As of February 2004
The Board of Directors is responsible for determining the compensation of the Chief Executive Officer of the Corporation and for reviewing and approving the compensation policy for the senior management of the Corporation.
In order to provide for the more efficient and effective performance of its duties in respect to these functions, the Board appoints a group of its Directors to constitute a Compensation Committee (the Committee).
STATEMENT OF POLICY
The Committee is responsible for administering the Corporation's stock option plans, reviewing and approving the senior management compensation policy, and annually recommending to the Board the compensation of the Chief Executive Officer.
The Committee shall oversee the continuing implementation of Mercury's compensation philosophy, which is to have compensation policies for executive officers based on the belief that the interests of the Corporation's executives should be closely aligned with those of the Corporation's shareholders. Accordingly, the Committee shall assure that compensation policies are designed to achieve the following objectives:
1. 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.
2. Maintain a significant portion of executives' total compensation at risk, tied to both annual and long-term financial performance of the Corporation and the creation of shareholder value.
3. Further the Corporation's short- and long-term strategic goals and values by aligning compensation with business objectives and individual performance.
The committee comprises a minimum of three directors, all of whom shall be independent, consistent with the definitions of NASDAQ, who are appointed by and serve at the pleasure of the Board.
The Chairman of the Compensation Committee and each of its members shall be appointed by the Board of Directors for a term of one year, which term(s) may be extended at the Board's discretion.
Meetings of the Committee may be face-to-face or by telephonic conference call. It shall be a goal of the Committee to reach consensus on all matters with which it deals. Minutes of all meetings shall be kept by the Chairman or his designee. The Committee shall meet face-to-face at least once a year, in addition to its meetings conducted coincident with Board meetings.
RESPONSIBILITY AND AUTHORITY
The Compensation Committee shall administer the Corporation's stock option plans. This includes sole authority to approve all proposed stock option grants, with the exception of grants to the Chief Executive Officer. In that case the Committee will make an annual recommendation for a grant of options to the CEO, for approval by the Board of Directors. When appropriate, the Committee will make recommendations for changes to the Corporation's stock option plans, for approval by the Board of Directors. Annually the Committee will assess the pool of common shares of the Corporation available for granting options, and, if appropriate, will recommend allocation of additional shares to the Board of Directors. If approved, the proposed addition will be submitted to the Corporation's shareholders for approval. The Committee shall establish guidelines for granting stock options to new employees at all levels and for periodic grants to current employees at all levels. For other responsibilities and authority of the Committee, refer to the Corporation's stock option plans.
The Committee shall review and approve the Corporation's compensation policy for senior management. This policy will address salary, performance bonuses, stock options, and any other form of senior management compensation. At least annually the Committee shall review compensation survey data, which has been obtained from a significant number of high technology companies, which are generally comparable to the Corporation in revenues and other relevant parameters. If appropriate, based on this review, the Committee will, in coordination with management, modify the senior management compensation guidelines for salaries, bonuses, or stock option grants, as appropriate.
The Committee shall annually review the performance and compensation of the Chief Executive Officer and recommend to the Board compensation for the next fiscal year. This recommendation shall address base salary, performance bonus for the past fiscal year of the Corporation, target bonus for the new fiscal year, the number of stock options to be granted, and any other aspects of CEO compensation. The Chief Executive Officer may not be present during voting or deliberations concerning his compensation.
The Committee shall annually, based on recommendations by the Chief Executive Officer, review and approve the compensation of the elected officers of the Corporation and appointed officers of the Corporation who report directly to the Chief Executive Officer, and any other "officer" as defined in Section 16 of the Securities Exchange Act of 1934, as amended, and Rule 16a-1 promulgated thereunder.
In meeting its responsibilities the Committee will, when necessary, engage independent consultant(s) with recognized expertise in executive compensation. The Committee has sole authority to engage such consultants.