MTS SYSTEMS CORPORATION amended and restated EXECUTIVE CHANGE IN CONTROL SEVERANCE PLAN Effective January 1, 2014

1.1.    Establishment of Plan. MTS Systems Corporation, a Minnesota corporation, (the “Company”) establishes the MTS Systems Corporation Executive Change in Control Severance Plan (the “Plan”), effective as of the Effective Date. This Plan was approved by the Compensation Committee of the Board of Directors on September 30, 2103 and the Board of Directors on October 1, 2013. Capitalized terms used in the Plan shall have the meaning set forth in this Plan.

1.2.    Purpose of the Plan. The purpose of this Plan is to provide uniform and consistent benefits to Participants who incur a Separation from Service with the Company and its Affiliates in connection with and following a Change in Control of the Company under conditions set forth in this Plan. This Plan is an unfunded welfare benefit plan maintained by the Company for a select group of management or highly compensated employees and, as such, is intended to be exempt from the provisions of Parts 2, 3 and 4 of Subtitle B of Title I of ERISA and shall be administered and interpreted to give effect to such intent.

1.3.    Applicability of the Plan. This Plan constitutes the complete and entire statement regarding severance pay following a Change in Control for all employees of the Company and its Affiliates who meet the Plan’s eligibility requirements and, effective upon a Change in Control, supersedes any and all previous severance agreements and any other plan, policy, custom or practice providing severance benefits to Participants of this Plan, including the Company Executive Severance Plan.

1.4.    Effective Date; Term of Plan. This Plan shall be effective from and after the Effective Date and shall continue in effect until amended or terminated as provided in Article 7; provided, however, that:

2.1.    “Affiliate” means an entity that would be considered with the Company a single employer under Sections 414(b) and (c) and 1563(a) of the Code, except that 50% shall be substituted for the 80% each place it appears in Sections 414(b) and (c) and 1563(a) of the Code.

2.2.    “Annual Compensation” means the sum of the Participant’s:

Annual Compensation shall not include: (i) any amount actually paid to the Participant as a target bonus (regardless of whether all or any portion of such Company bonus was contributed to a deferred compensation plan); (ii) compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired, the vesting of restricted stock or distribution of restricted stock units; and (iii) any payments actually or constructively received from a plan or arrangement of deferred compensation between the Company and the Participant. All items included in Annual Compensation shall be those in effect on the Date of Termination and shall be calculated without giving effect to any reduction in such compensation that would constitute a breach of this Plan.

2.3.    “Cause” means:

2.4.    “Change in Control” shall mean a change in control which would be required to be reported in response to Item 6(e) on Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement, including, without limitation, if:

2.5.    “Code” means the Internal Revenue Code of 1986, as amended, and regulations and other guidance promulgated thereunder.

2.6.    “Company” means MTS Systems Corporation, a Minnesota corporation, and any successor thereto.

2.7.    “Conflicting Product” means any product, process, system or service of any person or entity, in existence or under development, which is the same as or similar to or competes with, or has a usage allied to, a product, process, system, or service produced, developed, or used by the Company or its Affiliates.

2.8.    “Date of Termination” means the date specified in the Notice of Termination, which shall not be less than 10 nor more than 30 days, from the date such Notice of Termination is given and on which occurs a Separation from Service.

2.9.    “Disability” means the Participant has incurred or is afflicted with any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, and as a result, has become eligible for and begun receiving income replacement benefits under the terms of the Company’s long-term disability plan or policy as may be in effect from time to time.

2.10.    “Effective Date” means January 1, 2014.

2.11.    “Eligible Employee” means any person employed by the Company in the positions or classifications in pay grade E1 and above and who is not a party to a separate written agreement between the Company or an Affiliate that provides for any payment or benefit, including but not limited to severance, to the employee in connection with, and for the period following, the employee’s Separation from Service.

 

2.12.    “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and regulations and guidance promulgated thereunder.

2.13.    “Good Reason” means, without the Participant’s express written consent, any of the following:

The Participant shall be entitled to terminate employment for Good Reason only if: (i) the Participant provides written notice to the CEO (or in the case of the CEO, to the Chair of the Compensation Committee) of the existence of a condition specified in paragraphs (a) through (e) above within 90 days of the initial existence of the condition; (ii) the Company does not remedy such condition within 30 days of the date of such notice; and (iii) the Participant terminates employment within 90 days following the last day of the remedial period described above.

2.14.    “Incumbent Director” means those individuals who are members of the Board of Directors of the Company on the Effective Date and any individual who subsequently becomes a member of the Board of Directors (other than a director designated by a person who has entered into agreement with the Company to effect a transaction contemplated by Section 2.4) 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.

2.15.    “Multiplier” means 200% with respect to all Participants.

2.16.    “Notice of Termination” means a notice that shall indicate the specific termination provision in this Plan relied upon and shall set forth the facts and circum-stances claimed to provide a basis for termination of the Participant’s employment.

2.17.    “Separation from Service” means the Participant’s termination of employment from the Company and its Affiliates. The Company will determine whether Participant has incurred a Separation from Service based on the facts and circumstances and in accordance with Treas. Reg. §1.409A-1(h)(1)(ii). The Company and the Participant shall take all steps necessary (including with regard to any post-termination services by the Participant) to ensure that any termination constitutes a Separation from Service as defined in this Section.

3.1.    Eligibility to Participate. An individual shall become a Participant on the day such individual becomes an Eligible Employee; provided, however, that any individual who is an Eligible Employee on the Effective Date of the Plan shall become a Participant on the Effective Date. Notwithstanding the forgoing, no Eligible Employee shall be eligible for benefits under Article 4 prior to a Change in Control.

3.2.    Termination of Participation. An individual ceases to be a Participant on the earliest of:

4.1.    Eligibility for Severance Payment. Subject to the conditions set forth in Section 4.3 and Article 5, and except as provided in the next sentence, the Participant shall be entitled to benefits provided in Section 4.2 if the Participant incurs a Separation from Service with the Company following a Change in Control:

The Participant shall not be entitled to the benefits provided in Section 4.2 if such Separation from Service is: (i) because of the Participant’s death or Disability, (ii) by the Company for Cause, (iii) by the Participant other than for Good Reason; or (iv) after the Participant has attained the age of 65.

4.2.    Severance Payment. Subject to the conditions set forth in Section 4.3 and Articles 5 and 6, the Company shall pay and provide to the Participant who satisfies the requirements of Section 4.1 the following amounts and benefits:

during the Benefit Continuation Period, and any such benefits actually received by Participant shall be reported to the Company.

4.3.    Release. The payments and benefits under Section 4.2 are conditioned upon the Participant executing and not rescinding within the time permitted under applicable law, a release of claims in a form substantially similar to that provided in Exhibit A (the “Release”). The Release will be presented to the Participant no later than 5 days after the Participant’s Date of Termination.

4.4.    Accrued Benefits. In addition to the benefits provided in Section 4.2, the Participant shall be entitled to the following additional benefits and payments upon the Participant’s Separation from Service:

4.5.    No Mitigation. The Participant shall not be required to mitigate the Severance Payment by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in Section 4.2 be reduced by any compensation earned by the Participant as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise except as provided in Articles 5 and 6.

5.1.    Limitation on Parachute Payments. In the event that the vesting, acceleration and payment of any equity awards or other compensation or benefits, together with all other payments and the value of any benefit received or to be received by the Participant under this Plan would result in all or a portion of such payment being subject to excise tax under Section 4999 of the Code, then the amounts due under Section 4.2 that the Company shall pay to the Participant shall be either (i) the full payment or (ii) such lesser amount determined by the Company in accordance with this Section 5.1 that would result in no portion of the payment being subject to excise tax under Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable federal, state, and local employment

taxes, income taxes, and the Excise Tax, results in the receipt by the Participant, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code. In the event the amounts due under Section 4.2 are reduced, the amounts shall be reduced in the following order of priority: first, with respect to any amount that does not constitute the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregarding the acceleration in the time of payment and then disregarding the acceleration of vesting as a result of a Change in Control and second, with respect to any amount that constitutes the “deferral of compensation” under Section 409A of the Code and regulations promulgated thereunder, disregarding the acceleration in the time of payment and then disregarding the acceleration of vesting as a result of a Change in Control first with respect to Company funded amounts and then the Participant’s deferrals, in each case only to the extent necessary to satisfy (ii) above. All determinations required to be made under this Section 5.1 shall be made by a nationally recognized accounting firm other than the Company’s outside auditor immediately prior to the event triggering the payments that are subject to the Excise Tax (the “Accounting Firm”). The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and Participant. Notice must be given to the Accounting Firm within 15 business days after an event entitling Participant to an amount due under this Plan. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Accounting Firm’s determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). For the purposes of all calculations under Section 280G of the Code and the application of this Section 5.1, all determinations as to present value shall use 120 percent of the applicable federal rate (determined under Section 1274(d) of the Code) compounded based on the nature of the payment, as in effect on the Date of Termination, but if not otherwise specified, compounded on a semiannual basis. The determination by the Accounting Firm shall be final and binding on the Company and the Participant.

5.2.    Offset for Clawback. The Company shall offset against any Severance Payment due and owing to the Participant any incentive compensation previously paid to the Participant by the Company that the Participant is required by law or the terms of any incentive compensation plan or agreement to repay to the Company as a result of any material misstatement of the Company’s financial statement or for any other reason, regardless of the Participant’s culpability.

6.1.    Noncompetition. Except as provided in Section 6.3, as a condition of receiving benefits under this Plan, the Participant will not render services, directly or indirectly, in connection with the design, implementation, development, manufacture, marketing, sale, merchandising, leasing, servicing or promotion of any Conflicting Product to any person or organization, wherever located, for a period of two years following the Date of Termination. If the Participant violates this Section 6.1, all benefits under this Plan shall cease immediately, other than insurance benefits, which the Participant may continue where permitted under federal and state law at the Participant’s own expense.

6.2.    Confidentiality. The Participant further agrees and acknowledges the Participant’s existing obligation that at all times during and subsequent to his or her employment with the Company, the Participant will not divulge or appropriate to the Participant’s own use or the uses

of others any secret or confidential information or knowledge pertaining to the business of the Company, or any of its Affiliates, obtained during his or her employment by the Company or any of its Affiliates.

6.3.    Waiver - Unfriendly Change in Control. Notwithstanding anything herein to the contrary, the restriction on competition under Section 6.1 shall not apply if the Participant’s employment terminates following a Change in Control and the Change in Control was not approved by a majority of the Incumbent Directors in office immediately prior to the Change in Control (an “Unfriendly Change in Control”). Furthermore, in such event, the Company waives any other similar restriction on the Participant’s subsequent employment and, subject to the limitation in Section 6.2, consents unconditionally to any employment the Participant may subsequently obtain.

7.1.    Funding of Payments. In order to assure the performance of the Company or its successor of its obligations under this Plan, the Company may deposit in a so-called “rabbi” trust in separate accounts an amount equal to the maximum payment that will be due each Participant under the terms hereof; provided, however, that the Company shall deposit in trust in separate accounts the amount equal to the maximum payment due each Participant immediately upon an Unfriendly Change in Control as defined in Section 6.3. If the Company deposits funds in trust, such deposit shall be made no later than the occurrence of the Change in Control. Under such written trust instrument, the trustee shall be instructed to pay to the Participant (or the Participant’s legal representative, as the case may be) the amount to which the Participant shall be entitled under the terms hereof, and the balance, if any, of the Participant’s account not so paid or reserved for payment shall be repaid to the Company. The written instrument governing the trust shall be irrevocable from and after such Change in Control and shall contain such provisions protective of the Participant as are contained in similar trust agreements approved by the Internal Revenue Service in published private letter rulings (provided that the assets of the trust shall be reachable by creditors of the Company as required by such rulings). The trustee shall be a national bank selected by the Company, with trust powers and whose principal officers are located in the Minneapolis/St. Paul metropolitan area. The trustee shall invest the assets of the trust in any readily marketable securities of U.S. corporations (other than the Company, its successor, or any Affiliate of the Company or its successor). If and to the extent there are not amounts in trust sufficient to pay Participants under this Plan, the Company shall remain liable for any and all payments due to Participants.

8.1.    Administration. The Plan shall be administered by the Compensation Committee of the Board of Directors of the Company; provided, however, that the Committee may delegate any and all of its powers and authority to a person or committee appointed by the Committee, subject to its review, and in that case, all references in the Plan to the Compensation Committee shall instead mean such person or other committee. The Compensation Committee shall have full power to construe, interpret and administer this Plan, including to make any determination required under this Plan and to make such rules and regulations as it deems advisable for the operation of this Plan. All determinations of the Compensation Committee shall be final and binding on all parties, subject only to the review of the Board of Directors of the Company.

8.2.    Named Fiduciary and Plan Administrator. The Company is designated as the Named Fiduciary of the Plan. The Chief Human Resources Officer of the Company is authorized to perform general administrative functions under the Plan on behalf of the Company. Personnel acting within the scope of their employment on behalf of the Company in the performance its duties on behalf of the Named Fiduciary under this Plan shall not become or be deemed to be fiduciaries in their individual capacity.

8.3.    Claims Procedure and Review. A Participant may make a claim for Plan benefits within the time and in the manner described herein. Such claim shall be made within 60 days after the claim arises by filing a written request with the CEO (or in the case of the CEO, to the Chair of the Compensation Committee of the Board of Directors). The claim shall be determined by the Compensation Committee within a reasonable time (not to exceed 60 days except in unusual circumstances and after notice to the Participant of the delay) after the receipt of the written claim. Notice of the Compensation Committee’s decision shall be communicated to the Participant in writing. If the claim is denied, the notice shall include the specific reasons for the denial (including reference to pertinent Plan provisions), a description of any additional material or information necessary for the Compensation Committee to reconsider the claim, the reasons for any of such additional material or information, and an explanation of the review procedure.

8.4.    Appeal. The Participant or his or her duly authorized representative may, within 60 days after receiving such written notice of review, request the Board of Directors to review the Compensation Committee’s decision. The Board of Directors shall afford the claimant a hearing and the opportunity to review all pertinent documents and submit issues and comments orally and in writing and shall render a review decision in writing within 60 days after receipt of request for review.

9.1.    Amendment. The Company reserves the right, prior to a Change in Control, to amend or modify, in whole or in part, any or all of the provisions of this Plan by a written instrument approved by the Compensation Committee; provided, however, that no amendment or modification shall:

9.2.    Termination. Continuation of the Plan is not assumed as a contractual obligation of the Company and the Company reserves the right prior to a Change in Control, by written instrument approved by the Compensation Committee, to reduce, suspend or discontinue the Plan; provided, however, that no such reduction, suspension or discontinuance shall:

This Plan shall neither impose nor confer any further rights or obligations on the Company or the Participant on the day after the end of the term of this Plan. Termination of this Plan shall not end the employment relationship between the Company and the Participant.

10.1.    Participant Rights. Nothing in this Plan shall be construed as giving a Participant the right to be retained in the employment of the Company, and a Participant shall remain subject to discharge at any time to the same extent as if this Plan had not been adopted.

10.2.    Tax Withholding. The Company shall, at the time required for such payment, deduct from any payments due under this Plan and remit to the Company or the proper governmental authorities an amount sufficient to satisfy federal, state, and local tax withholding requirements. Except with respect to required tax withholdings, the Company shall not be liable for any other taxes payable with respect to the benefits provided under Section 4.2.

10.3.    Remedies. In addition to any other remedies available at law or under the terms of this Plan, the Company will be entitled to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of this Plan, in particular, Section 6.1, it being agreed that money damages alone would be an inadequate remedy for such breach. The rights and remedies of the Company under this Plan are cumulative and not alternative. If the Company brings a claim against the Participant under this Section 10.3 the non-prevailing party shall reimburse the prevailing party for its reasonable attorney’s fees and costs

10.4.    Notice. Notices and all other communications provided for in the Plan shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the last known residence address of the Participant or in the case of the Company, to the CEO (or in the case of the CEO, to the Chair of the Compensation Committee of the Board of Directors), or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

10.5.    Anti-Alienation. Benefits conferred by this Plan shall not, to the extent permitted by law, be subject to alienation, assignment, pledge, levy, attachment, garnishment or other legal process or in any manner anticipated, encumbered, committed, withdrawn or surrendered, and neither shall the same be subject or liable in any way for debts, contracts, or agreements or other claims of creditors of such Participants or their beneficiaries whether such claims are now contracted or which may hereafter be contracted or incurred prior to actual payment thereof.

10.6.    Non-application of Section 409A of the Code. It is the intent of the Company that this Plan satisfy those requirements of Section 409A of the Code to constitute a “separation pay plan” to exempt the payments hereunder from the definition of a “nonqualified deferred compensation plan” under Section 409A of the Code, and the Plan shall be so administered and interpreted in manner consistent with, and that gives effect to, such intention. The Company shall have the authority, without the consent of the Participant to amend such provision to maintain, to maximum extent practicable, the intent that this Plan remains exempt from the requirements applicable to a “nonqualified deferred compensation plan” under Section 409A of the Code.

10.7.    Successors. All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to 51% or more of the ‑business and/or assets of the Company to expressly assume and agree to perform the Company’s obligations under this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall entitle the Participant to the compensation and benefits from the Company in the same amount and on the same terms as the Participant would be entitled hereunder if the Participant terminated his or her employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

10.8.    Binding Agreement. This Plan shall inure to the benefit of and be enforceable by the Participant's personal or legal representatives, successors, heirs, and designated beneficiaries. If the Participant should die while any amount would still be payable to the Participant hereunder if the Participant had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the Participant's designated beneficiaries, or, if there is no such designated beneficiary, to the Participant's estate.

10.9.    Entire Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made to any Participant or person that is not expressly set forth in this Plan.

10.10.    Validity. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect.

10.11.    Governing Law. The validity, interpretation, construc-tion and performance of this Plan shall be governed by the laws of the State of Minnesota, except to the extent pre-empted by federal law.

MTS SYSTEMS CORPORATION

By /s/ Kristin Trecker

Its Senior Vice President and Chief Human Resources Officer