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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MTS SYSTEMS CORPORATION
(Name of Registrant as Specified in Its Charter)
N/A
(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)(1)
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 SYSTEMS CORPORATION
14000 Technology Drive
Eden Prairie, MN 55344-2290
Telephone 612-937-4000
Fax 612-937-4515, Telex 29-0521
- --------------------------------------------------------------------------------
Dear MTS Shareholder:
On behalf of the Board of Directors, we invite you to attend your
Company's Annual Meeting of Shareholders. The Annual Meeting will be held on
Tuesday, January 26, 1999 at 4:00 p.m. at the Company's headquarters 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 that are not returned. Last year approximately 92% of the
shares were voted. Please help us by taking a few minutes to complete the
enclosed proxy card and 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
/s/ Sidney W. Emery, Jr.
Sidney W. Emery, Jr.
CHIEF EXECUTIVE OFFICER
December 22, 1998
<PAGE>
MTS SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 26, 1999
The Annual Meeting of Shareholders of MTS Systems Corporation (the
"Company") will be held on Tuesday, January 26, 1999 at the Company's
headquarters 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 duly elected;
2. To ratify and approve an amendment to the Company's Amended and Restated
Articles of Incorporation to authorize the creation of 25,000,000 shares
of Preferred Stock and to authorize multiple classes of Common Stock,
without changing the number of authorized 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 foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 30,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and at any adjournment or postponement
thereof.
For the Board of Directors,
/s/ Patrick Delaney
Patrick Delaney
SECRETARY
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, Minnesota 55344
December 22, 1998
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD, WHICH IS LOCATED ON THE OUTSIDE OF THE
ENVELOPE, AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT
THE ANNUAL MEETING. 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 Tuesday, January 26, 1999 (the "Annual Meeting") or
any adjournment or postponement thereof.
The Company will bear the entire cost of the solicitation of proxies,
including the preparation, assembly, printing and mailing of this Proxy
Statement and any additional information furnished to shareholders. 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 Company intends to mail this Proxy Statement and the accompanying
proxy card on or about December 22, 1998 to all holders of the Common Stock of
the Company as of the record date of November 30, 1998, who are entitled to
vote at the Annual Meeting.
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 in this Proxy Statement.
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 not voted
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.
2
<PAGE>
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 18,598,890 shares were issued and
outstanding on November 30, 1998. 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 of its intention to cumulate votes at
the Annual Meeting to any officer of the Company before the meeting, or to the
presiding officer at the meeting, all of the shareholders entitled to vote at
the meeting 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 November 30, 1998
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 the close of business on November
30, 1998, 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:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- -------------------------------------- ---------------------- ---------
<S> <C> <C>
E. Thomas Binger 1,143,000(1) 6.1%
5575 Wayzata Boulevard
Minneapolis, MN 55412
Donald M. Sullivan 329,258(1)(2) 1.8%
Charles A. Brickman 185,000(1) *
Marshall L. Carpenter 179,797(1)(3) *
Keith D. Zell 135,933(1)(4) *
William G. Beduhn 92,437(1)(5) *
Mauro G. Togneri 53,832(1)(6) *
Thomas E. Holloran 34,664(1) *
Thomas E. Stelson 34,000(1) *
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------------------- ------------------------ ---------
<S> <C> <C>
Bobby I. Griffin 27,000(1) *
Sidney W. Emery, Jr. 26,650(1)(7) *
Russell A. Gullotti 13,000(1) *
Linda Hall Whitman 5,374(1) *
Jean-Lou Chameau 3,000(1) *
Brendan C. Hegarty 3,000(1) *
All directors and executive officers 2,563,367(1)(8) 13.4%
as a group (21 persons)
</TABLE>
- ------------------
*Less than 1%.
(1) Includes the following number of shares which could be purchased under
stock options exercisable within sixty (60) days of November 30, 1998: Mr.
Binger, 7,000 shares; Mr. Brickman, 15,000 shares; Mr. Carpenter, 50,549,
Mr. Sullivan, 205,266 shares; Mr. Zell, 66,181 shares; Mr. Beduhn, 36,833
shares; Mr. Emery, no shares; Mr. Holloran, 15,000 shares; Mr. Stelson,
11,000 shares; Mr. Griffin, 15,000 shares; Mr. Gullotti, 11,000 shares;
Dr. Whitman, 3,000 shares; Mr. Chameau, 3,000 shares; Mr. Hegarty, 3,000
shares; Mr. Togneri, 37,832 shares; and by all directors and executive
officers as a group, 632,317 shares.
(2) Includes 17,750 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(3) Includes 129,248 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(4) Includes 40,018 shares held in a trust for the benefit of Mr. Zell's
children for which Mr. Zell serves as trustee.
(5) Includes 6,108 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly. Includes
46,856 shares held by his spouse, the beneficial ownership of such shares
is disclaimed.
(6) Includes 3,840 shares owned jointly with his spouse. The voting and
investment discretion over those shares are shared accordingly.
(7) Includes a restricted stock grant of 24,000 shares issued on March 17, 1998
in connection with his employment with the Company.
(8) Includes 270,371 shares owned jointly with a spouse, 77,308 shares owned
directly by a spouse and 40,018 shares which are held in trust.
4
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL #1)
Eight directors will be elected at the Annual Meeting. The Board of
Directors has nominated for election the eight persons named below and each has
consented to being named a nominee. Each of the nominees is currently a
director of the Company and will, if elected, serve until the next Annual
Meeting of Shareholders or until a successor is elected and qualified. If any
nominee is 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. It is intended that proxies will be voted for
such nominees. The proxies cannot be voted for a greater number of persons than
eight.
Donald M. Sullivan, who has served as the Chairman of the Board of
Directors of the Company since May 1994, is retiring from the Board and will
not be standing for re-election at the Annual Meeting. The Board has nominated
Sidney W. Emery, Jr., the President and Chief Executive Officer of the Company,
to serve as Chairman. On the occasion of Mr. Sullivan's retirement, the Board
expresses its deep appreciation for the leadership and vision he provided as
Chairman and recognizes his long-standing service to the Company in various
capacities since 1976.
Mr. Binger, who retired during 1998, and Mr. Stelson, who is retiring and
will not be standing for re-election at the Annual Meeting, have served on the
Board of Directors of the Company since 1975 and 1979, respectively. The Board
acknowledges their valued service to the Company and expresses its gratitude.
The names of the nominees, their principal occupations for at least the
past five years and other
information is set forth below:
[PHOTO] President of Pinnacle Capital
CHARLES A. BRICKMAN Age 66 Corporation (a venture capital company)
DIRECTOR SINCE 1968 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.
[PHOTO] Dean of the College of Engineering and
JEAN-LOU CHAMEAU Age 45 Georgia Research Alliance Eminent
DIRECTOR SINCE 1998 Scholar at the Georgia Institute of
Technology since 1997; Vice Provost for
Research and Dean of Graduate Studies at
the Georgia Institute of Technology from
1995 to 1977; President of Golder
Associates, Inc. (an engineering
consulting firm) from 1994 to 1995;
Director of the School of Civil and
Environmental Engineering at the Georgia
Institute of Technology from 1991 to
1994; Professor and Head of the
Geotechnical Engineering Program at
Purdue University from 1980 to 1991; a
director of a number of privately-held
companies and non-profit organizations.
5
<PAGE>
[PHOTO]
SIDNEY W. EMERY, JR. Age 52 Chief Executive Officer and President of
DIRECTOR SINCE 1998 the Company since March 17, 1998;
management and executive positions with
Honeywell, Inc. (manufacturer of control
systems) from 1985 to 1997 (Area Vice
President, Western and Southern Europe
from 1994 to 1997; Group Vice President,
Military Avionics Systems from 1989 to
1994; Vice President and General
Manager, Space Systems Division from
1988 to 1989; Vice President,
Operations, Process Controls Division
from 1985 to 1988).
[PHOTO] Consultant; formerly President of
BOBBY I. GRIFFIN Age 61 Medtronic Pacing Business (manufacturer
DIRECTOR SINCE 1993 of pacing arrhythmia products and the
largest business unit within Medtronic,
Inc.) from 1993 to 1998; Executive Vice
President of Medtronic, Inc. (medical
technology company) from 1988 to 1998;
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
Urologix, Inc.; 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] Chairman of the Board of Directors of
RUSSELL A. GULLOTTI Age 56 National Computer Systems, Inc. (NCS)
DIRECTOR SINCE 1995 (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.
6
<PAGE>
[PHOTO] Consultant; formerly Executive Vice
BRENDAN C. HEGARTY Age 56 President and Chief Executive Officer of
DIRECTOR SINCE 1998 Recording Head Group of Seagate
Technology (manufacturer of computer
disk drives), from 1993 to 1998; Senior
Vice President and Chief Technical
Officer since 1989; Vice President of
Thin Film Operations for Control Data
Corporation (computer hardware and
software company) from 1988 to 1989;
management and executive positions with
IBM (computer hardware and software
company) from 1967 to 1987.
[PHOTO] Professor, Graduate School of Business,
THOMAS E. HOLLORAN Age 69 University of St. Thomas, Saint Paul,
DIRECTOR SINCE 1971 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.
[PHOTO] President of Ceridian Performance
LINDA HALL WHITMAN Age 50 Partners, Ceridian Corporation since
DIRECTOR SINCE 1995 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
and the Committee of 200 (an association
of women with direct profit
responsibility for a number of large
business entities).
7
<PAGE>
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. The Board of Directors met five times during fiscal year 1998,
which ended September 30, 1998. 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 1998. The Board of Directors
also took action in writing in lieu of a meeting six times during fiscal 1998,
which all of the directors signed.
BOARD COMMITTEES. The Audit Committee of the Board of Directors, which was
composed of Brickman (Chair), Hegarty and Stelson during fiscal 1998, met four
times. 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 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, which is
currently composed of Messrs. Holloran (Chair), Griffin and Dr. Whitman, met
five times and took two actions in writing during fiscal 1998. 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 of the Board of Directors, which is currently
composed of Messrs. Gullotti (Chair), Griffin, Holloran and Dr. Whitman, met
one time during fiscal 1998. The responsibilities of the Committee include
Board evaluation, Board membership and fee recommendations and chief executive
officer succession planning.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30, 1998,
1997, and 1996, 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, and Sidney W. Emery, Jr., the Company's 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 and Mr.
Emery, the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ----------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($) (#)(2) ($)(3)
- ----------------------------- ------ ---------------- ----------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Sullivan 1998 $268,500 $105,362 $ -0- -0- $10,684
Chairman 1997 262,500 214,275 -0- 105,900(7) 9,492
1996 241,154(4) 109,694 -0- 36,000 10,052
Sidney W. Emery, Jr. 1998 160,097 84,000 351,000(6) 120,000(8) 10,684
President and 1997 -0- -0- -0- -0- -0-
Chief Executive Officer 1996 -0- -0- -0- -0- -0-
Keith D. Zell 1998 187,790 85,484 -0- 13,000 10,684
Executive Vice President 1997 178,420 163,830 -0- 17,700 9,492
1996 162,479 25,089 -0- 24,000 10,052
William G. Beduhn 1998 150,315 108,110 -0- 8,500 10,684
Vice President 1997 148,326 115,690 -0- 7,800 9,492
1996 136,871 86,278 -0- 10,800 10,052
Mauro G. Togneri 1998 160,334 80,019 -0- 6,500 10,684
Vice President 1997 161,117 37,179 -0- 11,500 9,492
1996 154,558(5) 74,355 -0- 16,000 10,052
Marshall L. Carpenter 1998 173,418 42,358 -0- 8,650 10,684
Vice President and Chief 1997 171,882 109,459 -0- 11,500 9,492
Financial Officer 1996 158,604 81,281 -0- 16,000 10,052
</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) Options granted prior to February 1, 1998 have been adjusted to reflect the
Company's two-for-one stock split occurring on that date.
(3) 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.
(4) Includes $12,470 of compensation earned in fiscal year 1996 and deferred by
the Named Executive to a later date.
9
<PAGE>
(5) Includes $3,032 of compensation earned in the fiscal years 1997 and
deferred by the Named Executive to a later date.
(6) Represents a restricted stock grant of 24,000 shares issued on March 17,
1998 in connection with his employment with the Company. The value of the
restricted stock grant is based upon the last reported sale price for
shares of the Company's Common Stock on March 17, 1998, which was $14.625
per share. The restricted stock vests in full in three years from the date
of issuance unless the Company terminates Mr. Emery's employment, then, in
such event, 12,000 shares will vest if the termination occurs before the
second anniversary of his employment and 16,000 shares will vest if the
termination occurs after the second anniversary of his employment. The
restricted stock will also vest in full in the event of a change in
control of the Company that occurs at any time within three years from the
date of grant. The aggregate value of the restricted stock grant at the
end of fiscal 1998 was $14.75 per share or $354,000. Mr. Emery will be
entitled to receive dividends on the shares of restricted stock in the
event that the Board of Directors authorizes a distribution of dividends
to holders of Common Stock of the Company.
(7) Includes 80,000 shares granted in the fiscal year 1997 in connection with
an employment agreement and 25,900 shares granted according to an annual
plan.
(8) Represents a non-qualified stock option grant of 120,000 shares issued to
Mr. Emery on March 17, 1998 in connection with his employment with the
Company.
STOCK OPTIONS
The following table contains information concerning grants of stock
options under the Company's Stock Option Plans to the Named Executives during
the fiscal year ending September 30, 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING TO EMPLOYEES EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME OPTIONS GRANTED(1) IN FISCAL YEAR ($/SH) DATE $(2)
- ------------------ -------------------- ----------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
D. M. Sullivan -0- 0% -- -- --
S. W. Emery, Jr. 120,000 24.1% $14.625 3/17/03 $494,872
K. D. Zell 13,000 2.6% 15.75 1/27/03 557,737
W. G. Beduhn 8,500 1.7% 15.75 1/27/03 37,751
M. G. Togneri 6,500 1.3% 15.75 1/27/03 28,869
M. L. Carpenter 8,650 1.7% 15.75 1/27/03 38,417
</TABLE>
- ------------------
(1) Each option becomes exercisable in equal installments over a period of
three years, commencing one year after the date of grant.
(2) Based upon a Black-Scholes valuation method. Assumptions used include
expected average option life (3 years), risk-free interest rate (4.2%),
dividend yield (1.6%) and historical volatility (.40).
10
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during fiscal year ending
September 30, 1998 and unexercised options held as of September 30, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
ACQUIRED ON VALUE ------------------------------- ---------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ -------------- -------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
D. M. Sullivan 26,840 $323,327 184,631 29,269 $1,053,263 $151,816
S. W. Emery, Jr. -0- -0- -0- 120,000 -0- 15,000
K. D. Zell -0- -0- 48,081 32,535 342,613 101,305
W. G. Beduhn 2,800 34,825 27,799 17,301 200,612 45,632
M. G. Togneri -0- -0- 21,498 19,502 194,333 67,791
M. L. Carpenter -0- -0- 38,498 21,652 276,083 67,447
</TABLE>
- ------------------
(1) Based on closing price of $14.75 per share of the Company's Common Stock on
September 30, 1998.
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 Griffin and Dr.
Whitman are non-employee directors of the Company, serving 26, 5 and 3 years,
respectively. 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,
employment contracts, the Management Variable Compensation and Stock Option
Plans, and certain other employee benefit plans such as the Company's Profit
Sharing/Retirement Plans. The compensation philosophy of the Company is to be
competitive with comparable and directly competitive companies in order 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
unsuitable.
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
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Company's long-term progress. These objectives include, but are not limited to,
progress on the Company's current business plan objectives, longer-term
strategies 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 growth of per share earnings, 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. These
discretionary stock options do not exceed 15% of the number of shares that are
granted annually and are priced as of the date of approval. Options outstanding
under current plans fully vest in less than four years and all options expire
in seven years or less.
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 served as Chief
Executive Officer of the Company until his retirement from that position on
March 17, 1998. Mr. Emery assumed the duties of Chief Executive Officer of the
Company on that date and receives an annual base salary that was set at
$300,000 during 1998. In addition to his base salary, Mr. Emery receives
bonuses, reimbursements and certain fringe benefits available to executive
officers of the Company. The Human Resources Committee believes that Mr.
Sullivan has managed the Company well over the years in a highly competitive
industry. The Committee acknowledges his valued service. Mr. Emery had
demonstrated his leadership ability in a similar industry, and his compensation
is competitive in the marketplace and with the Company's overall management and
compensation strategy. The compensation paid to both Messrs. Sullivan and Emery
during 1998 is shown in the Summary Compensation Table.
BOARD ACTION. The full Board of Directors approves new stock option plans
for submission to 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
Bobby I. Griffin
Linda Hall Whitman
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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 178 companies). 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, 1993 and assuming reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
MTS SYSTEMS CORPORATION $ 100.00 $ 82.5 $ 98.2 $ 139.5 $ 262.0 $ 214.8
NASDAQ MARKET INDEX 100.00 100.8 139.3 165.2 226.8 231.8
ANALYTICAL INSTRUMENTS INDEX 100.00 104.0 164.3 171.0 289.2 184.9
</TABLE>
The Company's Common Stock closed at $14.75 per share on September 30,
1998.
EMPLOYMENT AND OTHER AGREEMENTS
Donald M. Sullivan, Sidney W. Emery, Jr., 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 executive officers will
receive monthly payments over periods ranging from six to eighteen months or
until age 65, whichever
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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, Emery, Zell, Carpenter, Togneri and
Beduhn are $634,397, $300,974, $364,486, $394,552, $230,947 and $265,155,
respectively. As a condition of the receipt of such payments, Mr. Sullivan and
the executive officers of the Company have agreed not to render services to any
competing entity concerning any similar or competing product for periods
ranging from nine to eighteen months and agreed to maintain the confidentiality
of certain information deemed by the Company to be proprietary.
In 1998, the Company also entered into change-in-control agreements with
Messrs. Emery, Zell, Carpenter, Togneri and Beduhn. In the event of a change in
control, these executive officers will be entitled to receive upon the
termination of their employment by the Company without cause or by the
executive for good reason at any time within three years of such change in
control, a lump-sum payment equal to (a) six to eighteen months of the highest
annual compensation they received during the previous three years, or (b)
twelve to thirty-six months of such officers' compensation in the event of an
unfriendly takeover. The executive officers may also, within a period beginning
thirty days and ending one hundred and eighty days following a change in
control, resign for any reason and be entitled to receive the aforementioned
payments.
DIRECTOR COMPENSATION
Directors who served during fiscal 1998 and were not otherwise directly or
indirectly compensated by the Company were each paid directors' fees in the
form of retainer of during 1998. The retainers for Messrs. Brickman, Holloran,
Griffin, Stelson, Gullotti, and Dr. Whitman, who served the entire fiscal year,
was $17,600. The retainer for Messrs. Binger and Hegarty, who did not serve the
entire year, was $13,200 and $8,800, respectively. The payment of 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 two committee meetings on different days
than the board meetings during 1998 and each received $1,500.
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 granted non-qualified options to purchase an
amount equal to 3,000 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 1998. Messrs. Hegarty and Chameau, who filled the vacancy created by the
retirement from the Board of Mr. Binger in 1998 and the anticipated vacancy
created by the retirement from the Board of Mr. Stelson in 1999, were each
granted a non-qualified option to purchase 3,000 shares of Common Stock. Each
non-employee director will be granted a non-qualified option to purchase up to
4,000 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 26, 1999 at
the fair market value of the Common Stock on such date. Mr. Brickman and Mr.
Stelson were also reimbursed for travel expenses to Board of Directors' and
committee meetings in Minneapolis.
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<PAGE>
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
(PROPOSAL #2)
The Articles of Incorporation of the Company do not currently authorize
the issuance of Preferred Stock. On December 1, 1998, the Board of Directors
unanimously adopted a resolution recommending to the shareholders for their
approval an amendment to Article VI of the Company's Amended and Restated
Articles of Incorporation to provide for the authorization and creation of up
to 25,000,000 shares of Preferred Stock, the relative rights, preferences and
other terms of which will be determined by the Board prior to any issuance. The
amendment to Article VI also restates the authority of the Board of Directors
to issue Common Stock, without changing the number of authorized shares of
Common Stock, to create additional classes of Common Stock and establish the
relative rights, preferences and other terms of the Common Stock. No changes
will be made to the Company's currently outstanding Common Stock.
The Board of Directors believes the creation of Preferred Stock and the
ability to issue multiple classes of Common Stock is in the best interests of
the Company and its shareholders in that the existence of such shares would
provide the Board with flexibility in managing the Company's capital structure
by allowing the issuance of additional equity, rather than debt, when the Board
deems it to be advantageous. The Preferred Stock could be issued in connection
with, among other things, stock dividends, financing transactions, corporate
mergers, acquisitions, employee benefit plans and other corporate purposes. The
availability of Preferred Stock would allow the issuance of such shares in the
future without the expense and delay of a special Shareholder's Meeting. The
shares of Preferred Stock would be available for issuance without further
shareholder action unless such action were required by applicable law or the
rules of the Nasdaq National Market or any other stock exchange on which the
Company's securities may then be listed or traded. The ability to issue
additional classes of Common Stock would also provide the Board additional
alternatives in connection with financing transactions, corporate acquisitions
and other corporate purposes.
The proposed Preferred Stock would be "blank check" preferred stock, which
means that the Board of Directors would have the discretion, from time to time,
to determine the designations and relative voting, distribution, dividend,
conversion, liquidation, and other rights, preferences, and limitations of
Preferred Stock, including, among other things: (i) the designation of each
class or series and number of shares in a class or series; (ii) the dividend
rights, if any, of the class or series; (iii) the redemption provisions, if
any, of the shares; (iv) the preference, if any, to which any class or series
would be entitled in the event of the liquidation or distribution of the
Company's assets; (v) the provisions of a purchase, retirement or sinking fund,
if any, to accommodate redemption of the Preferred Stock; (vi) the rights, if
any, to convert or exchange the shares into or for other securities; (vii) the
voting rights, if any (in addition to any prescribed by law), of the holders of
the shares of the class or series; (viii) the conditions or restrictions, if
any, on specified actions of the Company affecting the rights of the shares;
and (ix) any other preferences, privileges, powers, rights, qualifications,
limitations or restrictions of or on the class or series. Depending on the
rights and preferences designated for any particular series, issuances of
Preferred Stock could have the effect of diluting shareholders' equity,
earnings per share and voting rights attributable to the Common Stock.
The Board of Directors will make any determination to issue shares of
Preferred Stock based on its judgment at the time as to the best interests of
the Company and its shareholders. Although the Board of Directors has no
current plans of doing so, it could issue a series of Preferred Stock that
might,
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<PAGE>
depending on the terms of such series, impede or discourage an attempt to
obtain control of the Company by means of a merger, tender offer, proxy contest
or other means that the Board of Directors determines not to be in the best
interests of the Company and its shareholders. Under certain circumstances, for
example, such shares could be used to create voting impediments or to deter
persons or entities seeking to effect a takeover or otherwise gain control of
the Company. The issuance of Preferred Stock could also be used to dilute the
stock ownership of a potential acquiror. Such shares could be sold in public or
private transactions to purchasers who might side with the Board of Directors
in opposing a takeover bid that the Board of Directors determines not to be in
the best interests of the Company and its shareholders. In addition, shares of
Preferred Stock could be used in connection with the adoption by the Board of a
shareholder rights plan in which rights to purchase shares of Preferred Stock
could become exercisable by holders of Common Stock upon the occurrence of
certain triggering events. The existence of such a shareholder rights plan
could delay, impede or prevent offers for the Company that the Board of
Directors determines not to be in the best interests of the Company and its
shareholders.
While the Board has in the past discussed the merits of a shareholder
rights plan and may in the future decide to adopt such a plan, the Board of
Directors has no current arrangements, agreements or understandings regarding
the adoption of a shareholder rights plan or for the issuance of any series of
Preferred Stock, should the proposed amendment to the Company's Amended and
Restated Articles of Incorporation be approved and adopted.
The resolution to be considered and acted upon by the shareholders at the
Annual Meeting is as follows:
RESOLVED, that Article VI of the Amended and Restated Articles of
Incorporation of the Company, and any subsequent amendment thereto
effectuated prior to the date hereof, be deleted in their entirety and
replaced with the following:
ARTICLE VI
"The authorized capital stock of this corporation shall be Sixty-four
Million (64,000,000) shares of Common Stock of the par value of
Twenty-five cents ($.25) per share (the "Common Stock") and Twenty-five
Million (25,000,000) shares of preferred stock of the par value of
Twenty-five cents ($.25) per share (the "Preferred Stock"). The
designations and the powers, preferences and the rights, and the
qualifications, limitations or restrictions of the shares of each class
of stock shall be as follows:
Section 1. Common Stock. Subject to all of the rights of the
Preferred Stock, and except as may be expressly provided with respect to
the Preferred Stock herein, by law or by the Board of Directors pursuant
to this Article VI:
(a) dividends may be declared and paid or set apart for payment
upon the Common Stock out of any assets or funds of the corporation
legally available for the payment of dividends;
(b) the holders of Common Stock shall have the right to vote for
the election of directors and on all other matters requiring
shareholder action, each share being entitled to one vote;
16
<PAGE>
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the net assets of the corporation
shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective share ownership; and
(d) the Board of Directors may, from time to time, establish by
resolution different classes or series of shares and may fix the
rights and preferences of said shares in any class or series; and
the Board of Directors shall have the authority to issue shares of a
class or series to holders of shares of another class or series to
effectuate share dividends, splits, or conversion of its outstanding
shares. Subject to the provisions hereof and the limitations
prescribed by law, the Board of Directors is expressly authorized,
by adopting resolutions providing for the issuance of shares of any
particular class or series and, if and to the extent from time to
time required by law, by filing with the Minnesota Secretary of
State a statement with respect to the adoption of the resolutions
pursuant to the Minnesota Business Corporation Act (or other law
hereinafter in effect relating to the same or substantially similar
subject matter), to establish the number of shares to be included in
each such class and series and to fix the designation and relative
powers, preferences and rights and qualifications and limitations or
restrictions thereof relating to the shares of each such class and
series.
Section 2. Preferred Stock. The Preferred Stock may be issued from
time to time by the Board of Directors as shares of one or more series.
Subject to the provisions hereof and the limitations prescribed by law,
the Board of Directors is expressly authorized by adopting resolutions
providing for the issuance of shares of any particular series and, if
and to the extent from time to time required by law, by filing with the
Minnesota Secretary of State a statement with respect to the adoption of
the resolutions pursuant to the Minnesota Business Corporation Act (or
other law hereafter in effect relating to the same or substantially
similar subject matter), to establish the number of shares to be
included in each such series and to fix the designation and relative
powers, preferences and rights and the qualifications, limitations or
restrictions thereof relating to the shares of each such series. The
authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) the distinctive serial designation of such series and the
number of shares constituting such series, provided that the
aggregate number of shares constituting all series of Preferred
Stock shall not exceed 25,000,000;
(b) the annual dividend rate on shares of such series, if any,
whether dividends shall be cumulative and, if so, from which date or
dates;
(c) whether the shares of such series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date
or dates upon and after which such shares shall be redeemable, and
the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(d) the obligation, if any, of the corporation to retire shares
of such series pursuant to a sinking fund;
17
<PAGE>
(e) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and,
if so, the terms and conditions of such conversion or exchange,
including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any;
(f) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
terms of such voting rights;
(g) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of
the corporation; and
(h) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such
series.
Section 3. Pre-emptive Rights. Except as may be provided from time to
time in a written agreement between the corporation and a holder of
Common Stock or Preferred Stock or other action of the Board of
Directors with respect to Common Stock or Preferred Stock, no
shareholder of this corporation shall have any preferential, preemptive
or other rights to subscribe for, purchase or acquire any shares of the
corporation of any class, whether unissued or now or hereafter
authorized, or any obligations or other securities convertible into or
exchangeable for any such shares."
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 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
APPROVAL OF AUDITORS
(PROPOSAL #3)
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
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SHAREHOLDER PROPOSALS
The proxy rules of the Securities and Exchange Commission permit
shareholders of a company, after timely notice to the company, to present
proposals for shareholder action in the Company's Proxy Statement where such
proposals are consistent with applicable law, pertain to matters appropriate
for shareholder action and are not properly omitted by action of the Company in
accordance with the proxy rules. In order for a shareholder proposal to be
considered for inclusion in the Proxy Statement for the January 2000 Annual
Meeting of Shareholders, the proposal must be received by the Secretary of the
Company in writing no later than August 20, 1999. In addition, if the Company
receives notice of a shareholder proposal after November 5, 1999, such proposal
will be considered untimely pursuant to Rules 14a-4 and 14a-5(e) and the
persons named in proxies solicited by the Board of Directors for its 1999
Annual Meeting of Shareholders may exercise discretionary voting power with
respect to such proposal.
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,
1998 is enclosed herewith.
19
<PAGE>
PROXY
MTS SYSTEMS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 26, 1999
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 November 30, 1998, at the ANNUAL MEETING OF SHAREHOLDERS to be held on
January 26, 1999, or any adjournment or postponement thereof.
(1) ELECTION OF [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
DIRECTORS: (except as marked below) to vote for nominees
listed
CHARLES A. BRICKMAN, JEAN-LOU CHAMEAU, SIDNEY W. EMERY, BOBBY I. GRIFFIN,
BRENDAN C. HEGARTY THOMAS E. HOLLORAN, RUSSELL A. GULLOTTI, 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 authorize the creation of
25,000,000 shares of Preferred Stock and to authorize multiple classes of
Common Stock, without changing the number of authorized 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)
<PAGE>
(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.
