Common use of Cut-Back Clause in Contracts

Cut-Back. If the Retention Bonus, alone or in combination with any other payment or benefit payable or previously paid to Executive (collectively, “Payments”) would (i) constitute an “excess parachute payment” within the meaning of Section 280G of the Code (after a reduction for reasonable compensation for personal services rendered by Executive (or Executive refraining from the performance of services in compliance with a non-competition covenant)), and (ii) as such, be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest and penalties incurred in connection with such excise tax, collectively referred to herein as the “Excise Tax”), then Payments shall be either (a) reduced (but not below zero) so that the present value of the Payments will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of the Payments received by Executive shall be subject to the Excise Tax or (b) paid in full, whichever produces the better net after-tax position to Executive. In such event, except as otherwise provided in Section 5.1 of the MTS Systems Corporation Executive Change in Control Severance Plan, as amended and restated (the “Executive CIC Severance Plan”), the reduction will occur in the following order: (x) reduction of cash payments; (y) cancellation of accelerated vesting of equity awards; and (z) reduction of other employee benefits. If acceleration of vesting of compensation from equity awards is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant unless Executive elects in writing a different order for cancellation.

Cut-Back. If the Retention Bonus, alone or in combination with any other payment or benefit payable or previously paid to Executive (collectively, “Payments”) would (i) constitute an “excess parachute payment” within the meaning of Section 280G of the Code (after a reduction for reasonable compensation for personal services rendered by Executive (or Executive refraining from the performance of services in compliance with a non-competition covenant)), and (ii) as such, be subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any interest and penalties incurred in connection with such excise tax, collectively referred to herein as the “Excise Tax”), then Payments shall be either (a) reduced (but not below zero) so that the present value of the Payments will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of the Payments received by Executive shall be subject to the Excise Tax or (b) paid in full, whichever produces the better net after-tax position to Executive. In such event, except as otherwise provided in Section 5.1 of the MTS Systems Corporation Executive Change in Control Severance Plan, as amended and restated (the “Executive CIC Severance Plan”), the reduction will occur in the following order: (x) reduction of cash payments; (y) cancellation of accelerated vesting of equity awards; and (z) reduction of other employee benefits. If acceleration of vesting of compensation from equity awards is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant unless Executive elects in writing a different order for cancellation.