SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MTS SYSTEMS CORPORATION
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO] [MTS LETTERHEAD]
- --------------------------------------------------------------------------------
Dear MTS Shareholder:
On behalf of the Board of Directors, I want to invite you to attend your
Company's Annual Meeting of Shareholders. The Annual Meeting will be held on
Tuesday, January 27, 1998 at 4:00 p.m. at the Company's main office in Eden
Prairie, Minnesota.
We would like all of our shareholders to be represented at the Annual
Meeting, in person or by proxy. To that end, our staff works earnestly to follow
up on proxies which are not returned. Last year approximately 95% of the shares
were voted and we thank our shareholders for that response. Please help us by
taking the next few minutes to complete the enclosed proxy and then drop it in
the mail even if you plan to attend the Annual Meeting. Shareholders who attend
the Annual Meeting may revoke their proxies and vote in person if they desire.
Your promptness is much appreciated.
Very truly yours,
/s/ Donald M. Sullivan
Donald M. Sullivan
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
December 22, 1997
<PAGE>
MTS SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 27, 1998
The Annual Meeting of Shareholders of MTS Systems Corporation (the
"Company") will be held on January 27, 1998 at the Company's main office which
is located at 14000 Technology Drive, Eden Prairie, Minnesota 55344-2290. The
meeting will convene at 4:00 p.m. Central Standard Time for the following
purposes:
1. To elect eight directors to hold office until the next Annual Meeting
of Shareholders or until their successors are elected and qualify;
2. To ratify and approve an amendment to the Company's Amended and
Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock from 32,000,000 shares to 64,000,000
shares;
3. To ratify and approve the appointment of independent auditors for the
Company for the current fiscal year; and
4. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 1, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
For the Board of Directors,
/s/ Patrick Delaney
Patrick Delaney
SECRETARY
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, Minnesota 55344
December 22, 1997
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TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE, AND RETURN
YOUR PROXY WHICH IS LOCATED ON THE OUTSIDE OF THIS ENVELOPE. A POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR THIS PURPOSE. THE PROXY IS SOLICITED BY MANAGEMENT
AND MAY BE REVOKED OR WITHDRAWN BY YOU AT ANY TIME BEFORE IT IS EXERCISED.
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<PAGE>
MTS SYSTEMS CORPORATION
----------------------
PROXY STATEMENT
----------------------
GENERAL
This Proxy Statement is furnished to the shareholders of MTS Systems
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held on January 27, 1998 or any adjournment thereof.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, facsimile or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in shares registered in the names of nominees and will reimburse such
banks and brokers for their reasonable out-of-pocket expenses. The Company's
principal offices are located at 14000 Technology Drive, Eden Prairie, Minnesota
55344-2290, its telephone number is 612-937-4000 and its facsimile number is
612-937-4515. The mailing of this Proxy Statement to shareholders of the Company
commenced on or about December 22, 1997.
Any proxy may be revoked by request in person at the Annual Meeting or by
written notice mailed or delivered to the Secretary of the Company at any time
before it is voted. If not revoked, proxies will be voted as specified by the
shareholders. The shares represented by proxies that are signed but which lack
any such specification will be voted in favor of the proposals set forth in the
Notice of Annual meeting of Shareholders and in favor of the slate of directors
proposed by the Board of Directors herein.
Under Minnesota law, each item of business properly presented at a meeting
of shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or by
proxy, and entitled to vote on that item of business. However, if the shares
present and entitled to vote on that item of business would not constitute a
quorum for the transaction of business at the meeting, then the item must be
approved by a majority of the voting power of the minimum number of shares that
would constitute such a quorum. Votes cast by proxy or in person at the Annual
Meeting of Shareholders will be tabulated to determine whether or not a quorum
is present. Abstentions will be treated as shares that are present and entitled
to vote for purposes of determining the presence of a quorum and in tabulating
votes cast on proposals presented to shareholders for a vote, but as unvoted for
purposes of determining the approval of the matter on which the shareholder
abstains. Consequently, an abstention will have the same effect as a negative
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares will
not be considered as present and entitled to vote with respect to that matter.
OUTSTANDING SECURITIES AND VOTING RIGHTS
The Company has outstanding only one class of stock, $.25 par value common
stock (the "Common Stock"), of which 9,147,204 shares were issued and
outstanding on December 1, 1997. Each share is entitled to one vote on all
matters presented to shareholders.
<PAGE>
Shareholders have cumulative voting rights in the election of directors. If
any shareholder gives written notice to any officer of the Company before the
meeting, or to the presiding officer at the meeting, that shareholder may
cumulate votes for the election of directors by multiplying the number of votes
to which the shareholder is entitled by the number of directors to be elected
and casting all such votes for one nominee or distributing them among any two or
more nominees.
Only shareholders of record at the close of business on December 1, 1997
will be entitled to vote at the meeting. The presence, in person or by proxy, of
the holders of a majority of the shares of Common Stock entitled to vote at the
Annual Meeting of Shareholders constitutes a quorum for the transaction of
business.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of December 1, 1997, the number and
percentage of outstanding shares of Common Stock of the Company beneficially
owned (i) by each person who is known to the Company to beneficially own more
than five percent (5%) of the Common Stock of the Company, (ii) by each director
of the Company, (iii) by each executive officer named in the Summary
Compensation Table below, and (iv) by all directors and executive officers of
the Company as a group:
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------ ------------------ --------
Pioneering Management Corporation 806,100(1) 8.8%
60 State Street
Boston, MA 02114
E. Thomas Binger 573,500(2) 6.3%
5575 Wayzata Boulevard
Minneapolis, MN 55412
Donald M. Sullivan 171,712(2)(3) 1.9%
Charles A. Brickman 116,000(2) 1.2%
Thomas E. Holloran 15,832(2) *
Thomas E. Stelson 20,000(2) *
Bobby I. Griffin 12,000(2) *
Linda Hall Whitman 1,187 *
Russell A. Gullotti 5,000(2) *
Keith D. Zell 54,920(2)(4) *
Marshall L. Carpenter 81,876(2)(5) *
Mauro G. Togneri 19,252(2)(6) *
William G. Beduhn 39,377(2)(7) *
All directors and executive officers 1,216,109(2)(8) 13.3%
as a group (17 persons)
- ---------------------
*Less than 1%
(1) Based upon information provided to the Company by Pioneering Management
Corporation.
<PAGE>
(2) Includes the following number of shares which could be purchased under
stock options exercisable within sixty (60) days of the December 1, 1997
record date: Mr. Binger, 8,000 shares; Mr. Sullivan, 99,739 shares; Mr.
Brickman, 8,000 shares; Mr. Holloran, 8,000 shares; Mr. Stelson, 8,000
shares; Mr. Griffin, 8,000 shares; Mr. Gullotti, 4,000 shares; Mr. Zell,
20,044 shares; Mr. Carpenter, 17,252 shares; Mr. Togneri, 11,252 shares;
Mr. Beduhn, 13,801 shares; and by all directors and executive officers as a
group, 247,993 shares.
(3) Includes 12,375 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(4) Includes 20,009 shares held in a trust for the benefit of Mr. Zell's
children for which Mr. Zell serves as trustee.
(5) Includes 64,624 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(6) Includes 1,920 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(7) Includes 2,148 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly. Includes
23,428 shares held by his spouse, the beneficial ownership of such shares
is disclaimed.
(8) Includes 127,919 shares owned jointly with a spouse, 34,654 shares owned
directly by a spouse, 20,009 held in trust and 2,468 shares which are owned
directly by children.
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL #1)
Eight directors will be elected at the Annual Meeting, each to serve until
the next Annual Meeting of Shareholders or until a successor is elected and
qualified. The Board of Directors has nominated for election the eight persons
named below and each has consented to being named a nominee. It is intended that
proxies will be voted for such nominees. Each of the nominees was elected at the
Annual Meeting of Shareholders on January 28, 1997. The Board of Directors
believes that each nominee named herein will be able to serve, but should any
nominee be unable to serve as a director, the persons named in the proxies have
advised that they will vote for the election of such substitute nominee as the
Board of Directors may propose. The proxies cannot be voted for a greater number
of persons than eight.
The names of the nominees, their principal occupations for at least the
past five years and other information is set forth below:
[PHOTO]
CHARLES A. BRICKMAN Age 65
DIRECTOR SINCE 1968
President of Pinnacle Capital Corporation (a
venture capital company) since 1990; with
Kidder Peabody & Co., Inc., an investment
banking firm, from 1960 to 1990 (Vice
President from 1964 to 1990 and a director
from 1975 to 1990); a director of a number of
small, privately held companies.
[PHOTO]
THOMAS E. HOLLORAN Age 68
DIRECTOR SINCE 1971
Professor, Graduate School of Business,
University of St. Thomas, Saint Paul,
Minnesota since 1985; Chairman,
Minneapolis-Saint Paul Metropolitan Airports
Commission from 1989 to 1991; Chairman of the
Board of Directors and Chief Executive Officer
of the Inter-Regional Financial Group, Inc.
(holding company for various financial
enterprises) from 1976 to 1985; a director of
Flexsteel Industries, Inc., Medtronic, Inc.,
ADC Telecommunications Inc., National City
Bank of Minneapolis, National City
Bancorporation and Space Center Company;
Chairman and a director of Malt-o-Meal Company
and the Bush Foundation; a director of the
Minnesota Center for Corporation
Responsibility.
<PAGE>
[PHOTO]
E. THOMAS BINGER Age 74
DIRECTOR SINCE 1975
Chairman, Pacific Foundation, a private
charitable foundation; General Partner of
Pittsburgh Pacific Company, Ltd., an iron ore
mining company and personal investment
company, from 1970 to 1994; a director of
Bemis Company, Inc. from 1970 to 1994 and
Investors Savings Bank from 1991 to 1995.
[PHOTO]
THOMAS E. STELSON Age 69
DIRECTOR SINCE 1979
Consulting Engineer, Executive Vice President
and Professor of Civil Engineering Emeritus,
Georgia Institute of Technology, Atlanta,
Georgia since 1994; Chairman and President,
Center for Rehabilitation Technology, Inc.
since 1996; Pro Vice Chancellor for Research
and Development, Hong Kong University of
Science and Technology from 1991 to 1994;
previously Professor and Vice President,
Georgia Institute of Technology.
[PHOTO]
DONALD M. SULLIVAN Age 62
DIRECTOR SINCE 1982
Chairman of the Board of the Company since May
1994; Chief Executive Officer of the Company
since 1987; President of the Company since
1982; Executive Vice President of the Company
from 1980 to 1982; Vice President of the
Company from 1976 to 1980; employed by
Rosemount, Inc. from 1965 to 1976 (most
recently Senior Vice President of Industrial
Instrument and International Business); a
director of ADC Telecommunications, Inc. and
TSI, Inc.; member of Northwestern University's
Materials Science Department Advisory
Committee; formerly a director of Minnesota
High Technology Council.
<PAGE>
[PHOTO]
BOBBY I. GRIFFIN Age 60
DIRECTOR SINCE 1993
President of Medtronic Pacing Business
(manufacturer of pacing arrhythmia products
and the largest business unit within
Medtronic, Inc.) since 1991; Executive Vice
President of Medtronic, Inc. (medical
technology company) since 1988; held various
management positions in the pacing business
since joining Medtronic in 1973; involved in
bio-medical research and development since
1961 with General Electric-Hanford
Laboratories, Batelle Memorial Institutes, and
with McDonnell-Douglas Corporation-Donald W.
Douglas Laboratories; a director of The
Lutheran Brotherhood Board and Tentmakers
Youth Ministry; member of the Concordia
College Board of Trustees and the North
American Association for Pacing and
Electrophysiology.
[PHOTO]
LINDA HALL WHITMAN Age 49
DIRECTOR SINCE MARCH 1995
President of Ceridian Performance Partners,
Ceridian Corporation since February, 1996;
Vice President, Business Integration from
October 1995 to February 1996; management and
executive positions with Honeywell, Inc. from
1980 to 1995 (Vice President, Consumer
Business Group from 1993 to 1995; Director
Home Systems from 1991 to 1993); consultant,
psychologist, social worker and special
education teacher in Minnesota and Michigan
schools from 1969 to 1980; Minnesota 100
mentor since 1994; Member, Minnesota Women's
Economic Roundtable; a director of Minnesota
Zoo; former director of CAPITOL AIR, Inc. from
1994 to 1995 and Home Energy Systems Rating
Council from 1993 to 1995.
[PHOTO]
RUSSELL A. GULLOTTI Age 55
DIRECTOR SINCE MAY 1995
Chairman of the Board of Directors of National
Computer Systems, Inc. (NCS) (provider of data
collection systems and services) since May,
1995; President and Chief Executive Officer
since October, 1994; management and executive
positions with Digital Equipment Corporation
from 1977 to 1994 (President Sales/Service for
Americas from 1992 to 1994 and Vice President
Digital Services from 1988 to 1992); a
director of GenRad, Inc. and the Minnesota
Business Partnership.
<PAGE>
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. The Board of Directors met five times during fiscal 1997. None of
the directors attended fewer than 75% of the aggregate of the total number of
Board meetings and Committee meetings on which he or she served during fiscal
1997. The Board of Directors also took action in writing in lieu of a meeting
three times during fiscal 1997.
BOARD COMMITTEES. The Audit Committee of the Board of Directors, composed
of Messrs. Brickman (Chair), Binger and Stelson, met four times during fiscal
1997. Among other duties, the Audit Committee reviews and evaluates significant
matters relating to the audit and internal controls of the Company, reviews and
approves management's processes to ensure compliance with the Company's policies
and other laws and regulations, reviews the scope and results of the audits by,
and the recommendations of, the Company's independent auditors and approves
services provided by the auditors. The Audit Committee also reviews the audited
financial statements of the Company.
The Human Resources Committee of the Board of Directors, composed of
Messrs. Holloran (Chair), Binger and Dr. Whitman, met three times and took three
actions in writing during fiscal 1997. The Human Resources Committee makes
recommendations to the Board of Directors regarding the employment practices and
policies of the Company and the compensation paid to Company officers and
administers the Company's stock option and retirement plans.
The Governance Committee, composed of Messrs. Gullotti (Chair), Griffin,
Holloran and Dr. Whitman met one time during fiscal 1997. The responsibilities
of the Committee include Board evaluation, matters of Board governance, Board
membership recommendations and Chief Executive Officer succession planning.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30, 1997,
1996, and 1995, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to Donald M. Sullivan, the
Company's Chairman, Chief Executive Officer and President, and each of the four
other most highly compensated executive officers of the Company as determined in
accordance with the Securities and Exchange Commission rules (together with Mr.
Sullivan, the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)(2)
- --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
D. M. Sullivan 1997 $262,500 $214,275 52,950(5) $ 9,992
Chairman, Chief Executive 1996 241,154(3) 109,694 18,000(6) 10,052
Officer and President 1995 226,978(3) 58,584 18,000(6) 10,076
Keith D. Zell 1997 $178,420 $163,830 8,650 $ 9,992
Executive Vice President 1996 162,479 25,089 12,000(6) 10,052
1995 155,747 27,225 12,000(6) 10,076
M. L. Carpenter 1997 $171,882 $109,459 5,750 $ 9,992
Vice President and Chief 1996 158,604 81,281 8,000(6) 10,052
Financial Officer 1995 152,701 31,618 6,000(6) 10,076
M. G. Togneri 1997 $161,117 $ 37,179 5,750 $ 9,992
Vice President 1996 154,558(4) 74,355 8,000(6) 10,052
1995 145,580(4) 94,744 6,000(6) 10,076
William G. Beduhn 1997 $148,326 $115,690 3,900 $ 9,992
Vice President 1996 136,871 86,278 5,400(6) 10,052
1995 130,773 52,710 4,500(6) 10,076
</TABLE>
- ----------------------
(1) Represents earnings under the Management Variable Compensation Plan. The
amounts listed were earned in the fiscal year shown and were paid or will
be paid in the following year, unless deferred by the Named Executive.
(2) Represents contributions by the Company to the Company's Profit Sharing
Retirement Plan and the Company's 401(k) Plan on behalf of the Named
Executives.
(3) Includes $12,470 and $11,381 of compensation earned in fiscal years 1996
and 1995, respectively, and deferred by the Named Executive to a later
date.
(4) Includes $3,032 and $6,004 of compensation earned in the fiscal years 1996
and 1995, respectively, and deferred by the Named Executive to a later
date.
(5) Includes 40,000 shares granted in fiscal year 1997 in connection with an
employment agreement and 12,950 shares granted according to an annual plan.
(6) Restated in fiscal years 1996 and 1995, respectively, to reflect a
two-for-one stock split.
<PAGE>
STOCK OPTIONS
The following table contains information concerning grants of stock options
under the Company's Stock Option Plans to the Named Executives during the fiscal
year ending September 30, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED GRANT DATE
OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME (#) IN FISCAL YEAR ($/Sh) DATE $(3)
- ---- --------------- ---------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
D. M. Sullivan 40,000(1) 13.8% $22.25 5/20/02 $331,732
D. M. Sullivan 12,950(2) 4.5% 21.125 1/28/02 121,490
K. D. Zell 8,650(2) 3.0% 21.125 1/28/02 77,294
M. L. Carpenter 5,750(2) 2.0% 21.125 1/28/02 51,380
M. G. Togneri 5,750(2) 2.0% 21.125 1/28/02 51,380
W. G. Beduhn 3,900(2) 1.3% 21.125 1/28/02 34,850
</TABLE>
- --------------------
(1) The option became immediately exercisable in full on May 20, 1997, the date
of grant.
(2) The option becomes exercisable in equal installments over a period of three
years, commencing one year after the date of grant.
(3) Based upon the Black-Scholes valuation method. Assumptions used include
expected average option life (3 years), risk-free interest rate (5.8%),
dividend yield (1.2%) and historical volatility (.49).
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during fiscal year ending
September 30, 1997 and unexercised options held as of September 30, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
SHARES ----------------------------- -----------------------------
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. M. Sullivan 24,980 $250,074 89,422 30,948 $1,689,158 $591,686
K. D. Zell 13,629 250,592 13,160 20,648 285,877 394,699
M. L. Carpenter 10,000 191,000 12,667 13,083 277,507 246,274
M. G. Togneri 0 0 6,667 13,083 153,757 246,274
W. G. Beduhn 0 0 10,701 8,999 238,220 170,248
</TABLE>
- ------------------
(1) Based on closing price of $36.50 per share of the Company's Common Stock on
September 30, 1997.
<PAGE>
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This is the report of the Company's Human Resources Committee, which is
composed of the undersigned Board members. Messrs. Holloran and Binger and Dr.
Whitman have been non-employee directors of the Company since the close of
fiscal year 1996. This report shall not be deemed incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934.
The Human Resources Committee is responsible for executive compensation,
the Management Variable Compensation and Stock Option Plans, and certain other
employee benefit plans. The compensation philosophy of the Company is to be
competitive with comparable and directly competitive companies to attract and
motivate highly qualified employees.
The Company uses various compensation surveys -- international, national
and local -- to develop its compensation strategy and plans; this practice is
also used by the Human Resources Committee for executive compensation. In
general, the Committee does not use outside consultants to prepare specific
studies for it unless it judges the available survey data to be incomplete or
unrepresentative.
There are four components to the Company's executive compensation program:
(1) base salary; (2) management variable compensation (referred to in the
Summary Compensation Table above as "Bonus"); (3) stock options; and (4) profit
sharing/retirement. The Committee may adjust the mix of these components from
year to year according to survey data. In general, as is true for all the
Company's compensation programs, salaries and retirement compensation are
somewhat lower than average survey data, and bonus and stock options (i.e.,
potential annual and longer term variable compensation) may be somewhat higher.
This proportionality increases as responsibility and compensation increase.
BASE SALARY. Executive base salary is adjusted annually in January based on
the prior fiscal year's financial results and performance on developmental
objectives the Committee believes are critical to the Company's long-term
progress. These objectives include, but are not limited to, progress on the
Company's current Business Plan's objectives and staff development.
MANAGEMENT VARIABLE COMPENSATION. The Human Resources Committee annually
approves the Management Variable Compensation Plan, which includes executives,
managers, and key functional and technical leaders. It also recommends to the
full Board the corporate earnings and growth objectives upon which the Chief
Executive Officer's variable compensation is principally based. These objectives
are a mix of return on beginning equity per share, return on average net assets
and revenue growth.
Variable compensation is paid to each recipient by December 30 following
the close of the fiscal year unless the executive elects to defer a portion in
the Company's non-qualified, non-secured compensation deferral plan.
STOCK OPTIONS. The Company's current Stock Option Plans include directors,
executive, managers, and key functional and technical leaders. Stock options are
priced and granted annually on the date of the January Board of Directors'
meeting. In addition, Company officers from time to time recommend to the Human
Resources Committee for its approval at regular Board of Directors' meetings
stock option grants to employees who have shown exceptional service. For 1997,
these discretionary stock options did not exceed 15% of the number of shares
that are granted annually and were priced as of the date of approval. Options
that have been granted under current plans fully vest in less than four years
and all options expire in no more than seven years from the date of grant.
PROFIT SHARING/RETIREMENT. The Company sponsors an all employee Profit
Sharing/Retirement Plan for U.S. employees, except certain subsidiary employees
who are covered by subsidiary plans. All of the
<PAGE>
executives listed in the above tables are included in this Profit Sharing Plan.
The full Board annually approves the contribution formula for all employees,
including executives.
The Company also has a 401(k) Plan for U.S. employees, including
executives, under which the Company partially matches employee contributions at
a proportion set by the Company. The Human Resources Committee annually approves
the corporate matching formula for all employees.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Sullivan's compensation for
1995-1997 is shown in the Summary Compensation Table above. The Human Resources
Committee believes Mr. Sullivan has managed the Company well in a highly
competitive industry. Mr. Sullivan's compensation is consistent with this
evaluation and with the Company's overall management compensation strategy.
BOARD ACTION. The full Board of Directors approves new stock option plans
for submission for shareholder vote and approves the annual corporate earnings
and growth objectives for inclusion into the Management Variable Compensation
Plan. The full Board reviews all components of executive compensation and the
Profit Sharing/Retirement Plan every two to three years.
SUBMITTED BY THE HUMAN RESOURCES COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
Thomas E. Holloran, Chairman
E. Thomas Binger
Linda Hall Whitman
<PAGE>
SHAREHOLDER RETURN PERFORMANCE
The graph below sets forth a comparison of the cumulative shareholder
return of the Company's Common Stock over the last five fiscal years with the
cumulative total return over the same periods for the Nasdaq Market Index and
the Laboratory Apparatus and Analytical, Optical, Measuring, and Controlling
Instruments Index (the "Analytical Instruments Index") (SIC Code 382, which
includes 168 companies -- several of which the Company would consider to be
competitors). The graph below compares the cumulative total return of the
Company's Common Stock over the last five fiscal years assuming a $100
investment on September 30, 1992 and assuming reinvestment of all dividends.
[PLOT POINTS GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30,
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1992 1993 1994 1995 1996 1997
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<S> <C> <C> <C> <C> <C> <C>
MTS SYSTEMS CORPORATION $ 100.00 $ 113.8 $ 93.8 $ 111.8 $ 158.7 $ 298.1
NASDAQ MARKET INDEX 100.00 131.0 132.1 182.4 216.4 297.1
ANALYTICAL INSTRUMENTS INDEX 100.00 121.5 126.3 199.6 208.0 351.8
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The Company's Common Stock closed at $36.50 per share on September 30,
1997.
EMPLOYMENT AGREEMENTS
Donald M. Sullivan, Keith D. Zell, Marshall L. Carpenter, Mauro G. Togneri
and William G. Beduhn, individually, have agreements with the Company. The
agreements provide that, upon the termination of their employment with the
Company other than for cause, such officers will receive monthly payments over
periods ranging from 12 to 18 months or, for Messrs. Zell, Carpenter, Togneri
and Beduhn, until age 65 whichever occurs first. Such payments are based upon
their highest annual salaries and the average management variable compensation
and benefits they received during the
<PAGE>
previous three years. As of the date hereof, the maximum aggregate amounts of
such payments to each of Messrs. Sullivan, Zell, Carpenter, Togneri and Beduhn
are $604,338, $264,145, $389,440, $240,050 and $244,847, respectively. As a
condition to such payments, the officer must agree not to render services to any
competing entity concerning any similar or competing product for periods ranging
from nine to twelve months. In connection with his employment agreement entered
into in May of 1997, Mr. Sullivan was granted a five-year stock option to
purchase 40,000 shares of Common Stock of the Company at $22.25 per share.
DIRECTOR COMPENSATION
Directors who served during all of fiscal 1997 and were not otherwise
directly or indirectly compensated by the Company (Messrs. Binger, Brickman,
Holloran, Griffin, Stelson, Gullotti and Dr. Whitman) were each paid directors'
fees in the form of an annual retainer of $17,600 during fiscal 1997. The
payment of annual retainers is not dependent upon board meeting attendance. In
addition, non-employee directors who attended over a total of five board or
committee meetings not held on the same day as a regular board meeting were
compensated at the rate of $750 per half day meeting and $1,500 per full day
meeting. Messrs. Binger, Holloran and Dr. Whitman each attended three committee
meetings on different days than the board meetings and each received $750 for
each meeting. Messrs. Brickman, Gullotti and Griffin each attended one committee
meeting on different days than the board meetings and each received $750 for
that meeting.
Each of the non-employee directors who were elected at last year's Annual
Meeting of Shareholders (Messrs. Binger, Brickman, Holloran, Griffin, Stelson,
Gullotti and Dr. Whitman) were automatically granted options to purchase 2,000
shares each of Common Stock upon their re-election to the Board of Directors at
the Company's Annual Meeting of Shareholders for fiscal year 1997, and will each
be granted an option to purchase up to 3,000 shares of Common Stock upon their
re-election to the Board of Directors at the Company's Annual Meeting of
Shareholders to be held on January 27, 1998 at the fair market value on such
date. Mr. Brickman and Mr. Stelson were also reimbursed for travel expenses to
Board of Directors' meetings in Minneapolis, and all directors were reimbursed
for travel expenses to a Board of Directors' meeting in Berlin, Germany.
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
(PROPOSAL #2)
The Board of Directors has approved an amendment to the Company's Amended
and Restated Articles of Incorporation which would increase the number of
authorized shares of Common Stock from 32,000,000 shares to 64,000,000 shares.
The Board believes the adoption of this amendment is in the best interests of
the shareholders and recommends that the shareholders vote in favor of this
proposal. At December 1, 1997, 9,147,204 shares of Common Stock were issued and
outstanding. In addition, an aggregate number of 2,123,077 shares of Common
Stock were reserved for issuance under the Company's 1985 Stock Option Plan,
1987 Stock Option Plan, the 1990 Stock Option Plan, the 1994 Stock Plan, the
1997 Stock Option Plan and the Employee Stock Purchase Plan, leaving
approximately 22,000,000 shares available for corporate purposes.
The increase in the authorized number of shares of Common Stock is
primarily designed to facilitate a two-for-one stock split of the Company's
Common Stock authorized by the Board of Directors on December 3, 1997, in the
form of a stock dividend distributable to the shareholders of
<PAGE>
record on January 15, 1998, and to be paid on February 2, 1998. The Board of
Directors also believes the Company needs additional authorized shares to
provide the Company with the flexibility, as the need arises, to use Common
Stock without the expense and delay of a special shareholders' meeting, in
connection with possible equity financings, future opportunities for expanding
the Company's business through investments or acquisitions, management incentive
and employee benefits plans, future stock dividends and for other corporate
purposes. Such activities may require more shares of Common Stock than are
currently available to the Company. The Company has no present plans,
understandings or agreements for the issuance or use of the proposed additional
shares of Common Stock, except for the stock split discussed above and for the
issuance of shares under currently outstanding stock options and stock options
which may be granted in the future.
The newly authorized Common Stock would be identical to the existing
authorized Common Stock in all respects. Holders of Common Stock are entitled to
one vote per share and have the right to cumulate their votes in an election of
directors. Holders of Common Stock have no conversion rights and no preemptive
or other rights to subscribe for additional securities. Upon liquidation of the
Company, the holders of Common Stock will be entitled to share ratably in all
assets available for distribution after the payment or provision for payment of
all debts and liabilities. Each share of Common Stock is entitled to such
dividends as may from time to time be declared by the Board of Directors out of
funds legally available therefor.
The resolution to be considered and acted upon by the shareholders at the
Annual Meeting is as follows:
RESOLVED, that the first sentence of Article VI of the Amended and Restated
Articles of Incorporation of the Company be amended to read as follows:
ARTICLE VI
"The number of shares of the total authorized capital stock of this
corporation shall be Sixty-Four Million (64,000,000), all of which are
common shares of capital stock. Each common share of capital stock
shall have the par value of twenty-five cents ($.25). Each share shall
entitle the holder thereof to one vote for each share held by the
shareholder, but shareholders shall have no pre-emptive right to
subscribe for or purchase securities of the corporation; and all
shares shall be equal in all respects and shall confer equal rights
upon the holders thereof, including equal rights in and to dividends
and distributions and upon dissolution."
RESOLVED FURTHER, that the officers of the Company be, and they hereby are,
authorized and directed to execute such documents and certificates and take
such other actions as may be necessary to give effect to the foregoing
resolution.
The approval of the amendment to the Amended and Restated Articles of
Incorporation of the Company requires the affirmative vote of the holders of a
majority of the outstanding stock entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
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APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL #4)
Arthur Andersen LLP, independent certified public accountants, have been
the auditors for the Company since 1966. They have been reappointed by the Board
of Directors, on recommendation of its Audit Committee, as the Company's
auditors for the current fiscal year and shareholder approval of the appointment
is requested. In the event the appointment of Arthur Andersen LLP should not be
approved by the shareholders, the Board of Directors will make another
appointment to be effective at the earliest feasible time.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting of Shareholders, will have an opportunity to make a statement if
he or she desires to do so, and will be available to respond appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN LLP
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for inclusion in the
Proxy Statement for the January 1999 Annual Meeting of Shareholders, the
proposal must be received by the Secretary of the Company in writing no later
than August 21, 1998.
GENERAL
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission and
the NASD. Executive officers and directors are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company notes that all such reports have been filed in a timely manner.
OTHER MATTERS
The management of the Company knows of no matters other than the foregoing
to be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event that any additional matters should be
presented.
The Annual Report of the Company for the fiscal year ended September 30,
1997 is enclosed herewith.
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PROXY
MTS SYSTEMS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 27, 1998
The undersigned hereby appoints Donald M. Sullivan and Patrick Delaney (the
"Proxies"), each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of MTS Systems Corporation, held of record by the undersigned on December
1, 1997, at the ANNUAL MEETING OF SHAREHOLDERS to be held on January 27, 1998,
or any adjournment thereof.
(1) ELECTION OF [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
DIRECTORS: (except as marked below) to vote for nominees
listed
E. THOMAS BINGER, CHARLES A. BRICKMAN, BOBBY I. GRIFFIN, THOMAS E. HOLLORAN,
RUSSELL A. GULLOTTI, THOMAS E. STELSON, DONALD M. SULLIVAN, LINDA HALL WHITMAN
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
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(2) The proposal to ratify and approve an amendment to the Company's
Amended and Restated Articles of Incorporation to increase the number
of authorized shares of Common Stock from 32,000,000 shares to
64,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The proposal to ratify and approve the appointment of Arthur Andersen
LLP as independent auditor for the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
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(CONTINUED FROM THE OTHER SIDE)
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED IN FAVOR OF THE PROPOSALS.
Dated: ____________________________________
Signed:____________________________________
Signature of Shareholder
Signed:____________________________________
Signature of Shareholder
Please vote, date and sign this proxy
statement as your name is printed hereon.
When signing as attorney, executory
administrator, trustee, guardian, etc. give
full title as such. If the stock is held
jointly, each owner should sign. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
