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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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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):
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Proposed maximum aggregate value of transaction:
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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MTS Systems Corporation
14000 Technology Drive
Eden Prairie, MN 55344-2290 Telephone 952-937-4000
Fax: 952-937-4515
Info@mts.com
www.mts.com
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Very truly yours,
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Laura B. Hamilton
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Chair and Chief Executive Officer
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1.
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To elect eight directors to hold office until the next annual meeting of shareholders or until their successors are duly elected;
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2.
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To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2011;
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3.
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To approve the MTS Systems Corporation 2011 Stock Incentive Plan;
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4.
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To approve the MTS Systems Corporation 2012 Employee Stock Purchase Plan;
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5.
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To hold a non-binding, advisory vote regarding the compensation of the Company’s named executive officers;
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6.
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To hold a non-binding, advisory vote regarding the frequency of the voting on the compensation of the Company’s named executive officers; and
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7.
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To transact such other business as may properly come before the meeting or any adjournments or postponements thereof.
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For the Board of Directors,
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Bruce W. Mooty
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Secretary
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All shareholders are cordially invited to attend the annual meeting of shareholders in person. Whether or not you expect to personally attend, please vote over the Internet at www.proxyvote.com or by telephone at 1-800-690-6903. Alternatively, you may request a paper proxy card, which you may complete, sign and return by mail. The proxy is solicited by the Board of Directors and may be revoked or withdrawn by you at any time before it is exercised. |
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1)
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By Internet: You may access the website at www.proxyvote.com to cast your vote 24 hours a day, 7 days a week. You will need your control number found in the Notice of Internet Availability. Follow the instructions provided to obtain your records and create an electronic ballot.
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2)
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By telephone: If you reside in the United States or Canada, you may call 1-800-690-6903 by using any touch-tone telephone, 24 hours a day, 7 days a week. Have your Notice of Internet Availability in hand when you call and follow the voice prompts to cast your vote.
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3)
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By mail: If you request a paper proxy card, mark, sign and date each proxy card you receive and return it in the postage-paid envelope provided or to the location indicated on the proxy card.
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4)
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In person at the Annual Meeting: If you are a shareholder of record, please bring your proxy card to the Annual Meeting to vote your shares in person. If you hold your shares in street name, you must request a legal proxy from your broker or nominee to vote in person at the Annual Meeting.
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1)
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Returning a later-dated proxy by Internet, telephone or mail;
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2)
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Delivering a written notice of revocation to our Assistant Corporate Secretary at 14000 Technology Drive, Eden Prairie, Minnesota 55344; or
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3)
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Attending the Annual Meeting and voting in person. A shareholder’s attendance at the Annual Meeting will not by itself revoke a proxy given by the shareholder. Persons who hold shares through a broker or other intermediary should consult that party as to the procedures to be used for revoking a vote.
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1)
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FOR the election of each of the nominated directors (see Proposal 1 on page 5);
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2)
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FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2011 (see Proposal 2 on page 13);
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3)
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FOR the approval of the MTS Systems Corporation 2011 Stock Incentive Plan (see Proposal 3 on page 15);
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4)
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FOR the approval of the MTS Systems Corporation 2012 Employee Stock Purchase Plan (see Proposal 4 on page 21);
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5)
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FOR the approval of the non-binding, advisory vote regarding the compensation of the Company’s named executive officers (see Proposal 5 on page 45); and
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6)
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For the approval of the non-binding, advisory vote on a TWO-YEAR frequency of voting on the compensation of the Company’s named executive officers (see Proposal 6 on page 46).
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David J. Anderson – Age 63
Director since 2009
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Director of Modine Manufacturing Company (developer and manufacturer of thermal management systems and components) and a member of its Corporate Governance and Nominating Committee and Audit Committee since 2010; Director of Schnitzer Steel Industries, Inc. (metals recycler and steel manufacturer) and a member of its Nominating and Corporate Governance Committee since 2009; Co-Vice Chairman of Sauer-Danfoss, Inc. (developer and manufacturer of fluid power and electronic components and systems for mobile equipment applications) from 2008 until June 2009; President, Chief Executive Officer and Director of Sauer-Danfoss Inc. from 2002 until he retired in January 2009; held various senior management positions with Sauer-Danfoss Inc. from 1984 to 2008; prior to 1984, held various positions in sales, marketing and applications engineering within several manufacturing and distribution businesses. Mr. Anderson served on the boards of directors of the National Fluid Power Association and the National Fluid Power Association Education and Technology Foundation, chairing each in 2008 and 2009.
Mr. Anderson’s qualifications to sit on our Board include his 26 years of industrial business experience and his chief executive officer and operations experience. He also has technology and engineering experience, and ability to formulate and execute strategy and financial expertise.
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Jean-Lou Chameau – Age 57
Director since 1998
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President, California Institute of Technology (Caltech) since September 2006; Provost and Vice President at the Georgia Institute of Technology (Georgia Tech) June 2001 to August 2006; Dean of the College of Engineering and Georgia Research Alliance Eminent Scholar from 1997 to June 2001; Vice Provost for Research and Dean of Graduate Studies from 1995 to 1997; President of Golder Associates, Inc. (a provider of ground engineering, earth, and environmental services) from 1994 to 1995; Director of the School of Civil and Environmental Engineering at Georgia Tech from 1991 to 1994; Professor of Geotechnical Engineering at Purdue University from 1980 to 1991. Dr. Chameau currently serves as Trustee, Board of Trustees of the California Institute of Technology and Trustee of Internet2 and is a member of the Board on Higher Education and Workforce, National Research Council, member of InterWest Partners Advisory Committee, member of the Executive Committee, Council on Competitiveness, member of the Conseil d’Administration, Ecole Polytechnique, and member of the Academic Research Council, Singapore. He is a member of the U.S. National Academy of Engineering.
Dr. Chameau’s qualifications to sit on our Board include his executive experience in a large organization with a national laboratory and his expertise in engineering, science, research and technology. He also has extensive knowledge and experience in budgetary and financial responsibilities, strategic planning, human capital development, Europe and Asia business, and federal agency funding of research and development.
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Laura B. Hamilton – Age 49
Director since 2007
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Chair of the Board since September 2008; Chief Executive Officer of the Company since 2008; President and Chief Operating Officer of the Company from 2007 to 2008; Senior Vice President of the Company’s Test Division from 2003 to 2007; Vice President of the Company’s Materials and Aerospace Divisions from 2000 to 2003; Director of Business Process Improvement from 1999 to 2000; held various management positions with Quest Diagnostics (national clinical laboratory) from 1995 to 1999; held various management positions with Corning, Inc. (manufacturer of specialty glass and ceramics) from 1989 to 1995; held various positions, ending with Tax Manager, with Arthur Young and Company (public accounting firm) from 1984 to 1989.
Ms. Hamilton’s qualifications to sit on our Board include her 21 years of leadership and management experience in various technical, industrial businesses, including serving as Chair and Chief Executive Officer of the Company since 2008. She has substantial experience in strategy, policy setting, international business, human capital development and change management.
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Brendan C. Hegarty – Age 68
Director since 1998
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Director of Colm Campbell Company, Inc. (holding company of SAE Power, Inc., a manufacturer of switching power supplies) since 1994; Chief Executive Officer of NanoMagnetics (start-up nanotechnology company located in the United Kingdom) from 2001 to 2002; consultant with NanoMagnetics until he retired in 2003; Executive Vice President and Chief Operating Officer of Seagate Technology (manufacturer of computer disk drives) from 1993 to 1998; Senior Vice President and Chief Technical Officer of Seagate Technology from 1989 to 1993; Vice President of Thin Film Head 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.
Dr. Hegarty’s qualifications to sit on our Board include his over 43 years of executive management experience in technical, industrial business. He has technical research and development management experience, manufacturing experience and international management and investment experience.
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Emily M. Liggett – Age 55
Director since 2010
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President and Chief Executive Officer of Novatorque, Inc. (manufacturer of high-efficiency electric motor systems) since 2009; President and Chief Executive Officer of Apexon, Inc. (provider of supply chain optimization software solutions for global manufacturers) from 2004 to 2007; President and Chief Executive Officer of Capstone Turbine Corporation (provider of microturbine systems for clean, continuous distributed energy generation) from 2002 to 2003; various management and executive roles at Raychem Corporation (manufacturer of materials, electronics, telecom and energy products acquired by Tyco International in 1999) from 1984 to 2001, including Corporate Vice President of Raychem and Managing Director of Tyco Ventures. Ms. Liggett currently serves on the board of directors of Immersion Corporation and the Purdue University School of Engineering Advisory Board.
Ms. Liggett’s qualifications to sit on our Board include her chief executive officer and management experience in a variety of technical industrial companies. She has managed worldwide businesses, partnerships, and international joint ventures. She also has public company and private company operating and board experience, and expertise in strategy, operations, new product development, sales, marketing, and business development for highly technical businesses.
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William V. Murray – Age 50
Director since 2010
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President and Chief Executive Officer of ReShape Medical, Inc. (an early stage medical device company developing a non-surgical treatment for obesity) from 2008 until he voluntarily resigned effective December 10, 2010; President and Chief Executive Officer of Murray Consulting, Inc. (provider of executive management consulting and interim executive management services in the medical technology/life science industries) from 2006 to 2007; Division President of Molecular Biology at Applied Biosystems, Inc. (now part of Life Technologies) (life science tools company) from 2005 to 2006; Group President of Respiratory Technologies of VIASYS Healthcare, Inc. (publicly traded medical company focused on respiratory, critical care and neuro diagnostic businesses) from 2003 to 2004; held various senior executive positions at Medtronic, Inc. (a medical products company) from 1992 to 2003; held various product development and engineering positions at Medtronic, Inc. from 1985 to 1992; design engineer at Motorola, Inc. from 1983 to 1985. Mr. Murray currently serves as a Biomedical Leadership Team Board member for Octane (an industry association).
Mr. Murray’s qualifications to sit on our Board include his over 18 years of senior executive positions in various technical and manufacturing companies, with significant experience in product and business development, operations, business growth strategies and profit and loss responsibilities.
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Barb J. Samardzich – Age 52
Director since 2001
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Vice President of Global Product Programs of Ford Motor Company (car and truck manufacturer) effective January 1, 2011; Vice President of Powertrain Engineering of Ford Motor Company from 2005 to 2010; Executive Director - Small FWD and RWD Vehicles of Ford Motor Company from 2002 to 2005; Chief Engineer for the Automatic Transmission Engineering Operations of Ford Motor Company from 2000 to 2002; Quality Director for the Small and Medium Vehicle Center of the European operations of Ford Motor Company from 1999 to 2000; Chief Program Engineer for F650/F750 Ford trucks of Ford Motor Company from 1998 to 1999; previously held various positions in the Powertrain division of Ford Motor Company from 1990 to 1998; various engineering, sales and marketing positions in the Commercial Nuclear Fuel Division of Westinghouse Electric Corporation from 1981 to 1990.
Ms. Samardzich’s qualifications to sit on our Board include her extensive management and operations experience at a worldwide automotive manufacturing company. She has significant engineering experience, value creation and profit and loss responsibilities.
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Gail P. Steinel – Age 53
Director since 2009
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Owner of Executive Advisors (provider of leadership development services and strategic / profit improvement consulting) since 2007; Executive Vice President, Consumer, Industrial & Technology business unit at BearingPoint (a global technology and management consulting company) from 2002 to 2007; progressive management experience at Arthur Andersen (provider of audit, tax and consulting services), where her final position was Global Managing Partner of the Business Consulting Division, from 1979 to 2002. Ms. Steinel serves on several boards including the Board of Trustees of Federal Realty Investment Trust and is Chairperson of its Audit Committee.
Ms. Steinel’s qualifications to sit on our Board include her global managing partner experience, more than 25 years of business management consulting providing global strategy, policy development, complex problem solving and operations consulting services, as well as her financial expertise and experience as a certified public accountant.
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Name
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Fees earned or
paid in cash ($) (1)
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Stock Awards
($) (2)(3)
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All Other Compensation
($) (4)
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Total
($)
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David J. Anderson
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48,000 | 80,014 | 2,446 | 130,460 | ||||||||||||
Jean-Lou Chameau
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73,000 | 80,014 | 3,362 | 156,376 | ||||||||||||
Merlin E. Dewing (5)
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3,500 | 0 | 0 | 3,500 | ||||||||||||
Brendan C. Hegarty
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48,000 | 80,014 | 3,362 | 131,376 | ||||||||||||
Emily M. Liggett (6)
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21,000 | 60,020 | 307 | 81,327 | ||||||||||||
Lois M. Martin (5)
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24,000 | 0 | 749 | 24,749 | ||||||||||||
William V. Murray (6)
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22,000 | 60,020 | 301 | 82,321 | ||||||||||||
Barb J. Samardzich
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49,000 | 80,014 | 3,362 | 132,376 | ||||||||||||
Gail P. Steinel
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60,500 | 80,014 | 1,408 | 141,922 |
(1)
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Includes annual retainer and committee meeting fees paid in cash.
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(2)
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Amounts represent aggregate grant date fair value during fiscal 2010 under FASB ASC Topic 718, based on the valuation and utilizing the assumptions discussed in Note 2 to our Notes to Consolidated Financial Statements for the fiscal year ended October 2, 2010. Each of Mr. Anderson, Dr. Chameau, Dr. Hegarty, Ms. Samardzich and Ms. Steinel was awarded 3,128 shares of restricted stock during fiscal year 2010 with a grant date fair value of $25.58 per share. Each of Ms. Liggett and Mr. Murray was awarded 2,004 shares of restricted stock during fiscal year 2010 with a grant date fair value of $29.95 per share.
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(3)
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As of October 3, 2009, the named directors held restricted stock awards in the following amounts: Mr. Anderson – 5,016; Dr. Chameau – 18,773; Dr. Hegarty – 11,539; Mr. Liggett – 2,004; Mr. Murray – 2,004; Ms. Samardzich – 16,323; and Ms. Steinel – 3,128.
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(4)
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Reflects cash dividends paid on unvested restricted stock awards in fiscal 2010.
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(5)
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Mr. Dewing and Ms. Martin left the Board on December 2, 2009 and February 10, 2010, respectively.
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(6)
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Ms. Liggett and Mr. Murray joined the Board on May 15, 2010.
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Fiscal Year
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($000’s)
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2009
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2010
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Audit Fees(1)
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$ | 1,545 | $ | 1,192 | ||||
Audit-Related Fees(2)
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14 | 15 | ||||||
Tax Fees(3)
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12 | 21 | ||||||
All Other Fees
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— | — | ||||||
Total fees
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$ | 1,571 | $ | 1,228 |
(1)
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Includes annual audit of consolidated financial statements and Sarbanes-Oxley Section 404 attestation services.
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(2)
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Audit-related fees consist of fees for audits of our employee benefit plan.
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(3)
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Tax fees consist of fees for tax compliance and tax consultation services.
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Gail P. Steinel (Chair) |
Jean-Lou Chameau
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David J. Anderson
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Key Plan Features
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Description
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Effective Date of Plan
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January 31, 2011, provided the 2011 Plan is approved by shareholders
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If the 2011 Plan is not approved by our shareholders within 12 months of approval by our Board, the 2011 Plan will be terminated and any stock incentives granted under the 2011 Plan will be likewise terminated
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Term of Plan
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The earlier of January 31, 2018 or the date on which all shares reserved under the 2011 Plan have been issued or are no longer available for use under the 2011 Plan
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Eligible Participants
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Our employees or employees of any of our subsidiaries in key management and technical positions
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Non-employee members of the Board
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Key vendors to us or any of our subsidiaries
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Key Plan Features
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Description
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Total Shares Authorized and Share Counting
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1,000,000 shares of Common Stock for all types of stock incentive awards
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Shares available under the 2011 Plan are reduced by one share for each share underlying a stock option
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Shares available under the 2011 Plan are reduced by the aggregate shares exercised pursuant to a stock settled stock appreciation right (rather than the number of shares issued upon exercise)
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Shares available under the 2011 Plan are reduced by 2.5 shares for each share of restricted stock, performance stock or similar awards
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Shares withheld by us for taxes, shares tendered to us to pay the exercise price of an option, and shares re-acquired by us with amounts received from exercise of an option will not be added back to the 2011 Plan
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Shares available under the 2011 Plan will not be reduced for stock incentives settled in cash
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Individual Share Limits
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Up to 1,000,000 shares for all incentive stock options
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Up to 60,000 shares per year for all stock incentive awards for non-employee Directors
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Up to 200,000 shares per person per year under all stock incentives
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Up to an additional 100,000 shares for stock incentives to a newly hired key employee
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Type of Stock Incentive Awards
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Incentive stock options and non-qualified stock options with an exercise period no longer than seven years
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Restricted stock and restricted stock units
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Stock appreciation rights
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Performance stock and performance units
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Other awards in stock or cash
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Restricted stock awards on the annual election or re-election of non-employee directors, which stock will vest in three equal installments if the director continues to serve through the next three annual meetings of shareholders
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Vesting and Exercise
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Determined by the Compensation Committee based on service (time vesting) or upon achievement of performance targets (performance vesting) or both
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All non-performance awards that are not assumed or substituted will vest upon a change in control
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Objective performance criteria in the 2011 Plan, if approved by shareholders, will permit deductibility of executive officer awards as performance based compensation under Code Section 162(m). The performance criteria are the same as those listed in the Executive Variable Compensation Plan approved by shareholders in February 2010
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Key Plan Features
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Description
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Permissible Features
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We may specify that stock incentives are subject to reduction, cancellation, forfeiture or recoupment under certain circumstances
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We must require our named executive officers to disgorge certain compensation, including incentive or equity based compensation awarded under the 2011 Plan, in certain circumstances. Examples of these circumstances include misconduct leading to non-compliance with the financial reporting requirements under federal securities laws or restatements of our financial information
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We may hold restricted stock and restricted stock units until restrictions lapse
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Dividend and dividend equivalents on awards may be paid currently or deferred
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Options may be exercised with previously acquired shares
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Features Not Permitted
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Increase the number of shares reserved or any of the limits stated in the 2011 Plan without shareholder approval
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Extend the term of the 2011 Plan without shareholder approval
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Re-price stock options or stock appreciation rights
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Re-grant shares tendered for stock option exercise or payment of taxes
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Fiscal Year
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Beginning
Total Shares Outstanding (000’s) (A)
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Beginning
Total Plan Shares Reserved and Available (000’s) (B)
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Plan Shares (B)
as a Percentage of Total Shares (A+B)
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New Share
Grants During Year Under Plan (000’s)
(C)
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New Share
Grants (C) as a Percentage of Total Shares (A+B)
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2010
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16,564
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1,041
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5.9%
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394
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2.2%
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2009
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16,976
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1,079
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6.0%
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443
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2.5%
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2008
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17,704
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1,571
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8.2%
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407
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2.1%
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·
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Incentive stock options and non-qualified stock options: the right to purchase shares where value is based on the appreciation in the underlying shares in excess of an exercise price, which right may be exercised by the holder during the term of the option, which is generally five years and may not be more than seven years from the date of grant, unless earlier terminated upon certain events, such as for cause. The exercise price may be paid in cash or in previously owned shares or by other means permitted by the Compensation Committee. The exercise price of stock options granted under the 2011 Plan may not be less than the fair market value of our Common Stock on the date of grant. No option may be repurchased or exchanged for a lower priced option.
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Stock appreciation rights: a contractual right to the increase in the value of the underlying shares subject to the award that does not require payment based on the fair market value at time of grant, but which pays the appreciation in stock value when elected by the holder in the form of whole shares or cash, or a combination of both. Stock appreciation rights may not be granted at a purchase price less than the fair market value of our Common Stock on the date of grant, and may be exercised by the holder during the term of the stock appreciation right, which may not be more than seven years from the date of grant unless earlier terminated upon certain events, such as for cause.
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·
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Restricted stock and restricted stock units: awards of stock that do not require purchase, but which are not immediately available to the recipient until certain restrictions lapse, either based on time or upon achievement of performance related criteria. Restricted units may vest earlier than the date the shares are actually paid in exchange for the units, which may result in a deferral of income. The holder of restricted stock is entitled to vote those shares. The Compensation Committee may determine whether, with respect to restricted stock, to pay dividends on those shares to the holder or to defer dividends. Restricted stock units are not outstanding until paid in stock and therefore do not have voting or dividend rights.
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·
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Performance shares and performance units: awards of restricted or unrestricted stock that are issued to the recipient only upon satisfaction of performance based criteria.
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·
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Other awards: additional opportunities to reward participants through payment of cash or stock as a bonus, or as deferred compensation, or for other purposes for which stock will provide a meaningful incentive.
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·
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increase the number of shares that may be used under the 2011 Plan, or change any other limit on various types of awards;
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·
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permit the re-pricing of outstanding stock options; or
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·
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amend the maximum shares that may be granted as awards to any participant.
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Plan Category
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Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
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Weighted Average Exercise Price of Outstanding Options, Warrants and Rights
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Number of Shares
of Common Stock Remaining Available for Future Issuance under Equity Compensation Plans (1) |
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Equity Compensation Plans Approved by Shareholders
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1,418,000 | $ | 32.37 | 1,216,000 | (2) | |||||||
Equity Compensation Plans Not Approved by Shareholders
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0 | N/A | 0 | |||||||||
Total
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1,418,000 | $ | 32.37 | 1,216,000 |
(1)
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Excludes shares of Common Stock listed in the first column.
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(2)
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Consists of 771,000 shares available for awards under our 2006 Stock Incentive Plan (the “2006 Plan”) and 445,000 shares available for issuance under the 2002 Employee Stock Purchase Plan (the “2002 ESPP”). Effective January 31, 2011, the 2006 Plan will terminate in accordance with its terms, thereby eliminating our authority to grant any new awards under the 2006 Plan. If Proposal 3: Approval of the MTS Systems Corporation 2011 Stock Incentive Plan is approved by shareholders at the Annual Meeting, we will have the authority to make stock grants under that Plan. If Proposal 4: Approval of MTS Systems Corporation 2012 Employee Stock Purchase Plan is approved by shareholders at the Annual Meeting, employees may continue to participate in the 2002 ESPP through its expiration on December 31, 2011.
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Key Plan Features
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Description
|
||
Effective Date of Plan and Term of Plan
|
·
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The ESPP will commence on January 1, 2012 and will terminate on December 31, 2021, or on the date that all the shares reserved for issuance under the ESPP have been purchased, if earlier
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If the ESPP is not approved by our shareholders within 12 months of approval by our Board, the ESPP will be terminated and all stock options granted under the ESPP will be likewise terminated
|
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Eligible Participants
|
·
|
Any employee of the Company or any participating subsidiary who is customarily employed for more than 20 hours per week, more than 5 months in a calendar year, and has completed 12 or more months of continuous employment service prior to the first day of the applicable phase is eligible to participate in the ESPP
|
|
·
|
Approximately 833 employees are eligible to participate under the ESPP
|
||
·
|
Participation is voluntary
|
||
·
|
A participant enrolled in the 2002 ESPP on the purchase date of the last phase of the 2002 ESPP will be automatically enrolled in the ESPP, unless the participant cancels enrollment prior to the first day of the first phase of the ESPP
|
||
Total Shares Authorized
|
·
|
Maximum of 750,000 shares available for issuance under the ESPP
|
|
Individual Limits
|
·
|
No participant may be granted an option to purchase shares of Common Stock under the ESPP with an aggregate fair market value in excess of $25,000 in any calendar year or with the number of shares exceeding 10,000 shares in any phase
|
|
·
|
No participant may be granted an option under the ESPP if the participant, immediately after the grant of the option, would own stock (including stock subject to the option) possessing 5% or more of the total combined voting power or value of all classes of our issued and outstanding stock
|
Key Plan Features
|
Description
|
||
Options under the ESPP
|
·
|
The ESPP permits participants to purchase shares of our Common Stock with payroll deductions that have accumulated during a specified period, called a “phase”
|
|
·
|
Each phase will generally last for six months. No phase may run concurrently, but a phase may commence immediately after the termination of a preceding phase
|
||
·
|
A participant is granted an option as of the first day of the phase to purchase a number of shares of our Common Stock determined by dividing the participant’s accumulated payroll deductions by the purchase price applicable to that phase
|
||
·
|
The purchase price for shares is equal to the lesser of 85% of the fair market value of our Common Stock on the first date of a phase (the “Subscription Date”) or 85% of the fair market value our Common Stock on the last date of a phase (the “Purchase Date”)
|
||
·
|
A participant’s option for the purchase of shares will be exercised automatically on the last day of a phase and the number of full and fractional shares (rounded to the nearest 1/100th of a share) shares will be purchased as of that date
|
||
Participation by Eligible Employees
|
·
|
Employees make contributions to the ESPP through payroll deductions in whole percentages of 1% to 10% of each employee’s respective pay for the applicable phase of the ESPP. (A dollar amount election will be permitted only if necessary to maximize an employee’s payroll deductions for a Phase.)
|
|
·
|
After the first day of a phase, participants cannot increase or decrease the amount of payroll deductions, but may withdraw from participation during the phase, as described below
|
||
·
|
Eligible employees elect to participate in the ESPP by enrolling by the applicable deadline prior to the date the phase commences
|
||
Withdrawal and Termination of Employment
|
·
|
A participant may withdraw from the current phase at any time prior to six weeks before the purchase date, in which case all amounts withheld will be refunded, without interest
|
|
·
|
A participant may withdraw from the next phase at any time within the open enrollment period prior to the beginning of the next phase (generally, the four weeks prior to two weeks before the beginning of the phase)
|
||
·
|
A participant whose employment terminates during the phase will immediately cease to participate in the ESPP and that participant’s payroll deductions during that phase will be refunded, without interest
|
||
Rights and Restrictions on Stock Issued under ESPP
|
·
|
Until the later of 12 months after the date of exercise of an option at the end of the phase or 24 months from the date of grant of the option for a phase, the participant may not sell or otherwise transfer the shares acquired through the ESPP during that phase, without the approval of the Compensation Committee. The Compensation Committee may waive this restriction at any time as to shares acquired during a phase and may establish uniform rules for the transfer of stock during the restricted period
|
|
·
|
Participants may elect to have any dividends paid on shares purchased through the ESPP reinvested in our stock in lieu of receiving dividends in cash. Any shares purchased through the reinvestment of dividends will be purchased in the open market under our dividend reinvestment program
|
||
Administration
|
·
|
The Compensation Committee will administer the ESPP
|
|
·
|
the fair market value of the shares at the date of disposition in excess of the price paid by the participant for the shares, or
|
|
·
|
the fair market value of the shares on the first day of the phase in excess of the price paid by the participant for the shares.
|
•
|
Our use of different types of compensation provides a balance of short-term and long-term incentives with fixed and variable components;
|
||
•
|
Our compensation plan design and the governance processes work together to minimize exposure to excessive risk, while creating a focus on operational activities that contribute to long-term shareholder value creation;
|
||
•
|
The metrics used to determine the amount of a participant’s bonus under our short-term incentive plans focus on a combination of Company-wide metrics and business unit performance using a balance of profitability and capital efficiency measures;
|
||
•
|
Our bonus plans impose threshold and maximum payout levels on bonus awards to limit windfalls;
|
||
•
|
Commission-based payments represent a limited component of our historical overall compensation program;
|
•
|
Our programs include clawback provisions and allow the use of negative discretion for our named executive officers;
|
||
•
|
Our stock ownership guidelines discourage excessive risk taking; and
|
||
•
|
Our system of internal controls places a strong focus on avoiding undue financial risk through rigorous review processes.
|
|
·
|
Salary Freeze. Due to the uncertainty of the economic climate, as well as general market trends, the Committee decided in November 2009 to not award base salary increases to the named executive officers in fiscal 2010 as part of a Company-wide restriction on salary increases.
|
|
·
|
Strong Performance-Based Compensation Awards and Payouts. Our executive compensation is tightly linked with performance.
|
|
·
|
As with past years, we adopted an Executive Variable Compensation (EVC) Plan through which the named executive officers were eligible to earn cash incentive compensation based upon achievement of specific financial objectives for fiscal 2010 recommended by the Committee and approved by the Board that are designed to challenge the named executive officers to high performance.
|
|
·
|
As named executive officers assume greater responsibility, a larger portion of their total cash compensation is designed to and does become dependent on Company, business unit, and individual performance. For example, for fiscal 2010, amounts earned by Ms. Hamilton under the EVC Plan based upon achievement of four corporate financial goals represented 49% of her total cash compensation and 31% of her total compensation.
|
|
·
|
The Committee targets annual base salaries around the median base salaries of salary survey data, with the EVC Plan designed to allow the named executive officer to earn above target compensation only where the named executive officer delivers, and as a Company we deliver, performance that is also above our targets.
|
|
·
|
The Committee actively considered the impact of unusual or one-time events on our financial performance in setting the performance goals under the EVC Plan. In particular, the Committee determined to exclude from the fiscal 2010 performance results the impact of any settlement with an outstanding patent infringement litigation due to its one-time nature and the strategic benefit to the Company in obtaining a settlement. Further, the Committee believed it was critical during fiscal 2010 that the named executive officers focus on achievement of our business goals, given our challenges in fiscal 2009.
|
|
·
|
Appropriate Comparisons. In fiscal 2010, we adjusted our methodology for comparing the base salaries of the named executive officers.
|
|
·
|
We adjusted market data based on annual revenue. For fiscal 2010, we returned to the revenue adjustments we used in fiscal years 2006 to 2008 since that adjustment was more reflective of our revenue challenge in fiscal 2009 and our expected challenge to revenue in fiscal 2010.
|
|
·
|
We adjusted the base pay dataset for its age by a smaller factor in fiscal 2010 than in prior years, resulting in a smaller increase in market medians in fiscal 2010 as compared to fiscal 2009.
|
|
·
|
Even where our revised methodology showed that an increase in base pay for the Chief Executive Officer would be consistent with an increase in the median market base pay, the Committee determined not to adjust the median and base pay range that it considered appropriate for the Chief Executive Officer, which remained the same for fiscal 2010 as fiscal 2009.
|
|
·
|
Continuous Improvement in Compensation Practices. We implemented several new compensation practices in fiscal 2010 and we also maintained several long-standing compensation practices that we believe contribute to good governance.
|
|
·
|
We formalized the process used to evaluate risks associated with our compensation programs. As described under the Risk Considerations in Our Compensation Programs section, the Committee completed a formal review of assessments by management and its compensation consultant relating to compensation risk. The Committee concluded that our compensation policies and practices for fiscal 2010 do not create risks that are reasonably likely to have a material adverse effect on the Company.
|
|
·
|
We added a recoupment or “clawback” provision to the EVC Plan that was approved by shareholders at the fiscal 2009 annual meeting of shareholders held on February 10, 2010. We also added a similar provision to the 2011 Stock Incentive Plan that is the subject of shareholder approval at this Annual Meeting. These clawback provisions require a named executive officer to forfeit and allow us to recoup any payments or benefits received by the named executive officer under the EVC Plan or the 2011 Stock Incentive Plan under certain circumstances, such as certain restatements of our financial statements, termination of employment, and breach of an agreement between us and the named executive officer.
|
|
·
|
Our compensation programs encourage employees to build and maintain an ownership interest in the Company. We have established specific stock ownership guidelines for named executive officers.
|
|
·
|
Our compensation consultant is retained directly by and reports to the Committee. Our compensation consultant does not provide any services to management personally and had no prior relationship with our Chief Executive Officer or any other named executive officer.
|
•
|
to establish and maintain a systematic compensation program whereby executives are compensated in relation to their level of responsibilities and their work performance;
|
|
•
|
to maintain a program which will enable us to attract and retain qualified and competent executives;
|
|
•
|
to provide flexibility within the compensation program to meet changing competitive and economic conditions;
|
|
•
|
to maintain equitable and consistent relationships between positions within the Company; and
|
|
•
|
to align executive and shareholder interests.
|
Actuant Corporation
|
Hurco Companies Inc.
|
|
Arctic Cat Inc.
|
Keithley Instruments Inc.
|
|
Axcelis Technologies Inc.
|
Measurement Specialties Inc.
|
|
Badger Meter Inc.
|
Mettler-Toledo International Inc.
|
|
Brooks Automation Inc.
|
MKS Instruments Inc.
|
|
Cabot Microelectronics Corp
|
Moog Inc.
|
|
Cohu Inc.
|
National Instruments Corporation
|
|
CyberOptics Corporation
|
Perceptron Inc
|
|
Dionex Corporation
|
Roper Industries Inc.
|
|
ESCO Technologies Inc.
|
Symmetricom Inc.
|
|
FARO Technologies Inc.
|
Tennant Company
|
|
Graco, Inc.
|
Teradyne Inc.
|
|
·
|
Why we choose to pay each component;
|
|
·
|
The basis for payment of each component or what each component is designed to reward; and
|
|
·
|
How we determine the amount for each component.
|
Element of Compensation
|
Why Component is Paid & Basis for Component
|
How Component Was Determined
for Named Executive Officers
for Fiscal 2010
|
||
Base Pay
|
To provide a fixed level of competitive income, based on:
|
Within range of competitive pay, targeted to near median of market data
|
||
·
|
the individual’s scope of responsibility
|
In fiscal 2009, we announced cost reduction actions which included a salary freeze for fiscal 2010 for all employees, including the named executive officers
|
||
·
|
the individual’s level of performance and experience
|
|||
Short-Term Cash Incentive
|
To provide focus and rewards for achievement of fiscal year financial goals:
|
Performance based
|
||
·
|
EVC Plan, with Committee determined performance goals and minimum/target/maximum levels of achievement for each named executive officer
|
|||
·
|
Performance goals for fiscal 2010
|
|||
—
|
Earnings Per Share weighted at 30%
|
|||
—
|
Earnings Before Interest and Taxes as a Rate to Revenue weighted at 30%
|
|||
—
|
Revenue weighted at 25%
|
|||
—
|
Working Capital as a Rate to Revenue weighted at 15%
|
|||
Long-Term Equity Incentive
|
To provide an incentive for delivering long-term shareholder value, to align interests of executives and shareholders, and to retain executives
|
Value of equity awards designed to be within the range of competitive pay, targeted to near median of market data
|
||
·
|
Value of awards determined with reference to grant guideline ranges
|
|||
·
|
Value based on recipient’s responsibilities, individual performance, previous awards granted and progress toward satisfying the stock ownership guidelines
|
|||
·
|
One-half delivered through stock options and one-half through restricted stock units (RSUs)
|
|||
·
|
Stock options and RSUs each vest in equal installments over a 3-year period
|
Element of Compensation
|
Why Component is Paid & Basis for Component
|
How Component Was Determined
for Named Executive Officers
for Fiscal 2010
|
|
Benefits
|
To provide competitive retirement and health benefits
|
Based upon competitive market
|
|
U.S.-based named executive officers participate in most of the same benefit plans made available to our other U.S.-based employees. They include:
|
|||
·
|
Retirement savings plan with a Company match and annual fiscal year contribution as a percentage of earnings
|
||
·
|
Disability and life insurance
|
||
·
|
Health and welfare (medical, vision and dental)
|
||
U.S.-based named executive officers also are eligible to participate in our non-qualified Executive Deferred Compensation Plan, which allows us to provide non-qualified benefits that are identical to the tax-qualified plan benefits but on income above the allowable level of the qualified plans.
|
|||
One of our named executive officers, Mr. Hellwig, who resides in Germany, does not participate in our benefits programs available to U.S. employees. In accordance with his employment agreement, we make an annual contribution on Mr. Hellwig’s behalf to a retirement pension insurance fund. | |||
Perquisites
|
To provide limited executive perquisites
|
Based upon competitive market
|
|
·
|
All of our named executive officers received either a car allowance or use of a Company-owned automobile
|
Named Executive Officer
|
Fiscal 2010 Annualized
Base Salary
|
Fiscal 2010 Annualized Base Salary Percent Above (Below) Median of Base Salary Comparable
|
||||||
Laura B. Hamilton
|
$ | 525,000 | (14 | %) | ||||
Susan E. Knight
|
$ | 323,633 | 14 | % | ||||
Joachim Hellwig (1)
|
€214,860 | 4 | % | |||||
Alfred Richter (2)
|
$ | 300,000 | 5 | % | ||||
Kathleen M. Staby
|
$ | 244,401 | 6 | % |
(1)
|
Annualized base salary in Euros for fiscal 2010 is approximately $273,146, using the average exchange rate of $1.33485 for fiscal 2010. This annual base salary was 4% above median of the base salary comparable used to determine Mr. Hellwig’s fiscal 2009 base salary. Comparable data for fiscal year 2010 is not available.
|
(2)
|
Mr. Richter’s employment ended February 4, 2010.
|
Goal
|
Description
|
Weight
|
EPS
|
Earnings per share for fiscal 2010
|
30%
|
EBIT Rate to Revenue
|
Earnings before interest and taxes as a rate to revenue for fiscal 2010 (as a percentage)
|
30%
|
Revenue
|
Revenue for fiscal 2010 (in dollars)
|
25%
|
WCRR
|
Working capital as a rate to revenue for fiscal 2010 (as a percentage)
|
15%
|
Named Executive Officer
|
% of Fiscal 2010 Base Salary at Target Achievement
|
% of Fiscal 2010 Base Salary
at Maximum Achievement
|
||||||
Laura B. Hamilton
|
70 | % | 140 | % | ||||
Joachim Hellwig
|
35 | % | 70 | % | ||||
Susan E. Knight
|
50 | % | 100 | % | ||||
Alfred Richter
|
50 | % | 100 | % | ||||
Kathleen M. Staby
|
35 | % | 70 | % |
Corporate Goal (1)
|
Minimum (2)
|
Target (2)
|
Maximum (2)
|
Result (2)
|
% Achieved
Above Target |
|||||||||||||||
EPS
|
$ | 0.19 | $ | 1.00 | $ | 2.18 | $ | 1.38 | 132.2 | % | ||||||||||
EBIT Rate to Revenue
|
1.8 | % | 7.0 | % | 12.1 | % | 9.2 | % | 143.1 | % | ||||||||||
Revenue (in 000)
|
294,000 | 345,000 | 436,500 | 374,053 | 131.8 | % | ||||||||||||||
WCRR
|
27.3 | % | 23.7 | % | 21.3 | % | 20.0 | % | 200.0 | % |
(1)
|
Specific business unit performance goals and their corresponding minimum, target and maximum amounts are not disclosed due to the competitive harm of such disclosure. In general, the Committee sets target goals for the business unit to be achievable if the business unit executes its business plan reasonably well, minimum goals should be achieved a majority of the time, and maximum goals will be very challenging to meet.
|
(2)
|
The EPS and EBIT Rate to Revenue performance goals and actual fiscal 2010 results do not include the impact related to the settlement agreement entered into during fiscal 2010 relating to patent infringement litigation. Pursuant to the agreement, we paid $7.5 million and neither party admitted any liability or wrongdoing in the related matter. The settlement resulted in a pre-tax charge of $6.3 million during the three-month period ended July 3, 2010. The remaining $1.2 million pre-tax charge was accrued during the fourth quarter of fiscal 2009 based on management’s prior estimate of the settlement liability.
|
Named Executive Officer and
Payout Attributable to Performance Goal
|
||||||||||||||||||||
Performance Goal
|
% Achieved
|
Laura B. Hamilton
|
Joachim Hellwig (1)
|
Susan E. Knight
|
Kathleen M. Staby
|
|||||||||||||||
EPS
|
132.2 | % | $ | 145,748 | $ | 39,811 | $ | 64,175 | $ | 33,925 | ||||||||||
EBIT Rate to Revenue
|
143.1 | % | $ | 157,809 | $ | 60,228 | $ | 69,486 | $ | 36,733 | ||||||||||
Revenue
|
131.8 | % | $ | 121,043 | $ | 41,370 | $ | 53,297 | $ | 28,175 | ||||||||||
WCRR
|
200.0 | % | $ | 110,248 | $ | 30,114 | $ | 48,544 | $ | 25,662 | ||||||||||
Total
|
145.5 | % | $ | 535,850 | $ | 171,524 | $ | 235,503 | $ | 124,494 | ||||||||||
Total as % of Base Salary
|
101.9 | % | 59.8 | % | 72.8 | % | 50.9 | % |
(1)
|
Achievement of performance goal relating to EBIT Rate to Revenue, Revenue and WCRR of corporate performance for fiscal 2010 does not apply to Mr. Hellwig. Amounts attributable to each of these measures represents amounts attributable to actual achievement in fiscal 2010 by the Sensors business unit of the performance goal noted.
|
Named Executive Officer
|
Number of Shares Underlying Stock Options
|
Number of Shares Underlying Restricted Stock Units
|
Value of Awards
|
Value of Award Percent Above (Below) Median Award Value
|
||||||||||||
Laura B. Hamilton
|
40,000 | 13,300 | $ | 649,846 | (8 | %) | ||||||||||
Joachim Hellwig
|
5,000 | 1,700 | $ | 82,304 | (25 | %) | ||||||||||
Susan E. Knight
|
9,500 | 3,200 | $ | 155,519 | (13 | %) | ||||||||||
Kathleen M. Staby
|
5,000 | 1,700 | $ | 82,304 | (25 | %) |
Barb J. Samardzich (Chair)
|
Gail P. Steinel
|
William V. Murray
|
Name and Principal Position
|
Year
|
Salary
($)(2)
|
Bonus
($)
|
Stock
Awards
($)(3)
|
Option
Awards
($)(3)
|
Non-
Equity
Incentive
Plan
Compen-
sation
($)(4)
|
Change
In
Pension
Value
And
Non-
Qualified
Deferred
Compen-
sation
Earnings
($)(5)
|
All Other
Compen-sation
($)(7)
|
Total
($)
|
||||||||||||||||||||||||
Laura B. Hamilton
|
2010
|
524.992 | — | 80,646 | 269,190 | 534,850 | — | 26,216 | 1,735,894 | ||||||||||||||||||||||||
Chair and Chief
|
2009
|
532,684 | 3 | 164,361 | 17,479 | 26,350 | 981,308 | ||||||||||||||||||||||||||
Executive Officer
|
2008
|
374,042 | 240,435 | 526,816 | 306,141 | 25,365 | 1,232,364 | ||||||||||||||||||||||||||
Joachim Hellwig(1)
|
2010
|
286,803 | — | 48,654 | 33,648 | 171,524 | 17,249 | 31,291 | 589,169 | ||||||||||||||||||||||||
Vice President
|
2009
|
306,806 | 30,825 | 21,132 | 0 | 16,487 | 26,484 | 401,734 | |||||||||||||||||||||||||
2008
|
304,025 | 75,258 | 190,781 | 16,367 | 30,608 | 617,039 | |||||||||||||||||||||||||||
Susan E. Knight
|
2010
|
323,627 | — | 91,584 | 63,932 | 235,503 | — | 25,843 | 740,489 | ||||||||||||||||||||||||
Chief Financial Officer
|
2009
|
331,250 | 61,650 | 42,264 | 7,764 | 26,723 | 469,652 | ||||||||||||||||||||||||||
and Vice President
|
2008
|
304,586 | 142,992 | 207,745 | 25,365 | 680,689 | |||||||||||||||||||||||||||
Alfred Richter(6
|
2010
|
113,199 | 100,000 | 0 | 0 | 0 | — | 203,940 | 317,139 | ||||||||||||||||||||||||
Sr. Vice President (former)
|
2009
|
149,999 | 259,613 | 41,090 | 4,772 | 7,459 | 562,933 | ||||||||||||||||||||||||||
Kathleen M. Staby
|
2010
|
244,400 | — | 48,654 | 33,648 | 124,494 | — | 25,934 | 477,130 | ||||||||||||||||||||||||
Vice President
|
2009
|
249,012 | 30,825 | 21,132 | 4,085 | 26,632 | 331,687 | ||||||||||||||||||||||||||
2008
|
224,657 | 75,258 | 107,260 | 25,365 | 432,540 |
(1)
|
Currency converted from Euros to U.S. Dollars using the average exchange rate of $1.33485 for fiscal 2010.
|
(2)
|
There was one less pay period for Ms. Hamilton, Ms. Knight, and Ms. Staby in fiscal 2010 along with a base pay salary freeze for all named executive officers which accounts for the decrease in salary compared to fiscal 2009.
|
(3)
|
Amounts represent the aggregate grant date fair value of restricted stock units and stock options that were granted in each fiscal year as computed in accordance with FASB ASC Topic 718 utilizing the assumptions discussed in Note 2 to our Notes to Consolidated Financial Statements for the fiscal year ended October 2, 2010.
|
(4)
|
Amounts awarded for fiscal 2010 under the EVC Plan. Ms. Hamilton elected to defer 50% of her fiscal 2010 EVC into the Non-qualified Deferred Compensation Plan which is reflected in the Non-qualified Deferred Compensation table.
|
(5)
|
Represents increase in present value provided under the Employer Pension Commitment for Mr. Hellwig. We do not pay above-market or preferential earnings on non-qualified deferred compensation.
|
(6)
|
Mr. Richter’s employment ended February 4, 2010.
|
(7)
|
These amounts include all other compensation as described in the following table:
|
Retirement Plan
|
||||||||||||||||||||||||
Name
|
Match
$
|
Fiscal Year Contribution
$
|
Car
$ (1)
|
Payment for
unused vacation $ (2)
|
Severance,
Insurance and Outplacement $(3)
|
Total
$
|
||||||||||||||||||
Laura B. Hamilton
|
7,350 | 11,496 | 7,370 | — | — | 26,216 | ||||||||||||||||||
Joachim Hellwig
|
— | — | 13,082 | 18,210 | — | 31,292 | ||||||||||||||||||
Susan E. Knight
|
6,977 | 11,496 | 7,370 | — | — | 25,843 | ||||||||||||||||||
Alfred Richter (4)
|
1,711 | — | 2,680 | — | 199,549 | 203,940 | ||||||||||||||||||
Kathleen M. Staby
|
7,068 | 11,496 | 7,370 | — | — | 25,934 |
(1)
|
Represents cash car allowance for Ms. Hamilton, Ms. Knight, and Ms. Staby, and all expenses for Mr. Hellwig (as required by employment agreement).
|
(2)
|
Represents cash payment made in accordance with employment contract on payment for unused vacation (as required by employment agreement).
|
(3)
|
Represents $187,552 for severance, $10,000 for outplacement and $1,997 in employer cost of medical, dental, and life insurance in accordance with severance agreement.
|
(4)
|
Mr. Richter’s employment ended February 4, 2010.
|
Estimated Future
Payouts Under Non- Equity Incentive Plan Awards(2) |
All Other
Stock Awards:
Number of
Shares of Stock or
|
All Other Option Awards: Number of Securities Underly-ing
|
Exercise or
Base Price of
Option
|
Grant Date
Fair Value
of Stock
and Option
|
||||||||||||||||||||||||||
Name
|
Grant
Date
|
Approval Date
|
Award
Type(1)
|
Target
($)
|
Maximum
($)
|
Units
(#)(3)
|
Options
(#)(4)
|
Awards
($/Sh)(5)
|
Awards
($)(6)
|
|||||||||||||||||||||
Laura B. Hamilton
|
Cash
|
367,500 | 735,000 | — | — | — | — | |||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
RSU
|
— | — | 13,300 | — | — | 380,646 | ||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
Options
|
— | — | — | 40,000 | 28.62 | 269,200 | ||||||||||||||||||||||
Joachim Hellwig
|
Cash
|
100,382 | 200,764 | — | — | — | — | |||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
RSU
|
— | — | 1,700 | — | — | 48,654 | ||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
Options
|
— | — | — | 5,000 | 28.62 | 33,650 | ||||||||||||||||||||||
Susan E. Knight
|
Cash
|
161,817 | 323,633 | — | — | — | — | |||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
RSU
|
— | — | 3,200 | — | — | 91,584 | ||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
Options
|
— | — | — | 9,500 | 28.62 | 63,935 | ||||||||||||||||||||||
Alfred Richter(7)
|
— | — | — | — | — | — | — | |||||||||||||||||||||||
Kathleen M. Staby
|
Cash
|
85,540 | 171,081 | — | — | — | — | |||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
RSU
|
— | — | 1,700 | — | — | 48,654 | ||||||||||||||||||||||
7/6/2010
|
5/26/2010
|
Options
|
— | — | — | 5,000 | 28.62 | 33,650 |
(1)
|
The grants of restricted stock units and options were made pursuant to the 2006 Stock Incentive Plan.
|
(2)
|
These awards were made pursuant to the EVC Plan. There is no threshold level for these awards. The 2010 EVC performance goals are described under “Compensation Discussion and Analysis – Design of EVC Plan and Review of 2010 Performance.”
|
(3)
|
The restricted stock units vest in three equal installments beginning on the first anniversary of the grant date.
|
(4)
|
These options have an exercise price equal to the closing price on the grant date, with a 5 year term exercisable in three equal annual installments beginning on the first anniversary of the grant date.
|
(5)
|
Closing market value of shares on grant date.
|
(6)
|
Calculated using a multiple option form of the Black-Scholes option valuation model with assumptions for interest rate, expected life, share price volatility and dividend yield as described in note 2 to our Notes to Consolidated Financial Statements for the fiscal year ended October 2, 2010, resulting in a grant date fair value of $6.73 per share. The grant date fair value of a restricted stock unit is equal to the closing price of $28.62 on July 6, 2010.
|
(7)
|
Mr. Richter’s employment ended February 4, 2010.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||
Number of Securities Underlying Unexercised Options (1)
|
Number of Shares or Units of Stock Held That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock Held That Have Not Vested
($)(2)
|
||||||||||||||||||||||
Name
|
Exercisable
(#)
|
Un-Exercisable
(#)
|
Option Exercise Price
($)
|
Option Expiration Date
|
||||||||||||||||||||
Laura B. Hamilton
|
21,000 | — | 39.14 |
7/3/11
|
||||||||||||||||||||
45,000 | — | 46.03 |
7/2/12
|
|||||||||||||||||||||
46,667 | 23,333 | 35.88 |
6/30/13
|
|||||||||||||||||||||
11,667 | 23,333 | 20.55 |
6/29/14
|
|||||||||||||||||||||
0 | 40,000 | 28.62 |
7/6/15
|
|||||||||||||||||||||
21,100 | 664,650 | |||||||||||||||||||||||
Joachim Hellwig
|
9,800 | — | 39.14 |
7/3/11
|
||||||||||||||||||||
9,200 | — | 46.03 |
7/2/12
|
|||||||||||||||||||||
6,667 | 3,333 | 35.88 |
6/30/13
|
|||||||||||||||||||||
1,500 | 3,000 | 20.55 |
6/29/14
|
|||||||||||||||||||||
0 | 5,000 | 28.62 |
7/6/15
|
|||||||||||||||||||||
2,700 | 85,050 | |||||||||||||||||||||||
Susan E. Knight
|
21,000 | — | 39.14 |
7/3/11
|
||||||||||||||||||||
19,000 | — | 46.03 |
7/2/12
|
|||||||||||||||||||||
12,667 | 6,333 | 35.88 |
6/30/13
|
|||||||||||||||||||||
3,000 | 6,000 | 20.55 |
6/29/14
|
|||||||||||||||||||||
0 | 9,500 | 28.62 |
7/6/15
|
|||||||||||||||||||||
5,200 | 163,800 | |||||||||||||||||||||||
Alfred Richter (3)
|
0 | 0 | 0 | -- | 0 | 0 | ||||||||||||||||||
Kathleen M. Staby
|
9,000 | — | 39.14 |
7/3/11
|
||||||||||||||||||||
8,800 | — | 46.03 |
7/2/12
|
|||||||||||||||||||||
6,667 | 3,333 | 35.88 |
6/30/13
|
|||||||||||||||||||||
1,500 | 3,000 | 20.55 |
6/29/14
|
|||||||||||||||||||||
0 | 5,000 | 28.62 |
7/6/15
|
|||||||||||||||||||||
2,700 | 85,050 |
(1)
|
Stock options granted with a 5-year term, exercisable in three equal installments each year beginning on the first anniversary of the grant date.
|
(2)
|
Market value of unvested restricted stock units equals the closing price of our Common Stock on the NASDAQ Stock Market at fiscal year end ($31.50) multiplied by the number of shares or units. The restricted stock units vest in three equal annual installments beginning on the first anniversary of the grant date.
|
(3)
|
Mr. Richter’s employment ended February 4, 2010.
|
Options Awards
|
Stock Unit Awards
|
|||||||||||||||
Name
|
Number of Shares Acquired on Exercise (#)
|
Value Realized on Exercise ($)
|
Number of Shares Acquired on Vest(2) (#)
|
Value Realized on Vest(3) ($)
|
||||||||||||
Laura B. Hamilton
|
— | — | 2,624 | 76,411 | ||||||||||||
Joachim Hellwig
|
— | — | 573 | 16,686 | ||||||||||||
Susan E. Knight
|
— | — | 500 | 14,560 | ||||||||||||
Alfred Richter(1)
|
— | — | — | — | ||||||||||||
Kathleen M. Staby
|
— | — | 336 | 9,784 |
|
(1)
|
Mr. Richter’s employment ended February 4, 2010.
|
|
(2)
|
For Ms. Hamilton, Ms. Knight, and Ms. Staby, the number of shares acquired equals the difference between the number of restricted stock units vested and the number of restricted stock units withheld by the Company to cover tax withholding requirements. The number of restricted stock units that vested before the withholding was for Ms. Hamilton 2,900, for Ms. Knight 1,000, and for Ms. Staby 500. Mr. Hellwig did not have any restricted stock units withheld.
|
|
(3)
|
The value realized on the vesting of the restricted stock units is the fair market value of our Common Stock at the time of vesting.
|
Name
|
Plan Name
|
Number of Years Credited Service (#)
|
Present Value of Accumulated Benefit ($)(1)
|
Payments During Last Fiscal Year ($)
|
||||||||||
Joachim Hellwig
|
Employer Pension Commitment
|
N/A | 205,139 | — |
(1)
|
Currency converted from Euros to U.S. Dollars using the exchange rate of $1.33485 for fiscal 2010.
|
Name
|
Executive Contributions in Last FY ($)
|
Registrant Contributions in Last FY ($)
|
Aggregate Earnings in Last FY ($)(1)
|
Aggregate Withdrawals/ Distributions ($)
|
Aggregate Balance at Last FYE ($)
|
|||||||||||||||
Laura B. Hamilton
|
267,425 | — | 13,756 | — | 679,442 |
(1)
|
Earnings are determined on a calendar year basis. Earnings were 2.167% and 3.83% for 2009 and 2010, respectively.
|
Type of Benefit
|
Amount
($)
|
|||
Cash Payment
|
304,772 | |||
Life and Health Insurance (employers share)
|
1,997 | |||
Outplacement
|
10,000 | |||
Total
|
316,769 |
|
·
|
30% or more of the Company’s outstanding voting stock was acquired by any person;
|
|
·
|
current members of the Board or their successors elected or nominated by such members ceased to constitute at least a majority of the Board; or
|
|
·
|
the Company consummated a merger, consolidation, share exchange, division or other reorganization with another company and the Company’s shareholders hold 50% or less of the outstanding stock of the post-merger company.
|
|
·
|
the willful and continued failure by the executive to perform substantially the duties and responsibilities of the executive’s position with the Company after a written demand for substantial performance is delivered to the executive by the Board, which demand specifically identifies the manner in which the Board believes that the executive has not substantially performed the duties or responsibilities;
|
|
·
|
the conviction of the executive by a court of competent jurisdiction for felony criminal conduct which, in the good faith opinion of the Company, would impair the executive’s ability to perform his or her duties or impair the business reputation of the Company; or
|
|
·
|
the willful engaging by the executive in fraud or dishonesty that is demonstrably and materially injurious to the Company, monetarily or otherwise.
|
|
·
|
the authority, responsibilities or duties assigned to the executive, as compared to those in effect immediately prior to the change in control, are materially and adversely diminished without the executive’s written consent;
|
|
·
|
a material reduction by the Company in the executive’s annual compensation including, but not limited to, base pay or short- and long-term incentive pay in effect immediately prior to a change in control;
|
|
·
|
a material reduction in the budget over which the executive retains authority;
|
|
·
|
the material change in the geographic location at which the executive must perform services; or
|
|
·
|
any material violation of the Change in Control Agreement by the Company.
|
Name
|
Cash Payment
($)(1)
|
Accelerated Vesting
($)(2)
|
Benefits
($)(3)
|
Total Value
($)
|
||||||||||||
Laura B. Hamilton
|
1,622,703 | 1,035,346 | 25,733 | 2,683,782 | ||||||||||||
Joachim Hellwig (4)
|
— | — | — | — | ||||||||||||
Susan E. Knight
|
948,112 | 256,860 | 20,945 | 1,225,917 | ||||||||||||
Kathleen M. Staby
|
646,119 | 132,300 | 15,471 | 793,890 |
|
(1)
|
As described under the Change in Control Agreement summary above, all U.S. named executive officers would receive 24 monthly payments.
|
|
(2)
|
Represents the aggregate value at October 2, 2010, of options (stock price less exercise price), restricted stock awards, and restricted stock units held by each named executive officer as of such date that would have been vested and exercisable upon change in control. Under the 2006 stock programs, restricted stock awards, restricted stock units, and options fully vest upon change in control.
|
|
(3)
|
The value includes the aggregate of life, disability, and accident and health insurance benefits.
|
|
(4)
|
Mr. Hellwig’s employment agreement does not provide payments upon termination or in the event of a change in control.
|
Name and Address of Beneficial Owner
|
Number of Shares Beneficially Owned
|
Note
|
Percent of Class
|
|||||||||
Mairs and Power, Inc.
332 Minnesota Street, Suite W-1520
Saint Paul, MN 55101
|
1,823,462 | (1 | ) | 11.90 | % | |||||||
Pzena Investment Management, LLC
120 West 45th Street, 20th Floor
New York, NY 10036
|
1,009,981 | (2 | ) | 6.59 | % | |||||||
Laura B. Hamilton
|
176,812 | (3 | ), (4) | * | ||||||||
Susan E. Knight
|
79,940 | (3 | ), (5) | * | ||||||||
Kathleen M. Staby
|
40,045 | (3 | ) | * | ||||||||
Joachim Hellwig
|
26,330 | (3 | ) | * | ||||||||
Jean-Lou Chameau
|
18,773 | * | ||||||||||
Barb J. Samardzich
|
16,323 | * | ||||||||||
Brendan C. Hegarty
|
9,073 | * | ||||||||||
David J. Anderson
|
5,016 | * | ||||||||||
Gail P. Steinel
|
3,128 | * | ||||||||||
Emily M. Liggett
|
2,044 | * | ||||||||||
William V. Murray
|
2,044 | * | ||||||||||
All directors and executive officers as a group (11 persons)
|
379,528 | 2.44 | % |
(1)
|
According to the Form 13F filed on November 15, 2010 with the SEC, Mairs and Power, Inc. has reported that as of September 30, 2010 it has sole voting power and sole investment power over 1,823,462 shares.
|
(2)
|
According to the Form 13F filed on November 12, 2010 with the SEC, Pzena Investment Management, LLC has reported that as of September 30, 2010 it has sole investment power over 1,009, 981 shares and sole voting power over 825,704 shares and no voting power over 184,277 shares.
|
(3)
|
Includes the following number of shares which could be purchased under stock options exercisable within 60 days of December 15, 2010: Ms. Hamilton, 124,334 shares; Ms. Knight, 55,667 shares; Ms. Staby, 25,967 shares, and Mr. Hellwig, 27,167 shares.
|
(4)
|
Includes 3,101 shares owned by spouse who solely controls the voting and investment power over those shares.
|
(5)
|
Includes 10,000 shares owned jointly with spouse. Voting and investment power over those shares are shared accordingly.
|
|
·
|
Plan Term: January 31, 2011 through January 31, 2018
|
|
·
|
Adopted by the Company’s Board of Directors on November 23, 2010
|
|
·
|
Approved by the Company’s shareholders on _____
|
2.1
|
BOARD means the Board of Directors of the Company.
|
|
2.2
|
CAUSE means, unless otherwise defined in the Stock Incentive Agreement or in a separate agreement with the Participant that governs Stock Incentives granted under this Plan, a felony conviction of a Participant or a material violation of any Company policy, including, without limitation, any policy contained in the Company’s Code of Conduct Manual, or due to embezzlement from or theft of property belonging to the Company, regardless of when facts resulting in a finding of Cause are discovered by the Company.
|
|
2.3
|
CODE means the Internal Revenue Code of 1986, as amended and any successor, and regulations promulgated thereunder.
|
|
2.4
|
COMMITTEE means the Compensation Committee of the Board or any other committee appointed by the Board to administer the Plan.
|
|
2.5
|
COMPANY means MTS Systems Corporation, a corporation organized under the laws of the State of Minnesota (or any successor corporation).
|
|
2.6
|
DEFERRED COMPENSATION means any Stock Incentive under this Plan that provides for the “deferral of compensation” as defined in Treas. Reg. §1.409A-1(b) and that would be subject to the taxes specified in Section 409A(a)(1) of the Code if and to the extent the Stock Incentive Agreement does not meet or is not administered and interpreted in compliance with the requirements of Section 409A(a)(2), (3) and (4) of the Code. Deferred Compensation shall not include any amount that is otherwise exempt from the requirements of Section 409A of the Code.
|
|
2.7
|
DISABILITY means a physical or mental condition resulting from a bodily injury or disease or mental disorder rendering such person incapable of continuing to perform the essential employment duties of such person at the Company as such duties existed immediately prior to the bodily injury, disease or mental disorder.
|
|
2.8
|
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended and any successor, and regulations and rules promulgated thereunder.
|
|
2.9
|
EXERCISE PRICE means the price that shall be paid to purchase one (1) Share upon the exercise of an Option granted under this Plan.
|
2.10
|
FAIR MARKET VALUE of one Share on any given date shall be determined by the Committee as follows: (a) if the Shares are listed for or admitted for trading on one of more national securities exchanges, the last reported sales price on the principal exchange on the date in question, or if such Shares shall not have been traded on such principal exchange on such date, the last reported sales price on such principal exchange on the first day prior thereto on which such Shares were so traded; or (b) if the Shares are not listed for or admitted for trading on a national securities exchange, but is traded in the over-the-counter market, the closing bid price for such Shares on the date in question, or if there is no such bid price for such Shares on such date, the closing bid price on the first day prior thereto on which such price existed; or (c) if neither (a) or (b) is applicable, with respect to any Option intended to qualify as an ISO, by any fair and reasonable determination made in good faith by the Committee, and, with respect to any other Stock Incentive that is intended to be exempt from the requirements of Section 409A of the Code, a value determined by the reasonable application of a reasonable valuation method as defined in regulations promulgated under Section 409A of the Code, which determination shall be final and binding on all parties.
|
|
2.11
|
INSIDER means an individual who is, on the relevant date, an officer, member of the Board or ten percent (10%) beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.
|
|
2.12
|
ISO (“Incentive Stock Option”) means an Option granted under this Plan to purchase Shares that is intended by the Company to satisfy the requirements of Section 422 of the Code.
|
|
2.13
|
KEY EMPLOYEE means any employee of the Company or any Subsidiary holding a key management or technical position as determined by the Committee.
|
|
2.14
|
KEY PERSON means a person, other than a Key Employee, who is (a) a member of the Board; or (b) a service provider providing bona fide services to the Company or any Subsidiary who is eligible to receive Shares that are registered by a Registration Statement on Form S-8 under the the Securities Act of 1933, as amended, as in effect on the date hereof or any registration form(s) under the Securities Act of 1933, as amended, subsequently adopted by the Securities and Exchange Commission.
|
|
2.15
|
NQSO (“Non-Qualified Stock Option”) means an option granted under this Plan to purchase Shares that is not intended by the Company to satisfy the requirements of Section 422 of the Code, and includes any ISO that, by subsequent action of the Company or the Participant permitted by the Plan, ceases to be an ISO.
|
|
2.16
|
OPTION means an ISO or a NQSO.
|
|
2.17
|
OUTSIDE DIRECTOR means a member of the Board who is not an employee and who: (a) is a “non-employee director” under Rule 16b-3 under the Exchange Act, as amended from time to time; (b) is an “outside director” under Section 162(m) of the Code; (c) satisfies the requirements of the principal stock exchange for the Shares relating to the independence of directors or the independence of directors serving on the Compensation Committee of the Board; and (d) satisfies the independence or similar requirement of the Securities and Exchange Commission applicable to directors or to directors serving on the Compensation Committee of the Board.
|
|
2.18
|
PARTICIPANT means a Key Person, Key Employee, or any other employee who is designated to receive an award under the Plan by the Committee.
|
|
2.19
|
PERFORMANCE-BASED EXCEPTION means the performance-based exception from the tax deductibility limitations of Section 162(m) of the Code.
|
|
2.20
|
PERFORMANCE GOAL means, unless and until the Board proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Section, the performance measure(s) to be used by the Committee for purposes of making Bonus Awards shall be chosen from among the following: (a) earnings per share; (b) net income (before or after taxes); (c) return measures (including, but not limited to, return on assets, equity or sales); (d) cash flow return on investments (net cash flows divided by owners equity); (e) earnings before or after taxes, depreciation and/or amortization; (f) revenues and or sales (gross or net); (g) operating income (before or after taxes); (h) total shareholder return; (i) corporate performance indicators (indices based on the level of certain services provided to customers); (j) cash generation, working capital, profit and/or revenue targets; (k) growth measures, such as revenue or sales growth; (l) ratios, such as expenses or market share; and/or (m) share price (including, but not limited to, growth measures and total shareholder return). In setting performance goals using these performance measures, the Committee may establish goals on an absolute basis, rate basis, or relative to a peer group performance or other benchmark, and may exclude the effect of changes in accounting standards and non-recurring unusual events specified by the Committee, such as write-offs, capital gains and losses and acquisitions and dispositions of businesses.
|
2.21
|
PERFORMANCE PERIOD means the period during which a performance goal must be attained with respect to a Stock Incentive that is performance based, as determined by the Committee.
|
|
2.22
|
PERFORMANCE STOCK means an award of Shares granted to a Participant that is subject to the achievement of performance criteria, either as to the delivery of such Shares or the calculation of the amount deliverable as a result of achieving a level of performance over a specified Performance Period, or any combination thereof.
|
|
2.23
|
PERFORMANCE UNITS means a contractual right granted to a Participant to receive a Share (or cash equivalent) upon achievement of performance criteria or a level of performance over a specified Performance Period that are deliverable either at the end of the Performance Period or at a later time.
|
|
2.24
|
PLAN means the MTS Systems Corporation 2011 Stock Incentive Plan, as it may be further amended from time to time.
|
|
2.25
|
QUALIFYING EVENT means, with respect to a Participant, such Participant’s death, Disability or Retirement.
|
|
2.26
|
RESTRICTED STOCK AWARD means an award of Shares granted to a Participant under this Plan that is subject to restrictions in accordance with the terms and provisions of this Plan and the applicable Stock Incentive Agreement.
|
|
2.27
|
RESTRICTED STOCK UNIT means a contractual right granted to a Participant under this Plan to receive a Share (or cash equivalent) that is subject to restrictions of this Plan and the applicable Stock Incentive Agreement.
|
|
2.28
|
RETIREMENT means retirement from active employment with the Company and any subsidiary or parent corporation of the Company on or after age 65, or upon an earlier date with the consent of the Committee, and upon such terms and conditions as determined by the Committee.
|
|
2.29
|
SERVICE means services provided to the Company or any Subsidiary as either a Key Employee or a Key Person.
|
|
2.30
|
SHARE means one share of the common stock of the Company.
|
|
2.31
|
SPECIFIED EMPLOYEE means a Participant who is a “key employee” as described in Section 416(i)(1)(A) of the Code, disregarding paragraph (5) thereof. For purposes of determining key employees under Section 416(i)(1)(A) of the Code, the definition of compensation shall be the same as defined in the Company’s Retirement Savings Plan, but excluding any compensation of a Participant whose location is not effectively connected with the conduct of a trade or business within the United States. If a Participant is a key employee at any time during the 12 months ending on each September 30, the Participant is a Specified Employee for the 12 month period commencing on the next January 1. Any such identification of a Specified Employee under this Plan shall apply to all nonqualified deferred compensation plans in which the Specified Employee participates. In the case of certain corporate transactions (a merger, acquisition or spin-off), or in the case of nonresident alien employees, the Company will determine Specified Employees in accordance with Treas. Reg. §1.409A-1(i).
|
|
2.32
|
STOCK APPRECIATION RIGHT means a right granted to a Participant pursuant to the terms and provisions of this Plan whereby the individual, without payment to the Company (except for any applicable withholding or other taxes), receives Shares, or such other consideration as the Committee may determine, in an amount equal to the excess of the Fair Market Value per Share on the date on which the Stock Appreciation Right is exercised over the exercise price per Share noted in the Stock Appreciation Right, for each Share subject to the Stock Appreciation Right.
|
2.33
|
STOCK INCENTIVE means an ISO, NQSO, Restricted Stock, Restricted Stock Unit, Stock Appreciation Right, Performance Stock, Performance Unit, or cash.
|
2.34
|
STOCK INCENTIVE AGREEMENT means a document, agreement, certificate, resolution or other evidence in writing or electronic form approved by the Committee that sets forth the terms and conditions of a Stock Incentive granted by the Company or a Subsidiary to a Participant.
|
|
2.35
|
SUBSIDIARY means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
|
|
2.36
|
TEN PERCENT SHAREHOLDER means a person who owns (after taking into account the attribution rules of Section 424(d)) of the Code more than ten percent (10%) of the total combined voting power of all classes of shares of stock of either the Company or a Subsidiary.
|
3.1
|
AGGREGATE SHARES AUTHORIZED AND LIMITATIONS. The aggregate number of Shares that may be issued under the Plan is One Million (1,000,000) Shares. In addition, Shares subject to awards currently outstanding under the Company’s 2006 Stock Incentive Plan that are terminated, cancelled, surrendered or forfeited without the delivery of Shares may be reissued at the discretion of the Committee under the Plan. The aggregate number of Shares described above are subject to adjustment as provided in Section 3.4. Within the aggregate limit specified above and subject to adjustment as provided in Section 3.4:
|
|
(a)
|
No more than One Million (1,000,000) Shares may be used for Incentive Stock Options; and
|
|
(b)
|
No more than Sixty Thousand (60,000) Shares may be used for Stock Incentives for non-employee Directors in any calendar year (subject to the principle in Section 3.2(f)).
|
|
3.2
|
SHARE COUNTING. For purposes of determining the limits described in this Plan, in particular this Section 3, Shares covered by a Stock Incentive shall not be counted as used unless and until actually delivered to a Participant. If any Shares covered by a Stock Incentive are not purchased or are forfeited or reacquired by the Company prior to vesting, or if a Stock Incentive terminates, or is cancelled without the delivery of any Shares, such Shares shall be added back to the limits described in this Plan and are again available for grants from the Plan. In addition, the following principles shall apply in determining the number of Shares under any applicable limit:
|
|
(a)
|
Shares tendered or attested to in payment of the Exercise Price of an Option shall not be added back to the applicable limit;
|
|
(b)
|
Shares withheld by the Company to satisfy the tax withholding obligation shall not be added back to the applicable limit;
|
|
(c)
|
Shares that are reacquired by the Company with the amount received upon exercise of an Option shall not be added back to the applicable limit;
|
|
(d)
|
The aggregate Shares exercised pursuant to a Stock Appreciation Right that is settled in Shares shall reduce the applicable limit, rather than the number of Shares actually issued;
|
|
(e)
|
Any Stock Incentive that is settled in cash shall not reduce the applicable limit; and
|
|
(f)
|
Restricted Stock, Restricted Stock Units, Performance Stock, Performance Units and other Stock Incentive settled in Shares shall reduce the applicable limit by 2.5 Shares for each Share covered by the Incentive.
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3.3
|
LIMITATIONS ON STOCK INCENTIVES. Subject to adjustment pursuant to Section 3.4, no Participant may be granted any Stock Incentive covering an aggregate number of Shares in excess of Two Hundred Thousand (200,000) in any calendar year. Notwithstanding the foregoing, in connection with his or her initial service, a Participant may be granted Stock Incentives covering not more than an additional One Hundred Thousand (100,000) Shares, which shall not count against the limit set forth in the preceding sentence. The foregoing limits shall be determined by applying the principles of Section 3.2 (in particular Section 3.2(f)). With respect to any Performance Unit or Other Award that is not denominated in Shares, the maximum amount that a Participant may receive in any calendar year is Two Million dollars ($2,000.000).
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3.4
|
SHARE ADJUSTMENT. Notwithstanding anything in Section 12 to the contrary: (a) the number of Shares reserved under Section 3.1, (b) the limit on the number of Shares that may be granted subject to Stock Incentives during a calendar year to any individual under Section 3.1 and 3.3, (c) the number of Shares subject to certain Stock Incentives granted subject to Section 3.1, and (d) the Exercise Price of any Options and the specified price of any Stock Appreciation Rights, shall be adjusted by the Committee in an equitable manner to reflect any change in the capitalization of the Company, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Committee shall have the right to adjust (in a manner that satisfies the requirements of Code Section 424(a)): (i) the number of Shares reserved under Section 3.1; (ii) the number of Shares subject to certain Stock Incentives subject to Section 3.1; and (iii) the Exercise Price of any Options and the specified exercise price of any Stock Appreciation Rights in the event of any corporate transaction described in Section 424(a) of the Code that provides for the substitution or assumption of such Stock Incentives. If any adjustment under this Section creates a fractional Share or a right to acquire a fractional Share, such fractional Share shall be disregarded, and the number of Shares reserved under this Plan and the number subject to any Stock Incentives granted under this Plan shall be the next lower number of Shares, rounding all fractions downward. An adjustment made under this Section by the Committee shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in the number of Shares reserved under Section 3.1 or an increase in any limitation imposed by the Plan.
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|
(a)
|
the seventh (7th) anniversary of the effective date of this Plan, and
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(b)
|
the date on which all of the Shares reserved under Section 3 of this Plan have been issued or are no longer available for use under this Plan.
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5.1
|
GENERAL ADMINISTRATION. The Committee shall administer this Plan. The Committee, acting in its absolute discretion, shall exercise such powers and take such action as expressly called for under this Plan. The Committee shall have full power to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend or waive rules and regulations for the Plan’s administration, and to make all other determinations and take all other actions that may be necessary or advisable for the administration of the Plan. Notwithstanding anything herein to the contrary, the Board may, without further action of the Committee, exercise the powers and duties of the Committee or any delegate under the Plan, unless such exercise would cause any Stock Incentive not to comply with the requirements of Section 162(m) of the Code.
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5.2
|
AUTHORITY OF THE COMMITTEE. Except as limited by law or by the Articles of Incorporation or By-laws of the Company, and subject to the provisions herein, the Committee shall have full power to: (a) select Participants in the Plan; (b) determine the types of Stock Incentives for each Participant in a manner consistent with the Plan; (c) determine the number of Shares or the method of determining the number of Shares or other payment under such Stock Incentive; (d) determine the terms and conditions of Stock Incentives in a manner consistent with the Plan, including the time and manner of exercise, the restrictions on the rights granted under the Stock Incentive and the lapse thereof, the manner of payment, if any, the restrictions or holding period applicable to the payment or Stock received upon exercise or in satisfaction of the Stock Incentive; and (e) amend the terms and conditions of any outstanding Stock Incentives as provided in accordance with Section 12.3. The Committee shall have the independent authority and discretion over the appointment, compensation and oversight of the services of advisors to the Committee, including compensation consultants and legal counsel, provided such advisors meet the standards for independence as established by the Securities Exchange Commission. The Company shall pay the compensation and expenses of such advisors. The Committee may seek the assistance of such other persons as it may see fit in carrying out its routine administrative functions concerning the Plan.
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5.3
|
DELEGATION OF AUTHORITY. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board. The Committee may appoint one or more separate committees (any such committee, a “Subcommittee”) composed of two or more Outside Directors of the Company (who may but need not be members of the Committee) and may delegate to any such Subcommittee or to one or more executive officers of the Company the authority to grant Stock Incentives, and/or to administer the Plan or any aspect of it; provided, however, that only the Committee may grant Stock Incentives that meet the Performance-Based Exception, and only the Committee may grant Stock Incentives to Insiders.
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5.4
|
DECISIONS BINDING. All determinations and decisions made by the Committee pursuant to the provisions of this Plan and all related orders and resolutions of the Committee shall be final, conclusive and binding on all persons, including the Company, its shareholders, members of the Board, Participants, and their estates and beneficiaries.
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7.1
|
ALL STOCK INCENTIVES.
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|
(a)
|
Grants of Stock Incentives. The Committee, in its absolute discretion, shall grant Stock Incentives under this Plan from time to time and shall have the right to grant new Stock Incentives in exchange for outstanding Stock Incentives; provided, however, the Committee shall not have the right to: (i) lower the Exercise Price of an existing Option; (ii) any action which would be treated as a “repricing” under generally accepted accounting principles; or (iii) canceling of an existing Option at a time when its Exercise Price exceeds the fair market value of the underlying stock subject to such Option in exchange for another Option, a Restricted Stock Award, or other equity in the Company (except as provided in Sections 3.4, 10 and 11). Stock Incentives shall be granted to Participants selected by the Committee, and the Committee shall be under no obligation whatsoever to grant any Stock Incentives, or to grant Stock Incentives to all Participants, or to grant all Stock Incentives subject to the same terms and conditions.
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(b)
|
Shares Subject to Stock Incentives. The number of Shares as to which a Stock Incentive shall be granted shall be determined by the Committee in its sole discretion, subject to the provisions of Section 3.1 as to the total number of Shares available for grants under the Plan, and to any other restrictions contained in this Plan.
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(c)
|
Stock Incentive Agreements. Each Stock Incentive shall be evidenced by a Stock Incentive Agreement. The Stock Incentive Agreement may be in an electronic medium, may be limited to notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant. The Committee shall have sole discretion to modify the terms and provisions of any Stock Incentive in accordance with Section 12.3.
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(d)
|
Date of Grant. The date a Stock Incentive is granted shall be no earlier than the date on which the Committee: (i) has approved the terms and conditions of the Stock Incentive Agreement; (ii) has determined the recipient of the Stock Incentive and the number of Shares covered by the Stock Incentive; and (iii) has taken all such other action necessary to direct the grant of the Stock Incentive.
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(e)
|
Vesting of Stock Incentives. Stock Incentives under the Plan may have restrictions on the vesting or delivery of and, in the case of Options, the right to exercise, that lapse based upon the service of a Participant, or based upon other criteria that the Committee may determine appropriate, such as the attainment of performance criteria as determined by the Committee, including but not limited to one or more Pperformance Goals. If the Award is intended to meet the Performance-Based Exception, the attainment of such performance goals must satisfy the requirements of Sections 9.1, 9.2 and 9.3. Until the end of the period(s) of time specified in the vesting schedule and/or the satisfaction of any performance criteria, the Shares subject to such Stock Incentive Award shall remain subject to forfeiture.
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(f)
|
Acceleration of Vesting of Stock Incentives. Notwithstanding anything to the contrary in this Plan, the Committee shall have the power to permit, in its sole discretion, an acceleration of the expiration of the applicable restrictions or the applicable period of such restrictions with respect to any part or all of the Shares awarded to a Participant; provided, however, the Committee may grant Stock Incentive Awards precluding such accelerated vesting in order to qualify the Stock Incentive Awards for the Performance-Based Exception.
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(g)
|
Dividend Equivalents. The Committee may grant dividend equivalents with respect to any Stock Incentive. The Committee shall establish the terms and conditions to which the dividend equivalents are subject. Under a dividend equivalent, a Participant shall be entitled to receive payments equivalent to the amount of dividends paid by the Company to holders of Shares with respect to the number of dividend equivalents held by the Participant, which may be paid concurrently with the payment of dividends or deferred and paid at a later date. The dividend equivalent may provide for payment in Shares or in cash, or a fixed combination of Shares or cash, or the Committee may reserve the right to determine the manner of payment at the time the dividend equivalent is payable. Any such dividend equivalent that is intended to exempt from Section 409A of the Code with respect to a Stock Incentive that constitutes Deferred Compensation shall be stated in a separate arrangement.
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(h)
|
Transferability of Stock Incentives. Except as otherwise provided in a Participant’s Stock Incentive Agreement, no Stock Incentive granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except upon the death of the holder Participant by will or by the laws of descent and distribution. Except as otherwise provided in a Participant’s Stock Incentive Agreement, during the Participant’s lifetime, only the Participant may exercise any Option or Stock Appreciation Right unless the Participant is incapacitated, in which case the Option or Stock Appreciation Right may be exercised by and any other Stock Incentive may be payable to the Participant’s legal guardian, legal representative, or other representative whom the Committee deems appropriate based on applicable facts and circumstances. The determination of incapacity of a Participant and the identity of appropriate representative of the Participant to exercise the Option or receive any other payment under a Stock Incentive if the Participant is incapacitated shall be determined by the Committee.
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(i)
|
Deferral Elections. The Committee may require or may permit Participants to elect to defer the issuance of Shares or the settlement of Stock Incentives in cash under this Plan pursuant to such rules, procedures, or programs as it may establish from time to time. However, notwithstanding the preceding sentence, the Committee shall not, in establishing the terms and provisions of any Stock Incentive, or in exercising its powers under this Plan: (i) create any arrangement which would constitute an employee pension benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act, as amended, unless the arrangement provides benefits solely to one or more individuals who constitute members of a select group of management or highly compensated employees; or (ii) create any arrangement that would constitute Deferred Compensation unless the arrangement complies with Section 9.4 and 9.5 or unless the Committee, at the time of grant, specifically provides that the Stock Incentive is not intended to comply with Section 409A of the Code.
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7.2
|
OPTIONS.
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|
(a)
|
Grants of Options. Each grant of an Option shall be evidenced by a Stock Incentive Agreement that shall specify whether the Option is an ISO or NQSO, and incorporate such other terms as the Committee deems consistent with the terms of this Plan and, in the case of an ISO, necessary or desirable to permit such Option to qualify as an ISO. The Committee and/or the Company may modify the terms and provisions of an Option in accordance with Section 12 even though such modification may change the Option from an ISO to a NQSO.
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(b)
|
Termination of Service other than upon a Qualifying Event. Except as provided in the Option Agreement or a separate agreement with the Participant that covers Options, or as otherwise provided by the Committee: (i) if the Participant’s Service with the Company and/or a Subsidiary ends before the Options vest, the Participant shall forfeit all unvested Options; and (ii) any Options held by such Participant may thereafter be exercised to the extent it was exercisable at the time of such termination, but may not be exercised after 180 days after such termination, or the expiration of the stated term of the Options, whichever period is the shorter. In the event a Participant’s Service with the Company or any Subsidiary is terminated for Cause, all unexercised Options granted to such Participant shall immediately terminate.
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(c)
|
Termination of Service upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant that covers Options, and except as otherwise provided by the Committee: (i) if a Qualifying Event occurs before the date or dates on which Options vest, the Participant shall forfeit all unvested Options; and (ii) any Options held by such Participant may thereafter be exercised to the extent it was exercisable at the time of such Qualifying Event, but may not be exercised after 180 days after such Qualifying Event, or the expiration of the stated term of the Options, whichever period is the shorter.
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(d)
|
Exercise Price. Subject to adjustment in accordance with Section 3.4 and the other provisions of this Section, the Exercise Price shall be specified in the applicable Stock Incentive Agreement and shall not be less than the Fair Market Value of a Share on the date the Option is granted. With respect to each ISO to a Participant who is not a Ten Percent Shareholder, the Exercise Price shall not be less than the Fair Market Value of a Share on the date the ISO is granted. With respect to each ISO to a Participant who is a Ten Percent Shareholder, the Exercise Price shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the ISO is granted.
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(e)
|
Option Term. Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Stock Incentive Agreement, but no Stock Incentive Agreement shall: (i) make an Option exercisable prior to the date such Option is granted or after it has been exercised in full; or (ii) make an Option exercisable after the date that is: (A) the seventh (7th) anniversary of the date such Option is granted, if such Option is a NQSO or an ISO granted to a Participant who is not a Ten Percent Shareholder; or (B) the fifth (5th) anniversary of the date such Option is granted, if such Option is an ISO granted to a Ten Percent Shareholder. Options issued under the Plan may become exercisable based on the service of a Participant, or based upon the attainment (as determined by the Committee) of performance criteria, including but not limited to Performance Goals . Any Option that is intended to qualify for the Performance-Based Exception must satisfy the requirements of Sections 9.1, 9.2 and 9.3.
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(f)
|
Payment. The Exercise Price of Shares acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations by delivering to the Company or its designated agent, either: (i) in cash or by check at the time the Option is exercised; or (ii) at the discretion of the Committee at the time of the grant of the Option (or subsequently in the case of an NQSO): (A) by delivery (or by attestation) of other Shares, including Shares acquired as part of the exercise (i.e., a pyramid exercise); (B) if permitted by applicable law, the withholding of Shares delivered by that number of Shares equal to the Fair Market Value of the Exercise Price (i.e., a cashless or net exercise); (C) according to a deferred payment or other similar arrangement with the Participant, including use of a promissory note (except for executive officers and Directors of the Company to the extent such loans and similar arrangements are prohibited under Section 402 of the Sarbanes-Oxley Act of 2002); (D) pursuant to a “same day sale” program exercised through a brokerage transaction as permitted under the provisions of Regulation T applicable to cashless exercises promulgated by the Federal Reserve Board so long as the Company’s equity securities are registered under Section 12 of the Exchange Act, unless prohibited by Section 402 of the Sarbanes-Oxley Act of 2002; or (E) by some combination of the foregoing. Notwithstanding the foregoing, with respect to any Participant who is an Insider, a tender of Shares or, a cashless or net exercise shall be a subsequent transaction approved as part of the original grant of an Option for purposes of the exemption under Rule 16b-3 of the Exchange Act. Except as provided above, payment shall be made at the time that the Option or any part thereof is exercised, and no Shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Participant. The holder of an Option, as such, shall have none of the rights of a shareholder.
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(g)
|
ISO Tax Treatment Requirements. With respect to any Option that is intended to be an ISO, to the extent that the aggregate Fair Market Value (determined as of the date of grant of such Option) of Shares with respect to which such Option is exercisable for the first time by any individual during any calendar year exceeds one hundred thousand dollars ($100,000), to the extent of such excess, such Option shall not be treated as an ISO in accordance with Section 422(d) of the Code and in Treas. Reg. §1.422-4. With respect to any Option that is intended to be an ISO, such Option shall cease to be treated as an ISO if the Participant disposes of Shares acquired upon exercise of the Option within two (2) years from the date of the granting of the Option or within one (1) year of the exercise of the Option, or if the Participant has not met the requirements of Section 422(a)(2) of the Code.
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7.3
|
RESTRICTED STOCK.
|
|
(a)
|
Grants of Restricted Stock Awards. Shares awarded pursuant to Restricted Stock Awards shall be subject to such restrictions as determined by the Committee for periods determined by the Committee. The Committee may require a cash payment from the Participant in exchange for the grant of a Restricted Stock Award or may grant a Restricted Stock Award without the requirement of a cash payment.
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|
(b)
|
Termination of Service other than a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant covering the Restricted Stock, if the Participant’s Service with the Company and/or a Subsidiary ends for any reason other than a Qualifying Event before any restrictions lapse, the Participant shall forfeit all unvested Restricted Stock, unless the Committee determines that some or all of the Participant’s unvested Restricted Stock shall vest as of the date of such event.
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|
(c)
|
Termination of Service upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant covering the Restricted Stock: (i) if a Qualifying Event occurs before the date or dates on which restrictions lapse, the Participant shall forfeit all unvested Restricted Stock, unless the Committee determines that some or all of the Participant’s unvested Restricted Stock shall vest as of the date of such event; and (ii) in the case of Restricted Stock based on performance criteria then, as of the date on which such Qualifying Event occurs, the Participant shall be entitled to receive a number of Shares that is determined by measuring the selected performance criteria from the Company’s most recent publicly available quarterly results that are available as of the date the Qualifying Event occurs or such later date as the Committee determines, but no later than the end of the Performance Period; provided, however, the Committee may grant Restricted Stock Awards precluding such partial awards when a Qualifying Event occurs in order to qualify the Restricted Stock for the Performance-Based Exception.
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|
(d)
|
Voting, Dividend & Other Rights. Unless the applicable Stock Incentive Agreement provides otherwise, a Participant awarded Restricted Stock shall be entitled to vote and to receive dividends during the periods of restriction of the Shares to the same extent as the Participant would have been entitled if the Shares were not restricted.
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7.4
|
RESTRICTED STOCK UNITS.
|
|
(a)
|
Grants of Restricted Stock Units. A Restricted Stock Unit shall entitle the Participant to receive one Share at such future time and upon such terms as specified by the Committee in the Stock Incentive Agreement. The Committee may require a cash payment from the Participant in exchange for the grant of Restricted Stock Units or may grant Restricted Stock Units without such requirement.
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|
(b)
|
Termination of Service other than upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant covering the Restricted Stock Unit, if the Participant’s Service with the Company and/or a Subsidiary ends before the Restricted Stock Units vest, the Participant shall forfeit all unvested Restricted Stock Units, unless the Committee determines that the Participant’s unvested Restricted Stock Units shall vest as of the date of such event.
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|
(c)
|
Termination of Service upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant covering the Restricted Stock Unit: (i) if a Qualifying Event occurs before the date or dates on which restrictions lapse, the Participant shall forfeit all unvested Restricted Stock Units, unless the Committee determines that the Participant’s unvested Restricted Stock Units shall vest as of the date of such event; and (ii) in the case of Restricted Stock Units that are based on performance criteria, then as of the date on which such Qualifying Event occurs, the Participant shall be entitled to receive a number of Shares that is determined by measuring the selected performance criteria from the Company’s most recent publicly available quarterly results that are available as of the date the Qualifying Event occurs or such later date, but not later than the end of the Performance Period; provided, however, the Committee may grant Restricted Stock Units precluding entitlement to a partial award when a Qualifying Event occurs in order to qualify the Restricted Stock Units for the Performance-Based Exception.
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|
(d)
|
Voting, Dividend & Other Rights. A Participant awarded Restricted Stock Units shall not be entitled to vote or to receive dividends until the date the Shares are issued to the Participant pursuant to the Restricted Stock Units, and, unless the Stock Incentive Agreement provides otherwise, the Participant shall not be entitled to any dividend equivalents (as described in Section 7.1(f)).
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7.5
|
STOCK APPRECIATION RIGHTS.
|
|
(a)
|
Grants of Stock Appreciation Rights. A Stock Appreciation Right shall entitle the Participant to receive upon exercise the excess of the Fair Market Value of number of Shares exercised, over the specified price for such Shares. The specified price for a Stock Appreciation Right granted in connection with a previously or contemporaneously granted Option, shall not be less than the Exercise Price for Shares that are subject to the Option. In the case of any other Stock Appreciation Right, the specified price shall not be less than one hundred percent (100%) of the Fair Market Value of a Share at the time the Stock Appreciation Right is granted. If related to an Option, the exercise of a Stock Appreciation Right shall result in a pro rata expiration and cancellation of the same number of Shares of the related Option for which the Stock Appreciation Right has been exercised.
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|
(b)
|
Stock Appreciation Right Term. Each Stock Appreciation Right granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Stock Incentive Agreement, but no Stock Incentive Agreement shall: (i) make a Stock Appreciation Right exercisable prior to the date such Stock Appreciation Right is granted or after it has been exercised in full; or (ii) make a Stock Appreciation Right exercisable after the date that is: (A) the seventh (7th) anniversary of the date such Stock Appreciation Right is granted; or (B) the fifth (5th) anniversary of the date such Stock Appreciation Right is granted, if such Stock Appreciation Right is granted in connection with the grant of an ISO to a Ten Percent Shareholder. Stock Appreciation Rights issued under the Plan may become exercisable based on the service of a Participant, or based upon the attainment (as determined by the Committee) of performance criteria, including but not limited to Performance Goals . Any Stock Appreciation Right that is intended to qualify for the Performance-Based Exception must satisfy the requirements of Sections 9.1, 9.2 and 9.3.
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(c)
|
Payment. Upon exercise of a Stock Appreciation Right, the Company shall pay to the Participant the appreciation with Shares (computed using the aggregate Fair Market Value of Shares on the date of exercise) or in cash, or in any combination thereof as specified in the Stock Incentive Agreement or, if not specified, as the Committee determines. To the extent that a Stock Appreciation Right is exercised, the specified price shall be treated as paid in Shares for purposes of Section 3.
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|
(d)
|
Termination of Service other than upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant that governs the Stock Appreciation Rights granted, or as otherwise provided by the Committee: (i) if the Participant’s Service with the Company and/or a Subsidiary ends before the Stock Appreciation Rights vest, the Participant shall forfeit all unvested Stock Appreciation Rights; and (ii) any Stock Appreciation Rights held by such Participant may thereafter be exercised to the extent it was exercisable at the time of such termination, but may not be exercised after 180 days after such termination, or the expiration of the stated term of the Stock Appreciation Rights, whichever period is the shorter. In the event a Participant’s employment with the Company or any Subsidiary is terminated for Cause, all unexercised Stock Appreciation Rights granted to such Participant shall immediately terminate.
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|
(e)
|
Termination of Service upon a Qualifying Event. Except as provided in the Stock Incentive Agreement or a separate agreement with the Participant that governs the Stock Appreciation Rights granted , and except as otherwise provided by the Committee: (i) if a Qualifying Event occurs before the date or dates on which Stock Appreciation Rights vest, the Participant shall forfeit all unvested Stock Appreciation Rights; and (ii) any Stock Appreciation Rights held by such Participant may thereafter be exercised to the extent it was exercisable at the time of such Qualifying Event, but may not be exercised after 180 days after such Qualifying Event, or the expiration of the stated term of the Stock Appreciation Rights, whichever period is the shorter.
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|
(f)
|
Special Provisions for Tandem Stock Appreciation Rights. A Stock Appreciation Right granted in connection with an Option may only be exercised to the extent that the related Option has not been exercised. A Stock Appreciation Right granted in connection with an ISO: (i) will expire no later than the expiration of the underlying ISO; (ii) may be for no more than the difference between the exercise price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Stock Appreciation Right is exercised; (iii) may be transferable only when, and under the same conditions as, the underlying ISO is transferable; and (iv) may be exercised only: (A) when the underlying ISO could be exercised; and (B) when the Fair Market Value of the Shares subject to the ISO exceeds the exercise price of the ISO.
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7.6
|
PERFORMANCE STOCK AND PERFORMANCE UNITS.
|
|
(a)
|
Awards of Performance Stock and Performance Units. Performance Stock and Performance Units shall become payable to a Participant upon achievement of performance criteria as determined by the Committee. Each award will specify the number of Performance Stock or Performance Units to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment will be made in the case of a grant that is intended to qualify for the Performance-Based Exception, other than as provided in Sections 9.1, 9.2 and 9.3. Subject to the limitation set forth in Section 3.4, any grant of Performance Stock or Performance Units may specify that the amount payable with respect thereto may not exceed a maximum specified by the Committee at the date of grant.
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|
(b)
|
Payment. Each grant will specify the time and manner of payment of Performance Stock or Performance Units that have been earned. Any Performance Stock award shall be payable in Shares. Any Performance Unit award may specify that the amount payable with respect thereto may be paid by the Company in cash, in Shares or in any combination thereof and may either grant to the Participant or retain in the Committee the right to elect among cash or Shares.
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7.7
|
OTHER AWARDS.
|
|
(a)
|
Other awards may, subject to limitations under applicable law, be granted to any Participant denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of such Shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates or other business units thereof, or any other factors designated by the Committee. The Committee shall determine the terms and conditions of such awards.
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|
(b)
|
Cash awards, as an element of or supplement to any other Stock Incentives granted under this Plan, may also be granted to Participants on such terms and conditions as the Committee may determine, subject to the limitation set forth in Section 3.4.
|
|
(c)
|
Shares may be granted to a Participant as a bonus, or in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as the Committee shall determine, subject to the limitation set forth in Section 3.4.
|
|
(d)
|
Participants designated by the Committee may be permitted to reduce compensation otherwise payable in cash in exchange for Shares or other Stock Incentives under the Plan.
|
|
7.8
|
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK. Notwithstanding any other provisions of this Plan, a grant of Restricted Stock shall be made to each Director who is not an employee of the Company or any Subsidiary within the meaning of Rule 16b-3 of the Exchange Act and who at the regular annual shareholders meeting is elected (or re-elected) to the Board . Except as provided in (a) and (b) below, the number of Shares and the other terms of this Restricted Stock shall be determined by the Board in its sole discretion prior to such annual meeting of shareholders. The date of grant of the Restricted Stock is the date on which such non-employee Director is elected or re-elected to serve on the Board. The following terms shall be applied to the Restricted Stock granted under this Section to non-employee Directors:
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|
(a)
|
Each grant of Restricted Stock to a non-employee Director shall vest as to one third of the Shares on the date of each of the three regular annual shareholder meetings following the date of grant, provided that the non-employee Director continues to serve as a member of the Board for the period up to such annual meeting, and if the non-employee Director ceases to serve as a member of the Board other than as provided in (b) below, shall forfeit any Restricted Stock for which the restrictions have not lapsed.
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|
(b)
|
Termination of Service following Ten Years of Service. In the event a non-employee Director who has continuously served as a member of the Board for a period of ten years or more retires at the end of the non-employee Directors’ elected term and does not continue to serve on the Board for any reason (other than pursuant to the non-employee Director’s removal for Cause), all restrictions on the Restricted Stock that has not previously lapsed shall, upon such retirement, immediately lapse.
|
|
The Board, in its discretion, may, in addition to the Restricted Stock grants provided above, grant any additional Stock Incentive to all non-employee Directors or to any individual non-employee Director, provided that such grant shall be solely for substantial services performed or to be performed by the non-employee Directors or non-employee Director as determined in good faith by the Board.
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8.1
|
LEGALITY OF ISSUANCE. No Share shall be issued under this Plan unless and until the Committee has determined that all required actions have been taken to register such Share under the Securities Act of 1933 or the Company has determined that an exemption therefrom is available, any applicable listing requirement of any stock exchange on which the Share is listed has been satisfied, and any other applicable provision of state, federal or foreign law, including foreign securities laws where applicable, has been satisfied.
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8.2
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RESTRICTIONS ON TRANSFER; REPRESENTATIONS; LEGENDS. Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act of 1933 or have been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable to achieve compliance with the provisions of the Securities Act of 1933, the securities laws of any state, the United States or any other applicable foreign law. If the offering and/or sale of Shares under the Plan is not registered under the Securities Act of 1933 and the Company determines that the registration requirements of the Securities Act of 1933 apply but an exemption is available which requires an investment representation or other representation, the Participant shall be required, as a condition to acquiring such Shares, to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, except in compliance with the Securities Act of 1933, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel. All Stock Incentive Agreements shall contain a provision stating that any restrictions under any applicable securities laws will apply.
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8.3
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REGISTRATION OF SHARES. The Company may, and intends to, but is not obligated to, register or qualify the offering or sale of Shares pursuant to this Plan under the Securities Act of 1933 or any other applicable state, federal or foreign law.
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9.1
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DISCRETION IN FORMULATION OF PERFORMANCE CRITERIA. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance criteria; provided, however, that any Stock Incentives that are intended to qualify for the Performance-Based Exception may not be adjusted upward (although the Committee shall retain the discretion to adjust such Stock Incentives downward).
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9.2
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PERFORMANCE PERIODS. The Committee shall have the discretion to determine the period during which any performance criteria, including any Performance Goal must be attained with respect to a Stock Incentive. Such period may be of any length, and must be established prior to the start of such period or within the first ninety (90) days of such period (provided that the performance criteria are not in any event set after 25% or more of such period has elapsed).
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9.3
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MODIFICATIONS TO PERFORMANCE GOAL CRITERIA. In the event that the applicable tax and/or securities laws and regulatory rules and regulations change to permit Committee discretion to alter the governing performance measures noted above without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Stock Incentives that shall not qualify for the Performance-Based Exception, the Committee may make such grants without satisfying the requirements under Section 162(m) of the Code to qualify for the Performance-Based Exception.
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9.4
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LIMITATION ON PAYMENT OR EXERCISE. With respect to any Stock Incentive that constitutes Deferred Compensation, such Stock Incentive shall provide for payment or exercise only upon: (a) a fixed date or schedule that complies with the requirements of Treas. Reg. §1.409A-3; (b) on a date based upon the Participant’s “separation from service,” or “disability,” or “unforeseeable emergency” as those terms are defined under Section 409A of the Code; (c) the Participant’s death; or (d) a Change in Control as defined in Section 11.1. Any election permitted under any Stock Incentive that constitutes Deferred Compensation shall comply with the requirements of Treas. Reg. §1.409A-2 and shall be irrevocable as of the date of grant of the Stock Incentive. In addition, with respect to any Stock Incentive that constitutes Deferred Compensation, except to the extent acceleration or deferral is permitted by or complies with the requirements of Section 409A of the Code, neither the Committee nor a Participant may accelerate or defer the time or schedule of any payment or exercise of, or the amount scheduled to be reported as income as a result.
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9.5
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DELAY IN PAYMENT OR EXERCISE FOR SPECIFIED EMPLOYEES. Notwithstanding anything in the Plan, unless the Stock Incentive Agreement specifically provides otherwise, no Stock Incentive that constitutes Deferred Compensation shall be paid to or exercised by a Specified Employee earlier than 181 days following the Participant’s “separation from service” as defined for purposes of Section 409A of the Code (or if earlier, upon the Specified Employee’s death), except as permitted under Section 409A of the Code and the regulations and other guidance promulgated thereunder. The Committee may specify in the Stock Incentive Agreement that the amount of the Deferred Compensation delayed pursuant to this Section 16.4 shall accumulate interest or earnings during the period of such delay.
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9.6
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WITHHOLDING. All taxes imposed on any Stock Incentive shall be the sole responsibility of the Participant. The Company shall have the right to deduct or withhold, or require a Participant to remit to the Company as a condition precedent for the grant, exercise, satisfaction of conditions or the lapse of restrictions under any Stock Incentive or the issuance of Shares, an amount sufficient to satisfy the federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result. Unless the Stock Incentive Agreement provides otherwise, the Participant may satisfy such tax obligation by:
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(a)
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electing to have the Company withhold a portion of the Shares otherwise to be delivered upon such exercise, satisfaction of conditions or lapse of restriction with a Fair Market Value equal to the amount of such taxes, provided that the maximum amount shall not exceed the amount of the minimum required withholding; and
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(b)
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delivering to the Company Shares other than Shares issuable upon such exercise, satisfaction of conditions or lapse of restrictions with a Fair Market Value equal to the amount of such taxes.
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Notwithstanding the foregoing, with respect to any Participant who is an Insider, a withholding or tender of Shares shall be a subsequent transaction approved as part of the Stock Incentive for purposes of the exemption under Rule 16b-3 of the Exchange Act.
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9.7
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NOTIFICATION OF DISQUALIFYING DISPOSITIONS OF AN ISO. If a Participant sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of: (a) the date two (2) years after the date of grant of such ISO; or (b) the date one (1) year after the exercise of such ISO, then the Participant shall immediately notify the Company in writing of such sale or disposition and shall cooperate with the Company in providing sufficient information to the Company for the Company to properly report such sale or disposition to the Internal Revenue Service. The Participant acknowledges and agrees that he or she may be subject to federal, state and/or local tax withholding by the Company on the compensation income recognized by Participant from any such early disposition, and agrees that he or she shall include the compensation from such early disposition in his gross income for federal tax purposes. The Company may condition the exercise of any ISO on the Participant’s express written agreement with these provisions of this Plan.
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11.1
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CHANGE IN CONTROL. “Change in Control” of the Company means an event that would be required to be reported in response to Item 6(e) on Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement, including, without limitation, if:
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(a)
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Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or other than a Subsidiary of the Company, becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; or
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(b)
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During any period of two consecutive years (not including any period ending prior to the effective date of this Plan), the Incumbent Directors cease for any reason to constitute at least a majority of the Board. The term “Incumbent Directors” shall mean those individuals who are members of the Board of Directors on the effective date of this Plan and any individual who subsequently becomes a member of the Board (other than a director designated by a person who has entered into agreement with the Company to effect a transaction contemplated by Section 11.1(c)) whose election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the then Incumbent Directors; or
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(c)
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In the event:
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i.
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the Company consummates a merger, consolidation, share exchange, division or other reorganization of the Company with any corporation or entity, other than an entity owned at least 80% by the Company, unless immediately after such transaction, the shareholders of the Company immediately prior to such transaction beneficially own, directly or indirectly 51% or more of the combined voting power of resulting entity’s outstanding voting securities as well as 51% or more of the Total Market Value of the resulting entity, or in the case of a division, 51% or more of the combined voting power of the outstanding voting securities of each entity resulting from the division as well as 51% or more of the Total Market Value of each such entity, in each case in substantially the same proportion as such shareholders owned shares of the Company prior to such transaction;
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ii.
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the Company consummates an agreement for the sale or disposition (in one transaction or a series of transactions) of assets of the Company, the total consideration of which is greater than 51% of the Total Market Value of the Company; or the Company adopts a plan of complete liquidation or winding up of the Company.
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(d)
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“Total Market Value” shall mean the aggregate market value of the Company’s or the resulting entity’s outstanding common stock (on a fully diluted basis) plus the aggregate market value of the Company’s or the resulting entity’s other outstanding equity securities as measured by the exchange rate of the transaction or by such other method as the Committee determines where there is not a readily ascertainable exchange rate.
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11.2
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VESTING UPON A CHANGE IN CONTROL. Except as otherwise provided in a Stock Incentive Agreement or as provided in the next sentence, if a Change in Control occurs, and if the agreements effectuating the Change in Control do not provide for the assumption or substitution of all Stock Incentives granted under this Plan, with respect to any Stock Incentive granted under this Plan that is not so assumed or substituted (a “Non-Assumed Stock Incentive”), such Stock Incentive shall immediately vest and be exercisable and any restrictions thereon shall lapse. Notwithstanding the foregoing, unless the Committee determines at or prior to the Change in Control, no Stock Incentive that is subject to any performance criteria for which the performance period has not expired, shall accelerate at the time of a Change in Control.
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11.3
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DISPOSITION OF STOCK INCENTIVES. Except as otherwise provided in a Stock Incentive Agreement, the Committee, in its sole and absolute discretion, may, with respect to any or all of such Non-Assumed Stock Incentives, take any or all of the following actions to be effective as of the date of the Change in Control (or as of any other date fixed by the Committee occurring within the thirty (30) day period immediately preceding the date of the Change in Control, but only if such action remains contingent upon the effectuation of the Change in Control) (such date referred to as the “Action Effective Date”):
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(a)
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Unilaterally cancel such Non-Assumed Stock Incentive in exchange for:
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i.
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whole and/or fractional Shares (or whole Shares and cash in lieu of any fractional Share) or whole and/or fractional shares of a successor (or for whole shares of a successor and cash in lieu of any fractional share) that, in the aggregate, are equal in value to the excess of:
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a.
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in the case of Options, the Shares that could be purchased subject to such Non-Assumed Stock Incentive less the aggregate Exercise Price for the Options with respect to such Shares; and
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b.
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in the case of Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Stock, Performance Units and Other Awards, Shares subject to such Stock Incentive determined as of the Action Effective Date (taking into account vesting), less the value of any consideration payable on exercise.
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ii.
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cash or other property equal in value to the excess of:
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a.
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in the case of Options, the Shares that could be purchased subject to such Non-Assumed Stock Incentive less the aggregate Exercise Price for the Options with respect to such Shares; and
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b.
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in the case of Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Stock, Performance Units and Other Awards, Shares subject to such Stock Incentive determined as of the Action Effective Date (taking into account vesting) less the value of any consideration payable on exercise.
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(b)
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In the case of Options, unilaterally cancel such Non-Assumed Option after providing the holder of such Option with: (i) an opportunity to exercise such Non-Assumed Option to the extent vested within a specified period prior to the date of the Change in Control; and (ii) notice of such opportunity to exercise prior to the commencement of such specified period. However, notwithstanding the foregoing, to the extent that the recipient of a Non-Assumed Stock Incentive is an Insider, payment of cash in lieu of whole or fractional Shares or shares of a successor may only be made to the extent that such payment: (A) has met the requirements of an exemption under Rule 16b-3 promulgated under the Exchange Act; or (B) is a subsequent transaction the terms of which were provided for in a transaction initially meeting the requirements of an exemption under Rule 16b-3 promulgated under the Exchange Act. Unless a Stock Incentive Agreement provides otherwise, the payment of cash in lieu of whole or fractional Shares or in lieu of whole or fractional shares of a successor shall be considered a subsequent transaction approved by the original grant of the Option.
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11.4
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GENERAL RULE FOR OTHER STOCK INCENTIVES. If a Change in Control occurs, then, except to the extent otherwise provided in the Stock Incentive Agreement pertaining to a particular Stock Incentive or as otherwise provided in this Plan, each Stock Incentive shall be governed by applicable law and the documents effectuating the Change in Control.
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12.1
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AMENDMENT OF PLAN. This Plan may be amended by the Committee from time to time to the extent that the Committee deems necessary or appropriate; provided, however, no such amendment shall be made without the approval of the shareholders of the Company if such amendment:
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(a)
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increases the number of Shares reserved under Section 3, except as set forth in Section 3.4;
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(b)
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extends the maximum life of the Plan under Section 4 or the maximum exercise period under Section 7;
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(c)
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decreases the minimum Exercise Price under Section 7;
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(d)
|
changes the designation of Participant eligible for Stock Incentives under Section 6; or
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(e)
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would cause the Plan to no longer comply with Rule 16b-3 of the Exchange Act, Section 422 of the Code.
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12.2
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TERMINATION OF PLAN. The Board also may suspend the granting of Stock Incentives under this Plan at any time and may terminate this Plan at any time.
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12.3
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AMENDMENT OF STOCK INCENTIVES. The Committee shall have the right to modify, amend or cancel any Stock Incentive after it has been granted if:
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(a)
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the modification, amendment or cancellation does not diminish the rights or benefits of the Participant under the Stock Incentive (provided, however, that a modification, amendment or cancellation that results solely in a change in the tax consequences with respect to a Stock Incentive shall not be deemed as a diminishment of rights or benefits of such Stock Incentive);
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(b)
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the Participant consents in writing to such modification, amendment or cancellation;
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(c)
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there is a dissolution or liquidation of the Company;
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(d)
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this Plan and/or the Stock Incentive Agreement expressly provides for such modification, amendment or cancellation; or
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(e)
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the Company would otherwise have the right to make such modification, amendment or cancellation by applicable law.
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13.1
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SHAREHOLDER RIGHTS. Except as provided in Section 7. 3 with respect to Restricted Stock, or in a Stock Incentive Agreement, no Participant shall have any rights as a shareholder of the Company as a result of the grant of a Stock Incentive pending the actual delivery of Shares subject to such Stock Incentive to such Participant.
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13.2
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NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock Incentive to a Participant under this Plan shall not constitute a contract of employment or other relationship with the Company and shall not confer on a Participant any rights upon his or her termination of employment or relationship with the Company in addition to those rights, if any, expressly set forth in the Stock Incentive Agreement that evidences his or her Stock Incentive.
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13.3
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TRANSFERS & RESTRUCTURINGS. The transfer of a Participant’s employment between or among the Company or a Subsidiary (including the merger of a Subsidiary into the Company) shall not be treated as a termination of his or her Service under this Plan. Likewise, the continuation of Service by a Participant with a corporation that is a Subsidiary shall be deemed to be a termination of Service when such corporation ceases to be a Subsidiary.
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13.4
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LEAVES OF ABSENCE. Unless the Committee provides otherwise, vesting of Stock Incentives granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be in the Service of the Company in the case of any leave of absence approved by the Company. With respect to any ISOs, no such leave may exceed 90 days unless reemployment upon expiration of such leave is guaranteed by statute or contract and if reemployment upon expiration of a leave of absence is not so guaranteed, then three (3) months following the 91st day of such leave any ISO held by the Participant will cease to be treated as an ISO and if exercised thereafter will be treated for tax purposes as a NQSO.
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13.5
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GOVERNING LAW/CONSENT TO JURISDICTION. This Plan shall be construed under the laws of the State of Minnesota without regard to principles of conflicts of law. Each Participant consents to the exclusive jurisdiction in the United States District Court for the District of Minnesota for the determination of all disputes arising from this Plan and waives any rights to remove or transfer the case to another court.
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13.6
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ESCROW OF SHARES. To facilitate the Company’s rights and obligations under this Plan, the Company reserves the right to appoint an escrow agent, who shall hold the Shares owned by a Participant pursuant to this Plan.
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13.7
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NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered pursuant to the Plan or any Stock Incentive, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such Shares shall be cancelled or otherwise eliminated.
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13.8
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FORFEITURE AND RECOUPMENT. Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of an Award consistent with law, and for greater clarity, the Committee may specify in an Stock Incentive Agreement that the Participant’s rights, payments, and benefits with respect to a Stock Incentive, including any payment or Shares received upon exercise or in satisfaction of the Stock Incentive under this Plan shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions, without limit as to time. Such events shall include, but shall not be limited to, failure to accept the terms of the Stock Incentive Agreement, termination of Service under certain or all circumstances, violation of material Company policies, misstatement of financial or other material information about the Company, fraud, misconduct, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection, or other agreement that may apply to the Participant, or other conduct by the Participant that the Committee determines is detrimental to the business or reputation of the Company and its Subsidiaries, including facts and circumstances discovered after termination of Service.
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(a)
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The Company shall require the chief executive officer and chief financial officer of the Company to disgorge bonuses, other incentive- or equity-based compensation, and profits on the sale of Shares received within the 12-month period following the public release of financial information if there is a restatement of such financial information because of material noncompliance, due to misconduct, with financial reporting requirements under the federal securities laws. In no event shall the amount to be recovered by the Company be less than the amount required to be repaid or recovered as a matter of law. The operation of this subsection (a) shall be in accordance with the provisions of Section 302 of Sarbanes-Oxley Act and any applicable guidance.
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(b)
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The Company shall require each current and former executive officer to disgorge bonuses, other incentive- or equity-based compensation received within 36-month period prior to the public release of the restatement of financial information due to material noncompliance with the financial reporting requirements under the federal securities laws. The amount to be recovered shall be the percentage of incentive compensation, including equity awards, in excess of what would have been paid without the restated results. The operation of this subsection (b) shall be in accordance with the provisions of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any applicable guidance.
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(c)
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The Committee shall determine, as late as the time of the recoupment, regardless of whether such method is stated in the Stock Incentive Agreement, whether the Company shall effect any such recoupment: (i) by seeking repayment from the Participant; (ii) by reducing (subject to applicable law and the terms and conditions of the applicable plan, program or arrangement) the amount that would otherwise be payable to the Participant under any compensatory plan, program or arrangement maintained by the Company or any of its affiliates; (iii) by withholding payment of future increases in compensation (including the payment of any discretionary bonus amount) or grants of compensatory awards that would otherwise have been made in accordance with the Company’s otherwise applicable compensation practices; (iv) by a holdback or escrow (before or after taxation) of part or all of the Shares, payment or property received upon exercise or satisfaction of the Stock Incentive; or (v) by any combination of the foregoing.
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13.9
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SEVERABILITY. If any provision of the Plan or any Stock Incentive is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Stock Incentive under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Stock Incentive, such provision shall be stricken as to such jurisdiction or as to such Stock Incentive, and the remainder of the Plan or any such Stock Incentive shall remain in full force and effect.
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13.10
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NO TRUST OR FUND CREATED. Neither the Plan nor any Stock Incentive shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary and a Participant. To the extent that any Paticipant acquires a right to receive payments from the Company or any Subsidiary pursuant to a Stock Incentive, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary.
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·
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Plan Term: January 1, 2012 through December 31, 2022
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·
|
Adopted by the Company’s Board of Directors on November 23, 2010
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·
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Approved by the Company’s shareholders on _____
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(a)
|
The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company (hereinafter referred to as the “Board of Directors”) or another committee established by the Board of Directors (the Compensation Committee or such other committee, hereinafter referred to as the “Committee”). The Board of Directors shall fill all vacancies in the Committee and may remove any member of the Committee at any time, with or without cause.
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(b)
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Unless the Board of Directors limits the authority of the Committee, the Committee shall be vested with full authority to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. Decisions of the Committee will be final and binding on all parties who have an interest in the Plan. The Committee may delegate ministerial duties to such of the Company’s employees, outside entities and outside professionals as the Committee so determines. For all purposes of this Plan other than the Plan’s Section 3(b), references to the Committee shall also refer to the Board of Directors.
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(c)
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The Company shall pay all expenses of administering the Plan, other than costs associated with either any required tax withholding or the sale or other disposition of shares purchased under the Plan.
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(a)
|
The Plan will commence on January 1, 2012 and will terminate December 31, 2021, except that any Phase commenced prior to such termination shall, if necessary, be allowed to continue beyond such termination until completion. Notwithstanding the foregoing, this Plan shall be considered of no force or effect and any options granted shall be considered null and void unless the holders of a majority of all of the issued and outstanding shares of Stock approve the Plan within twelve (12) months after the date of its adoption by the Board of Directors.
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(b)
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The Plan shall be carried out in one or more offering periods (“Phases”) being for a period determined by the Committee prior to the commencement of a Phase, provided that no Phase, shall be for a period of less than three months (other than the first Phase, which may be shorter) nor for a period of longer than twelve months. No Phase shall run concurrently with any other Phase but a Phase may commence immediately after the termination of the preceding Phase. The existence and date of commencement of a Phase (the “Subscription Date”) shall be determined by the Committee and shall terminate on a date (the “Purchase Date”) determined by the Committee consistent with the limitations specified above, provided that the commencement of the first Phase shall be within twelve months before or after the date of approval of the Plan by the shareholders of the Company. In the event all of the Stock reserved for grant of options hereunder is issued pursuant to the terms hereof prior to the commencement of one or more Phases scheduled by the Committee or the number of shares remaining is so small, in the opinion of the Committee, as to render administration of any succeeding Phase impracticable, such Phase or Phases shall be canceled. Phases shall be numbered successively as Phase 1, Phase 2, Phase 3, etc.
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(c)
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The Board of Directors may elect to accelerate the Purchase Date of any Phase effective on the date specified by the Board of Directors in the event of (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Stock would be converted into cash, securities or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock in the surviving corporation immediately after the merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company. Subject to any required action by the shareholders, if the Company shall be involved in any merger or consolidation, in which it is not the surviving corporation, and if the Board of Directors does not accelerate the Purchase Date of the Phase, each outstanding option shall pertain to and apply to the securities or other rights to which a holder of the number of shares subject to the option would have been entitled.
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(d)
|
A dissolution or liquidation of the Company shall cause each outstanding option to terminate, provided in such event that, immediately prior to such dissolution or liquidation, each Participant shall be repaid the payroll deductions credited to the Participant’s account without interest.
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(a)
|
Participation in the Plan is voluntary. An eligible Employee may elect to participate in the Plan, and thereby become a “Participant” in the Plan, by enrolling online through E*TRADE via www.etrade.com/stockplans by the applicable deadline prior to the date a Phase commences. The first Subscription Date shall be a date after January 1, 2012 as determined by the Committee. A Participant who ceases to be an eligible Employee, although still employed by the Company, shall continue to be treated as a Participant for the remainder of the current Phase. A Participant who is enrolled in the MTS Systems Corporation 2002 Employee Stock Purchase Plan (“2002 Plan”) at the Purchase Date of the last phase of the 2002 Plan, and does not subsequently cancel enrollment prior to the Subscription Date of the first Phase of the Plan, will automatically be in enrolled in the Plan under their elections from the 2002 Plan.
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(b)
|
Once enrolled in the Plan, a Participant will continue to participate in the Plan until he or she withdraws from the Plan pursuant to Section 9(a), or until contributions are discontinued under Section 8(a)(iv)(A) or Section 9(e). A Participant who withdraws from the Plan pursuant to Section 9(a) may again become a Participant, if the Participant is then an eligible Employee, by proceeding as provided in Section 6(a) above, which shall be effective as of the next Subscription Date. A Participant whose payroll deductions were discontinued because of Section 8(a)(iv)(A) will automatically resume participation at the Subscription Date of the next Phase of the Plan that ends in the next calendar year, if he or she is then an eligible Employee. A Participant whose payroll deductions were discontinued because of Section 9(e) may resume participation and payroll deductions on the Subscription Date of the next Phase after the Participant is again permitted to make deferrals under the MTS Retirement Savings Plan, if he or she is then an eligible Employee, and enrolls through E*TRADE at www.etrade.com/stockplans.
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(a)
|
Upon enrollment, except as provided in the next sentence, a Participant shall elect to make contributions to the Plan by payroll deductions, in whole percentages of 1% to 10% of Pay or such lesser percentage as determined by the Committee, but not in excess of the limit specified in Section 8(a)(iv)(A) below for each Phase until the Employee ceases to be a Participant as described in Section 6(b) above. In the event the Company anticipates that the maximum contribution specified in Section 8(a)(iv)(A) for the Phase will apply to a Participant, the Participant may designate a dollar amount. Payroll deductions for a Participant shall commence on the first payday after the Subscription Date of the Phase and shall terminate on the last payday immediately prior to or coinciding with the Purchase Date of that Phase unless sooner terminated by the Participant as provided in Section 7 and 9 hereof. Except for payroll deduction, a Participant may not make any separate cash payments into the Participant’s account under the Plan.
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(b)
|
In the event that the Participant’s Pay for any pay period is terminated or reduced from the compensation rate for such a period as of the Subscription Date of the Phase for any reason so that the amount actually withheld on behalf of the Participant as of the Purchase Date of the Phase is less than the amount anticipated to be withheld over the Phase as determined on the Subscription Date of the Phase, then the extent to which the Participant may exercise the Participant’s option shall be based on the amount actually withheld on the Participant’s behalf. In the event of a change in the pay period of any Participant, such as from bi-weekly to monthly, an appropriate adjustment shall be made to the deduction in each new pay period so as to ensure the deduction of the proper amount authorized by the Participant.
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(c)
|
A Participant may withdraw from participation in the Phase and terminate the Participant’s payroll deduction authorized at such times as determined by the Committee and shall have the rights provided in Section 9. No Participant shall be entitled to increase or decrease the amount to be deducted during a Phase after the Subscription Date of that Phase.
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(d)
|
All payroll deductions made for Participants shall be credited to their respective accounts under the Plan.
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(e)
|
Notwithstanding (a) above and to comply with the limitation set forth in Section 8(a)(iv)(A), a Participant’s maximum payroll deduction for a calendar year shall be $21,250 (this maximum is reviewed periodically and subject to change based on Internal Revenue Code requirements). If a Participant’s payroll deductions are suspended due to this limitation, such payroll deductions shall, absent an election by the Participant to the contrary, resume beginning with the first pay period in the next following calendar year at the same level as in effect at the time of suspension.
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(a)
|
Grant of Option.
|
|
(i)
|
A Participant who is employed by the Company as of the Subscription Date of a Phase shall be granted an option as of such date to purchase shares of Stock to be determined by dividing the total amount credited to that Participant’s account under Section 7 hereof by the applicable purchase price set forth in Section 8(a)(ii) hereof, subject to the limitations of Sections 8(a)(iv)(A), 8(a)(iv)(B) and 8(a)(iv)(C) and Section 10 hereof.
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(ii)
|
The purchase price for such shares of Stock shall be the lower of:
|
|
A.
|
Eighty-five percent (85%) of the Fair Market Value of such shares of Stock on the Subscription Date of the Phase; or
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|
B.
|
Eighty-five percent (85%) of the Fair Market Value of such shares of Stock on the Purchase Date of the Phase.
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(iii)
|
Stock options granted pursuant to the Plan may be evidenced by agreements in such form as the Committee shall approve, provided that all Employees shall have the same rights and privileges and provided further that such options shall comply with and be subject to the terms and conditions set forth herein. The Committee may conclude that agreements are not necessary.
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(iv)
|
Anything herein to the contrary notwithstanding, no Participant shall be granted an option hereunder:
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A.
|
Which permits the Participant’s rights to purchase shares of Stock under all employee stock purchase plans of the Company, its Subsidiaries or its parent, if any, to accrue at a rate which exceeds $25,000 of the Fair Market Value of such Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. In the case of shares purchased during a Phase that commenced in the current calendar year, the limit shall be equal to $25,000 minus the Fair Market Value of the shares that the Participant previously purchased in the current calendar year under the Plan and all other employee stock purchase plans of the Company. In the case of shares purchased during a Phase that commenced in the immediately preceding calendar year, the limit shall be equal to $50,000 minus the Fair Market Value of the shares that the Participant previously purchased under this Plan and all other employee stock purchase plans of the Company in the current calendar year and in the immediately preceding calendar year. Any amounts that accrue in excess of this limit shall be immediately refunded at the end of the Phase, without interest.
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B.
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Which permits the Participant to purchase shares of Stock under all employee stock purchase plans of the Company, its Subsidiaries or its parent, if any, in excess of 10,000 shares per Phase under the Plan; or
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C.
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If immediately after the grant such Participant would own and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company, its parent, if any, or of any Subsidiary of the Company. For purposes of determining stock ownership under this Section, the rules of Section 424(d) of the Internal Revenue Code, as amended, shall apply.
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(v)
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The grant of an option pursuant to this Plan shall not affect 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 or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets.
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(b)
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Exercise of Option.
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(i)
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Unless a Participant gives written notice to the Company pursuant to Section 9 to withdraw, the Participant’s option for the purchase of shares will be exercised automatically for the Participant as of such Purchase Date for the purchase of that number of full and fractional shares (rounded to the nearest 1/100th of a share) of Stock that the accumulated payroll deductions in the Participant’s account at that time will purchase at the applicable purchase price set forth in Section 8(a)(ii), and subject to the limitations set forth in Sections 8(a)(iv)(A), 8(a)(iv)(B) and 8(a)(iv)(C), and Section 10 hereof.
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(ii)
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The Company shall, in addition, return to the Participant a cash payment equal to the balance, if any, in the Participant’s account which was not used for the purchase of Stock, without interest, as promptly as practicable after the Purchase Date of any Phase, or at the election of the Committee, apply such amount to the purchase of shares in the next Phase, if the Employee is then eligible.
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(iii)
|
The Committee may appoint a registered broker dealer to act as agent for the Company in holding and performing ministerial duties in connection with the Plan, including, but not limited to, maintaining records of Stock ownership by Participants and holding Stock in its own name for the benefit of the Participants. No trust or escrow arrangement shall be express or implied by the exercise of such duties by the agent. A Participant may, at any time, request of the agent that any shares allocated to the Participant be registered in the name of the Participant, in which event the agent shall issue a certificate for the whole number of shares in the name of the Participant and shall deliver to the Participant any cash for fractional shares, based on the then Fair Market Value of the shares on the date of issuance.
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(iv)
|
The Participant may direct the Committee or its agent to register the Participant’s account in joint tenancy with the Participant, or to register any shares in the name of the Participant and a joint tenant, provided that the joint tenant must be a natural person. The designation of a joint tenant shall be applied to any shares in the account or registered under the Plan in the name of the Participant and any additional shares allocated to the account or registered in the name of the Participant until further changed by the Participant. The Participant may change from a designated joint tenant to the Participant only and may change the named joint tenant with respect to the account or any shares, provided that any such change in joint tenant shall apply to any shares only when the restrictions described in Section 8(d) lapse.
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|
(c)
|
Unless the Committee designates otherwise, a Participant may elect to have any dividends on a Participant’s shares automatically reinvested in additional shares of Stock in lieu of receiving dividends in the form of cash. Any shares purchased through the reinvestment of dividends will be purchased on the open market. Such purchases shall be governed by the requirements of the Company’s dividend reinvestment program.
|
|
(d)
|
For a period beginning on the date of exercise and ending on the later of: (i) 12 months from the date of exercise or (ii) 24 months from the date of grant of the option pursuant to this Plan, each share of Stock so acquired may not, without the consent of the Committee (which consent shall be provided in a uniform and nondiscriminatory manner for similarly situated Participants) be sold, transferred (including changing the joint tenant on the Participant’s account or registered shares, the payment of the price upon the subsequent exercise of any option, or the payment of income taxes on the exercise), pledged or encumbered. The Committee may waive such restrictions with respect to Stock acquired upon the exercise of options granted or to be granted during any Phase of the Plan, either prior to or at any time subsequent to the Subscription Date of the Phase and may establish uniform rules for the transfer of such Stock during such period. During the period such shares are subject to the restrictions of this subsection (d), such shares shall be held by the transfer agent or the Company, or an appropriate legend describing the restriction and referencing the Plan shall be placed on the certificate evidencing such Stock.
|
|
(a)
|
A Participant may, at any time prior to six weeks before the Purchase Date of a Phase, withdraw all deductions from Pay then credited to the Participant’s account by giving written notice to the Company. Within a reasonable time upon receipt of such notice of withdrawal, all such deductions credited to the Participant’s account will be paid to the Participant, without interest, and no further payroll deductions by the Participant to this Plan will be permitted during the Phase. In such event, the option granted the Participant under that Phase of the Plan will lapse immediately. Partial withdrawals of payroll deductions hereunder may not be made. Subject to Section 9(e) below, a Participant’s withdrawal will not have any effect upon the Participant’s eligibility to participate in any succeeding Phase of the Plan or in any similar plan that may hereafter be adopted by the Company.
|
|
(b)
|
Notwithstanding the provisions of Section 9(a) above, if a Participant files reports pursuant to Section 16 of the Securities Exchange Act of 1934 (at the Subscription Date of a Phase or becomes obligated to file such reports during a Phase) then such a Participant shall not have the right to withdraw all or a portion of the accumulated deductions from Pay except in accordance with Sections 9(c) and (d) below.
|
|
(c)
|
In the event of the death of a Participant, the person or persons specified in Section 14 may give notice to the Company within 60 days of the death of the Participant electing to purchase the number of full shares which the accumulated payroll deductions in the account of such deceased Participant will purchase at the purchase price specified in Section 8(a)(ii) and have the balance in the account distributed in cash, without interest, to the person or persons specified in Section 14. If no such notice is received by the Company within said 60 days, the accumulated payroll deductions will be distributed in full in cash, without interest, to the person or persons specified in Section 14.
|
|
(d)
|
Upon termination of Participant’s employment for any reason other than death of the Participant, the Company shall return to the Participant, without interest, any payroll deductions credited to the Participant’s account during that Phase.
|
|
(e)
|
In the event the Participant’s participation is suspended under the MTS Retirement Savings Plan as a result of receiving a hardship withdrawal, the Participant shall be immediately and automatically suspended from the Plan and all payroll deductions shall be discontinued and returned to the Participant, without interest. The Participant shall again participate in the Plan as provided in Section 6(b) above.
|
|
(f)
|
The Committee shall be entitled to make such rules, regulations and determination as it deems appropriate under the Plan in respect of any leave of absence taken by or disability of any Participant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine:
|
|
(i)
|
Whether or not any such leave of absence shall constitute a termination of employment for purposes of the Plan; and
|
|
(ii)
|
The impact, of any, of any such leave of absence on options under the Plan theretofore granted to any Participant who takes such leave of absence.
|
|
(a)
|
The maximum number of shares of Stock to be issued upon the exercise of options to be granted under the Plan shall be 750,000. Such shares may, at the election of the Board of Directors, be either shares authorized but not issued or shares acquired in the open market by the Company. Shares subject to the unexercised portion of any lapsed or expired option may again be subject to option under the Plan.
|
|
(b)
|
If the total number of shares of Stock for which options are to be granted for a given Phase as specified in Section 8 exceeds the number of shares then remaining available under the Plan (after deduction of all shares for which options have been exercised or are then outstanding) and if the Committee does not elect to cancel such Phase pursuant to Section 4, the Committee shall make a pro rata allocation of the shares remaining available in as uniform and equitable a manner as it shall consider practicable. In such event, the options to be granted and the payroll deductions to be made pursuant to the Plan, which would otherwise be affected, may, in the discretion of the Committee, be reduced accordingly. The Committee shall give written notice of such reduction to each Participant affected.
|
|
(c)
|
The Participant (or a joint tenant named pursuant to Section 10(d) hereof) shall have no rights as a shareholder with respect to any shares subject to the Participant’s option until the date of the issuance of a Stock certificate evidencing such shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such Stock certificate is actually issued, except as otherwise provided in Section 12 hereof.
|
|
(d)
|
The shares of Stock to be delivered to a Participant pursuant to the exercise of an option under the Plan will be registered in the name of the Participant or, if the Participant so directs by written notice to the Committee prior to the Purchase Date of that Phase of the Plan, in the names of the Participant and one other person the Participant may designate as the Participant’s joint tenant with rights of survivorship, to the extent permitted by law.
|
|
(a)
|
Subject to any required action by the shareholders of the Company, the number of shares covered by each outstanding option, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares or the payment of a share dividend (but only on the shares) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company.
|
|
(b)
|
In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the shares within the meaning of this Plan.
|
|
(c)
|
To the extent that the foregoing adjustments relate to shares or securities of the Company, such adjustments shall be made by the Committee, and its determination in that respect shall be final, binding and conclusive, provided that each option granted pursuant to this Plan shall not be adjusted in a manner that causes the option to fail to continue to qualify as an option issued pursuant to an “employee stock purchase plan” within the meaning of Section 423 of the Code.
|
|
(d)
|
Except as hereinbefore expressly provided in this Section 12, no Participant shall have any right by reason of any subdivision or consolidation of shares of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of any class, or securities convertible into shares of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to the option.
|
|
(a)
|
Options granted under any Phase of the Plan shall not be transferable except under the laws of descent and distribution and shall be exercisable only by the Participant during the Participant’s lifetime and after the Participant’s death only by the Participant’s beneficiary of the representative of the Participant’s estate as provided in Section 9(c) hereof.
|
|
(b)
|
Neither payroll deductions credited to a Participant’s account, nor any rights with regard to the exercise of an option or to receive shares of Stock under any Phase of the Plan may be assigned, transferred, pledged or otherwise disposed of in any way by the Participant. Any such attempted assignment, transfer, pledge or other disposition shall be null and void and without effect, except that the Company may, at its option, treat such act as an election to withdraw funds in accordance with Section 9.
|
|
(a)
|
A Participant may file a written (or if available, electronic) designation of a beneficiary who is to receive any cash credited to the Participant’s account under any Phase of the Plan in the event of such Participant’s death prior to exercise of the Participant’s option pursuant to Section 8 hereof, or to exercise the Participant’s option and become entitled to any Stock and/or cash upon such exercise in the event of the Participant’s death prior to exercise of the option pursuant to Section 8 hereof. The Participant may change the beneficiary designation at any time upon receipt of a written notice by the Company, or if available, through electronic means.
|
|
(b)
|
Upon the death of a Participant and upon receipt by the Company of proof deemed adequate by it of the identity and existence at the Participant’s death of a beneficiary validly designated under the Plan, the Company shall in the event of the Participant’s death, allow such beneficiary to exercise the Participant’s option pursuant to Section 9(c) if such beneficiary is living on the Purchase Date of the Phase and deliver to such beneficiary the appropriate shares of Stock and/or cash after exercise of the option. In the event there is not validly designated beneficiary under the Plan who is living at the time of the Participant’s death or in the event the option lapses, the Company shall deliver the cash credited to the account of the Participant without interest to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed to the knowledge of the Company, it may, in its discretion, deliver such cash to the spouse (or, if no surviving spouse, to any one or more children of the Participant), or if no spouse or child is known to the Company, then to such relatives of the Participant known to the Company as would be entitled to such amounts, under the laws of intestacy in the deceased Participant’s domicile as though named as the designated beneficiary hereunder. The Company will not be responsible for or be required to give effect to the disposition of any cash or Stock or the exercise of any option in accordance with any will or other testamentary disposition made by such Participant or in accordance with the provision of any law concerning intestacy, or otherwise. No designated beneficiary shall, prior to the death of a Participant by whom the Participant has been designated, acquire any interest in any Stock or in any option or in the cash credited to the Participant’s account under any Phase of the Plan.
|
|
(a)
|
The Employees of any Subsidiary of the Company that adopts this Plan by action of its Board of Directors with the consent of the Company, shall be entitled to participate in the Plan on the same basis as Employees of the Company, unless the Board of Directors of the Company determines otherwise. Effective as of the date of coverage of any Subsidiary, any references herein to the “Company” shall be interpreted as referring to such Subsidiary.
|
|
(b)
|
In the event that any Subsidiary, which is covered under the Plan, ceases to be a Subsidiary of the Company, the employees of such Subsidiary shall be considered to have terminated their employment for purposes of Section 9 hereof as of the date such Subsidiary ceases to be such a Subsidiary.
|
|
(a)
|
“Employee” means any common law employee, including an officer, of the Company or any Participating Subsidiary who as of the day immediately preceding the Subscription Date of a Phase is customarily employed by the Company for more than twenty (20) hours per week and more than five (5) months in a calendar year.
|
|
(b)
|
“Fair Market Value” of a share of Stock shall be the closing price of the Stock on the applicable date or the nearest prior business day on which trading occurred on the exchange on which the Stock is traded or on the Nasdaq Stock Market. If the Stock is not traded on any exchange or listed on the Nasdaq Stock Market, the Committee shall determine the Fair Market Value of a share of Stock for each valuation date in a manner acceptable under Section 423 of the Internal Revenue Code of 1986, as amended.
|
|
(c)
|
“Pay” means (i) the total base compensation paid in cash to a Participant by the Company and any Subsidiary, including salary, wages, commissions, overtime pay and shift premiums, plus (ii) any pre-tax contributions made by the Participant under Sections 401(k), 125 or 132(f)(4) of the Code. “Pay” shall exclude discretionary bonuses and incentive pay, including Executive Variable Compensation, Management Variable Compensation and Variable Compensation, all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of options, and similar items. Except to the extent required by applicable law or as modified above or as otherwise determined by the Committee in a uniform and nondiscriminatory manner, the definition of Pay shall be interpreted and administered in a manner consistent with the definition of compensation as determined from time to time for purposes of elective deferrals under the qualified retirement plan of the Company.
|
|
(d)
|
“Stock” means the common stock of the Company.
|
|
(e)
|
“Subsidiary” means any domestic corporation defined as a subsidiary of the Company in Section 424(f) of the Internal Revenue Code of 1986, as amended.
|
|
(a)
|
The Plan shall not, directly or indirectly, create any right for the benefit of any Employee or class of Employees to purchase any shares of Stock under the Plan, or create in any Employee or class of Employees any right with respect to continuation of employment by the Company, and it shall not be deemed to interfere in any way with the Company’s right to terminate, or otherwise modify, an Employee’s employment at any time.
|
|
(b)
|
The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Employee participating in the Plan, including, without limitation, such Employee’s estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy, or representative of creditors of such Employee.
|
|
(c)
|
As a condition of the obligations of the Company under this Plan, each Participant must, no later than the date as of which any part of the value of an option under this Plan first becomes includable as compensation in the gross income of the Participant for federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to such value. The Company or any Subsidiary, to the extent permitted by law, may deduct any such taxes from any payment of any kind otherwise due to the Participant. If the Committee permits, a Participant may elect by written notice to the Company to satisfy part or all of the withholding tax requirements under this Section by (i) authorizing the Company to retain from the number of shares of Stock that would otherwise be deliverable to the Participant, or (ii) delivering (including by attestation) to the Company from shares of Stock already owned by the Participant, that number of shares having an aggregate Fair Market Value equal to part or all of the tax payable by the Participant under the this Section, and in the event shares of Stock are withheld, the amount withheld will not exceed the minimum required federal, state and FICA withholding amount. Any such election will be in accordance with, and subject to, applicable tax and securities laws, regulations and rulings.
|
|
(d)
|
The law of the State of Minnesota will govern all matters relating to this Plan except to the extent it is superseded by the laws of the United States.
|
|
(e)
|
The offering of the shares hereunder shall be subject to the effecting by the Company of any registration or qualification of the shares under any federal or state law or the obtaining of the consent or approval of any governmental regulatory body which the Company shall determine, in its sole discretion, is necessary or desirable as a condition to or in connection with, the offering or the issue or purchase of the shares covered thereby. The Company shall make every reasonable effort to effect such registration or qualification or to obtain such consent or approval.
|
|
(f)
|
The Plan is expressly made subject to (i) the approval by shareholders of the Company, and (ii) at the Company’s election, the receipt from the Internal Revenue Service of a determination letter or ruling, in scope and content satisfactory to Company legal counsel, respecting the qualification of the Plan within the meaning of Section 423 of the Code. If the Plan is not so approved by the shareholders and if, at the election of the Company, the aforesaid determination letter or ruling from the Internal Revenue Service is not received on or before one year after the Plan’s adoption by the Board of Directors, the Plan shall not come into effect. In such case, the accumulated payroll deductions credited to the account of each Participant shall forthwith be repaid to the Participant without interest.
|
|
(g)
|
It is intended that the Plan and any option granted under the Plan made to a person subject to Section 16 of the Securities Exchange Act of 1934 meet all requirements of Rule 16b-3. If any provisions of the Plan or any option granted under the Plan would disqualify the Plan or such option, or would otherwise not comply with Rule 16b-3, such provision or option shall be construed or deemed amended to conform to Rule 16b-3.
|
MTS SYSTEMS CORPORATION
14000 TECHNOLOGY DRIVE
EDEN PRAIRIE, MN 55344
|
VOTE BY INTERNET - www.proxyvote.com
|
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on February 8, 2011. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
|
|
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
|
|
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
|
|
VOTE BY PHONE - 1-800-690-6903
|
|
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on February 8, 2011. Have your proxy card in hand when you call and then follow the instructions.
|
|
VOTE BY MAIL
|
|
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
M28460-P03493
|
KEEP THIS PORTION FOR YOUR RECORDS
|
|
DETACH AND RETURN THIS PORTION ONLY |
MTS SYSTEMS CORPORATION
|
For
|
Withhold
|
For All
|
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
|
||||||||||||||||||
All
|
All
|
Except
|
||||||||||||||||||||
The Board of Directors recommends that you vote FOR the following:
|
||||||||||||||||||||||
1.
|
To elect eight directors:
|
£
|
£
|
£
|
||||||||||||||||||
Nominees:
|
||||||||||||||||||||||
01) David J. Anderson
|
05) Emily M. Liggett
|
|||||||||||||||||||||
02) Jean-Lou Chameau
|
06) William V. Murray
|
|||||||||||||||||||||
03) Laura B. Hamilton
|
07) Barb J. Samardzich
|
|||||||||||||||||||||
04) Brendan C. Hegarty
|
08) Gail P. Steinel
|
|||||||||||||||||||||
The Board of Directors recommends you vote FOR the following proposals:
|
For
|
Against
|
Abstain
|
The Board of Directors recommends you vote for a frequency of two years:
|
1 Year
|
2 Years
|
3 Years
|
Abstain
|
||||||||||||||
2.
|
To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal 2011.
|
£
|
£
|
£
|
6.
|
To hold a non-binding, advisory vote regarding the frequency of the voting on the compensation of the Company’s named executive officers.
|
£
|
£
|
£
|
£
|
||||||||||||
3.
|
To approve the MTS Systems Corporation 2011 Stock Incentive Plan.
|
£
|
£
|
£
|
THIS PROXY/VOTING INSTRUCTION, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2, 3, 4, AND 5, AND WILL BE VOTED FOR THE TWO-YEAR FREQUENCY IN ITEM 6. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
|
|||||||||||||||||
4.
|
To approve the MTS Systems Corporation 2012 Employee Stock Purchase Plan
|
£
|
£
|
£
|
||||||||||||||||||
5.
|
To hold a non-binding, advisory vote regarding the compensation of the Company’s named executive officers.
|
£
|
£
|
£
|
||||||||||||||||||
For address changes and/or comments, please check this box and write them on the back where indicated.
|
£
|
|||||||||||||||||||||
This proxy should be marked, dated and signed by the shareholder(s) exactly as his, her or their name(s) appear(s) hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.
|
||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
Signature (Joint Owners)
|
Date
|
M28461-P03493 |
PROXY
|
|||
MTS SYSTEMS CORPORATION
|
|||
Proxy for the Annual Meeting of Shareholders
|
|||
February 9, 2011
|
|||
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
|
|||
The undersigned shareholder of MTS Systems Corporation, a Minnesota corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement and hereby appoints Laura B. Hamilton and Bruce W. Mooty, each with the power to appoint a substitute, and hereby authorizes them to represent and to vote all the shares of Common Stock of the Company, held of record by the undersigned on December 15, 2010, at the ANNUAL MEETING OF SHAREHOLDERS to be held on February 9, 2011, and any adjournments or postponements thereof.
|
|||
Address Changes/Comments:
|
|||
(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
|
|||