Process~~” shall mean that (a) the Participant reasonably determines in good faith that a “Good Reason” event has occurred; (b) the Participant notifies the Company in writing of the first occurrence of the Good Reason event within sixty (60) days of the first occurrence of such event; (c) the Participant cooperates in good faith with the Company's efforts, for a period not less than thirty (30) days following such notice (the “Cure Period”), to remedy the event; (d) notwithstanding such efforts, the Good Reason event continues to exist; and (e) the Participant terminates his or her employment within sixty (60)

~~days after the end of the Cure Period. If the Company cures the Good Reason event during the Cure Period, Good Reason~~shares shall be ~~deemed not to have occurred.~~

“~~Inventory Reduction” means, as to any Performance Period, the reduction~~subject to the Company's or a business unit's inventory during the Performance Period, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any significant items shall be included or excluded from such calculation with respect to one or more Participants.provisions of Section 7(c) above.

“~~Net Income~~” means, as to any Performance Period, the income after taxes of the Company or a business unit for the Performance Period determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any significant items shall be included or excluded from such calculation with respect to one or more Participants.

“~~New Orders~~” means, as to any Performance Period, the firm orders for a system, product, part, or service, which are being recorded for the first time as defined in the Company's order-recognition policies and procedures.

“~~Operating Cash Flow~~” means the Company's or a business unit's sum of Net Income, plus depreciation and amortization, less capital expenditures, plus changes in working capital comprised of accounts receivable, inventories, other current assets, trade accounts payable, accrued expenses, product-warranty costs, advance payments from customers, and long-term accrued expenses, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Operating Income~~” means the Company's or a business unit's income from operations, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Over-Achievement Award~~” means for any Participant, an amount equal to the result of (a) the Participant's Target Over-Achievement Award multiplied by (b) the Over-Achievement Award Pool established for a Performance Period. Notwithstanding the foregoing, ~~sentence, each Over-Achievement~~the Administrator may accelerate the vesting of Restricted Stock granted to an employee in the case of retirement, deatth or disability.


SECTION 8.	DEFERRED STOCK AWARDS

(a)Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of phantom stock units to a grantee, subject to ~~a cap~~restrictions and conditions as the Administrator may determine at the time of ~~one-hundred percent (100%)~~grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of ~~the sum of (x) the Participant's Target Bonus under this Plan (i.e., the corporate~~pre-established performance ~~bonus) plus (y) the Participant's target bonus for management-by-results performance (i.e., the MBR bonus) under the Company's plan titled “Executive Bonus Plan - Individual Performance” (the “Individual Performance Plan”). Each Over-Achievement Award shall consist~~goals and objectives. The grant of a ~~Current Portion and a Banked Portion.~~

~~An example of the calculation of a Participant's Over-Achievement~~Deferred Stock Award is ~~as follows. Assume that~~contingent on the ~~Participant's Target Over-Achievement~~grantee executing the Deferred Stock Award ~~is 6.67%~~agreement. The terms and conditions of the Over-Achievement Award Pool and that the Over-Achievement Award Pool is $1,500,000. Further assume that the Participant's Target Bonus under this Plan is $75,000 and the Participant's target bonus under the Individual Performance Plan is $25,000 for a total target bonus of $100,000. The Over-Achievement Award would be calculated as follows: (a) 6.67% multiplied by (b) $1,500,000 equals $100,500. In this example, the Participant's Over-Achievement Award is $100,000 since the calculated Over-Achievement Award ($100,500) exceeds the cap ($100,000) by $500.

“~~Over-Achievement Award Pool” means the incentive pool established pursuant to Section 3.4.~~

“~~Participant” means, as to any Performance Period, an Employee who has been approved by the Committee for participation in the Plan for that Performance Period.~~

“~~Payout Formula~~” means, as to any Performance Period, the formula or payout matrix established by the Committee in order to determine the Actual Bonuses (if any) to be paid to Participants. The formula or matrix may differ from Participant to Participant. The formula or matrix may contain adjustments to account for acquisitions during the Performance Period, provided thateach such ~~adjustments shall be set forth in writing in a manner that would enable a third-party having knowledge of the relevant facts to apply such adjustments to calculate the payout of any Participant.~~

“~~Performance Goals~~” means the goals (or combined goals) approved by the Committee to be applicable to a Participant for a Target Bonus for a Performance Period. As approved by the Committee, the Performance Goals for any Target Bonus applicable to a Participant may provide for a targeted level or levels of achievement using one or more of the following measures: (a) Cash Position; (b) Controllable Profits; (c) Days Sales Outstanding; (d) Earnings Per Share; (e) EBITDA; (f) Free Cash Flow; (g) Inventory Reduction; (h) Net Income; (i) New Orders; (j) Operating Cash Flow; (k) Operating Income; (l) Return on Assets; (m) Return on Equity; (n) Return on Sales; (o) Revenue; and (p) Total Shareholder Return. Performance Goals may differ from Participant to Participant, from Performance Period to Performance Period, and from bonus to bonus. Any criteria used may be measured, as applicable, (a) in absolute terms, (b) in relative terms (including without limitation by the passage of time and/or against another company or companies), (c) on a per-share basis, (d) against the performance of the Company as a whole or a segment of the Company, (e) on a pre-tax or after-tax basis, and/or (f) on a GAAP or non-GAAP

basis. Prior to the Determination Date, the Committee shall determine whether any elements shall be included in or excluded from the calculation of any Performance Goal with respect to any Participant.

“~~Performance Period~~” means any calendar month, fiscal quarter, fiscal half year, fiscal year, or multi-fiscal year period, or any combination of such periods, for which a Target Bonus has been set. The “fiscal year” is the Company's fiscal year. A Performance Period shall be set for each Target Bonus and Target Over-Achievement Award.

“~~Plan” means the Mercury Systems, Inc. Executive Bonus Plan - Corporate Financial Performance, as set forth in this instrument and as hereafter amended from time to time.~~

“~~Planned Retirement” shall be deemed the reason for the Termination of Employment by the Participant of the Participant's employment if such employment is terminated pursuant to mutual~~ agreement between the Participant and the Company in connection with the Participant's retirement on or after attaining the minimum age, completing the minimum number of years of service, and satisfying all other conditions specified for retirement status under the Company's retirement policy statement effective October 25, 2002 (or any successor policy thereto).

“~~Return on Assets~~” means the percentage equal to the Company's or a business unit's Operating Income before incentive compensation, divided by average net Company or business unit, as applicable, assets, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Return on Equity~~” means the percentage equal to the Company's Net Income divided by average shareholder's equity, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Return on Sales~~” means the percentage equal to the Company's or a business unit's Operating Income before incentive compensation, divided by the Company's or the business unit's, as applicable, Revenue, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Revenue~~” means, as to any Performance Period, the Company's or a business unit's revenues for the Performance Period, determined in accordance with generally accepted accounting principles, provided, however, that prior to the Determination Date, the Committee shall determine whether any items shall be excluded or included from such calculation with respect to one or more Participants.

“~~Shares” means shares of the Company's common stock.~~

“~~Target Bonus” means the target bonus payable under the Plan to a Participant for the Performance Period, expressed as a percentage of the Participant's base salary, as determined by the Committee.~~

“~~Target Over-Achievement Award~~” means the target over-achievement award payable under the Plan to a Participant for the Performance Period, expressed as a percentage of the Over-Achievement Award Pool, as determined by the Committee prior to the Determination Date.

“~~Termination of Employment~~” means a cessation of the employee-employer relationship between an Employee and the Company or an Affiliate for any reason, including without limitation a termination by resignation, discharge, death, Disability, Planned Retirement, or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous reemployment by the Company or an Affiliate.

“~~Total Shareholder Return” means the total return (change in Share price plus reinvestment of any dividends) of a Share.~~

~~SECTION 3~~

~~SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS AND BONUSES~~

~~3.1~~ ~~Selection of Participants~~. The Committee shall select Employees who shall be Participants for any Performance Period. The Committee also may designate as Participants one or more individuals (by name or position) who are expected to become Employees during a Performance Period. Participation in the Plan shall be determined by the ~~Committee on~~Administrator, and such terms and conditions may differ among individual Awards and grantees. In the event that any such Deferred Stock Award granted to employees shall have a ~~Performance-Period-by-Performance-Period basis. Accordingly, an Employee who is~~performance-based goal, the restriction period with respect to such award shall not be less than one year, and in the event any such Deferred Stock Award shall have a ~~Participant for~~time-based restriction, the total restriction period with respect to such award shall not be less than three years; provided, however, that any Deferred Stock Award with a ~~given Performance Period is in no way guaranteed or assured~~time-based restriction may become vested incrementally over such three-year period. No portion of ~~being selected for participation in~~ any ~~subsequent Performance Period.~~

~~3.2~~ ~~Determination of Performance Goals for Target Bonus. On or~~Deferred Stock Award granted to employees may vest prior to the ~~Determination Date,~~first anniversary of the ~~Committee~~grant date. At the end of the deferral period, the Deferred Stock Award, to the extent vested, shall ~~approve (a)~~be paid to the ~~Performance Goals~~grantee in the form of shares of Stock.

Notwithstanding the foregoing, the Administrator may accelerate the vesting of a Deferred Stock Award granted to an employee in the case of retirement, deatth or disability.

(b)Election to Receive Deferred Stock Awards in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of a Deferred Stock Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any deferred compensation shall be converted to a fixed number of phantom stock units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid but for the deferral.

(c)Rights as a Shareholder. During the deferral period, a grantee shall have no rights as a shareholder; provided, however, that the grantee may be credited with dividend equivalent rights with respect to the ~~Target Bonus~~phantom stock units underlying his Deferred Stock Award, subject to such terms and conditions as the Administrator may determine.

(d)Termination. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 15 below, in writing after the Award agreement is issued, a grantee’s right in all Deferred Stock Awards that

have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for ~~all eligible Participants for the~~any reason.


SECTION 9.	PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

Notwithstanding anything to the contrary contained herein, if any Restricted Stock Award or Deferred Stock Award granted to a Covered Employee is intended to qualify as “Performance-based Compensation” under Section 162(m) of the Code and the regulations promulgated thereunder (a “Performance-based Award”), such Award shall comply with the provisions set forth below:

(a)Performance ~~Period, (b)~~Criteria. The performance criteria used in performance goals governing Performance-based Awards granted to Covered Employees may include any or all of the following criteria at the Company, Subsidiary, business unit or business segment level as appropriate: (i) the Company’s return on equity, assets, capital or investment: (ii) pre-tax or after-tax profit levels or EBITDA or adjusted EBITDA; (iii) bookings or revenue growth; (iv) bookings or revenues; (v) operating income as a ~~Target Bonus for each Participant,~~percentage of sales; (vi) total shareholder return; (vii) changes in the market price of the Stock; (viii) sales or market share; (ix) earnings per share; (x) improvements in operating margins; (xi) operating cash flow or free cash flow; (xii) working capital improvements; (xiii) design wins or entering into contracts with key customers; and ~~(c) a Payout Formula or Formulae for purposes~~(xiv) any combination of ~~determining the Actual Bonus (if any) payable~~such performance metrics.

(b)Grant of Performance-based Awards. With respect to each ~~Participant. Each Payout Formula shall (a) be in writing, (b) be based on~~Performance-based Award granted to a comparison of actual performance to the Performance Goals, or (c) provide for the payment of all or a portion of a Participant's Target Bonus, depending upon the extent to which actual performance meets or falls below the Performance Goals.

~~3.3~~ ~~Over-Achievement Award Pool~~.

~~a. No later than the Determination Date,~~Covered Employee, the Committee shall ~~establish in writing~~select, within the ~~budgeted adjusted EBITDA~~first 90 days of a Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the performance criteria for such grant, and the ~~Performance Period and~~achievement targets with respect to each performance criterion (including a threshold level of performance below which no amount will become payable with respect to such Award). Each Performance-based Award will specify the amount payable, or the formula for determining the ~~size~~amount payable, upon achievement of the ~~Over-Achievement Award Pool~~various applicable performance targets. The performance criteria established by the Committee may be (but need not be) different for ~~such~~each Performance ~~Period. The size~~Cycle and different goals may be applicable to Performance-based Awards to different Covered Employees.

(c)Payment of Performance-based Awards. Following the ~~Over-Achievement Award Pool~~completion of a Performance Cycle, the Committee shall ~~be determined by reference~~meet to review and certify in writing whether, and to what extent, the performance criteria for the Performance Cycle have been achieved and, if so, to also calculate and certify in writing the amount of the ~~actual adjusted EBITDA~~Performance-based Awards earned for the Performance ~~Period~~Cycle. The Committee shall then determine the actual size of each Covered Employee’s Performance-based Award, and, in ~~excess~~doing so, may reduce or eliminate the amount of the ~~budgeted adjusted EBITDA~~Performance-based Award for ~~such Performance Period. The Committee may include adjusted EBITDA from acquisitions completed during the Performance Period in the adjusted EBITDA for such Performance Period only~~a Covered Employee if, ~~the following criteria are satisfied: (a) the acquisition is in line with the Company's core business strategy as determined by the Board~~ in its sole discretion; (b) the Company must satisfy its organic Revenue target for the Performance Period without including Revenue derived from the acquisition; and (c) the acquisition must be accretive to the Company's adjusted EBITDA for the Performance Period. If the adjusted EBITDA for a Performance Period includes adjusted EBITDA derived from an acquisition,judgment, such adjusted EBITDA may not exclude fees and other expenses, including without limitation financing, accounting, legal, and other fees incurred in connection with the acquisition during the related Performance Period, that would be included in such adjusted EBITDA under generally accepted accounting principles.reduction or elimination is appropriate.

b. The Committee shall grant in writing to each Participant a Target Over-Achievement Award representing a percentage of the Over-Achievement Award Pool to be established for such Performance Period. In no event shall Target Over-Achievement Awards for any Performance Period represent more than one-hundred percent (100%) of the Over-Achievement Award Pool for such Performance Period.

~~3.4~~ (d)~~Determination of Over-Achievement~~Maximum Award ~~Pool and Over-Achievement Awards~~Payable. After the end of each Performance Period, the Committee shall certify in writing the extent to which the adjusted EBITDA for such Performance Period exceeds the budgeted adjusted EBITDA for such Performance Period, shall establish the Over-Achievement Award Pool, if any, based on the formula established pursuant to Section 3.3(a) and determine each Participant's Over-Achievement Award. Notwithstanding any contrary provision of the Plan, the Committee, in its sole discretion, may (a) eliminate or reduce the Over-AchievementThe maximum Performance-based Award payable to any ~~Participant and (b) eliminate~~one Covered Employee under the Plan for a Performance Cycle is 300,000 Shares (subject to adjustment as provided in Section 3(c) hereof).


SECTION 10.	Transferability of Awards

(a)Transferability. Except as provided in Section 10(b) below, during a grantee’s lifetime, his or ~~reduce~~her Awards shall be exercisable only by the ~~size~~grantee, or by the grantee’s legal representative or guardian in the event of the ~~Over-Achievement Award Pool.~~grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.

~~3.5~~ (b)~~Determination of Actual Bonuses~~Committee Action. ~~After~~Notwithstanding Section 10(a), the ~~end~~Administrator, in its discretion, may provide either in the Award agreement regarding a given Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Awards (other than any Incentive Stock Options) to his or her immediate family members, to trusts for the benefit of ~~each Performance Period,~~such family members, or to partnerships in which such family members are the ~~Committee shall certify~~only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award.

(c)Family Member. For purposes of Section 10(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50 percent of the voting interests.

(d)Designation of Beneficiary. Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.


SECTION 11.	TAX WITHHOLDING

(a)Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.

(b)Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company shares of Stock owned by the grantee with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.


SECTION 12.	CHANGE OF CONTROL

(a) Occurrence of Change of Control. If within six monthsfollowing the consummation of a Change of Control of the Company, as defined in Section 12(b)(i), the employment of a grantee with a minimum of six months of service with the Company or any of its Subsidiaries as of the effective date of such Change of Control (the “Effective Date”) is involuntarily terminated, then (i) if such Change in Control does not constitute a Sale Event, 50% of the unvested Awards of such grantee will automatically be fully vested, (ii) if such Change in Control constitutes a Sale Event and provision is made for the assumption or continuation of Awards hereunder, or the substitution of such Awards with new Awards of the successor entity or parent thereof, 50% of the unvested assumed, continued or substituted Awards will automatically be fully vested, and (iii) if such Change in Control constitutes a Sale Event and provision is not made for the assumption, continuation or substitution of Awards hereunder, such that all of the unvested Awards of such grantee terminated upon consummation of the Sale Event without any payment with respect thereto, the grantee will be entitled to receive a cash payment equal to the difference between (x) the Sale Price multiplied by the number of shares of Stock subject to 50% of such grantee’s unvested Awards as of the consummation of the Sale Event and (y) the aggregate exercise price of such unvested Awards. Notwithstanding the foregoing, in the event that the fair market value (less any exercise price) of the Awards subject to automatic vesting or any cash payment to which the ~~Performance Goals applicable to each participant for~~grantee may become entitled in accordance with the ~~Performance Period were achieved. The Actual Bonus for each Participant~~preceding sentence exceeds $25,000 as of the date of termination of employment, then such vesting or payment shall be ~~determined by applying~~conditioned upon the ~~Payout Formula~~grantee executing and failing to revoke during any applicable revocation period a general release of all claims against the ~~level of actual performance that has been certified by the Committee. Notwithstanding any contrary provision of the Plan, the Committee,~~Company and its Subsidiaries and affiliates in ~~its sole discretion, may eliminate or reduce the Actual Bonus payable~~a form acceptable to ~~any Participant below that which otherwise would be payable under the Payout Formula, including discretion that is exercised through the establishment of additional objective goals.~~

~~3.6~~ ~~Maximum Payment. In no event shall payment to any individual Participant under the Plan with respect to any Performance Period exceed $2,000,000.~~

~~SECTION 4~~

~~PAYMENT OF AWARDS AND BONUSES~~

~~4.1~~ ~~Right to Receive Payment. Each Over-Achievement Award and Actual Bonus that may become payable under the Plan shall be paid solely from the general assets of~~ the Company or the Affiliate that employs the Participant (as the case may be), as determined by the Committee. Nothing in the Plan shall be construed to create a trust or to establish or evidence any Participant's claim of any right to payment of an Over-Achievement Award or Actual Bonus other than as an unsecured general creditor with respect to any payment to which he or she may be entitled.

~~4.2~~ ~~Form of Payment. Each payment under the Plan shall be in cash.~~

~~4.3~~ ~~Timing of Payments~~.

~~a. Payment of each Actual Bonus shall be made as soon as administratively practical but in no event later than seventy-five (75) days following the end of the applicable Performance Period.~~

b. Payment of each Over-Achievement Award shall be as follows: (i) the Current Portion shall be paid in no event later than seventy-five (75) days following the end of the applicable Performance Period; and (ii) the Banked Portion shall be paid in three equal payments, a single payment to be madeits successor within ~~seventy-five (75)~~60 days of ~~the end of the Company's~~

~~fiscal year during each of the second, third, and fourth fiscal years following the end of the Performance Period during which~~ such ~~portion was earned.~~

~~4.4~~ ~~Employment at Time of Payment. Unless otherwise set forth herein or determined by the Committee,~~termination. For purposes hereof, a ~~Participant must be employed on the date an Over-Achievement Award or Actual Bonus is to be paid.~~

~~4.5~~ ~~Proration. The Committee has the discretion to pro rate awards if a Participant's~~grantee’s employment with the Company or any Subsidiary is ~~terminated prior to~~considered “involuntarily terminated” if the ~~end~~Company or any Subsidiary terminates such grantee’s employment with the Company or such Subsidiary without Cause, as defined in Section 12(b)(ii), or such grantee resigns his or her employment with the Company or such Subsidiary for Good Reason, as defined in Section 12(b)(iii). Notwithstanding the foregoing, in the event the Change of Control of the ~~Performance Period~~Company is not approved by the Board of Directors, all of the outstanding Awards will automatically become fully vested upon the consummation of the Change of Control of the Company. Further, all of the outstanding Awards held by Non-Employee Directors will automatically become fully vested upon the consummation of a Change of Control of the Company.

(b) Definitions. For purposes of the Plan:


(i)	A “Change of Control of the Company” shall be deemed to have occurred upon the occurrence of any of the following events:


(A)	any “Person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its

subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Exchange Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or ifindirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Company’s Board of Directors (“Voting Securities”) (in such case other than as a ~~Participant is employed~~result of an acquisition of securities directly from the Company or an acquisition of securities involving a Corporate Transaction of the type described in the exclusion set forth in clause (C) below); or

(B)

persons who, as of the date hereof, constitute the Company’s Board of Directors (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the date hereof shall be considered an Incumbent Director if such person’s election was approved by or such person was nominated for election by either (x) a vote of at least a majority of the Incumbent Directors or (y) a vote of at least a majority of the Incumbent Directors who are members of a nominating committee comprised, in the majority, of Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or

(C)

the consummation of a consolidation, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction in which the shareholders of the Company immediately prior to the Corporate Transaction, would, immediately after the Corporate Transaction, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the corporation issuing cash or securities in the Corporate Transaction (or of its ultimate parent corporation, if any).

Notwithstanding the foregoing, a “Change of Control of the Company” shall not be deemed to have occurred for purposes of the foregoing clause (A) solely as the result of an acquisition of securities by the Company that, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all then outstanding Voting Securities, then a “Change of Control of the Company” shall be deemed to have occurred for ~~less than~~purposes of the ~~entire Performance Period.~~foregoing clause (A).

(ii)

“Cause” shall mean (A) conduct by the grantee constituting a material act of willful misconduct in connection with the performance of his or her duties, including, without limitation, misappropriation of funds or property of the Company or any of its Subsidiaries other than the occasional, customary and de minimis use of the Company or its Subsidiaries’ property for personal purposes; (B) the commission by the grantee of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the grantee that would reasonably be expected to result in material injury to the Company or any of its Subsidiaries; (C) the grantee’s willful and continued failure to perform his or her duties with the Company and its Subsidiaries (other than any failure resulting from incapacity due to physical or mental illness), which continues 30 days after a written demand of performance is delivered to the grantee by any Senior Vice President or Vice President of the Company, which identifies the manner in which such person believes that the grantee has not performed his or her duties; (D) a violation by the grantee of the employment policies of the Company and its Subsidiaries which has continued following written notice of such violation from any Senior Vice President or Vice President of the Company; or (E) the grantee’s willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law

~~4.6~~ ~~Termination due~~

enforcement authorities, after being instructed by the Company or any of its Subsidiaries to ~~Death, Disability, Planned Retirement, Termination without Cause, and Resignation for Good Reason~~. cooperate, 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.

(iii)

“Good Reason” shall mean (A) a reduction in the grantee’s annual cash base salary as in effect on the Effective Date, except for across-the-board reductions similarly affecting all or substantially all Company employees; or (B) a relocation whereby the Company or any Subsidiary requires the grantee to be principally based at any office or location that is more than 50 miles from the grantee’s office on the Effective Date; provided that the reasons set forth above will not constitute “Good Reason” unless, within 30 days after the first occurrence of such Good Reason event, the grantee shall have given written notice to the Company specifically identifying the event that the grantee believes constitutes Good Reason and the Company, or, if applicable, its Subsidiary, has not remedied such event within a reasonable cure period of not less than 30 days after the Company’s receipt of such notice.


SECTION 13.	Additional Conditions Applicable to Nonqualified Deferred Compensation Under Section 409A.

In the event any Stock Option or Stock Appreciation Right under the Plan is granted with an exercise price of a Participant's (a) death, (b) Disability, (c) Planned Retirement, (d) termination without Cause, or (e) resignation for Good Reason, the Participant shall be entitled to a prorated portion of his or her Over-Achievement Award (Current Portion and Banked Portion) and Actual Bonus for the current Performance Period, subject to satisfactionless than 100 percent of the ~~applicable Performance Goals and establishment of the Over-Achievement Award Pool, if any, based~~Fair Market Value on the ~~number~~date of ~~days worked during~~grant (regardless of whether or not such exercise price is intentionally or unintentionally priced at less than Fair Market Value), or such grant is materially modified and deemed a new grant at a time when the ~~current Performance Period prior~~Fair Market Value exceeds the exercise price, or any other Award is otherwise determined to the Termination of Employment. In addition, each such Participant shall be entitled to receive any Over-Achievement Awards and Actual Bonus earned for a prior Performance Period, to the extent not paid, including the Banked Portions of any Over-Achievement Awards. Such payments shall be made as soon as administratively practicable and in no event later than seventy-five (75) days following the end of the Performance Period in which the Termination of Employment occurred.

~~4.7~~ ~~Section 409A. Notwithstanding anything in this Plan to the contrary, to the extent that any payment or benefit described in this Plan constitutes “non-qualified~~constitute “nonqualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Participant's Termination of Employment, then such payments or benefits shall be payable only upon the Participant's “Separation from Service.” The term “Separation from Service” shall mean the Participant's “separation from service” from the Company, an affiliate of the Company or a successor entity within the meaning set forth in Section 409A of the Code, determined in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h). If the Participant is considered a “specified employee,” within the meaning of Section 409A of the Code (a “409A Award”), the following additional conditions shall apply and ~~amounts payable under~~shall supersede any contrary provisions of this Plan ~~are considered deferred compensation subject~~or the terms of any agreement relating to such 409A Award.

(a)Exercise and Distribution. Except as provided in Section 13(b) hereof, no 409A Award shall be exercisable or distributable earlier than upon one of the ~~Code, no payments will be paid during the six-month period following the Participant's Separation from Service.~~following:

~~SECTION 5~~


(i)	Specified Time. A specified time or a fixed schedule set forth in the written instrument evidencing the 409A Award.

(ii)

Separation from Service. Separation from service (within the meaning of Section 409A) by the 409A Award grantee; provided, however, that if the 409A Award grantee is a “key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) and any of the Company’s Stock is publicly traded on an established securities market or otherwise, exercise or distribution under this Section 13(a)(ii) may not be made before the date that is six months after the date of separation from service.


(iii)	Death. The date of death of the 409A Award grantee.


(iv)	Disability. The date the 409A Award grantee becomes disabled (within the meaning of Section 13(c)(ii) hereof).

(v)

Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the meaning of Section 13(c)(iii) hereof), but only if the net value (after payment of the exercise price) of the number of shares of Stock that become issuable does not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the exercise, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the grantee’s other assets (to the extent such liquidation would not itself cause severe financial hardship).


(vi)	Change in Control Event. The occurrence of a Change in Control Event (within the meaning of Section 13(c)(i) hereof), including the Company’s discretionary exercise of the right to accelerate vesting of such grant upon a Change in Control Event or to terminate the Plan or any 409A Award granted hereunder within 12 months of the Change in Control Event.

~~ADMINISTRATION~~

~~5.1~~ (b)~~Committee is the Administrator~~No Acceleration. A 409A Award may not be accelerated or exercised prior to the time specified in Section 13(a) hereof, except in the case of one of the following events:


(i)	Domestic Relations Order. The 409A Award may permit the acceleration of the exercise or distribution time or schedule to an individual other than the grantee as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).


(ii)	Conflicts of Interest. The 409A Award may permit the acceleration of the exercise or distribution time or schedule as may be necessary to comply with the terms of a certificate of divestiture (as defined in Section 1043(b)(2) of the Code).


(iii)	Change in Control Event. The Administrator may exercise the discretionary right to accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the 409A Award for compensation.

(c)Definitions. Solely for purposes of this Section 13 and not for other purposes of the Plan, the following terms shall be ~~administered~~defined as set forth below:


(i)	“Change in Control Event” means the occurrence of a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (as defined in regulations promulgated under Section 409A).

(ii)

“Disabled” means a grantee who (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its Subsidiaries.

(iii)

“Unforeseeable Emergency” means a severe financial hardship to the grantee resulting from an illness or accident of the grantee, the grantee’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the grantee, loss of the grantee’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the grantee.


SECTION 14.	TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall not be deemed a termination of employment:

(a)a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or

(b)an approved leave of absence for military service or sickness, or for any other purpose approved by the ~~Committee. The Committee shall consist of not less than two (2) members of~~Company, if the ~~Board. Each member of the Committee shall qualify as an “outside director” under Section 162(m) of the Code. If it~~employee’s right to re-employment is ~~later determined that one~~guaranteed either by a statute or ~~more members of the Committee do not so qualify, actions taken~~ by ~~the Committee prior to such determination shall be valid despite such failure to qualify.~~

~~5.2~~ ~~Committee Authority~~. It shall be the duty of the Committee to administer the Plan in accordance with the Plan's provisions; provided, however, that any determinations regarding the participation of the Company's Chief Executive Officer in the Plan, and any awardscontract or ~~payments to such Chief Executive Officer~~ under the ~~Plan, shall be ratified by a majority~~policy pursuant to which the leave of absence was granted or if the ~~independent directors on the~~Administrator otherwise so provides in writing.


SECTION 15.	AMENDMENTS AND TERMINATION

The Board ~~who also qualify as “outside directors” under Section 162(m) of the Code. The Committee shall have all powers and discretion necessary~~may, at any time, amend or appropriate to administer the Plan and to control its operation, including without limitation the power to (a) select Employees who shall be granted awards and bonuses, (b) review and approve the terms and conditions of awards and bonuses, (c) interpretdiscontinue the Plan and the ~~awards~~Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(c) or 3(d), in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights, effect repricing through cancellation and ~~bonuses, (d) adopt~~re-grants, or repurchase out-of-the-money Stock Options or Stock Appreciation Rights for cash, unless the Administrator proposes for shareholder vote, and shareholders approve, such ~~procedures~~reduction, cancellation and ~~subplans as are necessary~~re-grant, repricing, or ~~appropriate to permit participation in~~repurchase. Any material Plan amendments (other than amendments that curtail the scope of the Plan), including any Plan amendments that (i) increase the number of shares reserved for issuance under the Plan, ~~by Employees who are foreign nationals~~(ii) expand the type of Awards available under, materially expand the eligibility to participate in, or ~~employed outside of~~materially extend the ~~United States, (e) adopt rules for the administration, interpretation, and application~~term of, the Plan, ~~as are consistent therewith, and (f) interpret, amend,~~ or ~~revoke any such rules.~~

~~5.3~~ ~~Decisions Binding. All determinations and decisions made~~(iii) materially change the method of determining Fair Market Value, shall be subject to approval by the ~~Committee, the Board, and any delegate~~Company shareholders entitled to vote at a meeting of ~~the Committee pursuant~~shareholders. In addition, to the ~~provisions of the Plan shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.~~

~~5.4~~ ~~Delegation~~extent determined by the ~~Committee. The Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers~~Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan ~~to one or more directors and/or officers~~are qualified under Section 422 of the ~~Company, provided, however,~~Code or to ensure that ~~the Committee may not delegate its authority and/or powers with respect to awards that are intended to qualify~~compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the ~~Code.~~

~~SECTION 6~~

~~GENERAL PROVISIONS~~

~~6.1~~ ~~Tax Withholding. The Company or an Affiliate, as determined~~Code, Plan amendments shall be subject to approval by the Committee, shall withhold all applicable taxes from any Over-Achievement Award and Actual Bonus, including any federal, state, and local taxes (including without limitation the Participant's FICA obligations).

~~6.2~~ ~~No Effect on Employment~~.Company shareholders entitled to vote at a meeting of shareholders. Nothing in this Section 15 shall limit the ~~Plan~~Administrator’s authority to take any action permitted pursuant to Section 3(c) or 3(d).


SECTION 16.	STATUS OF PLAN

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall ~~interfere with or limit in any way the right~~have no rights greater than those of a general creditor of the Company ~~or an Affiliate, as applicable, to terminate any Participant's employment or service at any time, with or without Cause. For purposes of~~unless the ~~Plan, transfer of employment of a Participant between the Company and any one of its Affiliates (or between Affiliates)~~Administrator shall ~~not be deemed a Termination of Employment. Employment with the Company and its Affiliates is on an at-will basis only. The Company~~otherwise expressly reserves the right, which may be exercised at any time and without regard to when during or after a Performance Period such exercise occurs, to terminate any individual's employment with or without Cause, and to treat him or her without regard to the effect which such treatment might have upon him or her as a Participant.

~~6.3~~ ~~Participation. No Employee shall have the right to be selected to receive an award or bonus under this Plan, or, having been so selected, to be selected to receive a future award or bonus.~~

~~6.4~~ ~~Indemnification~~. Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from (a) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or herdetermine in connection with any Award or ~~resulting from any claim, action, suit,~~Awards. In its sole discretion, the Administrator may authorize the creation of trusts or ~~proceeding~~other arrangements to ~~which he~~meet the Company’s obligations to deliver Stock or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any award or bonus, and (b) from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.

~~6.5~~ ~~Successors. All obligations of the Company and any Affiliate under the Plan,~~make payments with respect to ~~awards granted~~Awards hereunder, ~~shall be binding on any successor to the Company and/or such Affiliate, whether~~provided that the existence of such ~~successor~~trusts or other arrangements is consistent with the ~~result~~foregoing sentence.


SECTION 17.	GENERAL PROVISIONS

(a)No Distribution; Compliance with Legal Requirements. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.

No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.

(b)Delivery of Stock Certificates. Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a ~~direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets~~stock transfer agent of the Company orshall have mailed such ~~Affiliate.~~

~~6.6~~ ~~Beneficiary Designations. If permitted by~~certificates in the ~~Committee, a Participant under~~United States mail, addressed to the ~~Plan may name a beneficiary or beneficiaries to whom any vested but unpaid award or bonus~~grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall be ~~paid in~~deemed delivered for all purposes when the ~~event of the Participant's death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in~~Company or a ~~form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate.~~

~~6.7~~ ~~Nontransferability of Awards and Bonuses~~. No award or bonus granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the limited extent provided in Section 6.6. All rights with respect to an award granted to a Participant shall be available during his or her lifetime only to the Participant.

~~SECTION 7~~

~~AMENDMENT, TERMINATION, AND DURATION~~

~~7.1~~ ~~Amendment, Suspension, or Termination~~. The Board or the Committee, each in its sole discretion, may amend or terminate the Plan, or any part thereof, at any time and for any reason. The amendment, suspension, or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Target Over-Achievement Award or Target Bonus theretofore granted to such Participant or Over-Achievement Award (Current Portion and Banked Portion) or Actual Bonus earned by such Participant. During any period of suspension or after termination of the Plan, no award or bonus may be granted.

~~7.2~~ ~~Duration of the Plan. The Plan shall commence on the date specified herein, and subject to Section 7.1 (regarding the Board or the Committee's right to amend or terminate the Plan), shall remain in effect thereafter.~~

~~SECTION 8~~

~~LEGAL CONSTRUCTION~~

~~8.1~~ ~~Section 162(m) Conditions; Bifurcation of Plan. It is the intent~~Stock transfer agent of the Company ~~that~~shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records). Stock Certificates or uncertified Stock for any Restricted Stock Award shall be delivered to the Secretary of the Company to be held in escrow until the Award becomes vested.

(c)Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the ~~awards and bonuses under~~grant of Awards do not confer upon any employee any right to continued employment with the Plan to Participants who are or may become persons whose compensation is subject to Section 162(m) of the Code, satisfy any applicable requirements of Section 162(m) of the Code. Any provision, application, or interpretation of the Plan inconsistent with this intent shall be disregarded. The provisions of the Plan may be bifurcated by the Board or the Committee at any time so that certain provisions of the Plan,Company or any ~~award, required in order to satisfy the requirements of Section 162(m) of the Code are only applicable to Participants whose compensation is subject to Section 162(m) of the Code.~~Subsidiary.

~~8.2~~ (d)~~Language Conventions~~Trading Policy Restrictions. Unless the Plan expressly specifies otherwise or the context of any language of the Plan clearly requires otherwise, language referring to the plural shall include the singular, language referring to the singular shall include the plural, language referring to one gender shall be deemed to include both genders, language referring to a natural person shall be deemed to include corporationsOption exercises and other entities, use of the word “include”, “includes”, or “including” shall not be deemed to be limiting and shall be deemed to be followed by the language “without limitation”, use of the word “or” shall be deemed to have the inclusive meaning conveyed by the phrase “and/or”, use of the words “hereof”, “herewith”, “herein”, “hereinafter”, “hereby”, “hereunder”, and similar terms shall be deemed to refer to the Plan as a whole and not to any particular provision of the Plan, references to articles and sections shall be deemed to refer to articles and sections of the Plan, and references to schedules, exhibits, or other attachments shall be deemed to refer to schedules, exhibits, or other attachments to the Plan.

~~8.3~~ ~~Severability~~. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

~~8.4~~ ~~Requirements of Law. The granting of awards~~Awards under the Plan shall be subject to ~~all~~such Company’s applicable ~~laws, rules,~~insider trading policy and ~~regulations,~~procedures, as in effect from time to time.


SECTION 18.	EFFECTIVE DATE OF PLAN

This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of shareholders at which a quorum is present. Subject to such approval by the shareholders and to ~~such approvals by any governmental agencies or national securities exchanges as~~the requirement that no Stock may be ~~required.~~issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan by the Board. No grants of Stock Options and other Awards may be made hereunder after November 17, 2018 and no grants of Incentive Stock Options may be made hereunder after the tenth (10^th) anniversary of the date the restated Plan is approved by the Board.


SECTION 19.	GOVERNING LAW

~~8.5~~ ~~Governing Law. The~~

This Plan and all ~~awards~~Awards and actions taken thereunder shall be governed by, and construed in accordance with, ~~and governed by~~ the laws of ~~The~~the Commonwealth of Massachusetts, ~~but~~applied without regard to ~~the portion~~conflict of ~~such laws relating to conflicts of law.~~law principles.

~~8.6~~ ~~Captions. Headings and captions are used in the Plan for convenience of reference only, do not form a part of this Plan, and shall not affect in any way the meaning or interpretation of the Plan.~~DATE INITIALLY APPROVED BY BOARD OF DIRECTORS: September 14, 2005

DATE INITIALLY APPROVED BY SHAREHOLDERS: November 14, 2005

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: October 10, 2008

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: November 17, 2008

DATE AMENDED: April 22, 2009

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: September 14, 2009

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: October 21, 2009

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: September 14, 2010

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: October 21, 2010

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: September 13, 2011

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: October 21, 2011

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: July 24, 2012

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: October 17, 2012

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: July 30, 2014

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: October 21, 2014

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: January 20, 2015

DATE RESTATEMENT APPROVED BY SHAREHOLDERS: December 8, 2015

DATE RESTATEMENT APPROVED BY BOARD OF DIRECTORS: September 16, 2016

DATE RESTATEMENT APPROVED BY SHAREHOLDERS:

Appendix B

Below is a reconciliation between adjusted EBITDA and the most comparable GAAP financial metric.



(in millions)	Fiscal 2016
Income (loss) from continuing operations	$	19.7
Interest expense (income), net	1.0
Tax provision (benefit)	5.5
Depreciation	6.9
Amortization of intangible assets	8.8
Restructuring and other charges	1.2
Impairment of long-lived assets	0.2
Acquisition and financing costs	4.7
Fair value adjustments from purchase accounting	1.4
Litigation and settlement expenses	(1.9		)
Stock-based compensation expense	9.6
Adjusted EBITDA	$	57.3



Name of Individual or Group	Maximum Bonus	Maximum Over-Achievement Award (1)	Maximum Total (Bonus + Over-Achievement Award)
Mark Aslett	$375,000	$500,000	$875,000
Kevin M. Bisson	139,500	186,000	325,500
Gerald M. Haines II	139,500	186,000	325,500
Didier M.C. Thibaud	139,500	186,000	325,500
Charles A. Speicher	56,438	75,250	131,688
All executive officers, as a group (2)	849,938	1,133,250	1,983,188
All directors who are not executive officers, as a group (3)	—	—	—
All employees who are not executive officers, as a group (4)	278,100	370,800	648,900



Name and Address of Beneficial Owner*	Number of Shares Beneficially Owned(1)	Percent of Class(1)
Mark Aslett(2)	934,249	2.8	%
James K. Bass(3)	42,537	**
George W. Chamillard(4)	129,203	**
Michael A. Daniels(5)	42,537	**
George K. Muellner(6)	42,537	**
William K. O’Brien(7)	74,203	**
Lee C. Steele(8)	133,203	**
Vincent Vitto(9)	106,203	**
Kevin M. Bisson(10)	142,030	**
Gerald M. Haines II(11)	173,702	**
Charles A. Speicher(12)	59,749	**
Didier M.C. Thibaud(13)	511,834	1.5
All directors, director nominees, and executive officers as a group (12 persons)(14)	2,391,987	7.0	%



Name	Annual Grant (# of shares)	Retention Grant (# of shares)	Total (# of shares)
Mark Aslett	126,502	190,000	316,502
Kevin M. Bisson	50,395	—	50,395
Gerald M. Haines II	39,128	34,000	73,128
Charles A. Speicher	17,533	—	17,533
Didier M.C. Thibaud	72,396	80,000	152,396

Year First
Elected a
Director

Principal Occupation

Class I Directors—Nominated for a Term Ending in 2019:

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.