EXHIBIT 10.k
SEVERANCE AGREEMENT
AGREEMENT made as of this 20th day of May, 1997 by and between MTS
Systems Corporation, a Minnesota corporation ("MTS") and Xxxxxx X. Xxxxxxxx (the
"Executive").
WHEREAS, MTS considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of MTS and its shareholders; and
WHEREAS, Executive has made and is expected to make, due to Executive's
intimate knowledge of the business and affairs of MTS, its policies, methods,
personnel and problems, a significant contribution to the profitability, growth
and financial strength of MTS; and
WHEREAS, Executive is willing to remain in the employ of MTS upon the
understanding that MTS will provide income security if the Executive's
employment is terminated under certain terms and conditions;
THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until the earlier of (a) September 30, 2000, (b)
the date the Executive and MTS agree in writing to terminate this Agreement, or
(c) the Date of Termination indicated under paragraph 2, 3, or 4 hereunder.
Notwithstanding the preceding sentence, if a change in control occurs, this
Agreement, except for subparagraph 4(b), shall be superseded by the provisions
of any other Agreement in effect between the Executive and MTS which contains
provisions relating to benefits due Executive following a Change in Control if
the Executive would receive greater benefits thereunder. If this Agreement has
not terminated under (b) or (c) by September 30, 2000, it shall automatically
renew for successive one-year terms effective October 1, 2000 (and each
successive October 1 thereafter during which the Agreement remains in effect)
unless Executive or MTS has provided a Notice of Termination to the other party
prior to the October 1 renewal date.
2. Termination by Reason of Death or Disability. In the event of the
Executive's death or disability while employed by MTS, Executive shall be
entitled to such
benefits provided under any policy, plan or program governing death or
disability maintained by MTS and covering such Executive. The determination of
disability and the amount and entitlement of benefits shall be governed by the
terms of such policy, plan or program. The gross (pre-tax) benefits which
Executive receives under subparagraph 4(a) shall be reduced by any gross
(pre-tax) benefits which Executive receives under any MTS disability or life
insurance policy, plan or program for which MTS paid the premiums, including if
those premiums were reported as taxable income to Executive.
3. Termination for Cause.
(a) If Executive's employment shall be terminated by MTS for
Cause, MTS shall pay to Executive his full base salary through the Date
of Termination at the rate in effect at the time of Notice of
Termination is given and MTS shall have no further obligation to
Executive under this Agreement.
(b) Termination by MTS of Executive's employment for "Cause"
shall mean termination as a result of:
(i) the conviction of the Executive by a court of
competent jurisdiction for felony criminal conduct; or
(ii) willful misconduct by the Executive; or
(iii) violation by the Executive of any employment
agreement applicable to the Executive.
4. Termination Other Than for Cause. Except for Cause or Change in
Control, Executive will be Chief Executive Officer at least until October 1,
1997 and Chairman of the Board until January 28, 1998, and neither party will
terminate the employment relationship before January 28, 1998. If Executive's
employment is terminated by MTS other than for Cause or if Executive voluntarily
terminates his employment, including because a successor to the assets of MTS
fails to assume MTS's obligations under this Agreement, Executive shall be
entitled to the following benefits:
(a) Executive shall be paid a monthly Severance Payment of an
amount equal to the Executive's Monthly Gross Income, as defined in
subparagraph (vi) below, for the time periods set forth in
subparagraphs (i) through (v) below.
(i) If Executive's Date of Termination is on or
before April 30, 1998, Severance Payments shall be paid to
Executive for 24 months.
(ii) If Executive's Date of Termination is between
May 1, 1998 and September 30, 1998, Severance Payments shall
be paid to Executive for the number of months indicated below.
Month in which Date Months of Severance
of Termination Occurs Payments
--------------------- --------
May, 1998 23
June, 1998 22
July, 1998 21
August, 1998 20
September, 1998 19
(iii) If Executive's Date of Termination is between
October 1, 1998 and September 30, 1999, Severance Payments
shall be paid for 18 months.
(iv) If Executive's Date of Termination is between
October 1, 1999 and February 28, 2000, Severance Payments
shall be paid for the number of months indicated below.
Month in which Date Months of Severance
of Termination Occurs Payments
--------------------- --------
October, 1999 17
November, 1999 16
December, 1999 15
January, 2000 14
February, 2000 13
(v) If Executive's Date of Termination is on or after
March 1, 2000, Severance Payments shall be paid for 12 months.
(vi) For purposes of this Agreement, Monthly Gross
Income shall mean the sum of the following amounts, subject to
applicable federal and state withholding.
(A) 1/12 of the highest average base salary
for any 12-consecutive month period during the 36
calendar month period ending immediately prior to the
Date of Termination; plus
(B) 1/36 of the total Management Variable
Compensation earned during the 3 most recent fiscal
years ending immediately prior to the Date of
Termination; plus
(C) the product of the average percentage of
MTS profit sharing contributions to the MTS Systems
Corporation Profit Sharing Retirement Plan and Trust
(as a percent of Compensation as defined in the Plan)
for the 3 most recent Plan Years ending immediately
prior to the Date of Termination multiplied by the
sum of (i) and (ii) above.
(b) MTS shall continue to pay the employer share of
Executive's MTS group life, disability, accident and health insurance
benefits until Executive's Date of Termination. Thereafter, the
following shall occur:
(i) If Executive's Date of Termination occurs prior
to September 30, 1998, MTS shall continue to pay the employer
share of Executive's said group benefit premiums until that
date.
(ii) Effective October 1, 1998 and until September
30, 2000, MTS shall pay 50% of said group benefit premiums.
All premium payments made on Executive's behalf following his Date of
Termination and Executive's continued participation in the plans are
contingent upon Executive making the appropriate timely written
election to continue his group benefits following his Date of
Termination, said group benefits continuing in effect for active MTS
employees, and Executive continuing to be eligible under the terms of
the plans and applicable laws. Executive shall be responsible for
payment of his portion of the premiums for such benefits. MTS may
deduct from its payments to the Executive those amounts. Benefits
otherwise receivable by Executive pursuant to this subparagraph (b)
shall be reduced or eliminated to the extent comparable benefits are
actually received by Executive during such period from a source outside
MTS, and any such benefits actually received by Executive shall be
reported to MTS.
(c) MTS shall pay to Executive all legal fees and expenses
reasonably incurred by Executive in seeking to obtain or enforce any
right or benefit to which he is entitled under this Agreement.
(d) Executive shall be entitled to receive all benefits
payable to the Executive under the MTS Systems Corporation Profit
Sharing Retirement Plan and any other plan or agreement relating to
retirement benefits.
(e) Executive shall receive, on the date of this Agreement, an
option to purchase 50,000 shares of MTS common stock. Such option shall
be granted pursuant to one or more Option Agreements, substantially in
the form of Exhibit A, and shall have the following terms: The option
shall be immediately vested and exercisable and shall be transferrable
to the extent provided under the MTS 1997 Stock Option Plan. The
exercise period of the option shall expire on the fifth anniversary of
the date of execution of this Agreement by the Executive. The exercise
price shall equal the closing price of the Company's common stock on
the NASDAQ national market on the date of this Agreement, subject to
adjustment in certain events as provided in the Option Agreement.
Executive's rights under any existing Option Agreements and under any
other options which the Executive may be granted in the future, shall
remain in full force and effect including, in particular, the
expiration of the exercise period for such options as contained in the
Option Agreements. Nothing under this Agreement or under the Option
Agreement referred to above, shall extend the exercise period for any
existing options or any future options granted to Executive.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise; nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits after the Date of
Termination or otherwise except as specifically provided herein.
6. Non-Competition and Confidentiality.
(a) Executive agrees that, as a condition of receiving
benefits under this Agreement, he will not render services directly or
indirectly to any competing organization located in any market in which
MTS is doing business as of Executive's Date of Termination for the
period of time during which Executive is receiving benefits under this
Agreement or any other Agreement containing Change in Control
provisions, in connection with the design, implementation, development,
manufacture, marketing, sale, merchandising, leasing, servicing or
promotion of any "Conflicting Product" which as used herein means any
product, process, system or service of any person, firm, corporation,
organization other than MTS, in existence or under development, which
is the same as or similar to or competes with, or has a usage allied
to, a product, process, system, or service produced, developed, or used
by MTS. MTS agrees that it will respond in writing to Executive within
15 days of its receipt of Executive's written inquiry to the Board as
to whether an activity proposed by him would constitute competition
under this subparagraph. If MTS fails to respond to Executive as set
forth in the preceding sentence, Executive's proposed activity shall be
deemed not to constitute competition under this subparagraph. MTS
agrees that its approval of such proposed activity by Executive shall
not be unreasonably withheld. Executive agrees that violation of this
covenant not to compete with MTS shall result in immediate cessation of
all benefits hereunder, other than insurance benefits, which
Executive may continue where permitted under federal and state law at
his own expense.
(b) Executive further agrees and acknowledges his existing
obligation that, at all times during and subsequent to his employment
with MTS, he will not divulge or appropriate to his own use or the uses
of others any secret or confidential information pertaining to the
business of MTS, or any of its subsidiaries, obtained during his
employment by MTS or any of its subsidiaries.
7. Successors; Binding Agreement
(a) MTS will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of MTS to expressly
assume and agree to perform this Agreement in the same manner and to
the same extent that MTS would be required to perform it if no such
succession had taken place. Failure of MTS to obtain such assumption
and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Executive (i), if
Executive is still employed by MTS, to terminate his employment by
written Notice of Termination and to receive the compensation and
benefits from MTS described in this Agreement as if his termination was
by MTS other than for Cause, or (ii) if Executive is no longer employed
by MTS but is receiving benefits hereunder, to accelerate all remaining
benefits due him hereunder and receive them, to the extent possible, in
a lump sum, upon his written notice to the Board.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, heirs,
and designated beneficiaries. If Executive should die while any amount
would still be payable to Executive hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's designated beneficiaries, or, if there is no such
designated beneficiary, to the Executive's estate.
8. Notice of Termination.
(a) Any purported termination of Executive's employment by
either Executive or MTS under this Agreement shall be communicated by
written notice to the other party.
(b) For purposes of this Agreement, "Date of Termination"
shall mean the date specified in the written Notice of Termination
which shall not be less than 10 nor more than 30 days from the date
such Notice of Termination is given.
(c) Notice of Termination and all other communications
provided for in the Agreement shall be deemed to have been duly given
when delivered or mailed by United States registered or certified mail,
return receipt requested, postage pre-paid, addressed to the last known
residence address of the Executive or in the case of MTS, to its
principal office to the attention of each of the then directors of MTS
with a copy to its Secretary, or to such other address as either party
may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon
receipt.
9. Release of Claims. Executive's right to the benefits and payments
described in paragraph 4 of this Agreement is contingent upon Executive's
execution of a severance release agreement which shall be provided to Executive
by MTS with or following his Notice of Termination. The severance release
agreement shall require a full release of all claims which Executive may have
against MTS or any MTS affiliate or individual associated with MTS.
10. Injunctive Relief. Executive consents that, in the case of any
violation or threatened violation of paragraph 6 of this Agreement, MTS may
apply for and secure injunctive relief, temporary or provisional, in court,
without bond but upon due notice, pending final resolution on the merits
pursuant to arbitration as set forth in paragraph 11 hereof. No waiver of any
violation of this Agreement shall be implied from any failure by MTS to take
action under this paragraph.
11. Arbitration. Any and all claims or disputes between Executive and
MTS (including the validity, scope, and enforceability of this paragraph),
except as otherwise provided under paragraph 10, shall be submitted for
arbitration and resolution to an arbitrator. No demand for arbitration may be
made after the date when the institution of legal or equitable proceedings based
on such claim or dispute would be barred by the applicable statute of
limitation. The arbitrator shall be selected by mutual agreement of the parties.
Unless otherwise provided for in this Agreement, the Expedited Labor Arbitration
Rules of the American Arbitration Association shall apply. If the parties are
unable to agree upon an arbitrator, any such dispute shall be solely and finally
settled by arbitration in accordance with the Expedited Labor Arbitration Rules
of the American Arbitration Association ("AAA"). The parties agree that no
punitive damages shall be awarded hereunder. The parties also agree that all
awards, decisions and remedies in favor of a winning party hereunder with
respect to any issue shall be proportional to the violation caused by the losing
party with respect to that issue. All costs in conducting the arbitration,
including but not limited to the arbitration filing fee, the arbitrator's fees
and expenses, and the reasonable attorney's fees and expenses of the prevailing
party (including the attorney's fees and costs incurred by the prevailing party
in seeking or resisting temporary or provisional court relief as set out in
paragraph 10 above), shall be the responsibility of the losing party. In the
event there is more than one issue in dispute and there is no one prevailing
party with respect to all issues in dispute, costs and attorney's fees shall be
prorated by the arbitrator according to the relative dollar value of each issue.
The arbitrator's Award shall be final and binding. In the event either party
must resort to the judicial process to enforce the provisions of this Agreement,
the award
of an arbitrator or equitable relief granted by an arbitrator, the party seeking
enforcement shall be entitled to recover from the other party all costs of
litigation including, but not limited to, reasonable attorney's fees and court
costs. The arbitration proceedings and Award shall be maintained by both parties
as strictly confidential, except as otherwise required by court order and with
respect to the parties' attorneys and tax advisors, and, with respect to MTS,
members of its management, and, with respect to Executive, his family.
12. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto
at any time of any breach by the other party to this Agreement of, or
compliance with, any other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
similar time.
(b) No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this
Agreement.
(c) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of
Minnesota.
(d) Any provision of this Agreement which conflicts with
applicable law shall be modified to the extent necessary to ensure its
enforceability. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
This Agreement supersedes the Employment Agreements between MTS and the
Executive dated 25th of January, 1984 and May 1, 1990.
IN WITNESS WHEREOF, MTS, through its authorized officer, and the
Executive have executed this Agreement as of the day and date first above
written.
EXECUTIVE: MTS SYSTEMS CORPORATION
By
------------------------------ -----------------------------
Xxxxxx X. Xxxxxxxx
Its
-----------------------------
FIRST AMENDMENT TO SEVERANCE AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1997, amends the Severance
Agreement between MTS SYSTEMS CORPORATION, a Minnesota corporation (the
"Company") and XXXXXX X. XXXXXXXX, an employee of the Company (the "Employee")
dated as of May 20, 1997.
WHEREAS, the Company on May 20, 1997, granted to the Employee, pursuant to
subparagraph 4(e) of the Severance Agreement and in accordance with the terms of
the Nonqualified Stock Option Agreement also dated May 20, 1997, the right and
option to purchase up to 50,000 shares of common stock of the Company on the
terms and conditions set forth therein; and
WHEREAS, the Employee and the Company desire that the number of Shares granted
to Employee pursuant to the Severance Agreement and under the terms of the
Nonqualified Stock Option Agreement be reduced to 40,000 Shares;
THEREFORE, the parties hereto agree that Subparagraph 4(e) of the Severance
Agreement be and hereby is amended to reduce the number of shares subject to the
option grant from 50,000 Shares to 40,000 Shares, by substituting "40,000" for
"50,000" on the second line of said Subparagraph.
Except as and set forth above, the terms and conditions of the Severance
Agreement dated as of May 20, 1997 be and hereby shall remain in full force and
effect including, but not limited to, the exercise price per Share upon exercise
and the date of expiration of the Option.
IN WITNESS WHEREOF, the Company has duly executed this Agreement and the
Employee has hereunto set his hand as of the day and year first above written.
MTS SYSTEMS CORPORATION
By:
By:
Assistant Secretary
EMPLOYEE
Xxxxxx X. Xxxxxxxx
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of the 20th day of May, 1997, between MTS
SYSTEMS CORPORATION, a Minnesota corporation (the "Company") and XXXXXX X.
XXXXXXXX, an employee of the Company or of a subsidiary corporation of the
Company (the "Employee").
The Company desires, by affording the Employee an opportunity to
purchase its Common Shares, par value $0.25 (hereinafter sometimes called
"Shares"), to provide the Employee with an added incentive to extend his period
of service to the Company, and through a proprietary interest, to increase his
personal participation in the success of the Company.
THEREFORE, the parties agree:
1. The Company hereby irrevocably grants to the Employee, as a matter
of separate agreement and not in lieu of salary or any other compensation for
services, the right and option (the "Option"), to purchase all or any part of an
aggregate of 50,000 Shares on the terms and conditions herein set forth, at the
price of $22.25 per Share. These Shares are issued to the Employee directly from
the authorized but unissued stock of the Company and are not issued pursuant to
any existing stock option plan of the Company.
2. Subject to the other provisions of this Agreement, this Option shall
be exercisable immediately after the date of this Agreement and Shares may be
purchased at any time thereafter until expiration of the Option. This Option
shall expire, and neither the Employee nor his transferee as defined in Section
6 may exercise this Option after the 20th day of May, 2002.
3. This Agreement does not confer any right with respect to continuance
of employment by the Company or by a subsidiary of the Company, nor will this
Agreement interfere in any way with the Employee's right, or Employee's
employer's right, to terminate Employee's employment at any time.
4. The Employee shall have none of the rights of a shareholder with
respect to the Shares subject to this Option until the Shares shall have been
issued to Employee upon exercise of the Option.
5. Except as provided in Section 6, this Option shall not be
transferable by the Employee (or by his transferee as provided in Section 6)
otherwise than by will or the laws of descent and distribution, and is
exercisable, during Employee's lifetime, only by Employee. Any attempt to
assign, transfer, pledge, hypothecate, or otherwise dispose of this Option
contrary to the provisions of Sections 5 or 6, or any attachment or similar
process upon this Option, shall be null and void and without effect.
6. The Employee may transfer this Option in whole or in increments of
1,000 Shares to (a) the Employee's spouse, children or grandchildren ("Immediate
Family Members"), (b) a trust or trusts for the exclusive benefit of the
Employee and/or such Immediate Family Members, or (c) a partnership or
partnerships in which the Employee and/or such Immediate Family Members are the
only partners, provided that (i) there is no consideration for any such
transfer, and (ii) subsequent transfers of transferred Options shall be
prohibited except to other Immediate Family Members of the Employee or by the
laws of descent and distribution of the transferee. Following transfer, the
Option or Options shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer, provided that the term
Employee herein shall in such event be deemed to refer to the transferee.
7. In the event this Option is being exercised by any person or persons
other than the Employee, the notice of exercise shall be accompanied by an
appropriate proof of the right of such person or persons to exercise this
Option.
8. The Employee understands that upon exercise of this Option, in whole
or in part, that the Shares purchased may not be sold, transferred, pledged or
otherwise disposed of unless the Shares are registered under the Securities Act
of 1933, or unless the Company has received an opinion of counsel satisfactory
to the Company that said registration is not required.
9. In the event that the Employee breaches the terms of the
Non-Competition and Confidentiality provisions described in Section 6 of the
Employee's Severance Agreement dated May 20, 1997, any Options which are
unexercised shall immediately be forfeited and shall not thereafter be
exercisable. In addition, the Company shall have the right to repurchase for
cash any shares of the Company's common stock acquired by the Employee as a
result of the exercise of any portion or all of this Option and held by either
the Employee or by any Immediate Family Member or by any trust or partnership in
which Employee or any Immediate Family Member has a beneficial interest. The
Company shall give the Employee written notice of the exercise of its right to
repurchase and shall close on the repurchase no later than three months after
the date of that notice. The purchase price for the shares so purchased shall be
the purchase price for Option Shares under this Option Agreement or the closing
bid price for shares of the Company's common stock on the date of the Company's
notice, whichever is lower.
10. In the event that the Employee breaches the terms of the
Non-Competition and Confidentiality provision described in Section 6 of the
Employee's Severance Agreement dated May 20, 1997, Employee shall pay to the
Company in cash, upon demand, all gains or other economic value actually or
constructively received by Employee, any Immediate Family Member or any trust or
partnership in which Employee or any Immediate Family Member has a beneficial
interest, upon the sale of any Option Shares in connection with the Employee's
or transferee's exercise of any portion or all of the Option under this Option
Agreement, equal to the difference between the purchase price for Option Shares
under this Option Agreement and the value received upon the sale of any such
shares. The foregoing payment will apply to all such sales which occur at any
time after that date which is 12 months prior to the date of the termination of
the employment of the Employee.
11. This Option Agreement shall be administered by the Compensation
Committee of the Board of Directors consisting of at least two Directors, all of
whom shall be Outside Directors and Non-Employee Directors, who shall serve at
the pleasure of the Board.
12. The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing this Option as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Option Agreement and to otherwise supervise the administration of the
Option.
13. All decisions made by the Committee pursuant to the provisions of
the Option shall be final and binding on all persons, including the Company,
Employee and the Employee's Immediate Family Members.
14. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Shares or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the number and option price of
Shares subject to this Option, as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of Shares subject to
any award shall always be a whole number.
15. The grant of this Option shall not limit in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
16. This Option may be exercised in whole or in part at any time during
the exercise period by giving written notice of exercise to the Company,
specifying the number of Shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or by any other form of legal consideration deemed sufficient by the
Committee and consistent with applicable law, including promissory notes or a
properly executed exercise notice together with irrevocable instructions to a
broker acceptable to the Company to promptly deliver to the Company the amount
of sale or loan proceeds to pay the exercise price. Payment in full or in part
may also be made in the form of unrestricted Shares already owned by the
Employee (which in the case of Stock acquired upon exercise of the Option have
been owned for more than six months on the date of surrender). All or part of
the option exercise price made be paid by having the Company withhold from the
Shares that would otherwise be issued upon exercise that number of Shares having
a Fair Market Value equal to the aggregate option exercise price for the Shares
with respect to which such election is made. No Shares shall be issued until
full payment therefor has been made. The Employee shall generally have the
rights to dividends and other rights of a shareholder with respect to shares
subject to the option when the Employee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in Section 8.
17. The Committee may not amend, alter, or terminate this Option
without the written consent of the Employee.
18. The Employee shall, no later than the date as of which any part of
the value of an award first becomes includible as compensation in the gross
income of the Employee for Federal income tax purposes, pay to the Company, or
make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under this Option shall be
conditional on such payment or arrangements and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Employee. The Employee may elect by written notice
to the Company to satisfy part or all of the withholding tax requirements
associated with the award by (i) authorizing the Company to retain from the
number of Shares that would otherwise be deliverable to the Employee, or (ii)
delivering to the Company from Shares already owned by the Employee, that number
of shares having an aggregate Fair Market Value equal to part or all of the tax
payable by the Employee under this Section 18. Any such election shall be in
accordance with, and subject to, applicable tax and securities laws, regulations
and rulings.
19. For purposes of this Option, the following terms shall have the
following meaning:
(a) "Fair Market Value" of Share on any
given date shall be determined by the Committee as follows:
(i) if the Share is listed for trading on one of more national
securities exchanges, or is traded on the Nasdaq Stock Market,
the last reported sales price on the principal such exchange
or the Nasdaq Stock Market on the date in question, or if such
Share shall not have been traded on such principal exchange on
such date, the last reported sales price on such principal
exchange or the Nasdaq Stock Market on the first day prior
thereto on which such Share was so traded; or (ii) if the
Share is not listed for trading on a national securities
exchange or the Nasdaq Stock Market, but is traded in the
over-the-counter market, including the Nasdaq Small Cap
Market, the closing bid price for such Share on the date in
question, or if there is no such bid price for such Share on
such date, the closing bid price on the first day prior
thereto on which such price existed; or (iii) if neither (i)
or (ii) is applicable, by any means fair and reasonable by the
Committee, which determination shall be final and binding on
all parties.
(b) "Non-Employee Director" means a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3)
under the Securities Exchange Act of 1934.
(c) "Outside Director" means a Director who:
(i) is not a current employee of the Company or any member of
an affiliated group which includes the Company; (ii) is not a
former employee of the Company who receives compensation for
prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year; (iii) has not been
an officer of the Company; (iv) does not receive remuneration
from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise
permitted under
Code Section 162(m) and regulations thereunder. For this
purpose, remuneration includes any payment in exchange for
good or services. This definition shall be further governed by
the provisions of Code Section 162(m) and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the Company has duly executed this Agreement and
the Employee has hereunto set his/her hand as of the day and year first above
written.
MTS SYSTEMS CORPORATION
By:
Its:
By:
Its Assistant Secretary
EMPLOYEE
Xxxxxx X. Xxxxxxxx
FIRST AMENDMENT TO NONQUALIFIED
STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1997, amends that certain
Stock Option Agreement between MTS SYSTEMS CORPORATION, a Minnesota corporation
(the "Company") and XXXXXX X. XXXXXXXX, an employee of the Company (the
*Employee*) dated as of May 20, 1997.
WHEREAS, the Company on May 20, 1997, granted to the Employee, pursuant to the
terms of the Nonqualified Stock Option Agreement, the right and option to
purchase up to 50,000 shares of common stock of the Company on the terms and
conditions set forth therein; and
WHEREAS, the Employee and the Company desire that the number of Shares granted
to Employee under the terms of the Nonqualified Stock Option Agreement be
reduced to 40,000 Shares;
THEREFORE, the parties hereto agree that Section 1 of the Nonqualified Stock
Option Agreement be and hereby is amended to reduce the number of shares subject
to the option grant from 50,000 Shares to 40,000 Shares and to accomplish this,
said Section 1 hereby is amended to read as follows:
*The Company hereby irrevocably grants to the Employee, as a matter of a
separate Agreement and not in lieu of salary or another compensation for
services, the right and option (the *Option*), to purchase all or any part of an
aggregate of 40,000 Shares on the terms and conditions herein set forth, at a
price of $22.25 per Share. These Shares are issued to the Employee directly from
the authorized, but unissued stock of the Company and are not issued pursuant to
any existing Stock Option Plan of the Company.*
Except as and set forth above, the terms and conditions of the Nonqualified
Stock Option Agreement dated as of May 20, 1997 be and hereby shall remain in
full force and effect including, but not limited to, the exercise price per
Share upon exercise and the date of expiration of the Option.
IN WITNESS WHEREOF, the Company has duly executed this Agreement and the
Employee has hereunto set his hand as of the day and year first above written.
MTS SYSTEMS CORPORATION
By:
By:
Assistant Secretary
EMPLOYEE
Xxxxxx X. Xxxxxxxx
