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:
[X] Preliminary proxy statement
[ ] 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
- --------------------------------------------------------------------------------
(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):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which 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>
DRAFT 11/26/97
[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 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,
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. 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 public
accountants 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,
Patrick Delaney
SECRETARY
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, Minnesota 55344
December 22, 1997
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.
<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, 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.
<PAGE>
OUTSTANDING SECURITIES AND VOTING RIGHTS
The Company has outstanding only one class of stock, $.25 par value
common stock (the "Common Stock"), of which 9,148,437 shares were issued and
outstanding on December 1, 1997. Each share is entitled to one vote on all
matters presented to shareholders.
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:
Name and Address of Number of Shares Percent
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 184,087(2)(3) 2.0%
Charles A. Brickman 116,000(2) 1.2%
Thomas E. Holloran 15,832(2) *
Thomas E. Stelson 20,000(2) *
<PAGE>
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned of Class
- ------------------- ------------------ --------
Bobby I. Griffin 12,000(2) *
Linda Hall Whitman 1,187 *
Russell A. Gullotti 5,000(2) *
Keith D. Zell 74,929(2)(4) *
Marshall L. Carpenter 146,500(2)(5) *
Mauro G. Togneri 21,172(2)(6) *
William G. Beduhn 41,525(2)(7) *
All directors and executive officers 1,364,037(2)(8) 14.6%
as a group (17 persons)
- --------------------
*Less than 1%
(1) Based upon information provided to the Company by Pioneering Management
Corporation.
(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 minor
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 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:
[picture] 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 Illinois Consolidated Telephone Co.
and a number of small, privately held companies.
Charles A. Brickman - Age 65
Director since 1968
[picture] 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
Thomas E. Holloran - Age 68 and the Bush Foundation; a director of the
Director since 1971 Minnesota Center for Corporation Responsibility.
<PAGE>
[picture] 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.
E. Thomas Binger - Age 74
Director since 1975
[picture] Consulting Engineer, Executive Vice President
and Professor of Civil Engineering Emeritus,
Georgia Institute of Technology, Atlanta,
Georgia since 1994; Vice President and
President-Elect, Center for Rehabilitation
Technology, Inc.; 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.
Thomas E. Stelson - Age 69
Director since 1979
[picture] 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 (Emerson) 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
Donald M. Sullivan - Age 62 director of Minnesota High Technology Council.
Director since 1982
<PAGE>
[picture] 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
Bobby I. Griffin - Age 60 Concordia College Board of Trustees and the
Director since 1993 North American Association for Pacing and
Electrophysiology.
[picture] President of Ceridian Performance Partners,
Ceridian Corporation since May, 1996; management
and executive positions with Honeywell, Inc.
from 1980 to 1996 (Vice President, Business
Integration from October 1995 to May 1996; Vice
President, Consumer Business Group from 1993 to
1995); 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
Linda Hall Whitman - Age 49 1994 to 1995 and Home Energy Systems Rating
Director since March 1995 Council from 1993 to 1995.
[picture] 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.
Russell A. Gullotti - Age 55
Director since May 1995
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. The Board of Directors met five times during fiscal year
1997, which ended September 30, 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 year ended 1997. The Board of
Directors also took action in writing in lieu of a meeting three times during
fiscal 1997.
<PAGE>
BOARD COMMITTEES. The Audit Committee of the Board of Directors is
composed of Messrs. Brickman (Chair), Binger and Stelson, met four times during
fiscal year 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 the Code of Conduct and management's processes to ensure
compliance with the Code of Conduct 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 is composed of
Messrs. Holloran (Chair), Binger and Dr. Whitman, met three times and took three
actions in writing during fiscal year 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 is composed of Messrs. Gullotti (Chair),
Griffin and Binger and Dr. Whitman met one time during fiscal year 1997. The
responsibilities of the Committee include Board evaluation, 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
Name and Principal Underlying All Other
Position Year Salary($) Bonus($)(1) Options(#) Compensation($)(2)
- -------- ---- --------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
D. M. Sullivan 1997 $262,500 $_______ 52,950(5) $ 9,492
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 $_______ 8,650 $ 9,492
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 $_______ 5,750 $ 9,492
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 $_______ 5,750 $ 9,492
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 $_______ 3,900 $ 9,492
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 $6,004 of compensation earned in the fiscal years 1996
and 1995, respectively, and deferred by the Named Executive to a later
date.
(5) Includes 40,000 shares granted in fiscal year 1997 in connection with a
new employment agreement and 12,950 shares granted according to an annual
plan.
(6) Restated in fiscal years 1996 and 1995, respectively, to reflect a
two-for-one stock split.
<PAGE>
STOCK OPTIONS
The following table contains information concerning grants of stock
options under the Company's Stock Option Plans to the Named Executives during
the fiscal year ending September 30, 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED GRANT DATE
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED*(#)(1) IN FISCAL YEAR ($/Sh) DATE VALUE $ (2)
---- ----------- -------------- ------ ---- -------
<S> <C> <C> <C> <C> <C>
D. M. Sullivan 40,000 13.8% $22.25 5/20/02 $288,808
D. M. Sullivan 12,950 4.5% 21.125 1/28/02 115,720
K. D. Zell 8,650 3.0% 21.125 1/28/02 77,294
M. L. Carpenter 5,750 2.0% 21.125 1/28/02 51,380
M. G. Togneri 5,750 2.0% 21.125 1/28/02 51,380
W. G. Beduhn 3,900 1.3% 21.125 1/28/02 34,850
</TABLE>
- -----------------------------------
(1) Each option becomes exercisable in equal installments over a period of
three years, commencing one year after the date of grant.
(2) Based upon the Black-Scholes valuation method. Assumptions used include
expected average option life (3 years), risk-free interest rate (5.8%),
dividend yield (1.2%) and historical volatility (.49).
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during fiscal year ending
September 30, 1997 and unexercised options held as of September 30, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY
Shares OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
Acquired on Value ------------------------------ ------------------------------
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D. M. Sullivan(1) 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 Exchange 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 10% of the number of
shares that are granted annually and would be 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.
<PAGE>
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 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
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.
<PAGE>
[PLOT POINTS GRAPH]
FISCAL YEAR ENDING SEPTEMBER 30,
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
MTS SYSTEMS CORPORATION $100.0 $113.8 $ 93.8 $111.8 $158.7 $298.1
ANALYTICAL INSTRUMENTS INDEX 100.0 131.0 132.1 182.4 216.4 297.1
NASDAQ MARKET INDEX 100.0 121.5 126.3 199.6 208.0 351.8
</TABLE>
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
under which, 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 until age 65, whichever occurs first, based upon their
highest annual salaries and the average management variable compensation and
benefits they received during the 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 $________, $_______, $_______, $________
and $_________, 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. Mr. Sullivan
was granted a five-year stock option in connection with his employment agreement
in May of 1997 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,
<PAGE>
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, 9,148,437 shares of Common Stock were issued and
outstanding. In addition, an aggregate number of _______ 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
________ shares available for corporate purposes.
The Board of Directors 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 number of shares authorized for issuance
under the existing stock plans of the Company referred to above.
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:
<PAGE>
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 stock entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
---------------
APPROVAL OF 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 & Co. 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
---------------------------------------
<PAGE>
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.
<PAGE>
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.)
(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.
[ ] 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)
- --------------------------------------------------------------------------------
(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.
