MTS SYSTEMS CORP (Form: 8-K, Received: 11/29/2011 06:01:57)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 22, 2011

MTS SYSTEMS CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA	0-2382	41-0908057
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

14000 TECHNOLOGY DRIVE, EDEN PRAIRIE, MN 55344

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

(952) 937-4000

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

N/A

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12

o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Interim Chief Executive Officer Bonus Award Agreement

On November 22, 2011, the Board of Directors (the “Board”) of MTS Systems Corporation (the “Company”) granted William V. Murray, the Company’s Interim Chief Executive Officer, a bonus award in accordance with the compensation terms agreed to upon Mr. Murray’s appointment to the Interim Chief Executive Officer position on August 25, 2011. As specified in the Interim Chief Executive Officer Bonus Award Agreement (the “Award Agreement”), the maximum value of the bonus is $770,000, payable 70% in restricted stock units and 30% in cash. The number of restricted stock units to vest and the amount of cash to be paid will be determined based on achievement of performance objectives and Mr. Murray’s tenure in the role. A copy of the Award Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference in response to this Item 5.02. The foregoing description of the Award Agreement is qualified in its entirety by reference to the full text of such agreement.

Officer Promotions

On November 22, 2011, the Board appointed Arthur R. (Rich) Baker to the position of Senior Vice President, Test. Mr. Baker had been serving as the Vice President and General Manager of the Test segment. In connection with Mr. Baker’s promotion and designation by the Board as an executive officer of the Company, the Company entered into a Change in Control Agreement with Mr. Baker, dated as of November 22, 2011 (the “CIC Agreement”). The CIC Agreement provides for severance benefits upon an involuntary termination of employment without Cause or a voluntary termination of employment for Good Reason within 24 months of a Change in Control, as such terms are defined in the CIC Agreement. With certain exceptions, the severance benefits would consist of (a) a lump-sum payment equal to two times the sum of Mr. Baker’s annual salary and the average payout he received under the Company’s cash incentive program for the previous three fiscal years, and (b) 18 months of continued coverage under the Company’s life, disability, accident and health plans, at the Company’s expense. These severance benefits are subject to customary terms and conditions under the CIC Agreement, including non-competition and confidentiality covenants. A copy of the CIC Agreement is attached hereto as Exhibit 10.2 and incorporated herein by reference in response to this Item 5.02. The foregoing description of the Change in Control Agreement is qualified in its entirety by reference to the full text of such agreement.

On November 22, 2011, the Board also appointed Susan E. Knight as Senior Vice President and Chief Financial Officer and Joachim Hellwig as Senior Vice President, Sensors. Ms. Knight had been serving as Vice President and Chief Financial Officer, and Mr. Hellwig had been serving as Vice President, Sensors.

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On November 22, 2011, the Board approved an amendment and restatement of the Company’s bylaws, effective as of such date.

The amendments implement changes that modernize the bylaws to enable the Company to take advantage of the flexibility permitted under the revised Minnesota corporation statutes. The amended and restated bylaws permit the Board in its discretion to provide for shareholder participation in shareholder meetings by remote access, provide that the Chairman of the Board is not itself an officer position, update the descriptions of officer appointments and duties, update provisions governing board committees, permit directors to consent to Board actions by means of electronic communication, and otherwise reflect current statutory provisions.

The amended and restated bylaws are attached hereto as Exhibit 3.b. The foregoing description of the amendments made to the bylaws is qualified in its entirety by reference to the full text of the amended and restated bylaws.

Item 9.01

Financial Statements and Exhibits

(d)

Exhibits

3.b

Amended and Restated Bylaws of MTS Systems Corporation (reflecting amendments through November 22, 2011)

10.1

Form of Interim Chief Executive Officer Bonus Award Agreement, dated as of November 22, 2011

10.2

Form of Change in Control Agreement between the Company and Arthur R. Baker, dated as of November 22, 2011

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MTS SYSTEMS CORPORATION (Registrant)
Date: November 28, 2011	By:	/s/ Susan E. Knight
		Susan E. Knight Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Number	Title	Method of filing

3.b	Amended and Restated Bylaws of MTS Systems Corporation (reflecting amendments through November 22, 2011)	Filed electronically

10.1	Interim Chief Executive Officer Bonus Award Agreement, dated as of November 22, 2011	Filed electronically

10.2	Change in Control Agreement, dated as of November 22, 2011	Filed electronically

Exhibit 3b

AMENDED AND RESTATED BYLAWS

MTS SYSTEMS CORPORATION

(Reflecting Amendments through November 22, 2011)

_________________________________________________________

ARTICLE I

Shareowners

Section 1 . Annual Meetings . The annual meeting of the shareowners of this Corporation may be held on such date and at such place as determined by the Board of Directors, subject to the rights of shareowners to demand the calling of an annual meeting in accordance with the Minnesota Business Corporation Act as then in effect (the “MBCA”). The Board of Directors may postpone the holding of any previously scheduled annual meeting of shareowners upon giving public notice prior to the scheduled annual meeting date.

The Board of Directors may determine that shareholders not physically present in person or by proxy at a shareholder meeting may, by means of remote communication, participate in a shareholder meeting held at a designated place. The Board of Directors also may determine that a meeting of the shareholders shall not be held at a physical place, but instead solely by means of remote communication. Participation by remote communication constitutes presence at the meeting.

Section 2 . Properly Brought Business . The business transacted at any special meeting of shareowners is limited to the purpose or purposes stated in the notice of the meeting given pursuant to Article I, Section 5. At the annual meeting, the shareowners shall elect Directors of the Corporation and shall transact such other business as may properly come before them. To be properly brought before the meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) otherwise properly brought before the meeting by a shareowner.

In addition to any other applicable requirements, for business to be properly brought before the annual meeting by a shareowner (other than the nomination and election of Directors, which is governed by Article II, Section 10), the shareowner must have given timely notice thereof in writing to the Secretary of the Corporation. In the case of business to be brought before an annual meeting [to be held in 2011 and later], to be timely, each such notice must be given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation, not less than 90 days nor more than 120 days prior to a meeting date corresponding to the previous year’s annual meeting; provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a shareholder is timely only if received not less than 90 days before the annual meeting or, if later, within 10 days after the first Public Announcement of the date of the annual meeting. Except to the extent otherwise required by law, the adjournment of an annual meeting of shareholders shall not commence a new time period for the giving of a shareholder’s notice as described above.

Each such notice to the Secretary shall set forth as to each matter the shareowner proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address of record of the shareowner proposing such business and of any beneficial owners on whose behalf the proposal is being made, (iii) such shareowner’s or beneficial owner’s Interest in the Corporation, (iv) any material interest of such shareowner or beneficial owner in such business, and (v) a representation that the shareowner is a holder of record of shares of the Corporation entitled to vote at such meeting, will continue to be a holder of record of shares entitled to vote at the meeting through the date of the meeting, and intends to appear in person or by proxy at the meeting to make the proposal.

Notwithstanding anything in these Bylaws to the contrary, no business shall be transacted at the annual meeting except in accordance with the procedures set forth in this Article. The Chairman of the shareowners’ meeting (who, in the absence of special designation by the Board of Directors, shall be the Chairman of the Board of Directors) may, if the facts warrant, determine that a proposal was not made in accordance with the foregoing procedure, and if he or she should so determine, he or she shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted; provided, however, that nothing in this Article shall be deemed to preclude discussion by any shareowner of any business properly brought before the annual meeting, in accordance with these Bylaws. Notwithstanding the foregoing provisions of these Bylaws, this Article I, Section 2 does not apply to any shareowner proposal made pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The requirements, procedures and notice deadlines of Rule 14a-8 shall govern any proposal made pursuant thereto. A shareowner must also comply with all applicable requirements of Minnesota law and the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Article I, Section 2.

For purposes of these Bylaws, “Public Announcement” means disclosure (i) when made in a press release reported by the Dow Jones News Service, Associated Press, or comparable national news services, (ii) when contained in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations thereunder, or (iii) when given as the notice of the meeting pursuant to Article I, Section 5.

For purposes of these Bylaws, “Interest” means (i) the class or series (if any) and number of shares of the Corporation that are beneficially owned by a shareowner or any beneficial owner on whose behalf the proposal is made, (ii) any option, warrant, convertible security, stock appreciation right, swap, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right is subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) owned beneficially by such shareowner or any such beneficial owner and any other opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (iii) any proxy, contract, arrangement, understanding, or relationship pursuant to which such shareowner or any such beneficial owner has a right to vote any shares of the Corporation, (iv) any short interest of such shareowner or any such beneficial owner in any security of the Corporation (for purposes of these Bylaws, a person shall be deemed to have a “short interest” in a security if such person has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (v) any rights to dividends on the shares of the Corporation owned beneficially by such shareowner or any such beneficial owner that are separated or separable from the underlying shares of the Corporation, (vi) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareowner or any such beneficial owner is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, and (vii) any performance-related fees (other than an asset-based fee) that such shareowner or any such beneficial owner is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such shareowner’s or any such beneficial owner’s immediate family sharing the same household (which information shall be supplemented by such shareowner not later than 10 days after the record date for the meeting to update and disclose such information as of the record date).

Section 3 . Special Meetings . A special meeting of the shareowners may be called at any time by the Chairman of the Board of Directors of the Corporation and shall be called by the Secretary upon the request in writing by the Chief Executive Officer, the Chief Financial Officer, two or more members of the Board of Directors, upon the vote of the Directors, or upon the request in writing of shareowners in accordance with the MBCA. Such meeting shall be called by delivering a notice as provided in Article I, Section 5. The Board of Directors may postpone the holding of any previously scheduled special meeting of shareowners called upon the vote of the Directors upon giving public notice prior to the scheduled special meeting date.

Section 4 . Manner of Acting . At any shareowners’ meeting, each shareowner shall be entitled to one vote for each share of stock standing in his, her or its name on the books of the Corporation as of the record date of the meeting.

Any shareowner may vote either in person or by proxy. A shareholder voting by proxy authorized to vote on less than all items of business considered at the meeting shall be considered to be present and entitled to vote only with respect to those items of business for which the proxy has authority to vote. A proxy who is given authority by a shareholder who abstains with respect to an item of business shall be considered to have authority to vote on that item of business.

Except for the election of directors or as otherwise required by law or specified in the Articles of Incorporation of the Corporation, the shareholders shall take action by the affirmative vote of the holders of the greater of (a) a majority of the voting power of the shares present and entitled to vote on that item of business or (b) a majority of the voting power of the minimum number of shares entitled to vote that would constitute a quorum for the transaction of business at a duly held meeting of shareholders. Directors are elected by a plurality of the voting power of the shares present and entitled to vote on the election of directors at a meeting at which a quorum is present.

The presence in person or by proxy of the holders of a majority of the shares of stock entitled to vote at any shareowners’ meeting shall constitute a quorum for the transaction of business. If no quorum be present at any meeting, the shareowners present in person or by proxy may adjourn the meeting to such future time as they shall agree upon without further notice if the date, time and place at which the meeting will be reconvened is announced at the meeting at which such adjournment is taken and the adjourned meeting is held not more than 120 days after the date fixed for the original meeting. Furthermore, the Chairman of the shareowners’ meeting (who, in the absence of special designation by the Board of Directors, shall be the Chairman of the Board of Directors) may adjourn the meeting to a future time whether or not a quorum is present without further notice if the date, time and place at which the meeting will be reconvened is announced at the meeting at which such adjournment is taken and the adjourned meeting is held not more than 120 days after the date fixed for the original meeting.

Section 5 . Notice . Unless otherwise required by the MBCA, written notice of each meeting of the shareholders, stating the date, time, and place and, in the case of a special meeting, the purpose or purposes, shall be given at least 10 days and not more than 60 days before the meeting to every holder of shares entitled to vote at such meeting except as specified in Article I, Section 4 with respect to adjourned meetings or as otherwise permitted by law. Notice may be given to a shareholder by means of electronic communication if the requirements of MBCA Section 436, Subdivision 5, as amended from time to time, are met. Notice to a shareholder is also effectively given if the notice is addressed to the shareholder or a group of shareholders in a manner permitted by the rules and regulations under the Exchange Act, so long as the Corporation has first received the written or implied consent required by those rules and regulations. The business transacted at a special meeting of shareholders is limited to the purposes stated in the notice of the meeting.

A shareholder may waive notice of the date, time, place, or purpose of a meeting of shareholders. A waiver of notice by a shareholder entitled to notice is effective whether given before, at, or after the meeting, and whether given in writing, orally, by authenticated electronic communication, or by attendance. Attendance by a shareholder at a meeting, including attendance by means of remote communication, is a waiver of notice of that meeting, unless the shareholder objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened, or objects before a vote on an item of business because the item may not lawfully be considered at that meeting and does not participate in the consideration of the item at that meeting.

Section 6 . References . References in these Bylaws or in resolutions or other actions of the Corporation to “shareowners”, “shareholders” or “stockholders” shall be interchangeable.

ARTICLE II

Directors

Section 1 . General Powers . The Board of Directors shall have the general management and control of all business and affairs of the Corporation and shall exercise all the powers that may be exercised or performed by the Corporation under the MBCA, its Articles of Incorporation, and its Bylaws.

Section 2 . Number and Quorum . The Board of Directors of this Corporation shall consist of from three to ten Directors, and a majority of the Directors then holding office shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such a majority is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice. The Directors present at a duly organized meeting may continue to transact business until adjournment notwithstanding the withdrawal of enough Directors to leave less than a quorum.

Section 3 . Tenure and Vacancies . Each Director shall be elected for a term of one year, and shall hold office for that term and until his or her successor is elected. Any vacancies occurring in the Board of Directors for any reason, and any newly created directorships resulting from an increase in the number of Directors, may be filled by a majority of the Directors then in office.

Section 4 . Notice . The Board of Directors may meet regularly at such time and place as it shall fix by resolution or prior notice, and no notice of regular meetings shall be required. Special meetings of the Board of Directors may be called by the Chair of the Board or any two Directors by giving at least three days’ notice to each of the other Directors by mail, by authenticated electronic communication, or in person, provided that such notice may be waived either before, at, or after a meeting in writing, orally, by authenticated electronic communication, or by attendance by any Director. Attendance by a Director at a meeting is a waiver of notice of that meeting, except where the Director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting.

Section 5 . Action Without Meeting . Any action which might have been taken at a meeting of the Board of Directors may be taken without a meeting if done in writing, signed by all of the Directors or consented to by authenticated electronic communication, and any such action shall be as valid and effective in all respects as if taken by the Board at a regular meeting. The written action is effective when signed, or consented to by authenticated electronic communication, unless a different effective time is provided in the written action.

Section 6 . Compensation . The Board of Directors shall fix and change as it may from time to time determine by a majority vote, the compensation to be paid the members of the Board of Directors.

Section 7 . Dividends . Subject to the provisions of applicable laws and its Articles of Incorporation, the Board of Directors shall have full power to determine whether any, and if any, what part of any, funds legally available for the payment of the dividends shall be declared in dividends and paid to the shareowners; the division of the whole or any part of such funds of this Corporation shall rest wholly within the discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the shareowners as dividends or otherwise.

Section 8 . Committees . Except as otherwise provided in Article III of these Bylaws, the Board of Directors may, in its discretion, by the affirmative vote of a majority of the Directors, appoint committees consisting of one or more natural persons, who need not be Directors, which shall have and may exercise such powers as shall be conferred or authorized by the resolutions appointing them. A majority of any such committee, if the committee be composed of more than two members, may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to discharge any such committee.

The Board of Directors may establish a committee composed of one or more independent directors or other independent persons to consider legal rights or remedies of the Corporation and whether those rights and remedies should be pursued.

Section 9 . Absent Directors . A Director may give advance written consent or opposition to a proposal to be acted on at a Board of Directors meeting. If the Director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of or against the proposal and shall be entered in the minutes or other record of action at the meeting, if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the Director has consented or objected.

Section 10 . Nomination for Election . Subject to the rights of holders of any class or series of stock having a preference over the common shares of capital stock of the Corporation as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareowner entitled to vote generally in the election of Directors. However, any shareowner entitled to vote generally in the election of Directors may nominate one or more persons for election as Directors at a meeting only if written notice of such shareowner’s intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not less than 90 days nor more than 120 days prior to a meeting date corresponding to the previous year’s annual meeting. If, however, the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by a shareowner is timely only if received not less than 90 days before the annual meeting or, if later, within 10 days after the first Public Announcement of the date of the annual meeting. If a special meeting of shareowners is called in accordance with Article I, Section 5, for the purpose of electing one or more members of the Corporation’s Board of Directors, for a shareowner’s notice of nominations to be timely, it must be delivered to the Secretary of the Corporation within 10 days after the first Public Announcement of the date of such special meeting. Except to the extent otherwise required by law, the adjournment of a meeting of shareholders shall not commence a new time period for the giving of a shareholder’s notice as described above.

Each such notice to the Secretary shall set forth: (i) the name and address of record of the shareowner who intends to make the nomination and of any beneficial owners on whose behalf the nomination will be made; (ii) such shareowner’s or beneficial owner’s Interest in the Corporation; (iii) a representation that the shareowner is a holder of record of shares of the Corporation entitled to vote at such meeting, will continue to be a holder of record of shares entitled to vote at the meeting through the date of the meeting, and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iv) the name, age, business and residence addresses, and principal occupation or employment of each nominee; (v) a description of all arrangements or understandings between the shareowner or beneficial owner 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 the shareowner; (vi) such other information regarding each nominee proposed by such shareowner as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (vii) the consent of each nominee to serve as a Director of the Corporation if so elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a Director of the Corporation.

The Chairman of the shareowners’ meeting (who, in the absence of special designation by the Board of Directors, shall be the Chairman of the Board of Directors) may, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if he or she or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. A shareowner must also comply with all applicable requirements of Minnesota law and the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Article II, Section 10.

Section 11 . Chairman of the Board of Directors . The Board of Directors may elect or appoint from its members a Chairman who shall preside at all meetings of shareholders and of the Board of Directors, shall make reports to the Board of Directors and shareholders, and shall have such other authority and perform such other duties as the Board of Directors may from time to time determine.

ARTICLE III

Executive Committee

The Board of Directors may by unanimous affirmative action of the entire Board designate two or more of their number to constitute an Executive Committee which, to the extent determined by unanimous affirmative action of the Board, shall have and exercise the authority of the Board in the management of the business of the Corporation. Such Executive Committee shall act only in the interval between meetings of the Board and shall be subject at all times to the control and direction of the Board.

ARTICLE IV

Officers

Section 1 . Designation; Multiple Offices . The Corporation shall have one or more natural persons exercising the functions of the offices of Chief Executive Officer and Chief Financial Officer. The Board of Directors may elect or appoint such other officers as it deems necessary for the operation and management of the Corporation, with such powers, rights, duties, and responsibilities as may be determined by the Board, including, without limitation, a President, a Chief Operating Officer, one or more Vice Presidents (any of which may be designated as an Executive Vice President or Senior Vice President in the discretion of the Board of Directors), a Secretary, and a Treasurer, each of whom shall have the powers, rights, duties, and responsibilities set forth in these By-Laws unless otherwise determined by the Board. One person may hold any two or more offices.

Section 2 . Term and Removal . All officers of the Corporation shall hold office until their respective successors are chosen and have qualified or until their earlier death, resignation or removal.

An officer may resign at any time by giving written notice to the Corporation. The resignation is effective without acceptance when the notice is given to the Corporation, unless a later effective date is specified in the notice.

An officer may be removed at any time, with or without cause, by a resolution approved by the affirmative vote of a majority of the Directors present at a duly held Board meeting.

Any vacancy in the office of Chief Executive Officer or Chief Financial Officer because of resignation, removal, disqualification, death, disability, or other cause shall be filled by the Board of Directors for the unexpired portion of the term. Any such vacancy in office, other than Chief Executive Officer or Chief Financial Officer, also may be filled for the unexpired portion of the term by the Board of Directors.

Section 3 . Chief Executive Officer . The Chief Executive Officer shall have general and active management of the business under the supervision and direction of the Board of Directors and he or she shall be responsible for carrying into effect all orders and resolutions of the Board of Directors. He or she shall also have such other powers and perform such other duties as the Board of Directors may from time to time prescribe.

Section 4 . Chief Financial Officer . The Chief Financial Officer shall be responsible for keeping accurate financial records for the Corporation, shall deposit all funds in the name of and to the credit of the Corporation in such banks or depositories or with such custodians as may be authorized to receive the same by the Board of Directors, shall render such accounts thereof as may be required by the Board of Directors or Chief Executive Officer and shall perform such other duties as the Board of Directors may from time to time prescribe.

Section 5 . President . Unless otherwise determined by the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. If an officer other than the Chief Executive Officer is designated President, the President shall perform such duties as may from time to time be assigned by the Board.

Section 6 . Vice Presidents . The Vice Presidents of the Corporation shall each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as from time to time may be conferred by the Board of Directors.

Section 7 . Secretary . The Secretary shall keep a record of the meetings and proceedings of the Directors and shareowners, have custody of the corporate seal and of other corporate records specifically entrusted to him or her by these Bylaws or by direction of the Board of Directors, and shall give notice of such meetings as are required by these Bylaws or by the Directors.

Section 8 . Delegation . Unless prohibited by a resolution of the Board of Directors, an officer elected or appointed pursuant to these Bylaws may, without the approval of the Board of Directors, delegate some or all of the duties and powers of an office to other persons. An officer who delegates the duties or powers of an office remains subject to the standard of conduct for an officer with respect to the discharge of all duties and powers so delegated.

ARTICLE V

Fiscal Year

Each fiscal year of the Corporation shall end on the Saturday closest to September 30 of such year and the succeeding fiscal year shall commence on the next day thereafter, and each fiscal quarter shall end on the Saturday closest to December 31, March 31 and June 30 of each year and the succeeding fiscal quarter shall commence on the respective next day thereafter.

ARTICLE VI

Office

The principal office of this Corporation shall be at such place as the Board of Directors shall fix from time to time.

ARTICLE VII

Seal

The Corporation shall have a corporate seal which shall bear the name of the Corporation and the name of the state of incorporation and the words “corporate seal.” It shall be in such form and bear such other inscription as the Board of Directors may determine or approve. The use or nonuse of the corporate seal shall not affect the validity, recordability or enforceability of any document or act.

ARTICLE VIII

General Provisions

Section 1 . Stock Certificates . Shares of stock in this Corporation not exceeding the authorized number thereof as specified in the Articles of Incorporation may be issued as either certificated or uncertificated shares. Any certificates issued for certificated shares shall be authenticated by the Chief Executive Officer, the President or any Vice President and by the Secretary or another officer upon authorization by the Board of Directors and receipt by the Corporation of such consideration for such shares as shall be specified by the Board of Directors. In the event that a bank, trust company or other similarly qualified corporation is designated and agrees to act as the registrar and/or transfer agent for the Corporation, then the signatures of the officers specified above and the seal of the Corporation may be imprinted upon the stock certificates by facsimile and said certificates may be authenticated by signature of an authorized agent of the said registrar and/or transfer agent. If a person signs or has a facsimile signature placed upon a certificate while an officer of the Corporation or an authorized agent of a registrar and/or transfer agent, the certificate may be issued by the Corporation, even if the person has ceased to serve in that capacity before the certificate is issued, with the same effect as if the person had that capacity at the date of its issue. The officers of the Corporation may delegate to such transfer agent and/or registrar such of the duties relating to the recording and maintenance of records relating to shares of stock and shareowners of the Corporation as may be deemed expedient and convenient and as are assumed by said registrar and/or transfer agent.

Section 2 . Stock Transfer and Record Date . The Board of Directors may establish reasonable regulations for recording of transfers of shares of stock in this Corporation, and may establish a date, not earlier than 60 days prior to any shareowners’ meeting, as of which the shareowners entitled to vote and participate in any shareowners’ meeting shall be determined.

Section 3 . Lost Certificates . No certificate for shares of stock in the Corporation, or any other security issued by this Corporation, shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation, if the Board of Directors shall so require, of a bond of indemnity in such amount (not exceeding twice the value of the shares represented by such certificate), upon such terms and secured by such surety as the Board of Directors may in its discretion require.

Section 4 . Indemnification . Any person who at any time shall serve or shall have served as a Director, officer or employee of the Corporation, or of any other enterprise at the request of the Corporation, and the heirs, executors and administrators of such person, shall be indemnified by the Corporation in accordance with, and to the fullest extent permitted by, the provisions of the MBCA, as it may be amended from time to time.

ARTICLE IX

Amendment

Section 1 . Board Amendment . The Board of Directors may alter or may amend these Bylaws and may make or adopt additional Bylaws, subject to the power of the shareowners to change or repeal the Bylaws; provided the Board of Directors shall not make, repeal or alter any Bylaw fixing Directors’ qualifications, classifications, term of office, or number, except the Board of Directors may make or alter any Bylaw to increase the number of Directors; fixing a quorum for meetings of shareholders; or prescribing procedures for removing Directors or filling vacancies in the Board of Directors.

Section 2 . Shareowner Amendment . The shareowners may alter or amend these Bylaws and may make or adopt additional Bylaws by a majority vote at any annual meeting of the shareowners or at any special meeting called for that purpose.

Exhibit 10.1

MTS Systems Corporation

Interim Chief Executive Officer Bonus

This Bonus Award Agreement (this “Agreement”), dated November 22, 2011, is by and between MTS Systems Corporation, a Minnesota corporation (the “Company”), and William V. Murray, who is serving as the Company’s interim Chief Executive Officer.

Pursuant to the term sheet for Mr. Murray’s compensation as interim Chief Executive Officer of the Company, dated August 25, 2011, the Board of Directors of the Company (the “Board”) hereby grants to Mr. Murray a performance bonus award with an aggregate value of up to $770,000 (the “Bonus”). The total payout level of the Bonus will be dependent on Mr. Murray’s performance and tenure in the position of interim Chief Executive Officer, as set forth in Sections 2 and 3 of this Agreement.

The Bonus consists of two components: 30% of the Bonus payout (the “Cash Component”) will be paid in the form of cash, and 70% of the Bonus payout (the “Equity Component”) will be paid in the form of restricted stock units (“RSUs”) granted under and subject to the terms of the Company’s 2011 Stock Incentive Plan (the “Plan”). The Bonus is subject to the following terms and conditions:

Maximum Number of Restricted Stock Units . The maximum number of RSUs that constitute the Equity Component is 14,081, which is equal to the maximum value of the Equity Component ($770,000 x .7 = $539,000), divided by the closing sale price of one share of the Company’s common stock, par value $.25 per share (a “Share”) on the NASDAQ Global Select Market on November 22, 2011 ($38.28). Each RSU that vests pursuant to Section 3 of this Agreement represents the right to receive one Share, as provided in Section 5 of this Agreement.

Performance Measurement . Subject to further adjustment for time of service as provided in Section 3 of this Agreement, the amount of the Bonus that will be paid out is dependent on the extent to which the performance goals specified in Appendix A (the “Performance Goals”) for the Performance Period have been satisfied. The Performance Period began on October 2, 2011 and will end on the earlier of the date on which Mr. Murray’s position as interim Chief Executive Officer is terminated (regardless of whether Mr. Murray is appointed Chief Executive Officer of the Company on a full-time basis following termination of the interim Chief Executive Officer role), or August 25, 2012.

For purposes of determining the extent to which the Performance Goals have been satisfied at the completion of the Performance Period, the Board will adjust as necessary the Performance Goals that are based on Company financial performance metrics to reflect performance through the last completed interim fiscal period (month or full quarter, as applicable) and assess the degree to which Mr. Murray has satisfied individual performance objectives in the amount of time he has served as interim Chief Executive Officer.

The Board’s determination of the extent to which the Performance Goals have been satisfied at the completion of the Performance Period will be expressed as a percentage between 0 and 100, and that percentage will be applied to (a) the maximum value of the Cash Component to determine the dollar amount that has been deemed earned pursuant to the performance measurement set forth in this Section 2 (the “Performance-Earned Dollars”) and (b) the maximum number of RSUs comprising the Equity Component to determine the number of RSUs that have been deemed earned pursuant to the performance measurement set forth in this Section 2 (the “Performance-Earned RSUs”).

Time of Service Measurement and Vesting . Each of the Performance-Earned Dollars and Performance-Earned RSUs will be multiplied by a fraction, the numerator of which will be the number of days that have elapsed between August 25, 2011 and the end of the Performance Period, and the denominator of which will be 365. The numbers resulting from this calculation will be the “Cash Payout Dollars” and the “Vested RSUs,” respectively. Any RSUs that are not Vested RSUs at the conclusion of the Performance Period will be forfeited without consideration.

4. Payment of Cash Component . Subject to Section 8 of this Agreement, the Company will pay Mr. Murray an amount equal to the Cash Payout Dollars as soon as practicable following the end of the Performance Period.

5. Settlement of Equity Component . The Company will issue Mr. Murray one Share for each Vested RSU on August 25, 2012 (the “Settlement Date”). In the event that the Performance Period ends on August 25, 2012 or shortly before such date such that the performance measurement calculations set forth in Section 2 of this Agreement have not been completed before the Settlement Date, such Shares will be issued as soon as practicable following the end of the Performance Period. The Company will make a book entry reflecting the issuance of such Shares to Mr. Murray on the Company’s stock records. Subject to Section 8 of this Agreement, the Company will electronically deliver settlement Shares representing the number of Vested RSUs to a brokerage account designated by the Company.

6. Service Requirement . The Bonus will be forfeited in its entirety if Mr. Murray’s employment as interim Chief Executive Officer of the Company is terminated for Cause (as defined in the Plan), if Mr. Murray voluntarily resigns the position of interim Chief Executive Officer of the Company before August 25, 2012, or if Mr. Murray’s employment as interim Chief Executive Officer of the Company is terminated for any reason other than death or Disability (as defined in the Plan) prior to January 1, 2012. For purposes of this Section 6, Mr. Murray will not be deemed to have voluntarily resigned the position of interim Chief Executive Officer of the Company if he is assuming the position of full-time Chief Executive Officer of the Company immediately following the termination of the interim Chief Executive Officer position. In the event Mr. Murray’s employment as interim Chief Executive Officer is terminated due to his death or Disability, the Cash Component and the Equity Component will each be subject to the time of service measurement set forth in Section 3 of this Agreement but not to the performance measurement set forth in Section 2 of this Agreement, such that the maximum value of the Cash Component will be paid and the maximum number of RSUs that constitute the Equity Component will be settled, subject in each case to time-based proration.

Rights as Shareholder . Until the Settlement Date, Mr. Murray will not be deemed for any purpose to be, or have rights as, a shareholder of the Company with respect to the RSUs, or to exercise, directly or by proxy, voting rights or to receive dividends with respect to the Shares issuable hereunder. In addition, Mr. Murray will not be entitled to any dividend equivalents, in the form of cash, additional RSUs or Shares, with respect to the RSUs for the period prior to the Settlement Date. From and after the Settlement Date, Mr. Murray will have all rights and privileges of any other shareholder with respect to the Shares issued or issuable in settlement of the Vested RSUs.

Tax Consequences and Withholding . As a condition to the Company’s obligation to transmit to Mr. Murray the Cash Payout Dollars and to issue Shares in settlement of the Vested RSUs, Mr. Murray shall pay any required tax withholding applicable to the Bonus. The Company will retain from the number of Shares that would otherwise be issued to him a number of Shares that have an aggregate Fair Market Value (as defined in the Plan) equal to part or all of the tax payable by Mr. Murray under this Section 8, provided that the amount withheld shall not exceed the statutory minimum required federal, state FICA and other payroll taxes.

Mr. Murray authorizes the Company to withhold from the payment of Cash Payout Dollars amounts sufficient to satisfy the tax payable by Mr. Murray under this Section 8 with respect to the Cash Component.

No Transfer . Except as otherwise provided in Section 7.1(h) of the Plan, Mr. Murray may not sell, transfer, pledge, assign or otherwise encumber any of the RSUs, whether voluntarily, involuntarily or by operation of law. Any purported transfer, pledge or encumbrance of such RSUs shall be void and unenforceable against the Company, and no purported transferee shall acquire any right or interest with respect to the Shares as a result.

10.

Discontinuance of Service . Nothing in this Agreement shall be construed as constituting a commitment, guaranty, agreement or understanding of any kind or nature that the Company or its subsidiaries will retain the services of Mr. Murray as an employee, director or consultant, and this Agreement shall not affect in any way the right of the Company or its subsidiaries or Mr. Murray to terminate the relationship as an employee, director or consultant at any time or for any reason in accordance with the procedures governing such termination, without regard to the effect it may have upon Mr. Murray under this Agreement.

11.

Section 409A . This Agreement is intended to be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986 (the “Code”) and shall be construed and interpreted in accordance with such intent. Except as provided herein or as provided in the Plan, no payment shall be subject to further deferral except as otherwise permitted or required pursuant to regulations and other guidance issued pursuant to Section 409A of the Code. Any provision of this Agreement that would fail to satisfy the exemption for a short-term deferral for purposes of Section 409A of the Code shall be amended to so comply on a timely basis.

12.

Compensation Recovery . To the extent that any compensation paid or payable pursuant to this Agreement is considered “incentive-based compensation” within the meaning and subject to the requirements of Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”), such compensation shall be subject to potential forfeiture or recovery by the Company in accordance with any compensation recovery policy adopted by the Board or any committee thereof in response to the requirements of Section 10D of the Exchange Act and any implementing rules and regulations thereunder adopted by the Securities and Exchange Commission or any national securities exchange on which the Company’s common stock is then listed. This Agreement may be unilaterally amended by the Company to comply with any such compensation recovery policy.

In addition, cash amounts paid and Shares issued pursuant to this Bonus are subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of fraud; misconduct; breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection, or other agreements to which Mr. Murray is currently or hereafter becomes a party; or other conduct by Mr. Murray that the Board determines is detrimental to the business or reputation of the Company and its subsidiaries, including facts and circumstances discovered after termination of employment.

13.

Interpretation and Binding Effect . The Board shall exercise any authority and discretion in the interpretation of this Agreement; with respect to the Equity Component, such interpretation will be made in accordance with the terms of the Plan. This Agreement will be binding in all respects on Mr. Murray’s heirs, representatives, successors and assigns, and on the successors and assigns of the Company.

14.

Governing Law and Choice of Jurisdiction . This Agreement will be interpreted and enforced under the laws of the state of Minnesota (without regard to its conflicts or choice of law principles). Mr. Murray consents to the exclusive jurisdiction of the United States District Court for the District of Minnesota for the determination of all disputes arising from this Agreement and waives any rights to remove or transfer the case to another court.

By executing this Agreement, Mr. Murray accepts this Bonus and agrees to all the terms and conditions described in this Agreement and, with respect to the Equity Component, the terms and conditions described in the Plan.

		MTS SYSTEMS CORPORATION


William V. Murray		Name:
		Title:

Appendix A to

Bonus Award Agreement

[Intentionally Omitted]

Exhibit 10.2

CHANGE IN CONTROL AGREEMENT

MTS Systems Corporation

14000 Technology Drive

Eden Prairie, MN 55344-2290

Telephone 952-937-4000

Fax 952-937-4515

THIS CHANGE IN CONTROL AGREEMENT is made and entered into by and between MTS Systems Corporation, a Minnesota corporation with its principal offices at 14000 Technology Drive, Eden Prairie, MN 55344 (the “Company”) and Arthur Richard Baker, III (the “Executive”), residing at Eden Prairie (work location) , and shall be effective as of this 22 nd day of November, 2011.

WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its shareholders; and

WHEREAS, the Executive has made and is expected to continue to make, due to the Executive's intimate knowledge of the business and affairs of the Company, its policies, methods, personnel, and problems, a significant contribution to the profitability, growth, and financial strength of the Company; and

WHEREAS, the Company, as a publicly held corporation, recognizes that the possibility of a Change in Control may exist, and that such possibility and the uncertainty and questions which it may raise among management may result in the departure or distraction of the Executive in the performance of the Executive's duties, to the detriment of the Company and its shareholders; and

WHEREAS, it is in the best interests of the Company and its stockholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to ensure the continued availability to the Company of the Executive in the event of a Change in Control; and

WHEREAS, the Company and the Executive previously signed a Change in Control Agreement and now desire to amend and restate that Agreement in its entirety to exempt it from the requirements applicable to nonqualified deferred compensation plans pursuant to Section 409A of the Code and regulations promulgated thereunder, and this Agreement shall be construed and administered in a manner that is consistent with and gives effect to such intention.

THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:

MTS CONFIDENTIAL

Change in Control Agreement

1. Term of Agreement . This Agreement shall be effective from and after the date hereof and shall continue in effect through December 31, 2012, and shall automatically be extended for successive one-year periods thereafter unless the Board of Directors of the Company (the “Board”) shall have approved, and the Executive is notified in writing, prior to January 1, 2013 and each January 1 thereafter, that the term of this Agreement shall not be extended or further extended; provided , however , that if a Change in Control shall have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of 24 months from the date of the occurrence of a Change in Control or, if an event triggering the Company’s severance payment obligations to the Executive under Section 4(d) has occurred during such 24-month period, this Agreement shall continue in effect until the benefits payable to the Executive hereunder have been paid in full. In the event that more than one Change in Control shall occur during the original or any extended term of this Agreement, the 24-month period shall follow the last Change in Control. This Agreement shall neither impose nor confer any further rights or obligations on the Company or the Executive on the day after the end of the term of this Agreement. Expiration of the term of this Agreement of itself and without subsequent action by the Company or the Executive shall not end the employment relationship between the Company and the Executive.

2. Change in Control . No benefits shall be payable hereunder unless there shall have been a Change in Control. For purposes of this Agreement, a “Change in Control” of the Company shall mean a change in control which would be required to be reported in response to Item 6(e) on Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement, including, without limitation, if:

(a) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or

(b) During any period of two consecutive years (not including any period ending prior to the effective date of this Agreement), the Incumbent Directors cease for any reason to constitute at least a majority of the Board of Directors. The term “Incumbent Directors” shall mean those individuals who are members of the Board of Directors on the effective date of this Agreement and any individual who subsequently becomes a member of the Board of Directors (other than a director designated by a person who has entered into agreement with the Company to effect a transaction contemplated by Section 2(c)) whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the then Incumbent Directors; or

Change in Control Agreement

(c) (i) The Company consummates a merger, consolidation, share exchange, division or other reorganization of the Company with any corporation or entity, other than an entity owned at least 80% by the Company, unless immediately after such transaction, the shareholders of the Company immediately prior to such transaction beneficially own, directly or indirectly 51% or more of the combined voting power of resulting entity’s outstanding voting securities as well as 51% or more of the Total Market Value of the resulting entity, or in the case of a division, 51% or more of the combined voting power of the outstanding voting securities of each entity resulting from the division as well as 51% or more of the Total Market Value of each such entity, in each case in substantially the same proportion as such shareholders owned shares of the Company prior to such transaction; (ii) the shareholders of the Company approve an agreement for the sale or disposition (in one transaction or a series of transactions) of assets of the Company, the total consideration of which is greater than 51% of the Total Market Value of the Company, or (iii) the Company adopts a plan of complete liquidation or winding-up of the Company. “Total Market Value” shall mean the aggregate market value of the Company’s or the resulting entity’s outstanding common stock (on a fully diluted basis) plus the aggregate market value of the Company’s or the resulting entity’s other outstanding equity securities as measured by the exchange rate of the transaction or by such other method as the Board determines where there is not a readily ascertainable exchange rate.

3. Termination Following Change in Control . If a Change in Control shall have occurred during the term of this Agreement, the Executive shall be entitled to the benefits provided in subsection 4(d) unless such termination is (A) because of the Executive's death or Retirement, (B) by the Company for Cause or Disability, or (C) by the Executive other than for Good Reason. The Company and the Executive shall take all steps necessary (including with regard to any post-termination services by the Executive) to ensure that any termination described in this Section 3 constitutes a Separation from Service as defined in subsection 3(h).

(a) Disability . Termination by the Company or the Executive of the Executive’s employment based on “Disability” may occur in the event the Executive has incurred or is afflicted with 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, and as a result, has become eligible for and begun receiving income replacement benefits under the terms of the Company’s long-term disability plan or policy as may be in effect from time to time.

Change in Control Agreement

(b) Retirement . Termination by the Company or the Executive of the Executive's employment based on “Retirement” shall mean termination on or after attaining age sixty-five (65).

(i) the willful and continued failure by the Executive (other than any such failure resulting from (1) the Executive’s incapacity due to physical or mental illness, (2) any such actual or anticipated failure after the issuance of a Notice of Termination by the Executive for Good Reason or (3) the Company’s active or passive obstruction of the performance of the Executive’s duties and responsibilities) to perform substantially the duties and responsibilities of the Executive’s position with the Company after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the duties or responsibilities;

(ii) the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct which, in the good faith opinion of the Company, would impair the Executive’s ability to perform his or her duties or impair the business reputation of the Company; or

(iii) the willful engaging by the Executive in fraud or dishonesty that is demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the Executive’s part shall be deemed “willful” unless committed, or omitted by the Executive in bad faith and without reasonable belief that the Executive’s act or failure to act was in the best interest of the Company and the Executive shall have either failed to correct, or failed to take all reasonable steps to correct, such act or failure to act within sixty (60) days from the Executive’s receipt of written notice from the Company demanding that the Executive take such action. The Executive shall not be terminated for Cause unless and until the Company shall have delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive’s conduct was Cause and specifying the particulars thereof in detail.

Change in Control Agreement

(d) Good Reason . The Executive shall be entitled to terminate his or her employment for Good Reason; provided, however, that no such termination under this Section 3(d) shall be effective unless: (A) the Executive provides written notice to the Chair of the Board of Directors of the Company of the existence of a condition specified in paragraphs (i) through (v) below within 90 days of the initial existence of the condition; (B) the Company does not remedy such condition within 30 days of the date of such notice; and (C) the Executive terminates employment within 90 days following the last day of the remedial period described above. For purposes of this Agreement, “Good Reason” shall mean, without the Executive's express written consent, any of the following:

(i) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s authority, duties or responsibilities with respect to the Executive’s position immediately prior to the Change in Control, or any action by the Company that results in a diminution in such authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity);

(ii) a material reduction in the Executive’s base compensation in effect immediately prior to the Change in Control;

(iii) a material reduction in the budget over which the Executive retains authority;

(iv) a material change in the geographic location at which the Executive must perform services for the Company; and

iv) Any material violation of this Agreement by the Company, including but not limited to any purported termination of the Executive’s employment that is not made pursuant to a Notice of Termination satisfying the requirements of this Agreement.

For purposes of this Section 3(d), any good faith determination of Good Reason made by the Executive shall be conclusive. The Executive’s mental or physical incapacity following the occurrence of an event described above in paragraphs (i) through (v) shall not affect the Executive’s ability to terminate employment for Good Reason and the Executive’s death following delivery of a Notice of Termination for Good Reason shall not affect the Executive’s estate’s entitlement to the payments and benefits provided hereunder upon a termination of employment for Good Reason.

Change in Control Agreement

(e) Notice of Termination . Any purported termination of the Executive's employment by the Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 9. For purposes of this Agreement, a “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth the facts and circumstances claimed to provide a basis for termination of the Executive's employment.

(f) Date of Termination . For purposes of this Agreement, “Date of Termination” shall mean:

(i) If the Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that the Executive shall have been absent from full-time performance of duties for at least three (3) months and shall not have returned to the full-time performance of the Executive's duties during such 30 day period, in accordance with Section 3(a) hereof);

(ii) If the Executive's employment is terminated pursuant to subsections (b) or (c) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection (b) above shall not be less than 10 days, and in the case of a termination pursuant to subsection (c) above shall not be less than 10 nor more than 30 days, respectively, from the date such Notice of Termination is given); and

(iii) Notwithstanding anything contained herein to the contrary, the date on which a Separation from Service takes place.

(g) Dispute of Termination . If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company shall continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this subsection. Amounts paid under this subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts under this Agreement.

Change in Control Agreement

(h) Separation from Service . Separation from Service means the Executive’s termination of employment (as defined in this subsection 3(h)) from the Company and its Affiliates. A Executive incurs a termination of employment that constitutes a Separation from Service if the Executive and the Compensation Committee of the Board of Directors of the Company reasonably anticipate either than the Executive will not perform any additional services after a certain date for the Company and any Affiliate (the “Company Group”), or that the Executive’s level of bona fide services for the Company Group will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period. The Executive does not incur a Separation from Service if on military leave, sick leave, or other bona fide leave of absence if such leave does not exceed a period of 6 months, or if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Company Group, provided that there is a reasonable expectation that the Executive will return to perform further services. If an Executive’s leave exceeds 6 months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of 6 months. Where a leave of absence is due to a Disability, the 6 month leave period described above shall be 12 months unless the leave is earlier terminated. The service of the Executive as a director of the board of any entity in the Company Group will not be considered in determining whether the Executive has incurred a Separation from Service as an employee of the Company Group. The Compensation Committee will determine whether a Executive has incurred a Separation from Service based on the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(h)(1)(ii). For purposes of this subsection 3(h), “Affiliate” means an entity that would be considered with the Company a single employer under Sections 414(b) and (c) and 1563(a) of the Code, except that 50% shall be substituted for the 80% each place it appears in Sections 414(b) and (c) and 1563(a) of the Code.

4. Compensation Upon Termination or During Disability . Following a Change in Control of the Company, as defined in subsection 2(a), upon termination of the Executive's employment or during a period of Disability, the Executive shall be entitled to the following benefits:

Change in Control Agreement

(a) During any period that the Executive fails to perform full-time duties with the Company as a result of a Disability, the Company shall pay the Executive, the Executive's base salary as in effect at the commencement of any such period and the amount of any other form or type of compensation otherwise payable for such period if the Executive were not so disabled, until such time as the Executive is determined to be eligible for long term disability benefits in accordance with the Company's insurance programs then in effect or the Executive is terminated for Disability.”

(b) If the Executive's employment shall be terminated by the Company for Cause or by the Executive other than for Good Reason or Disability, the Company shall pay to the Executive his or her full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to the Executive under this Agreement, except with respect to any benefits to which the Executive is entitled under any Company pension or welfare benefit plan, insurance program or as otherwise required by law.

(c) If the Executive's employment shall be terminated by the Company or by the Executive for Disability or Retirement, or by reason of death, the Company shall immediately commence payment to the Executive (or the Executive's designated beneficiaries or estate, if no beneficiary is designated) of any and all benefits to which the Executive is entitled under the Company's retirement and insurance programs then in effect.

(d) If the Executive's employment shall be terminated (A) by the Company other than for Cause, Retirement, Disability or the Executive’s death or (B) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below:

(i) The Company shall pay the Executive, through the Date of Termination, the Executive's base salary as in effect at the time the Notice of Termination is given and any other form or type of compensation otherwise payable for such period;

Change in Control Agreement

(ii) In lieu of any further salary payments for periods subsequent to the Date of Termination, the Company shall pay a severance payment (the “Severance Payment”) equal to two times the Executive's Annual Compensation as defined below. For purposes of this Section 4, “Annual Compensation” shall mean the Executive’s annual salary (regardless of whether all or any portion of such salary has been contributed to a deferred compensation plan), the average annual Management Variable Compensation (“MVC”) earned by the Executive during the three (3) fiscal years immediately preceding the Date of Termination or, if less, the actual number of fiscal years the Executive has participated in the MVC plan, and any other type or form of compensation paid to the Executive by the Company (or any corporation (an “Affiliate”) affiliated with the Company within the meaning of Section 1504 of the Internal Revenue Code of 1986 as it may be amended from time to time (the “Code”)) and included in the Executive’s gross income for federal tax purposes during the 12-month period ending immediately prior to the Date of Termination, but excluding: a) any amount actually paid to the Executive as a cash payment of the target bonus (regardless of whether all or any portion of such Company bonus was contributed to a deferred compensation plan); b) compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired; and c) any payments actually or constructively received from a plan or arrangement of deferred compensation between Company and the Executive. All of the items included in Annual Compensation shall be those in effect on the Date of Termination and shall be calculated without giving effect to any reduction in such compensation that would constitute a breach of this Agreement. The Severance Payment shall be made in a single lump sum within 30 days after the Date of Termination;

(iii) For the 18-month period after the Date of Termination (the “Benefit Continuation Period”), the Company shall arrange to provide, at its sole expense, the Executive with life, disability, accident and health insurance benefits substantially similar to those that the Executive is receiving or entitled to receive immediately prior to the Notice of Termination. The Executive shall be responsible for the payment of his or her portion of the premiums for such benefits at the same relative percentage of total premiums as the Executive paid prior to the Date of Termination. Following the end of the Benefit Continuation Period, the Executive shall be eligible for continued health coverage as required by Code Section 4980B or other applicable law (“COBRA Coverage”), as if the Executive’s employment with the Company had terminated as of the end of the Benefit Continuation Period, and the Company shall take such actions as are necessary to cause such COBRA Coverage not to be offset by the provision of benefits under this paragraph (iii) and to cause the period of COBRA Coverage to commence at the end of the Benefit Continuation Period. The cost of providing such benefits shall be in addition to (and shall not reduce) the Severance Payment. Benefits otherwise receivable by the Executive pursuant to this paragraph (iii) shall be reduced to the extent comparable benefits are actually received by the Executive during the Benefit Continuation Period, and any such benefits actually received by Executive shall be reported to the Company; and

Change in Control Agreement

(iv) The Company shall also pay to the Executive all legal fees and expenses incurred by the Executive as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); provided that such payment for legal fees and expenses shall be made not later than the last day of the calendar year following the year in which the Executive incurred the fees and expenses and the Executive’s right to such payment may not be liquidated or exchanged for any other benefit.

(e) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 (except as expressly provided in Section 4(d)(iii)) be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise.

(f) The Executive shall be entitled to receive all benefits payable to the Executive under the Company pension and welfare benefit plans or any successor of such plan and any other plan or agreement relating to retirement benefits which shall be in addition to, and not reduced by, any other amounts payable to the Executive under this Section 4.

(g) The Executive shall be entitled to exercise all rights and to receive all benefits accruing to the Executive under any and all Company stock purchase and stock option plans or programs, or any successor to any such plans or programs, which shall be in addition to, and not reduced by, any other amounts payable to the Executive under this Section 4.

(h) The Company will indemnify the Executive (and the Executive’s legal representative or other successors) to the fullest extent permitted (including payment of expenses in advance of final disposition of the proceeding) by the laws of the State of Minnesota, as in effect at the time of the subject act or omission, or the Articles of Incorporation and By-Laws of the Company as in effect at such time or on the date of this Agreement, whichever affords or afforded greater protection to the Executive; and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and officers, against all costs, charges and expenses whatsoever incurred or sustained by the Executive or the Executive’s legal representatives in connection with any action, suit or proceeding to which the Executive (or the Executive’s legal representative or other successors) may be made a party by reason of the Executive’s being or having been a director, officer or employee of the Company or any of its subsidiaries or his or her serving or having served any other enterprise as a director, officer or employee at the request of the Company, provided that the Company shall cause to be maintained in effect for not less than six years from the date of a Change in Control (to the extent available) policies of directors’ and officers’ liability insurance of at least the same coverage as those maintained by the Company on the date of this Agreement and containing terms and conditions which are no less advantageous than such policies.

Change in Control Agreement

Notwithstanding anything herein to the contrary, if the Executive’s employment is governed by a separate written employment agreement that provides benefits upon a termination of employment, the aggregate of any payments or benefits payable under such employment agreement shall offset and reduce the aggregate of payments and benefits under this Agreement.

5. Non-Compete and Confidentiality .

(a) Noncompetition . Except as provided in subsection (c) below, the Executive agrees that, as a condition of receiving benefits under this Agreement, the Executive will not render services directly or indirectly to any competing organization, wherever located, for a period of one year following the Date of Termination, in connection with the design, implementation, development, manufacture, marketing, sale, merchandising, leasing, servicing or promotion of any “Conflicting Product” which as used herein means any product, process, system or service of any person, firm, corporation, organization other than the Company, in existence or under development, which is the same as or similar to or competes with, or has a usage allied to, a product, process, system, or service produced, developed, or used by the Company. The Executive agrees that violation of this covenant not to compete with the Company shall result in immediate cessation of all benefits hereunder, other than insurance benefits, which the Executive may continue where permitted under federal and state law at his or her own expense.

(b) Confidentiality . The Executive further agrees and acknowledges the Executive’s existing obligation that at all times during and subsequent to his or her employment with MTS, the Executive will not divulge or appropriate to the Executive’s own use or the uses of others any secret or confidential information or knowledge pertaining to the business of MTS, or any of its subsidiaries, obtained during his or her employment by MTS or any of its subsidiaries.

(c) Waiver - Unfriendly Change in Control . Notwithstanding anything herein to the contrary: the restriction on competition under subsection (a) shall not apply if the Executive’s employment terminates following a Change in Control which has not been approved by a majority of the Incumbent Directors in office immediately prior to the Change in Control (an “Unfriendly Change in Control”). Furthermore, in such event, the Company waives any other restriction on the Executive’s employment and consents unconditionally to any employment the Executive may subsequently obtain.

Change in Control Agreement

6. Limits on Payments and Benefits . In the event that the vesting, acceleration and payment of any equity awards or other compensation or benefits, together with all other payments and the value of any benefit received or to be received by the Executive would result in all or a portion of such payment being subject to excise tax under Section 4999 of the Code, then the amounts due under Section 4 that the Company shall pay to the Executive shall be either (A) the full payment or (B) such lesser amount determined by the Company in accordance with this Section 6 that would result in no portion of the payment being subject to excise tax under Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable Federal, state, and local employment taxes, income taxes, and the Excise Tax, results in the receipt by the Executive, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code. In the event the amounts due under Section 4 are reduced, the amounts shall be reduced in the following order of priority: first, with respect to any amount that does not constitute the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control and second, with respect to any amount that constitutes the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregard the acceleration in the time of payment and then disregard the acceleration of vesting as a result of a Change in Control first with respect to Company funded amounts and then the Executive’s deferrals, in each case only to the extent necessary to satisfy (B) above. All determinations required to be made under this Section 14 shall be made by a nationally recognized accounting firm that is the Company’s outside auditor immediately prior to the event triggering the payments that are subject to the Excise Tax (the “Accounting Firm”). The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and Executive. Notice must be given to the Accounting Firm within fifteen (15) business days after an event entitling Executive to an amount due under this Agreement. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). For the purposes of all calculations under Section 280G of the Code and the application of this Section 6, all determination as to present value shall use 120 percent of the applicable Federal rate (determined under Section 1274(d) of the Code) compounded based on the nature of the payment, as in effect on the date of this Agreement, but if not otherwise specified, the Company and Executive agree to compound such rate on a semiannual basis. The determination by the Accounting Firm shall be final and binding on the Company and the Executive.

Change in Control Agreement

7. Funding of Payments . In order to assure the performance of the Company or its successor of its obligations under this Agreement, the Company may deposit in a so-called “rabbi” trust an amount equal to the maximum payment that will be due the Executive under the terms hereof; provided, however, that the Company shall deposit in trust the amount equal to the maximum payment due Executive immediately upon an Unfriendly Change in Control. Under such written trust instrument, the trustee shall be instructed to pay to the Executive (or the Executive’s legal representative, as the case may be) the amount to which the Executive shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to the Company. If the Company deposits funds in trust, payment shall be made no later than the occurrence of the Change in Control. The written instrument governing the trust shall be irrevocable from and after such Change in Control and shall contain such provisions protective of the Executive as are contained in similar trust agreements approved by the Internal Revenue Service in published private letter rulings (provided that the assets of the trust shall be reachable by creditors of the Company as required by such rulings). The trustee shall be a national bank selected by the Company with the consent of the Executive, with trust powers and whose principal officers are located in the Minneapolis/St. Paul metropolitan area. The trustee shall invest the assets of the trust in any readily marketable securities of U.S. corporations (other than the Company, its successor, or any affiliate of the Company or its successor). If and to the extent there are not amounts in trust sufficient to pay Executive under this Agreement, the Company shall remain liable for any and all payments due to Executive.

8. Successors; Binding Agreement .

(a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to 51% or more of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to the compensation and benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive terminated his or her employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, successors, heirs, and designated beneficiaries. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designated beneficiaries, or, if there is no such designated beneficiary, to the Executive's estate.

Change in Control Agreement

9. Notice . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the last known residence address of the Executive or in the case of the Company, to its principal office to the attention of each of the then directors of the Company with a copy to its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

10. Non-application of Section 409A of the Code . It is the intent of the Company and the Executive that this Agreement satisfy those requirements of Section 409A of the Code to constitute first a “short term deferral” and then a “separation pay plan” to exempt the payments hereunder from the definition of a “nonqualified deferred compensation plan” under Section 409A of the Code, and the Agreement shall be so administered and interpreted in manner consistent with, and that gives effect to, such intention. The Company shall have the authority, without the consent of the Executive to amend such provision to maintain to maximum extent practicable the intent that this Agreement remains exempt from the requirements applicable to a “nonqualified deferred compensation plan” under Section 409A of the Code and regulations and other guidance promulgated thereunder.

11. Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties. No waiver by either party hereto at any time of any breach by the other party to this Agreement of, or compliance with, any condition or provision of this Agreement to be performed by such other-party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or similar time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota.

12. Validity . The invalidity or unenforceability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

Change in Control Agreement

IN WITNESS WHEREOF, the undersigned officer, on behalf of MTS Systems Corporation, and the Executive have hereunto set their hands as of the date first above written.


	MTS SYSTEMS CORPORATION


	By
	Its	CEO


	EXECUTIVE: