<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
--------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MERCURY COMPUTER SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
MERCURY COMPUTER SYSTEMS, INC.
199 RIVERNECK ROAD
CHELMSFORD, MA 01824
(978) 256-1300
October 20, 2000
Dear Stockholder:
Mercury Computer Systems, Inc. (the "Corporation") will hold a Special
Meeting of Stockholders (the "Meeting") in lieu of the 2000 Annual Meeting of
Stockholders on November 16, 2000 at The Boston Museum of Science, Science Park,
Boston, Massachusetts. We look forward to your attending either in person or by
proxy. The Notice of Meeting, the Proxy Statement and the Proxy Card from the
Board of Directors are enclosed. These materials provide further information
concerning the Meeting.
At this year's Meeting, the agenda includes the election of Class III
Directors. The Board of Directors recommends that you vote FOR the election of
the slate of nominees for directors. Please refer to the enclosed Proxy
Statement for detailed information.
If you have any further questions concerning the Meeting or any of the
proposals, please feel free to contact the Corporation at (978) 256-1300.
Sincerely yours,
/s/ James R. Bertelli
JAMES R. BERTELLI
President and Chief Executive Officer
<PAGE> 3
MERCURY COMPUTER SYSTEMS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS IN LIEU OF THE
2000 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 16, 2000
To the Stockholders:
A Special Meeting of the Stockholders of MERCURY COMPUTER SYSTEMS, INC. in
lieu of the 2000 Annual Meeting of Stockholders will be held on Thursday,
November 16, 2000 at 10:00 a.m. at The Boston Museum of Science, Science Park,
Boston, Massachusetts, for the following purposes:
1. To elect Mr. James R. Bertelli as a Director for a term of three
years, as more fully described in the accompanying Proxy Statement.
2. To elect Mr. R. Schorr Berman as a Director for a term of three
years, as more fully described in the accompanying Proxy Statement.
3. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on October 10, 2000,
as the record date for the meeting. All stockholders of record on that date are
entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By order of the Board of Directors
/s/ Anthony J. Medaglia, Jr.
ANTHONY J. MEDAGLIA, JR., Clerk
Chelmsford, Massachusetts
October 20, 2000
<PAGE> 4
MERCURY COMPUTER SYSTEMS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mercury Computer Systems, Inc. (the
"Corporation") for use at the Special Meeting of Stockholders in lieu of the
2000 Annual Meeting of Stockholders to be held on Thursday, November 16, 2000,
at the time and place set forth in the notice of the meeting, and at any
adjournments thereof (the "Meeting"). The approximate date on which this Proxy
Statement and form of proxy are first being sent to stockholders is October 20,
2000.
VOTING AND REVOCABILITY OF PROXIES
If the enclosed proxy is properly executed and is received prior to the
Meeting, it will be voted in the manner directed by the stockholder. If no
instructions are specified with respect to any particular matter to be acted
upon, proxies will be voted in favor thereof. Any person giving the enclosed
form of proxy has the power to revoke it by voting in person at the meeting, or
by giving written notice of revocation to the Clerk of the Corporation any time
before the proxy is exercised.
The holders of a majority in interest of all Common Stock issued,
outstanding and entitled to vote are required to be present in person or to be
represented by proxy at the meeting in order to constitute a quorum for the
transaction of business. The election of the nominees for Director will be
decided by plurality vote. Both abstentions and broker "non-votes" are counted
as present for the purposes of determining the existence of a quorum for the
transaction of business. However, for purposes of determining the number of
shares voting on a particular proposal, abstentions and broker "non-votes" are
not counted as votes cast or shares voting.
The Corporation will bear the cost of the solicitation. It is expected that
the solicitation will be made primarily by mail, but regular employees or
representatives of the Corporation (none of whom will receive any extra
compensation for their activities) may also solicit proxies by telephone,
telegraph and in person and arrange for brokerage houses and other custodians,
nominees, and fiduciaries to send proxies and proxy materials to their
principals at the expense of the Corporation.
The Corporation's principal executive offices are located at 199 Riverneck
Road, Chelmsford, Massachusetts 01824, telephone number (978) 256-1300.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on October 10, 2000
are entitled to notice of and to vote at the Meeting. On that date the
Corporation had outstanding and entitled to vote 21,423,437 shares of Common
Stock, par value $.01 per share. Each outstanding share of the Corporation's
Common Stock entitles the record holder to one vote.
ELECTION OF DIRECTORS
Pursuant to Massachusetts law, the Board of Directors is divided into three
classes, with each class as nearly equal in number as possible. Presently, the
Board of Directors consists of seven members, with Mr. James A. Dwyer, Dr.
Albert Belle Isle and Mr. Melvin Sallen serving as Class I Directors; Dr. Gordon
Baty and Mr. Sherman Mullin serving as Class II Directors; and Mr. James
Bertelli and Mr. R. Schorr Berman serving as Class III Directors. The terms of
the Class I, Class II, and Class III Directors expire in 2001, 2002, and 2000,
respectively. Following expiration of its respective current term, each class is
then elected for a subsequent three-year term.
<PAGE> 5
It is proposed that the Class III nominees listed below, whose terms expire
at this meeting, be elected to serve a term of three years and until their
successors are duly elected and qualified or until they sooner die, resign or
are removed.
The persons named in the accompanying proxy will vote, unless authority is
withheld, for the election of the nominees named below. If such nominees should
become unavailable for election, which is not anticipated, the persons named in
the accompanying proxy will vote for such substitute as the Board of Directors
may recommend. Mr. Bertelli is an Executive Officer of the Corporation. Mr.
Berman is not related to any Executive Officer of the Corporation or its
subsidiaries.
<TABLE>
<CAPTION>
YEAR FIRST POSITION WITH THE CORPORATION
ELECTED A OR PRINCIPAL OCCUPATION
NAME OF NOMINEE AGE DIRECTOR DURING PAST FIVE YEARS
--------------- --- ---------- ---------------------------------------------------
<S> <C> <C> <C>
NOMINATED FOR A TERM ENDING IN
2003:
James R. Bertelli.................. 60 1981 Mr. Bertelli co-founded the Corporation in 1981,
and has served as the Corporation's President,
Chief Executive Officer, and a Director since that
time. Prior to founding the Corporation, Mr.
Bertelli founded a manufacturer's representative
organization after a brief period at Analogic
Corporation in sales management positions. Prior to
that, Mr. Bertelli served as a marketing manager
for Digital Equipment Corporation's telephone
industry products group. After a tour of duty in
the Army Signal Corps, Mr. Bertelli began his
high-tech career with RCA Corporation as a computer
systems analyst, and later moved into computer
sales with RCA and Univac.
R. Schorr Berman................... 52 1993 Mr. Berman is President and Chief Executive Officer
of MDT Advisers, Inc., a money management firm. Mr.
Berman is also a director of Arch Communications
Group, Inc. and numerous private companies.
SERVING A TERM ENDING IN 2001:
Dr. Albert P. Belle Isle........... 57 1986 Dr. Belle Isle is an independent investor in
technology-based companies, was President of Custom
Silicon, Inc., a semiconductor company, and has
also served as a Vice President of Wang
Laboratories, Inc. and in various technical and
business management positions during fifteen years
with the General Electric Company.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
YEAR FIRST POSITION WITH THE CORPORATION
ELECTED A OR PRINCIPAL OCCUPATION
NAME OF NOMINEE AGE DIRECTOR DURING PAST FIVE YEARS
--------------- --- ---------- ---------------------------------------------------
<S> <C> <C> <C>
James A. Dwyer..................... 63 2000 Mr. Dwyer currently President of Wireless One
Network, Inc., a former cellular operator in
Florida, and President of Qualicom Systems, Inc.,
an SMR company located in southwest Florida.
Previously, Mr. Dwyer was President of American
Cellular Telephone Corp., and Attorney and Vice
President, International Relations of Western Union
International. Mr. Dwyer currently serves on the
Board of Directors of the Cellular
Telecommunications Industry Association, and was
previously Chairman of its Executive Committee and
Chairman of its Legislative and Regulatory
Committee.
Melvin Sallen...................... 72 1990 Since 1991, Mr. Sallen has served as a consultant
to the Corporation in the area of Japanese
Strategies and Sales. Mr. Sallen served as Senior
Vice President of Analog Devices, Inc. from 1966
through 1992. Since 1992, Mr. Sallen has served as
President of Komon International, Inc., an
international consulting company. Mr. Sallen is
also a director of Tech On Line, Inc. and Copley
Controls Corporation.
SERVING A TERM ENDING IN 2002:
Dr. Gordon B. Baty................. 61 1983 Dr. Baty has been a partner of Zero Stage Capital
Co., Inc., a venture capital firm, since 1986. Dr.
Baty was the founder and Chief Executive Officer of
Icon Corporation, Context Corporation, and Wormser
Engineering, Inc. Dr. Baty is also a Director of
nine private companies.
Sherman N. Mullin.................. 64 1994 Mr. Mullin served as President of Lockheed Advanced
Development Co., a defense contractor, from 1990
through 1994. Mr. Mullin currently serves as an
ad-hoc advisor to the U.S. Air Force Scientific
Advisory Board.
</TABLE>
3
<PAGE> 7
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal year 2000, there were twelve (12) meetings of the Board of
Directors of the Corporation, two (2) meetings of the Audit Committee (see
below), and fourteen (14) meetings of the Compensation Committee (see below).
All of the Directors attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors and (ii) the total number of
meetings held by committees of the Board of Directors on which they served. Each
Director receives cash compensation in the amount of $9,000 for the fiscal year,
paid quarterly, plus an additional $2,000 for each meeting attended, as well as
reimbursement for reasonable expenses incurred in connection with attendance at
Board and committee meetings. In addition, committee members and the committee
chairman receive an annual retainer of $1,000 and $1,750, respectively, paid
quarterly, as well as an additional $300 for attending a meeting not held on the
same day as a meeting of the Board of Directors. The cash compensation paid to
Directors in their capacity as such during fiscal year 2000 was as follows:
<TABLE>
<CAPTION>
DIRECTOR CASH COMPENSATION
-------- -----------------
<S> <C>
Gordon B. Baty.............................................. $29,350
Albert P. Belle Isle........................................ $28,600
R. Schorr Berman............................................ $28,500
James R. Bertelli........................................... $ 0
Sherman N. Mullin........................................... $26,600
Melvin Sallen............................................... $27,650
</TABLE>
In addition to cash compensation, Directors are also granted options
pursuant to the 1998 Stock Option Plan for Non-Employee Directors.
The Board of Directors has a standing Audit Committee and Compensation
Committee. The members of the Audit Committee are Dr. Baty, Dr. Belle Isle and
Mr. Berman. The Audit Committee reviews the scope of the Corporation's
engagement of its independent public accountant and their reports. The Audit
Committee also meets with the financial staff of the Corporation to review
accounting procedures and reports. The Compensation Committee is currently
comprised of Messrs. Berman, Mullin and Sallen. The Compensation Committee is
authorized to review and make recommendations to the Board of Directors
regarding the salaries and bonuses to be paid executive officers and to
administer the Corporation's various stock option and stock purchase plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2000, Messrs. Berman, Mullin and Sallen served on the
Compensation Committee of the Corporation's Board of Directors for the entire
year. The Corporation had no outstanding loans to the Directors during fiscal
year 2000.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table shows, as of September 1, 2000, any person who is known
by the Corporation to be the beneficial owner of more than five percent of any
class of voting securities of the Corporation. For purposes of this Proxy
Statement, beneficial ownership is defined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934 and means generally the power to vote or
dispose of the securities, regardless of any economic interest therein.
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Memorial Drive Trust(1)..................................... 1,694,522 7.9%
R. Schorr Berman(2)......................................... 1,721,576 8.0%
Scudder Kemper Investments(3)............................... 2,108,900 9.8%
Peter B. Cannell & Co., Inc.(4)............................. 1,235,000 5.8%
</TABLE>
---------------
(1) The address of this beneficial owner is MDT Advisers, Inc., 125 Cambridge
Park Drive, Cambridge, MA, attention: R. Schorr Berman. Shares are held of
record by MD Co., a partnership organized by Memorial Drive Trust to hold
securities on behalf of Memorial Drive Trust.
(2) Includes options to purchase 22,054 shares exercisable within sixty days of
September 1, 2000, and 1,694,522 shares owned by MD Co., as to which Mr.
Berman may be deemed beneficial owner and as to which Mr. Berman disclaims
beneficial ownership except to the extent of his direct pecuniary interest.
Mr. Berman is President of MDT Advisers, Inc., which manages the investments
of MD Co. See note (1) above. Mr. Berman's address is c/o MDT Advisors,
Inc., 125 Cambridge Park Drive, Cambridge, MA.
(3) The address of Scudder Kemper Investments is 345 Park Avenue, New York, NY
10154.
(4) The address of Peter B. Cannell & Co., Inc. is 645 Madison Avenue, New York,
NY 10022.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished as of September 1, 2000, with
respect to Common Stock of the Corporation beneficially owned within the meaning
of Rule 13d-3 by all Directors of the Corporation and nominees, and by all
Directors and Executive Officers as a group. Unless otherwise indicated, the
individuals named held sole voting and investment power over the shares listed
below.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
James R. Bertelli (1)....................................... 939,248 4.4%
Donald Barry................................................ 32,760 *
Vincent A. Mancuso (2)...................................... 36,069 *
G. Mead Wyman (3)........................................... 113,805 *
Gordon B. Baty (4).......................................... 130,479 *
Albert P. Belle Isle (4).................................... 104,054 *
R. Schorr Berman (4)(5)..................................... 1,721,576 8.0%
Sherman N. Mullin (6)....................................... 42,534 *
Melvin Sallen (7)........................................... 59,696 *
Douglas Flood (8)........................................... 8,286 *
Steven Chasen (9)........................................... 67,360 *
All Directors and Executive Officers As a Group (11 persons)
(10)...................................................... 3,255,867 15.2%
</TABLE>
---------------
* Less than 1.0%.
(1) Includes 2,400 shares owned by Mr. Bertelli's spouse, and options to
purchase 74,478 shares exercisable within sixty days of September 1, 2000.
(2) Includes options to purchase 10,800 shares exercisable within sixty days of
September 1, 2000.
5
<PAGE> 9
(3) Includes options to purchase 30,000 shares exercisable within sixty days of
September 1, 2000.
(4) Includes options to purchase 22,054 shares exercisable within sixty days of
September 1, 2000.
(5) Includes 1,694,522 shares owned by MD Co., as to which Mr. Berman may be
deemed beneficial owner and as to which Mr. Berman disclaims beneficial
ownership except to the extent of his direct pecuniary interest. Mr. Berman
is President of MDT Advisers, Inc., which manages the investments of MD Co.
See footnote (1) in "Principal Holders of Voting Securities" above.
(6) Includes options to purchase 40,034 shares exercisable within sixty days of
September 1, 2000.
(7) Includes 800 shares owned by Mr. Sallen's wife, 4,000 shares owned by the
Lois S. Sallen Trust, of which Mr. Sallen is a co-trustee and beneficiary,
and options to purchase 18,396 shares exercisable within sixty days of
September 1, 2000.
(8) Includes options to purchase 8,000 shares exercisable within sixty days of
September 1, 2000.
(9) Includes options to purchase 12,900 shares exercisable within sixty days of
September 1, 2000.
(10) Includes 260,770 shares which certain Directors and Executive Officers have
the right to acquire upon the exercise of outstanding options, exercisable
presently or within sixty days of September 1, 2000.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the Performance Graph on page 9 shall not be incorporated by
reference into any such filing.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors has
furnished the following report on executive compensation.
The Committee administers the Corporation's stock option plans, makes
annual recommendations to the full Board of Directors regarding the chief
executive officer's salary, bonus, and equity-based compensation, and oversees
the executive compensation program for the Corporation's other employees,
including its executive officers. The Committee is composed of three independent
directors who are not employees of the Corporation.
COMPENSATION PHILOSOPHY
The Corporation's compensation policies for executive officers are based on
the belief that the interests of executives should be closely aligned with those
of the Corporation's shareholders. The compensation policies are designed to
achieve the following objectives:
- Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain the
leadership and skills necessary to build long-term shareholder value.
- Maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of the
Corporation and the creation of shareholder value.
- Further the Corporation's short and long-term strategic goals and values
by aligning compensation with business objectives and individual
performance.
6
<PAGE> 10
EXECUTIVE COMPENSATION
Compensation of executive officers other than the chief executive officer
is determined by the chief executive officer and is subject to review by the
Committee. The Committee historically has obtained outside survey data regarding
executive and senior level compensation and provided this data to the chief
executive officer to assist him in making compensation decisions. Compensation
for executive officers is comprised of base salary, annual cash bonuses and
periodic stock option grants.
Base salary. Annual determinations of base salaries are made based in part
on the competitive pay practices of companies in the same industry of similar
size and market capitalization, the skills, performance level, and contribution
to the business of the individual executives, and the needs of the Corporation.
Annual cash incentive awards. The Corporation's executive officers are
eligible to receive annual cash bonus awards designed to motivate executives to
attain short-term and longer-term corporate and individual management goals.
Award levels vary depending upon the achievement of performance criteria
established by the chief executive officer. The bonus criteria for each
executive officer are tailored to the achievement of financial and operational
goals specifically developed for that officer's area or responsibility, as well
as overall corporate performance and the attainment of other individual
objectives. Consequently, there is a direct link between the compensation of the
executive officers and the Corporation's performance.
Industry benchmark bonus. When Mercury's results exceed the performance of
the 50th percentile of the high-tech universe of the Russell 2000, an add on
will be applied to the executive officers compensation. In calculating this
bonus, Mercury's performance is based on revenue growth, earnings growth and
profit before tax percentage of sales.
Long-term incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Corporation
provides long-term incentives through its stock option plans, a purpose of which
is to create a direct link between executive compensation and increases in
shareholder value. Stock options are granted at fair market value and vest in
installments, generally over four years. When determining option awards for an
executive officer, the Committee considers the executive's current contribution
to Corporation performance, the anticipated contribution to meeting the
Corporation's long-term strategic performance goals, and industry practices and
norms. Long-term incentives granted in prior years and existing levels of stock
ownership are also taken into consideration. Because the receipt of value by an
executive officer under a stock option is dependent upon an increase in the
price of the Corporation's Common Stock, this portion of the executive's
compensation is directly aligned with an increase in shareholder value.
CHIEF EXECUTIVE COMPENSATION
The chief executive officer's compensation is comprised of base salary,
annual cash incentive awards and stock option grants.
In determining the base salary paid to Mr. Bertelli for the year ended June
30, 2000, the Committee considered his level of responsibility, salary increases
awarded to him in the past, his experience, his potential, and compensation
programs of other companies of similar size and characteristics.
Annual cash bonuses and stock option grants to Mr. Bertelli are based on
the attainment of individual and corporate performance targets established at
the beginning of the fiscal year. The annual cash bonus and option grants to Mr.
Bertelli for the fiscal year ended June 30, 2000 reflect the achievement of
predetermined targets based on the Corporation's revenue, pre-tax income, and
certain non-financial goals.
7
<PAGE> 11
Mr. Bertelli's base compensation increased 10%, from $302,500 during the
fiscal year ended June 30, 1999 to $332,750 during the fiscal year ended June
30, 2000. Mr. Bertelli's cash bonus of $241,620 and grant of options to purchase
32,381 shares of common stock in respect of the fiscal year ended June 30, 2000,
were based upon achievement of a significant portion of the pre-determined
targets described above. Mr. Bertelli's cash bonus and stock option grant
reflect increases in the Corporation's revenues and pre-tax profits of 42% and
80% respectively, from fiscal 1999 to fiscal 2000.
In 1993, the Internal Revenue Code was amended to limit the deduction a
public company is permitted for compensation paid in 1994 and thereafter to the
chief executive officer and to the four most highly compensated executive
officers, other than the chief executive officer. Generally, amounts paid in
excess of $1,000,000 to a covered executive, other than performance-based
compensation, cannot be deducted. In order to qualify as performance-based
compensation under the new tax law, certain requirements must be met, including
approval of the performance measures by the stockholders. The Committee intends
to consider ways to maximize deductibility of executive compensation, while
retaining the discretion the Committee considers appropriate to compensate
executive officers at levels commensurate with their responsibilities and
achievements.
COMPENSATION COMMITTEE
Melvin J. Sallen, Chairman
R. Schorr Berman
Sherman Mullin
8
<PAGE> 12
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return of the Corporation's Common Stock against the cumulative total return of
the MS Group 810 Diversified Computer Systems Index (consisting of 14 companies)
and the Russell 2000 Index for the period 1/31/98 through 6/30/00. The graph and
table assume that $100 was invested on 1/31/98 in each of the Corporation's
Common Stock, the MG Group 810 Diversified Computer Systems Index, and the
Russell 2000 Index and that all dividends were reinvested. This data was
furnished by Media General Financial Services, Richmond, Virginia.
<TABLE>
<CAPTION>
MERCURY COMPUTER
SYSTEMS, INC. MG GROUP INDEX RUSSELL 2000 INDEX
---------------- -------------- ------------------
<S> <C> <C> <C>
1/31/98 100.00 100.00 100.00
6/30/98 138.10 108.24 106.61
6/30/99 307.14 230.49 107.19
6/30/00 615.48 274.74 120.96
</TABLE>
9
<PAGE> 13
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- -----------------------------------------------------
<S> <C> <C>
James R. Bertelli......................... 60 President, Chief Executive Officer, Director and
Co-founder
G. Mead Wyman............................. 60 Senior Vice President, Chief Financial Officer and
Treasurer
Donald Barry.............................. 55 Vice President and Director of Medical Business Group
Vincent A. Mancuso........................ 53 Vice President and Director of Government Electronics
Group
Douglas Flood............................. 43 Vice President, Corporate Development
Steven Chasen............................. 45 Senior Vice President and General Manager, Operations
</TABLE>
MR. BERTELLI co-founded the Corporation in 1981, and has served as the
Corporation's President, Chief Executive Officer and a Director since that time.
For further information, see "Election of Directors."
MR. WYMAN has been Senior Vice President, Chief Financial Officer and
Treasurer of the Corporation since September 1998. From November 1996 until
September 1998, he served as Vice President, Chief Financial Officer and
Treasurer. Prior to joining Mercury, Mr. Wyman was Chief Financial Officer at
Dataware Technologies, Inc., a software design firm, from 1992 to 1996.
Previously, he was a general partner at Hambrecht and Quist Venture Partners,
and was the first Chief Financial Officer at Lotus Development Corporation. Mr.
Wyman also has held senior financial management positions at Prime Computer Inc.
and Millipore Corporation.
DR. BARRY was Vice President and Director of the Medical Business Group of
the Corporation from 1992 to October, 1999. Prior to that he served as General
Manager at Picker International, Inc., Chief Operating Officer at ESA, Inc., and
Director of International Marketing at American Motors Corp. Mr. Barry's
employment with the Corporation terminated on October 22, 1999.
MR. MANCUSO joined the Corporation in January 1997 as Vice President and
Director of Government Electronics Group. Before joining Mercury, Mr. Mancuso
was Director of Federal Sales at Siemens Pyramid Information Systems, Inc. from
1995 to 1996. From 1993 to 1995, he was Vice President of consulting at Federal
Sources, Inc., an information services company. From 1991 to 1992, he was Vice
President and General Manager at Government Technology Services, Inc., Advanced
Systems Division. Mr. Mancuso served nineteen years at Hewlett Packard in
various sales and marketing management positions.
MR. FLOOD has served as Vice President, Corporate Development since 1998.
Prior to joining the Corporation, Mr. Flood was Senior Vice President for
Business Development and Planning at FTP Software, Inc. from 1993 to 1998. Mr.
Flood has also held positions at the law firm of Fish & Richardson, Dun &
Bradstreet Corp., and Raytheon Company.
MR. CHASEN has served as Senior Vice President and General Manager,
Operations of the Corporation during 2000. Mr. Chasen also served as Vice
President and General Manager, Product Operations during 1999 and as Vice
President of Customer Service from 1991 to 1998. Prior to joining the
Corporation, Mr. Chasen served as Senior Director of Sales Support/Service at
Numerix Corp., was in charge of new business development at CMES, Inc., and was
an International Technical Support Manager at Ortho Diagnostic Systems.
10
<PAGE> 14
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Corporation's Chief Executive Officer and each of the Corporation's
four other most highly compensated executive officers (the "Named Executive
Officers") for the Corporation's three most recent fiscal years ended June 30,
2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#) COMPENSATION
--------------------------- ---- --------- -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
James R. Bertelli, President and CEO...... 2000 $332,750 $241,620 $8,451(1) 30,104 $25,437(2)
1999 $302,500 $136,730 $6,000(1) 15,052 $23,537(3)
1998 $275,000 $116,600 $6,000(1) 53,601 $28,194(4)
G. Mead Wyman, Senior Vice President,
Treasurer and CFO....................... 2000 $200,000 $ 92,086 $2,398(1) 26,000 $16,795(5)
1999 $185,000 $ 41,847 -- 5,000 $14,895(6)
1998 $175,000 $ 50,620 -- -- $ 4,652(7)
Vincent A. Mancuso, Vice President and
Director of Government Electronics
Group................................... 2000 $170,000 $1117,975 $2,596(1) 18,000 $12,042(8)
1999 $170,000 $125,000 -- 2,000 $ 4,220(9)
1998 $120,000 $147,000 -- -- $ 3,200(10)
Douglas Flood, Vice President, Corporate
Development(11)......................... 2000 $175,000 $ 72,025 $2,398(1) 18,000 $ 5,100(12)
1999 $111,346 $ 45,500 $ -- 80,000 $ 1,500(13)
1998 $ -- $ -- $ -- -- $ --
Steven Chasen, Senior Vice President and
General Manager, Operations............. 2000 $175,000 $ 83,376 $2,398(1) 18,000 $13,033(14)
1999 $145,000 $ 41,847 $ -- 2,000 $11,133(15)
1998 $136,000 $ 64,188 $ -- 51,000 $10,128(16)
</TABLE>
---------------
(1) Represents automobile allowance and compensation related to automobile
leases provided by the Corporation.
(2) Represents $5,100 matching contribution by the Corporation into Mr.
Bertelli's 401(k) plan for the benefit of Mr. Bertelli, and a premium of
$20,337 paid by the Corporation for a split dollar life insurance policy
for the benefit of Mr. Bertelli.
(3) Represents $3,200 matching contribution by the Corporation into Mr.
Bertelli's 401(k) plan for the benefit of Mr. Bertelli, and a premium of
$20,337 paid by the Corporation for a split dollar life insurance policy
for the benefit of Mr. Bertelli.
(4) Represents $3,200 matching contribution by the Corporation into Mr.
Bertelli's 401(k) plan for the benefit of Mr. Bertelli, and a premium of
$24,994 paid by the Corporation for a split dollar life insurance policy
for the benefit of Mr. Bertelli.
(5) Represents $5,100 matching contribution by the Corporation into Mr. Wyman's
401(k) plan for the benefit of Mr. Wyman, and a premium of $11,695 paid by
the Corporation for a split dollar life insurance policy for the benefit of
Mr. Wyman.
11
<PAGE> 15
(6) Represents $3,200 matching contribution by the Corporation into Mr. Wyman's
401(k) plan for the benefit of Mr. Wyman, and a premium of $11,695 paid by
the Corporation for a split dollar life insurance policy for the benefit of
Mr. Wyman.
(7) Represents $3,200 matching contribution by the Corporation into Mr. Wyman's
401(k) plan for the benefit of Mr. Wyman, and a premium of $1,452 paid by
the Corporation for a split dollar life insurance policy for the benefit of
Mr. Wyman.
(8) Represents $5,100 matching contribution by the Corporation into Mr.
Mancuso's 401(k) plan for the benefit of Mr. Mancuso , and a premium of
$6,942 paid by the Corporation for a split dollar life insurance policy for
the benefit of Mr. Mancuso.
(9) Represents $3,200 matching contribution by the Corporation into Mr.
Mancuso's 401(k) plan for the benefit of Mr. Mancuso, and a premium of
$1,020 paid by the Corporation for a split dollar life insurance policy for
the benefit of Mr. Mancuso.
(10) Represents $3,200 matching contribution by the Corporation into Mr.
Mancuso's 401(k) plan for the benefit of Mr. Mancuso.
(11) 1999 salary was earned from October 1998, when the Corporation hired Mr.
Flood, through June 30, 1999.
(12) Represents $5,100 matching contribution by the Corporation into Mr. Flood's
401(k) plan for the benefit of Mr. Flood.
(13) Represents $1,500 matching contribution by the Corporation into Mr. Flood's
401(k) plan for the benefit of Mr. Flood.
(14) Represents $5,100 matching contribution by the Corporation into Mr.
Chasen's 401(k) plan for the benefit of Mr. Chasen, and a premium of $7,933
paid by the Corporation for a split dollar life insurance policy for the
benefit of Mr. Chasen.
(15) Represents $3,200 matching contribution by the Corporation into Mr.
Chasen's 401(k) plan for the benefit of Mr. Chasen, and a premium of $7,933
paid by the Corporation for a split dollar life insurance policy for the
benefit of Mr. Chasen.
(16) Represents $1,787 matching contribution by the Corporation into Mr.
Chasen's 401(k) plan for the benefit of Mr. Chasen, and a premium of $8,341
paid by the Corporation for a split dollar life insurance policy for the
benefit of Mr. Chasen.
12
<PAGE> 16
STOCK OPTION AND STOCK PURCHASE PLANS
The Corporation has in effect its 1998 Stock Option Plan for Non-Employee
Directors, 1997 Employee Stock Purchase Plan, 1997 Stock Option Plan, 1993 Stock
Option Plan for Non-Employee Directors, 1991 Stock Option Plan, and 1982 Stock
Option Plan (together, the "Stock Option and Purchase Plans"). The Corporation
is no longer permitted to grant options under either its 1982 Stock Option Plan
or its 1993 Stock Option Plan for Non-Employee Directors; however, certain
persons continue to hold options to purchase shares of common stock granted
under such plans. The Compensation Committee of the Board of Directors is
responsible for the administration and interpretation of the Stock Option and
Purchase Plans. Copies of the Stock Option and Purchase Plans are available from
the Clerk of the Corporation upon request.
OPTION GRANTS, EXERCISES AND HOLDINGS
Option Grants. The following table sets forth certain information regarding
options granted to the Named Executive Officers during the year ended June 30,
2000. The Corporation did not issue any stock appreciation rights ("SARs")
during the three most recent fiscal years ended June 30, 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTION/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTION/SARS EMPLOYEES IN PRICE ----------------------
NAME GRANTED(#) FISCAL YEAR (%) ($/SHARE) DATE 5% ($) 10% ($)
---- ----------- ---------------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
James R. Bertelli (2)....... 30,104 3.2% $14.50 9/13/99 $274,518 $695,681
G. Mead Wyman(3)............ 26,000 2.9% $23.44 11/2/99 $383,233 $971,187
Vincent A. Mancuso(4)....... 18,000 1.9% $23.44 11/2/99 $265,315 $672,360
Douglas Flood(5)............ 18,000 1.9% $23.44 11/2/99 $265,315 $672,360
Steven Chasen(6)............ 18,000 1.9% $23.44 11/2/99 $265,315 $672,360
</TABLE>
---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the gains or "option spreads" that would exist for
the respective options granted. These gains are based on the assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted over the full option term. These assumed annual compound
rates of stock price appreciation are mandated by the rules of the
Commission and do not represent the Corporation's estimate or projection of
future Common Stock prices.
(2) No options were exercisable at June 30, 2000. The remaining options vest as
to 30,104 shares in increments of 7,526 shares on September 13 in each of
2000, 2001, 2002, and 2003 so long as Mr. Bertelli's employment with the
Corporation has not been terminated.
(3) No options were exercisable at June 30, 2000. The remaining options vest as
to 26,000 shares in increments of 6,500 shares on November 2 in each of
2000, 2001, 2002, and 2003 so long as Mr. Wyman's employment with the
Corporation has not been terminated.
(4) No options were exercisable at June 30, 2000. The remaining options vest as
to 18,000 shares in increments of 4,500 shares on November 2 in each of
2000, 2001, 2002, and 2003 so long as Mr. Mancuso's employment with the
Corporation has not been terminated.
13
<PAGE> 17
(5) No options were exercisable at June 30, 2000. The remaining options vest as
to 18,000 shares in increments of 4,500 shares on November 2 in each of
2000, 2001, 2002, and 2003 so long as Mr. Flood's employment with the
Corporation has not been terminated.
(6) No options were exercisable at June 30, 2000. The remaining options vest as
to 18,000 shares in increments of 4,500 shares on November 2 in each of
2000, 2001, 2002, and 2003 so long as Mr. Chasen's employment with the
Corporation has not been terminated.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND 6/30/00 OPTION VALUES
The following table provides information on option exercises and on the
value of the Named Executive Officers' unexercised options at June 30, 2000.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Bertelli...... 98,770 2,286,973 41,652 80,704 $1,192,035 $1,980,040
G. Mead Wyman.......... 0 0 28,000 96,000 837,500 2,307,625
Vincent A. Mancuso..... 20,800 611,900 10,000 41,200 303,125 845,000
Douglas Flood.......... 16,000 638,680 0 82,000 0 1,675,750
Steven Chasen.......... 17,460 655,732 0 46,040 0 932,713
</TABLE>
---------------
(1) Value of unexercised in-the-money stock options represents the difference
between the exercise prices of the stock options and the closing price of
the Corporation's Common Stock on The Nasdaq National Market on June 30,
2000.
(2) Value realized on exercise represents the difference between the exercise
prices of stock options exercised and the trading price of the Corporation's
Common Stock on The Nasdaq National Market on the date of such exercise.
OTHER MATTERS
Independent Public Accountants. The Board of Directors has appointed
PricewaterhouseCoopers LLP as independent auditors to examine the consolidated
financial statements of the Corporation and its subsidiaries for the fiscal year
ended June 30, 2001.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions. The engagement of
PricewaterhouseCoopers LLP was approved by the Board of Directors at the
recommendation of the Audit Committee of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires the Corporation's officers and
Directors and persons beneficially owning more than 10% of the outstanding
Common Stock of the Corporation to file reports of beneficial ownership and
changes in beneficial ownership with the Securities and Exchange Commission
("SEC"). Officers, Directors, and greater than 10% beneficial owners of Common
Stock are required by SEC regulation to furnish the Corporation with copies of
all Section 16(a) forms they file.
14
<PAGE> 18
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Corporation believes
that during the fiscal year ended June 30, 2000, all Section 16(a) filing
requirements applicable to its officers, Directors, and beneficial owners of
greater than 10% of its Common Stock were complied with, except that (i) through
inadvertence, four reports relating in the aggregate to six transactions by G.
Mead Wyman were not timely filed, (ii) through inadvertence, a Form 3 by Steven
Chasen was not timely filed, and (iii) through inadvertence, a Form 3 and two
reports relating in the aggregate to six transactions by Douglas Flood were not
timely filed.
Deadlines for Submission of Stockholder Proposals. Under regulations
adopted by the Securities and Exchange Commission, any proposal submitted for
inclusion in the Corporation's Proxy Statement relating to the Annual Meeting of
Stockholders to be held in 2001 must be received at the Corporation's principal
executive offices in Chelmsford, Massachusetts on or before June 20, 2001.
Receipt by the Corporation of any such proposal from a qualified stockholder in
a timely manner will not ensure its inclusion in the proxy material because
there are other requirements in the proxy rules for such inclusion. Stockholders
interested in submitting such a proposal are advised to contact knowledgeable
counsel with regards to the detailed requirements of such securities rules. In
accordance with the provisions of Rule 14a-4(c) promulgated under the Securities
Exchange Act of 1934, if the Corporation does not receive notice of a
stockholder proposal to be raised at its 2001 Annual Meeting of Stockholders on
or before June 20, 2001, then in such event, the proxies shall be allowed to use
their discretionary voting authority when the proposal is raised at the 2001
Annual Meeting of Stockholders.
In addition to the Securities and Exchange Commission requirements
regarding stockholder proposals, the Corporation's By-Laws contain provisions
regarding matters to be brought before stockholder meetings. If stockholder
proposals, including proposals regarding the election of Director, are to be
considered at the 2001 Annual Meeting of Stockholders, notice of them whether or
not they are included in the Corporation's proxy statement and form of proxy,
must be given by personal delivery or by United States mail, postage prepaid, to
the Clerk of the Corporation on or before August 6, 2001.
Other Matters. Management knows of no matters which may properly be and are
likely to be brought before the meeting other than the matters discussed herein.
However, if any other matters properly come before the meeting, the persons
named in the enclosed proxy will vote in accordance with their best judgment.
The cost of this solicitation will be borne by the Corporation. It is
expected that the solicitation will be made primarily by mail, but regular
employees or representatives of the Corporation (none of whom will receive any
extra compensation for their activities) may also solicit proxies by telephone,
telegraph and in person and arrange for brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to their principals
at the expense of the Corporation.
10-K REPORT. THE CORPORATION WILL PROVIDE EACH BENEFICIAL OWNER OF ITS
SECURITIES WITH A COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR THE CORPORATION'S MOST RECENT FISCAL YEAR, WITHOUT
CHARGE, UPON RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD
BE SENT TO MR. G. MEAD WYMAN, CHIEF FINANCIAL OFFICER, MERCURY COMPUTER SYSTEMS,
INC., 199 RIVERNECK ROAD, CHELMSFORD, MASSACHUSETTS 01824.
15
<PAGE> 19
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
/s/ Anthony J. Medaglia, Jr.
ANTHONY J. MEDAGLIA, JR., Clerk
Chelmsford, Massachusetts
October 20, 2000
16
<PAGE> 20
MERCURY COMPUTER SYSTEMS, INC.
SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 16, 2000
The undersigned hereby appoints James R. Bertelli and Anthony J. Medaglia, Jr.,
and each of them, with full power of substitution, proxies to represent the
undersigned at the Special Meeting in Lieu of the 2000 Annual Meeting of
Stockholders of Mercury Computer Systems, Inc. to be held on November 16, 2000
at 10:00 a.m. at the Boston Museum of Science, Science Park, Boston,
Massachusetts, and at any adjournment or adjournments thereof, to vote in the
name and place of the undersigned, with all powers which the undersigned would
possess if personally present, upon such business as may properly come before
the meeting including the proposals as set forth on the reverse side of this
Proxy Card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD
RECOMMENDS AN AFFIRMATIVE VOTE ON ALL PROPOSALS SPECIFIED. SHARES WILL BE VOTED
AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED WILL BE VOTED
IN FAVOR OF THE PROPOSALS.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the Proxy. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
------------------------------- ---------------------------------
------------------------------- ---------------------------------
------------------------------- ---------------------------------
------------------------------- ---------------------------------
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<PAGE> 21
{Top half of Proxy Card}
0 PLEASE MARK VOTES AS IN THIS EXAMPLE.
MERCURY COMPUTER SYSTEMS, INC.
Mark box at right if you plan to attend the Meeting. 0
Mark box at right if an address change or comment has 0
been noted on the reverse side of this card.
RECORD DATE SHARES: _____________
1. Election of Directors:
FOR WITHHELD
Mr. James R. Bertelli 0 0
FOR WITHHELD
Mr. R. Schorr Berman 0 0
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
PLEASE BE SURE TO DATE AND SIGN THIS PROXY.
DATE: __________________________________
SHAREHOLDER SIGN HERE: __________________________________
CO-OWNER SIGN HERE: __________________________________
DETACH CARD DETACH CARD DETACH CARD
-2-
<PAGE> 22
{Bottom half of Proxy Card}
MERCURY COMPUTER SYSTEMS, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Card.
There are a number of issues related to the management of your company that
require your immediate attention and approval. These are discussed in detail in
the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this Proxy Card to indicate how your shares will be
voted. Then sign the card, detach it, and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Special Meeting of Stockholders on
November 16, 2000.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Mercury Computer Systems, Inc.
-3-
