©

2006 Mercury Computer Systems, Inc.

Stock Option Exchange Program

Stock Option Exchange Program

Exhibit (a)(1)(O)

©

2006 Mercury Computer Systems, Inc.

2

Agenda

Agenda

•

Equity Compensation Philosophy

•

Program Overview

•

Key Dates

•

Eligibility

•

Things To Consider

•

What You Need to Do

•

Questions and Answers

©

2006 Mercury Computer Systems, Inc.

3

Equity Compensation Philosophy

Equity Compensation Philosophy

•

Equity Compensation is a reward based on the long term future

performance of the company.

•

Equity Compensation should align the actions and behaviors of

Mercury associates with the interests of Mercury shareholders.

•

Equity Compensation should foster a sense of ownership among

Mercury participants.

•

Equity Compensation should be cost efficient.

•

This is a voluntary program.

©

2006 Mercury Computer Systems, Inc.

4

Program Overview

Program Overview

•

Eligible

associates

can

elect

to

exchange

certain

underwater

stock

options

for

replacement

awards

to

be

granted

promptly

after

the

close

of

the

election

period.

•

Elections

to

participate

must

be

done

on

a

grant-by-grant

basis.

Grants

can

not

be

partially

exchanged.

•

Options

are

eligible

to

be

exchanged

if

their

per

share

exercise

price

is

greater

than

the

“threshold

price.”

•

The

“threshold

price”

is

the

greater

of

(1)

$23.00

or

(2)

the

closing

price

of

our

common

stock

reported

on

the

Nasdaq

Global

Select

Market

on

the

date

the

election

period

for

the

exchange

program

expires.

©

2006 Mercury Computer Systems, Inc.

5

Program Overview

Program Overview

•

All

eligible

options

will

be

exchanged

for

restricted

stock

rights

in

accordance

with

a

fixed

4-to-1

exchange

ratio.

As

an

example,

if

you

elect

to

exchange

an

eligible

option

representing

the

right

to

purchase

1,000

shares

of

common

stock,

you

will

receive

a

replacement

award

consisting

of

250

restricted

stock

rights.

We

will

not

issue

any

fractional

restricted

stock

rights.

•

Restricted

stock

rights

means

either

shares

of

restricted

stock

subject

to

a

restricted

stock

award,

or

phantom

stock

units

subject

to

a

deferred

stock

award.

©

2006 Mercury Computer Systems, Inc.

6

Program Overview

•

Restricted

stock

awards

consist

of

shares

of

our

common

stock

that

will

be

issued

on

the

date

the

awards

are

granted.

Restricted

stock

awards

will

be

subject

to

vesting

based

on

continued

employment

for

a

specified

period.

Until

shares

of

restricted

stock

have

vested,

they

remain

subject

to

(1)

forfeiture

upon

termination

of

employment

and

(2)

restrictions

on

transfer.

•

Deferred

stock

awards

consist

of

phantom

stock

units

that

are

not

actual

shares

of

our

common

stock.

Rather,

they

represent

the

right

to

receive

our

common

stock

at

a

future

date.

Phantom

stock

units

are

subject

to

(1)

forfeiture

upon

termination

of

employment

and

(2)

restrictions

on

transfer

prior

to

vesting

and

the

related

issuance

of

our

common

stock.

•

All

replacement

awards

will

be

granted

under

our

2005

Stock

Incentive

Plan,

and

will

be

subject

to

the

terms

of

that

plan

and

an

award

agreement

between

you

and

us.

©

2006 Mercury Computer Systems, Inc.

7

Program Overview: Multinational Conditions

Program Overview: Multinational Conditions

•

•

United States, Japan and United Kingdom

United States, Japan and United Kingdom

Options will be exchanged for restricted stock awards.  The new

grants will vest over three years. Generally, one third of the grant

will vest on the first, second and third grant anniversary date,

provided you are employed by us on the vesting date.

•

•

United Kingdom

United Kingdom

Associates will be responsible for paying the Company portion of

National Insurance costs.

•

•

France and Germany

France and Germany

Options will be exchanged for deferred stock awards.  The new

grants will vest over three years. Two thirds of the grant will vest

on the second grant anniversary date and the remaining one third

will vest on the third grant anniversary date, provided you are

employed by us on the vesting date.

©

2006 Mercury Computer Systems, Inc.

8

Key Dates

Key Dates

Estimated Replacement Award Grant Date

September 11, 2006

Election Period Ends/Expiration Date

September 8, 2006

Election Period begins

August 11, 2006

Milestone

Date

©

2006 Mercury Computer Systems, Inc.

9

Eligibility

Eligibility

•

Employees

are

“eligible

employees”

if

they

are

employed

by

Mercury

on

the

date

the

election

period

commences

and

on

the

date

on

which

the

tendered

options

are

cancelled

and

the

replacement

awards

are

granted.

•

Members

of

our

Board

of

Directors

and

our

five

most

highly

compensated

executive

officers

are

not

eligible

to

participate

in

the

exchange

program.

•

You

must

be

an

active

employee

on

the

replacement

award

grant

date

to

be

eligible

to

receive

a

replacement

award.

•

In

general,

employees

on

approved

leaves

of

absence

are

eligible.

•

If

you

receive

or

submit

a

notice

of

termination

on

or

before

the

replacement

award

grant

date,

you

will

not

be

eligible

to

participate.

In

these

cases

you

will

retain

your

outstanding

options

subject

to

their

existing

terms.

©

2006 Mercury Computer Systems, Inc.

10

Things To Consider

Things To Consider

•

Mercury

is

not

able

to

advise

you

on

what

course

of

action

is

right

for

you.

•

Participation

in

this

program

is

voluntary.

•

See

Section

14

and

15

and

Appendix

B

of

the

Offer

to

Exchange

for

a

description

of

certain

tax

consequences

of

the

exchange

program. 

These

descriptions

do

not

discuss

all

the

tax

consequences

that

may

be

relevant

to

you

in

light

of

your

particular

circumstances

and

are

not

intended

to

be

applicable

in

all

respects

to

all

categories

of

option

holders.

•

You

should

check

with

your

personal

financial/tax

advisor

prior

to

deciding

whether

to

participate.

©

2006 Mercury Computer Systems, Inc.

11

What You Need to Do

What You Need to Do

•

Read

all

materials

provided

to

you.

•

Review

your

option

holdings

via

your

personnel

grant

status

statement

or

on-line

via

your

eTrade

account.

•

If

you

choose

to

participate,

complete

and

submit

the

Election

Form

on

or

before

midnight

“Boston

Time”

on

the

expiration

date.

Follow

the

instructions

in

Appendix

C

of

the

Offer

to

Exchange.

•

You

may

change

or

revoke

your

election

at

any

time

prior

to

midnight

“Boston

Time”

on

the

expiration

date.

Follow

the

instructions

in

Appendix

C

or

D,

as

applicable,

of

the

Offer

to

Exchange.

•

Additional

copies

of

the

Offer

to

Exchange,

the

Election

Form

and

the

Notice

of

Withdrawal

are

available

at

http://hr.mc.com/optionexchange.

©

2006 Mercury Computer Systems, Inc.

12

If You Have Questions

If You Have Questions

•

You

can

find

the

materials

relating

to

the

Stock

Option

Exchange

Program

at

http://hr.mc.com/optionexchange.

•

If

you

have

questions

that

have

not

been

answered

during

this

presentation,

please

refer

to

the

Q&A

section

of

the

Offer

to

Exchange.

•

You

can

also

ask

additional

questions

by

sending

an

e-mail

to

MCS

Stock

Option

Exchange.