Based on the results for fiscal ~~2011,~~2014, the ~~potential~~ payouts to each named executive officer under the EVC Plan by performance goal were calculated as follows based upon their respective fiscal ~~2011~~2014 base salaries:

Named Executive Officer and
Potential Payout Attributable to Performance Goal (1)

Performance Goal % Achieved Susan E. Knight
Joachim Hellwig (2)
Kathleen M. Staby
EPS 164 % $ 81,088 $ 56,553 $ 43,156

EBIT 155 % $ 76,624 $ 42,418 $ 40,780

Revenue 139 % $ 57,254 $ 34,660 $ 30,472

WCRR 91 % $ 22,497 $ 0 $ 11,973

Total 144 % $ 237,463 $ 133,631 $ 126,381

Total as % of Target 144 % 116 % 144 %


			Named Executive Officer and Payout Attributable to Performance Goal
Performance Goal	Percent of Target Payout Achieved		Jeffrey A. Graves		Susan E. Knight		William E. Bachrach(2)		Michael B. Jost(1) (2)		Steven G. Mahon
EPS		0%		—		—		—		—		—

EBIT		0%		—		—		$50,248		—		—

Revenue		83%		$98,243		$37,111		$67,724		$18,522		$35,481

Orders		123%		$87,153		$32,922		—		$17,550		$31,476

Total				$185,396		$70,033		$117,972		$36,072		$66,957

Total as % of Target				39%		39%		77%		38%		39%

(1)

~~Under the terms awards made under the EVC Plan,~~Mr. Jost’s Letter Agreement provided for a ~~participant~~guaranteed minimum payout of 50% of base salary paid for fiscal 2014, which resulted in a payout of $47,595, as reflected in the EVC Plan must have been employed at the end of the fiscal year to be eligible for a payout under the EVC Plan. Because Ms. Hamilton’s separation from service was effective August 25, 2011, she was not eligible for a payout under the EVC Plan.Summary Compensation Table.

(2)

Achievement of the performance ~~goal~~goals relating to EBIT and Revenue ~~and WCRR of~~for corporate performance for fiscal ~~2011~~2014 does not apply to Mr. ~~Hellwig.~~Bachrach or Mr. Jost. Amounts attributable to each of these measures ~~represents~~represent amounts attributable to actual achievement in fiscal ~~2011~~2014 by the ~~Sensors business unit~~Sensor segment and Test segment of the performance goal noted. ~~Currency converted from Euros to U.S. Dollars using the average exchange rate of $1.38630 for fiscal 2011.~~

In light of the U.S. Department of Commerce investigation and temporary suspension imposed by the U.S. Department of the Air Force, the Committee chose to adjust each named executive officer’s potential payout downward. The actual amounts paid to each named executive officer under the EVC Plan for fiscal 2011 are as follows: Ms. Knight — $189,970; Mr. Hellwig — $126,949; and Ms. Staby — $101,105. The Committee believes that the adjusted amounts more accurately reflect the Company’s and named executive officers’ performance in fiscal 2011 than the amounts calculated above with reference only to achievement of the financial objectives.

The Committee has selected EPS, EBIT, Revenue and Orders for the performance goals in fiscal 2012. The Orders goal will replace the Working Capital Rate to Revenue goal used in previous years. The Committee believes that focusing on Orders is appropriate to achieve overall Company growth and improve shareholder value. Targets established for each of the performance goals focused on growth over the previous year’s performance, with no payout available on any one goal if performance results fall below fiscal 2011 results. Weightings assigned to each goal will remain the same as in fiscal 2011.

~~Fiscal 2011~~ Long-Term Incentive Awards

~~For~~The Committee’s historical practice with respect to long-term incentive (“LTI”) grant timing had been to make annual grants in early July based on decisions made at its May meeting. During fiscal ~~2009~~2013, the Committee moved the discussion of LTI awards from May to November. This change streamlined the process of holistically evaluating all elements of direct pay (base salary, short-term cash incentive and ~~2010,~~LTI) in order to examine how these pay elements interact to produce a competitively positioned total pay opportunity and drive pay-for-performance alignment under a variety of performance scenarios.

Moving the discussion of LTI awards from May to November resulted in LTI grants being delayed from July to December. Given that our ~~long term-incentive~~fiscal year ends in September, this change resulted in our effectively skipping an LTI grant in fiscal 2013. By the time we made an LTI award in December 2013 (our fiscal 2014), 17 months had passed since our most recent prior award in July 2012. To make LTI program participants whole for the delayed grant, after determining nominal LTI award values, the Committee multiplied that nominal value by an adjustment factor of 1.4. The adjustment factor was calculated by dividing the number of months that had elapsed since the prior LTI grant (17 months) by the number of months typically separating successive LTI awards ~~consisted~~(12 months).

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The awards for fiscal 2014 were weighted 50% of the value in stock options and 50% of the value in restricted stock units granted to the named executive officers at the discretion of the Committee and approved by the Board of Directors for the named executive officer other than the CEO and the independent directors of the Board for the CEO. The Committee chose to award both stock options and restricted stock units during those years instead of stock options only, which had been the Company’s prior practice, primarily because of the retention benefits presented by restricted stock units, which account for stock price volatility due to external factors outside management performance, and to reflect a growing market practice of using two equity vehicles for incentive compensation.

However, for fiscal 2011 the Committee and the independent directors of the Board granted long-term incentive awards to the named executive officers in the form of stock options only. When making its grant decisions in May 2011, the independent directors of the Board identified the following reasons for changing the grant practice from the prior two years: (1) the U.S. Department of Commerce investigation of the Company was ongoing with an uncertain outcome; (2) while restricted stock units have an inherent underlying value independent of performance or events, options do not; (3) a grant consisting of 100% options aligns the executives with shareholders regardless of the outcome of the U.S. Department of Commerce investigation; and (4) the independent directors believed it was important to treat all of the named executive officers consistently.

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The Committee and independent directors determined that the value of the awards to be granted would be based on performance and potential and would remain independent of concerns regarding the U.S. Department of Commerce investigation.units. In determining the number of ~~shares~~stock options to grant, the Committee reviewed the ~~equity~~stock options based on an average of the Black Scholes values over the last three years. This methodology was employed in order to reduce the effects of stock price and interest rate volatility over the recent past and reduce the magnitude of year-to-year changes in the number of stock options awarded. A more stable option grant ~~structure developed~~size (in terms of the number of options) also sends a signal that pay realized from stock option grants will be more sensitive to future stock price appreciation and less sensitive to past stock price volatility. This approach, however, causes the accounting value of the stock options that are shown in the Summary Compensation and Grants of Plan-Based Awards tables to differ from the value of RSUs, which would otherwise be unexpected with an equal-weighted mix of options and RSUs. The grants for fiscal ~~2011, which established grant guideline ranges (minimum, target,~~2015 and ~~maximum) for each named executive officer based upon Towers Watson’s analysis~~subsequent fiscal years will use the average of ~~market data. The grant guideline range was between 22% below to 22% above~~ the ~~target opportunity. Towers Watson provided~~Black Scholes values over the ~~Committee with information as~~last 90 days prior to the ~~dollar~~end of the fiscal year instead of the average of the Black Scholes values over the last three years. The change to this methodology was employed to better represent the value ~~and number~~ of ~~options necessary to provide compensation comparable~~our equity over the most current period prior to the ~~median~~date of ~~market for comparable positions for each named executive officer.~~the award.

After reviewing this information, the Committee and independent directors determined to award an aggregate level of value that was comparable to what was awarded to the named executive officers in fiscal 2010. The value of awards to individual named executive officers varied somewhat from their respective awards in fiscal 2010 and from the target amounts to reflect scope of responsibility, individual performance, previous awards granted, and progress toward satisfying the stock ownership guidelines. The Committee did not quantify or assign weights to these other criteria. The individual awards ranged from 20% below target to 20% above target.

The following table shows for each of the named executive officers the number of shares underlying the ~~stock option award~~equity awards and the aggregate value of the awards granted in December 2013 for fiscal 2014. Mr. Jost did not receive an award as ~~well as a comparison to~~he joined the ~~target amount established for each position. These~~Company after the awards were ~~approved~~made in December 2013. As discussed above, these awards were adjusted by 140% to make participants whole for the ~~Committee and the Board in May 2011 and, under our equity grant policy, granted on the first business day~~delayed timing of the ~~fiscal fourth quarter (July 5, 2011).~~ long-term incentive awards.


Named Executive Officer	Number of Shares Underlying Stock Options	Number of Restricted Stock Units	Aggregate Value of Awards

Jeffrey A. Graves	68,241	10,462	$1,358,000

Susan E. Knight	16,884	2,589	$336,000

William E. Bachrach	12,312	1,888	$245,000

Steven G. Mahon	16,181	2,481	$322,000

The options are all non-qualified stock options that vest in incremental installments of one-third per year commencing on the first anniversary of the date of grant and expire ~~five~~seven years after the date of grant.

Named Executive Officer

Number of Shares
Underlying Stock
Options
Value of Award
Value of Award as
Percent of Target
Award Value

Laura B. Hamilton(1)
80,000 $ 755,696 100 %

Joachim Hellwig 12,000 $ 113,354 120 %

Susan E. Knight 16,000 $ 151,139 80 %

Kathleen M. Staby 10,000 $ 94,462 100 %

The Committee extended the exercise period from five years, which it had historically used, to align the awards with prevalent market practice. The restricted stock units vest in incremental installments of one-third per year commencing on the first anniversary of the date of grant.

The annual long term-incentive awards granted in early December 2014 for fiscal 2015 described below were not adjusted to reflect the timing considerations described above and we do not anticipate that there will be any further adjustment as a result of the grant timing. As discussed previously, during fiscal 2014, the Committee considered changes to the design of its long-term incentive awards. Beginning in fiscal 2015, the Committee decided to grant performance restricted stock units using return on invested capital as a performance measure instead of time-vested restricted stock units. The Committee believes that measuring return on invested capital over a three-year period is an appropriate measure for such performance restricted stock units given its emphasis on profitability with a longer-term view. For fiscal 2015 and subsequent fiscal years, the Committee will continue to maintain an even mix of stock options and performance restricted stock units over a three year period, with stub cycles of one and two years in length for the initial awards granted in fiscal 2015 to address the transition from the current time-vested restricted stock units. The performance measure of return on invested capital will be expressed as annual targets for the applicable three-year period and the annual performance will be averaged over the performance period. The performance range will have a threshold, target and maximum performance expectations each cycle, with a 75% guaranteed threshold of target and up to a 125% maximum opportunity of target.

~~(1)~~

~~Upon the termination of Ms. Hamilton’s employment on August 25, 2011, all of her unvested stock option were forfeited. Therefore, she did not receive any value from the award reported above.~~24

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The following table shows for each of the named executive officers the number of shares underlying the equity awards and the aggregate value of the awards granted in December 2014 for fiscal 2015. Mr. Jost did not receive an award as he left the Company before the awards were made in December 2014, and Ms. Knight did not receive an award as she will retire on January 2, 2015.


Named Executive Officer	Number of Shares Underlying Stock Options	Number of Performance Restricted Stock Units at Target	Aggregate Value of Awards

Jeffrey A. Graves	32,854	8,010	$1,073,000

William E. Bachrach	8,420	2,053	$275,000

Steven G. Mahon	8,114	1,978	$265,000

The options are all non-qualified stock options that vest in incremental installments of one-third per year commencing on the first anniversary of the date of grant and expire seven years after the date of grant. The performance restricted stock units will be paid in fully vested shares at the end of the one, two and three-year performance period based on attainment of return on invested capital performance targets based on a board-approved budget set on an annual basis. The performance range is determined based on threshold, target and maximum performance expectations each cycle, with a 75% guaranteed threshold of target and up to a 125% maximum opportunity of target.

Compensation Policies

~~Stock~~Equity Incentive Grant Policy. The Committee recognizes the importance of adhering to specific practices and procedures in the granting of ~~stock~~equity incentives. Accordingly, the Committee has developed a formal policy relating to the grant of ~~stock~~equity incentives. Our policy is that grants of ~~stock~~equity incentives, other than new hire grants, will be made by the Committee once per ~~year. Our practice has been that the Committee meets in May each~~ year ~~in order to approve the awards and,~~ as ~~specified in our grant policy, the awards will have a grant date that is the first business day of the fiscal fourth quarter. Stock~~described above. Equity incentive awards to our Chief Executive Officer are approved by the independent directors of the Board following a recommendation by the Committee. Our policy is that the grant date for awards made by the Committee to new hires will be the 15th day of the month following the month of hire or, if the market is closed that day, the first ~~prior~~ business day prior thereto in which the market is open.

Under ~~the grant policy,~~our 2011 Stock Incentive Plan, the Committee may delegate authority to make awards to a subcommittee consisting only of independent directors or to one or more executive officers. The Committee has delegated authority to the Chief Executive Officer to make awards of stock options, restricted stock units or a combination of stock options and restricted stock units, other than to our executive ~~officers, under our 2011 Stock Incentive Plan on July 5, 2011, the first business day~~officers. This delegation is subject to a maximum number of ~~the fourth quarter of fiscal 2011. In connection with this delegation of authority, the Committee limited the awards to 240,000~~ shares ~~of stock, with each restricted stock unit granted reducing the total shares available for grant by 2.5 shares.~~and other restrictions.

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~~Engagement of Compensation Consultant.~~ The Committee has the sole authority to retain or replace the compensation consultant and the compensation consultant reports to the Committee. For fiscal 2011, the Committee engaged Towers Watson as its compensation consultant. In order to ensure the consultant is free from influence that could compromise its work for the Committee and to ensure its accountability to the Committee, the Committee from time to time analyzes information relating to the independence of the compensation consultant and the relationships among the consultant, management and the company.

Executive Compensation Clawback Policy. We added a recoupment or “clawback” provision to our EVC Plan that was approved by shareholders at the fiscal 2009 annual meeting of ~~shareholders held on February 10, 2010.~~shareholders. Our 2011 Stock Incentive Plan ~~which was approved by our shareholders at the fiscal 2010 annual meeting of shareholders held on February 9, 2011,~~ contains a similar provision. These clawback provisions require an executive officer to forfeit and allow us to recoup from the executive officer any payments or benefits received by the 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 for cause, and breach of an agreement between us and the executive ~~officer.~~officer.

~~Table~~PROPOSAL 4

APPROVAL OF THE MTS SYSTEMS CORPORATION

EXECUTIVE VARIABLE COMPENSATION PLAN

Our board of ~~Contents~~directors has approved, and recommends shareholder approval of, the material terms of the MTS Systems Corporation Executive Variable Compensation Plan (the “EVC Plan”) pursuant to which cash incentive awards are made to eligible employees of the Company. Because five years have passed since the adoption of the EVC Plan, Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) requires us to obtain shareholder re-approval of the material terms of the EVC Plan in order to preserve our ability to deduct, for federal income tax purposes, performance-based incentive compensation paid to certain of our executive officers under the EVC Plan. In connection with this re-approval, our board has approved certain changes to the EVC Plan, such as refinements to definitions, clarifying certain provisions related to Section 409A of the Code and specifying the effective date for the EVC Plan, assuming shareholder approval.

Section 162(m) of the Code generally does not permit us to deduct compensation of more than $1,000,000 per individual paid in any taxable year to our Chief Executive Officer and our three other highest paid executive officers, excluding our Chief Financial Officer, unless such compensation is considered “performance-based” in accordance with Section 162(m) and its implementing regulations. Cash incentive awards payable under the EVC Plan may qualify as performance-based compensation for purposes of Section 162(m) if, among other things, the material terms under which the incentive awards are to be paid, including the nature of the performance goals that must be attained before payments may be made, are approved by our shareholders every five years.

Our shareholders previously approved the EVC Plan at our February 2010 annual meeting. The EVC Plan authorizes the Compensation Committee (the “Committee”) to award cash bonuses to senior management employees, including the Chief Executive Officer and the three executive officers subject to Code Section 162(m), based on the achievement of pre-established objective financial and business performance goals. If the EVC Plan is reapproved by our shareholders, cash incentive awards under the EVC Plan with respect to our fiscal years beginning in and after October 2015 can continue to qualify as performance-based compensation for purposes of Section 162(m).

The full text of the EVC Plan is attached to this proxy statement as Appendix A. If the shareholders approve the restated EVC Plan, it will become effective as of beginning with the Company’s 2015 fiscal year.

Summary of the EVC Plan

Purpose of the EVC Plan

The purpose of the EVC Plan is to focus efforts on achievement of financial objectives that are important to the success of MTS and to reward our executives when our financial performance meets or exceeds the established objectives.

Eligibility and Participation

The Company maintains the EVC Plan primarily for employees who are executive officers or senior management employees. From time to time, the Committee will select from among the executive officers and senior management employees those individuals who will participate in the EVC Plan during a specific performance period. As a frame of reference, for the fiscal year ended September 27, 2014, there were approximately seven employees eligible to participate in the EVC Plan, and seven executive officers selected to participate.

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Performance Goals

Participants receive awards under the EVC Plan whose payout is contingent upon the degree of attainment over the applicable fiscal year or other period (“Performance Period”) of one or more financial goals (“Performance Goals”) established by the Committee and based on one or more of the following performance measures specified in the EVC Plan: (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 based on these performance measures, the Committee may establish goals on an absolute basis, rate basis, or relative to peer group company performance or other benchmarks, and the Performance Goals may contain a threshold, target and minimum in determining the range of a Bonus Award. The determination of a Performance Goal may exclude the effect of changes in accounting standards and non-recurring unusual events specified by the Committee, such as write-offs and acquisitions and dispositions of businesses. The Committee also has the discretion to adjust the determination of the degree of attainment of performance goals, but not in connection with any bonus award intended to qualify as performance-based compensation for Section 162(m) purposes if the effect of the adjustment would be to increase the amount otherwise payable under such award.

Bonus Awards

Not later than 90 days after the beginning of a Performance Period (but not later than after 25% of a Performance Period shorter than one year has elapsed), the Committee will, with respect to each participant or group of participants: (i) establish the Performance Goal(s) by which the financial performance of MTS will be measured and establish the Performance Period over which such Performance Goals will be measured; (ii) determine the percentage of each participant’s salary that may be awarded as bonus for the Performance Period, up to the maximum bonus payable to any executive for any fiscal year of $2,000,000; (iv) specify in terms of an objective formula or standard the method for calculating the amount payable to a participant if the Performance Goal(s) are satisfied; and (v) determine the frequency at which each bonus will be paid when attained.

Payment of Bonus Awards

Earned bonus amounts shall be paid within 90 days after the end of our fiscal year and only after the Committee certifies that the relevant Performance Goals established at the beginning of the Performance Period have been met. The Committee retains the discretion to reduce the amount otherwise payable to a participant even if the Performance Goals have been attained. Each participant may elect, in accordance with the terms of our qualified pension and non-qualified deferred compensation plans, to defer some or all of the bonus amount otherwise payable to the participant. The Committee may also specify that bonus amounts payable may be reduced or cancelled, or that bonus payments received by participants may be recovered if a participant violates our policies, such as non-compete or non-disclosure policies, or engages in conduct detrimental to the Company. We may also recover all or a portion of any bonus payment with respect to a fiscal year the financial results have been restated due to errors, omissions or fraud.

Administration

The EVC Plan is administered by the Committee, which is authorized to make all decisions required to administer, interpret and apply the EVC Plan, including selecting participants and determining the terms and conditions of bonus awards. The present members of the Committee are deemed to be independent non-employee directors, as defined under NASDAQ Stock Market listing standards, and “outside directors” as defined for purposes of Section 162(m). The Committee retains exclusive authority to make and administer bonus awards under the EVC Plan to the Chief Executive Officer and our four other most highly compensated executive officers, but the Committee may delegate to the Chief Executive Officer the authority to determine bonus awards to other executives.

Amendment and Termination

The Committee may amend, modify, suspend or terminate the EVC Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law. No such action may be taken by the Committee without shareholder approval if the lack of such approval would cause compensation intended to be performance-based for purposes of Section 162(m) to no longer qualify as such.

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Future Awards

As previously noted, our shareholders are being asked to re-approve the EVC Plan so that bonus awards under the EVC Plan with respect to our fiscal years beginning in and after October 2015 can continue to qualify as performance-based compensation for purposes of Section 162(m). As a result, amounts payable under EVC Plan for future periods that will be affected by the requested vote of shareholders are not currently determinable. However, the cash bonus amounts paid to our named executive officers under the EVC Plan for the fiscal year ended September 27, 2014 are reported in the section entitled “Executive Compensation” beginning on page 14 of this proxy statement.

OTHBoard Voting RecommendationER

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE

PROPOSAL TO APPROVE THE EVC PLAN.

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OTHER INFORMATION

Security Ownership of Principal Shareholders and Management~~Management~~

The following table sets forth, as of the close of business on December ~~14, 2011,~~16, 2014, the number and percentage of outstanding shares of our Common Stock beneficially owned (i) by each person who is known to us to beneficially own more than five percent of our Common Stock, (ii) by each director and director nominee, (iii) by each executive officer named in the Summary Compensation Table, and (iv) by all our directors and executive officers as a group:

Name and Address of Beneficial Owner
Number of Shares
Beneficially Owned
Note
Percent
of Class

Mairs and Power, Inc. 1,418,200 (1) 12.1 %
332 Minnesota Street, Suite W-1520
Saint Paul, MN 55101
BlackRock, Inc. 1,195,403 (2) 7.81 %
40 East 52nd St.

New York New York 10022
The Vanguard Group, Inc. 767,736 (3) 5.01 %
100 Vanguard Blvd.
Malvem, PA 19355
Laura B. Hamilton 210,530 (4) (5) *
Susan E. Knight 72,786 (4) , (6) *
Kathleen M. Staby 38,567 (4) , (7) *
Joachim Hellwig 34,097 (4) *
Jean-Lou Chameau 20,639 *
Barb J. Samardzich 18,189 *
Brendan C. Hegarty 10,939 *
David J. Anderson 6,882 *
Gail P. Steinel 4,994 *
Emily M. Liggett 3,870 *
William V. Murray 3,870 *
All directors and executive officers as a group (13 persons) 444,864 (8) 2.78 %


	Number of Shares		Percent
Name and Address of Beneficial Owner	Beneficially Owned	Note	of Class

Mairs and Power, Inc. 332 Minnesota Street, Suite W-1520 Saint Paul, MN 55101	1,823,382	(1)	12.10	%
BlackRock, Inc. 40 East 52nd St. New York, New York 10022	1,353,756	(2)	9.90	%
Ariel Investments, LLC 200 E. Randolph Drive, Suite 2900 Chicago, IL 60601	1,003,574	(3)	6.66	%
Royce & Associates, LLC 745 Fifth Avenue New York, NY 10151	937,948	(4)	6.22	%
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvem, PA 19355	937,353	(5)	6.22	%
NewSouth Capital Management, Inc. 999 S. Shady Rd., Suite 501 Memphis, TN 38120	758,183	(6)	5.03	%
Jeffrey A. Graves	52,134	(7)	*
Susan E. Knight	35,541	(7) (8)	*
William E. Bachrach	7,371	(7)	*
Michael B. Jost	0	(7) (9)
Steven G. Mahon	22,006	(7)	*
David J. Anderson	14,756	(7)	*
Jean-Lou Chameau	11,759	(7)	*
David D. Johnson	7,142		*
Emily M. Liggett	9,290	(7)	*
Randy J. Martinez	1,286	(7)	*
Barb J. Samardzich	23,609	(7)	*
Michael V. Schrock	1,286	(7)	*
Gail P. Steinel	10,414	(7)	*
Kenneth Yu	3,142	(7)	*

All directors and executive officers as a group (15 persons)	217,843	(10)	1.44	%

*Less than 1%.

(1)	According to the Schedule 13G/A filed on February ~~8, 2011~~6, 2014 with the SEC. Includes 1,446,980 shares over which Mairs and Power, Inc. has sole voting power and 1,823,382 shares over which Mairs and Power, Inc. has sole dispositive power.

(2)	According to the Schedule ~~13G~~13G/A filed on ~~February 7, 2011~~January 30, 2014 with the SEC. Includes 1,298,096 shares over which BlackRock, Inc. has sole voting power and 1,353,756 shares over which BlackRock, Inc. has sole dispositive power.

(3)	According to the Schedule 13G filed on February ~~10, 2011~~14, 2014 with the SEC. Includes ~~22,633~~881,214 shares over which Ariel Investments, LLC has sole voting power and 1,003,574 shares over which Ariel Investments, LLC has sole dispositive power.

(4)	According to the Schedule 13G/A filed on January 13, 2014 with the SEC. Includes 937,948 shares over which Royce & Associates, LLC has sole voting power and sole dispositive power.

(5)

According to the Schedule 13G/A filed on February 11, 2014 with the SEC. Includes 22,546 shares over which The Vanguard Group, Inc. has sole voting power, ~~and 745,103~~914,807 shares over which The Vanguard Group, Inc. has sole dispositive power and 22,546 shares over which The Vanguard Group, Inc. has shared dispositive power.

~~(4)~~37

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(6)	According to the Schedule 13G filed on February 7, 2014 with the SEC. Includes 620,838 shares over which NewSouth Capital Management, Inc. has sole voting power and 758,183 shares over which NewSouth Capital Management, Inc. has sole dispositive power.

(7)

Includes the following number of shares which could be purchased under stock options exercisable within 60 days of December ~~14, 2011: Ms. Hamilton~~16, 2014: Mr. Graves – ~~151,688~~41,941 shares; Ms. Knight – ~~47,167~~5,628 shares; Mr. Bachrach – 6,354; Mr. Mahon – 17,661 shares; Mr. Anderson – 3,274 shares; Mr. Chameau – 2,348 shares; Mr. Johnson – 1,324 shares; Ms. ~~Staby~~Liggett – ~~23,467~~2,348 shares; Mr. Martinez – 1,286 shares; Ms. Samardzich – 2,348 shares; Mr. Schrock – 1,286 shares; Ms. Steinel – 2,348 shares; and Mr. ~~Hellwig~~Yu – ~~23,867~~1,324 shares.

~~(5)~~

~~Includes 3,101 shares owned by Ms. Hamilton’s spouse, who solely controls the voting and investment power over those shares.~~

~~(6)~~(8)

Includes 10,000 shares owned jointly with Ms. Knight’s spouse. Voting and investment power over those shares are shared accordingly.

~~(7)~~(9)

~~Includes 181~~Mr. Jost is no longer an officer of the Company as of October 16, 2014. As a result, the number of shares ~~acquired pursuant to the MTS Dividend Reinvestment Plan.~~beneficially owned by Mr. Jost is current as of his Form 4 filing on March 17, 2014.

~~(8)~~(10)

Includes ~~19,501~~18,107 shares held by executive officers not listed in this table of which 15,829 shares could be purchased under stock options exercisable within 60 days of December ~~14, 2011.~~16, 2014.

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Related Party Transactions

The Audit Committee is responsible for the review and approval of all related party transactions between the Company and any of our executive officers, directors or director nominees, or any immediate family member of any such person. Pursuant to a related party transactions approval procedure adopted by the Audit Committee, all related party transactions that involve amounts in excess of $120,000 and in which a related party has or will have a direct or indirect material interest, ~~or transaction in which any of our directors or any of their affiliated organizations is a party,~~ must be approved in advance by the Audit Committee. If the proposed transaction involves a member of the Audit Committee, such member will not participate in the deliberations or vote on the proposed transaction. Related party transactions may be approved if the Audit Committee in good faith determines them to be (i) fair and reasonable to us, (ii) on terms no less favorable than could be obtained by us if the transaction did not involve a related party, and (iii) in our best interests.

During fiscal 2011, MTS Sensors purchased approximately $2.0 million of mechanical components and remote-mechanic workbench services from Mark-Tronik GmbH (“Mark-Tronik”). MTS Sensors is owned by MTS Systems GmbH, one of our wholly-owned subsidiaries. The brother-in-law of Mr. Hellwig, our Vice President and General Manager of MTS Sensors, is the owner and general manager of Mark-Tronik. The prices paid by MTS SensorsThere were ~~and will continue to be, the subject of arms-length negotiation on terms~~ no less favorable to MTS Sensors than MTS Sensors could otherwise obtain. Mr. Hellwig did not participate in negotiating or executing the MTS Sensors agreement with Mark-Tronik. The Audit Committee has reviewed and approved these related party transactions ~~after determining they met the required standards for approval.~~

During fiscal 2011, we purchased approximately $1.2 million of legal services from Gray Plant Mooty Mooty & Bennett, P.A. (“GPM”). The sister of Ms. Hamilton, our former Chair and CEO, is a shareholder of GPM. GPM had provided legal services to us prior to the sister of Ms. Hamilton joining GPM. The prices paid by us were the subject of arms-length negotiation on terms no less favorable to us than we could otherwise obtain. GPM was selected to provide legal services through a competitive bid process coordinated by Ms. Knight, our Vice President and CFO, that included a variety of law firms. Ms. Hamilton’s sister had no involvement in the bid process, did not provide legal services to us, was neither the billing attorney nor the relationship attorney on our account, and did not directly receive any compensation from transactions with us. The Audit Committee has reviewed and approved these related party transactions after determining they met the required standards for approval. GPM is no longer providing legal services to our Company.

~~The Audit Committee also reviewed three other transactions between the Company and third parties that occurred~~ during fiscal ~~2011. In each case it was determined that since the affiliate of the Company did not have a direct or indirect material interest, the transactions were not related party transactions.~~2014.

Section 16(a) Beneficial Ownership Reporting Co mpCompliance~~liance~~

The rules of the SEC require us to disclose the identity of directors, executive officers and beneficial owners of more than 10% of our Common Stock who did not file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934. Based solely on a review of copies of such reports and written representations from reporting persons, we believe that all directors and executive officers complied with all filing requirements applicable to them during fiscal ~~2011.~~2014.

Information Regarding Equity Compensation Plans

The following table sets forth information about our equity compensation plans as of September 27, 2014.

Plan Category	Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) (#)(in thousands)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (2) ($)	Securities Remaining Available for Future Issuance Under Equity Compensation Plans (3) (#)(in thousands)
Equity Compensation Plans Approved by Securityholders	707	40.36	1,288
Equity Compensation Plans Not Approved by Securityholders	–	–	–

Total	707	40.36	1,288

(1)	Reflects securities to be issued upon the exercise of vested stock options and the vesting of restricted stock units under our 2006 Stock Incentive Plan and 2011 Stock Incentive Plan.

(2)	The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock and restricted stock unit awards, since recipients are not required to pay an exercise price to receive the shares subject to these awards.

(3)	Includes securities available for future issuance under the 2011 Stock Incentive Plan other than those listed in the first column, and approximately 720,000 shares available for issuance under the 2012 Employee Stock Purchase Plan.

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Compensation Committee Interlocks and Insider P ~~artic~~Participation~~ipation~~

No member of our Compensation Committee has ~~ever~~ been an officer or employee of our Company or any of our subsidiaries and affiliates or has had any relationship with our Company requiring disclosure in our proxy statement other than service as a director. None of our executive officers has served on the board of directors or on the compensation committee of any other entity, any officer of which served either on our Board of Directors or on our Compensation Committee.

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Shareholder Proposals

Proposals Included in the Proxy Statement

Proposals of our shareholders that are intended to be presented by such shareholders at our fiscal ~~2012~~2015 annual meeting to be held in early ~~2013~~calendar 2016 and that shareholders desire to have included in our proxy materials related to such meeting must be received by us at our principal executive offices no later than 5:00 p.m., Central Time, ~~August 29, 2012,~~September 1, 2015, which is 120 calendar days prior to the anniversary of this year’s mailing date. Upon timely receipt of any such proposal we will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations governing the solicitation of proxies.

Proposals Not Included in the Proxy Statement

If a shareholder wishes to present a proposal at our fiscal ~~2012~~2015 annual meeting to be held in early ~~2013~~calendar 2016 or to nominate one or more directors and the proposal is not intended to be included in our proxy statement relating to that meeting, the shareholder must give advance notice to us prior to the deadline for such meeting determined in accordance with our Bylaws. In general, our Bylaws provide that such notice should be addressed to the Secretary and be no less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting, except in certain circumstances. For purposes of our fiscal ~~2012~~2015 annual meeting, such notice must be received no earlier than October ~~11, 2012~~13, 2015 and not later than November ~~10, 2012.~~12, 2015. These time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority. Our ~~bylaws~~Bylaws set out specific requirements that such shareholders and written notices must satisfy. Copies of those requirements will be forwarded to any shareholder upon written request to the Secretary of the Company.

Our management knows of no matters other than the foregoing to be brought before the Annual Meeting. However, this proxy gives discretionary authority in the event that additional matters should be presented.

A copy of our Annual Report and Form 10-K for the fiscal year ~~ended October 1, 2011,~~ended September 27, 2014, which includes audited financial statements, will be furnished without charge to any shareholder who requests it in writing from Corporate Secretary, MTS Systems Corporation, 14000 Technology Drive, Eden Prairie, Minnesota 55344, and are also available from the SEC’s Internet site at www.sec.gov~~www.sec.gov~~ or via our Internet site at www.mts.com~~www.mts.com~~.

Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

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ABOUT THE ANNUAL MEETING AND PROXY MATERIALS

What is the purpose of the Annual Meeting?

At the Annual Meeting, shareholders will vote upon (1) the election of nine directors, (2) the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015, (3) a non-binding, advisory vote to approve the compensation of the Company’s named executive officers, (4) the approval of the MTS Systems Corporation Executive Variable Compensation Plan, and (5) such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. In addition, our management will report on the performance of the Company and respond to questions from shareholders.

~~Table~~Why did I receive a notice in the mail regarding the Internet availability of ~~Contents~~proxy materials instead of a full set of proxy materials?

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our shareholders of record and beneficial owners. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice of Internet Availability or request a printed set of the proxy materials at no cost to the shareholder. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice of Internet Availability.

If you do not affirmatively elect to receive printed copies of the proxy materials, you will only be able to view our proxy materials electronically on the Internet. Providing our proxy materials to shareholders on the Internet rather than printing and mailing hard copies saves us these costs. We encourage you to view our proxy materials on the Internet. Shareholders who have affirmatively elected to receive a printed set of our proxy materials may change their election and elect to view all future proxy materials on the Internet instead of receiving them by mail.

Who is entitled to vote?

Only shareholders of record at the close of business on December 16, 2014 (the “Record Date”) will be entitled to vote at the Annual Meeting, or any adjournments or postponements thereof. Each outstanding share of the Company’s common stock, $0.25 par value (the “Common Stock”), entitles its holder to cast one vote on each matter to be voted upon.

Shareholders have cumulative voting rights in the election of directors. If any shareholder gives proper written notice to any officer of the Company before the Annual Meeting, or to the presiding officer at the Annual Meeting, that shareholder may cumulate their votes for the election of directors by multiplying the number of votes to which the shareholder is entitled by the number of directors to be elected and casting all such votes for one nominee or distributing them among any two or more nominees. If such notice is given by any shareholder, votes for directors by all shareholders will be cumulated. For instance, if a shareholder only votes for one nominee, such vote will be automatically cumulated and cast for that nominee. If a shareholder has voted for more than one nominee, the total number of votes that the shareholder is entitled to cast will be divided equally among the nominees for whom the shareholder has voted.

Who can attend the Annual Meeting?

All shareholders as of the Record Date, or their duly appointed proxies, may attend the virtual Annual Meeting at www.virtualshareholdermeeting.com/MTSC2015. If you hold your shares in street name, you must request a legal proxy from your broker or nominee to attend and vote at the Annual Meeting.

What constitutes a quorum?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of our Common Stock outstanding on the Record Date will constitute a quorum. A quorum is required for business to be conducted at the Annual Meeting. As of the Record Date, 15,074,616 shares of our Common Stock were outstanding, so holders of at least 7,537,309 shares of our Common Stock must be present, attending the virtual Annual Meeting or by proxy, to have a quorum. If you vote your proxy electronically through the Internet or by telephone, or submit a properly executed paper proxy card, your shares will be considered part of the quorum even if you abstain from voting.

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How do I vote?

You may vote in one of the following ways:

	● ~~MTS SYSTEMS CORPORATION~~ ~~14000 TECHNOLOGY DRIVE~~ ~~EDEN PRAIRIE, MN 55344~~	~~VOTE BY INTERNET - www.proxyvote.com~~
~~Use~~ By Internet before the ~~Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on February 7, 2012. Have your proxy card in hand when you~~Annual Meeting: You may access the ~~web site and follow~~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 to create an electronic ~~voting instruction form.~~ballot.

~~ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS~~

●

By telephone:If you ~~would like to reduce~~reside in the ~~costs incurred~~United States or Canada, you may call 1-800-690-6903 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~~24 hours a day, 7 ~~2012.~~days a week. Have your ~~proxy card~~Notice of Internet Availability in hand when you call and ~~then~~ follow the ~~instructions.~~voice prompts to cast your vote.


●	~~VOTE BY MAIL~~
	~~Mark,~~ By mail: If you request a paper proxy card, mark, sign and date ~~your~~each proxy card you receive 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.~~the location indicated on the proxy card.

●

At the Annual Meeting: If you are a shareholder of record, you may attend the Annual Meeting and vote your shares at www.virtualshareholdermeeting.com/ MTSC2015 during the meeting. You will need your control number found in the Notice of Internet Availability. Follow the instructions provided to vote.

Shares represented by proxies submitted through the Internet or by telephone, or those paper proxy cards properly signed, dated and returned, will be voted at the Annual Meeting in accordance with the instructions set forth therein. If a proxy is properly submitted, whether through the Internet, by telephone, or by mail using a paper proxy card, but contains no instructions, the shares represented thereby will be voted FOR all directors in Proposal 1, FOR ratification ofthe appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015 in Proposal 2, FOR the non-binding, advisory vote to approve the compensation of the Company’s named executive officers in Proposal 3, and FOR the approval of the MTS Systems Corporation Executive Variable Compensation Plan in Proposal 4, and at the discretion of the proxy holders as to any other matters that may properly come before the Annual Meeting.

The Internet and telephone voting procedures are designed to verify shareholders’ identities, allow them to give voting instructions and confirm that their instructions have been recorded properly. Shareholders voting through the Internet should be aware that they may incur costs to access the Internet and that these costs will be at the expense of the shareholder.

When do I vote?

If you wish to vote by Internet or telephone, you must do so before 11:59 p.m. Eastern Standard Time on February 9, 2015 using www.proxyvote.com or calling 1-800-690-6903, as applicable. If you want to vote after February 9, 2015 or revoke an earlier proxy, you must submit a signed proxy card or vote during the virtual Annual Meeting at www.virtualshareholdermeeting.com/MTSC2015.

Can I change my vote after I vote electronically or return my proxy card?

Yes. Even after you have voted electronically through the Internet or by telephone or submitted your proxy card, you may change your vote at any time before the proxy is exercised at the Annual Meeting. You may change your vote by:

●

Returning a later-dated proxy by Internet, telephone or mail;

●

Delivering a written notice of revocation to our Corporate Secretary at 14000 Technology Drive, Eden Prairie, Minnesota 55344; or

●

Attending the virtual Annual Meeting and voting. Your attendance at the Annual Meeting will not by itself revoke a proxy that you have previously submitted.

Shareholders who hold shares through a broker or other intermediary should consult that party as to the procedures to be used for revoking a vote.

What does the Board recommend?

The Board’s recommendations are set forth after the description of the proposals in this proxy statement. In summary, the Board recommends a vote:

●

FOR the election of each of the nominated directors (see Proposal 1 on page 1);

●

FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015 (see Proposal 2 on page 12);

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●

FOR the non-binding, advisory vote to approve the compensation of the Company’s named executive officers (see Proposal 3 on page 33); and

●

FOR the approval of the MTS Systems Corporation Executive Variable Compensation Plan (see Proposal 4 on page 34).

If you return a properly executed proxy card without specific voting instructions, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board. With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, at their own discretion.

What vote is required to approve each proposal?

For Proposal 1, the election of directors, each shareholder will be entitled to vote for nine nominees, and the nine nominees receiving the highest number of “FOR” votes will be elected.

For Proposals 2, 3 and 4, respectively, the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2015, the non-binding, advisory vote to approve the compensation of the Company’s named executive officers and the approval of the MTS Systems Corporation Executive Variable Compensation Plan, each shareholder is entitled to one vote for each share of Common Stock held, and the affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote on the proposal will be required for approval.

With respect to any other matter that properly comes before the Annual Meeting, the affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy and entitled to vote on the proposal will be required for approval.

A “WITHHELD” vote will be counted for purposes of determining whether there is a quorum, but will not be considered to have been voted in favor of the director nominee with respect to whom authority has been withheld.

A properly executed proxy marked “ABSTAIN” with respect to Proposals 2, 3 or 4, and any other matter that properly comes before the Annual Meeting, will not be voted, although it will be counted for purposes of determining whether there is a quorum. In Proposals 2, 3 and 4, abstentions will have the same effect as a negative vote.

If your shares are held in the “street name” of a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to the proposal to be acted upon. If you do not give your broker instructions as to how to vote your shares, your broker has authority under New York Stock Exchange rules to vote those shares for or against “routine” matters, such as the ratification of accounting firms. Brokers cannot vote on their customers’ behalf on “non-routine” proposals such as the election of directors or the non-binding, advisory vote to approve the compensation of the Company’s named executive officers and the approval of the MTS Systems Corporation Executive Variable Compensation Plan. These rules apply notwithstanding the fact that shares of our Common Stock are traded on the NASDAQ Global Select Market.

If your brokerage firm votes your shares only on “routine” matters because you do not provide voting instructions, your shares will be counted for purposes of establishing a quorum to conduct business at the Annual Meeting and in determining the number of shares voted for or against the routine matter. If your brokerage firm lacks discretionary voting power with respect to an item that is not a routine matter and you do not provide voting instructions (a “broker non-vote”), your shares will be counted for purposes of establishing a quorum to conduct business at the Annual Meeting, but will not be counted in determining the number of shares voted for or against the non-routine matter.

Who will count the vote?

Broadridge Financial Solutions, Inc. will act as inspector of elections to determine whether or not a quorum is present and tabulate votes cast by proxy or at the Annual Meeting.

What does it mean if I receive more than one Notice of Internet Availability?

If your shares are registered in more than one account, you will receive more than one Notice of Internet Availability. To ensure that all your shares are voted, vote electronically through the Internet or by telephone, or sign, date and return a paper proxy card for each Notice of Internet Availability you receive. We encourage you to have all accounts registered in the same name and address (whenever possible). You can accomplish this by contacting Broadridge Financial Solutions, Inc. by telephone at 800-542-1061 or in writing at Broadridge, 51 Mercedes Way, Edgewood, New York 11717.

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How will voting on any other business be conducted?

We do not know of any business to be considered at the Annual Meeting other than the matters described in this proxy statement. However, if any other business is properly presented at the Annual Meeting, your proxy gives authority to each of David J. Anderson and Jeffrey A. Graves to vote on such matters at their discretion.

How are proxies solicited?

In addition to use of the Internet and mail, proxies may be solicited by our officers, directors, and other employees by telephone, through electronic transmission, facsimile transmission, or personal solicitation. No additional compensation will be paid to such individuals for such activity.

What is “householding”?

We may send a single Notice of Internet Availability, as well as other shareholder communications, to any household at which two or more shareholders reside unless we receive other instruction from you. This practice, known as “householding,” is designed to reduce duplicate mailings and printing and postage costs, and conserve natural resources. If your Notice of Internet Availability is being householded and you wish to receive multiple copies of the Notice of Internet Availability, or if you are receiving multiple copies and would like to receive a single copy, or if you would like to opt out of this practice for future mailings, you may contact Broadridge Financial Solutions, Inc., by telephone at 800-542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.

Who pays for the cost of this proxy solicitation?

We will bear the entire cost of the solicitation of proxies, including the preparation, assembly, printing and mailing of the Notice of Internet Availability, the proxy statement and any additional information furnished to shareholders. We will reimburse banks, brokerage houses, and other custodians, nominees and certain fiduciaries for their reasonable expenses incurred in mailing proxy materials to their principals.

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Appendix A


	MTS Systems Corporation
	Executive Variable Compensation (EVC) Plan

Approved by the Board of Directors November 18, 2014

Approved by Shareholders _____________Plan Effective as of September 27, 2015

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Section		Page

Section 1.	Establishment and General Purpose of the Plan	1

Section 2.	Definitions	1

Section 3.	Administration	2

Section 4.	Eligibility and Participation	3

Section 5.	Performance Goals and Performance Periods	3

Section 6.	Qualified Performance-Based Compensation	4

Section 7.	Payment of Bonus Awards; Recoupment	4

Section 8.	Amendment and Termination	5

Section 9.	Miscellaneous	6

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Section 1.

Establishment and General Purpose of the Plan

1.1

Establishment. On November 18, 2014, the Board of Directors of MTS Systems Corporation, upon recommendation by the Compensation Committee of the Company’s Board of Directors, approved a restated incentive plan for executives as described herein. The name of this plan is the “MTS Systems Executive Variable Compensation (EVC) Plan” (the “Plan”). The material terms of the Plan shall be submitted for approval by the shareholders of the Company at the Company’s 2015 Annual Meeting of Shareholders. The Plan shall be effective beginning with the Company’s fiscal year 2015, subject to its approval by the shareholders of the Company, and shall replace the EVC Plan approved by shareholders in 2010. No payments shall be made pursuant to the Plan unless and until the shareholders of the Company have approved the Plan.

1.2

Purpose. The purpose of the Plan is to focus efforts on achievement of near term financial objectives that are critical to the success of the Company; to reward accomplishments when performance meets or exceeds established targets or business plan objectives; and to more closely tie total compensation (salary plus EVC) to the financial results of the Company. It is intended that, unless otherwise designated by the Committee at the time of the award, the “Performance-Based Awards” under this Plan shall be exempt from the limitation on the deductibility of compensation under §162(m) of the Code.

Section 2.

Definitions

Definitions as used in the Plan are:

2.1

“Affiliate” means any person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Company.

2.2

“Bonus Award” means the grant of the right to receive a cash bonus payable by the Company upon achievement of the Performance Goals as of the end of the Performance Period as designated by the Committee in accordance with the terms of the Plan, and shall include any Performance-Based Award.

2.3

“Code” means the Internal Revenue Code of 1986, as amended.

2.4

“Company” means MTS Systems Corporation, a corporation organized under the laws of the State of Minnesota (or any successor corporation).

2.5

“Committee” means the Compensation Committee of the Board of Directors. In the absence of the appointment of the Committee, references in the Plan to the Committee shall refer to the Board of Directors.

2.6

“Employee” means a person who performs services for the Company and who is regularly paid through the payroll of the Company, whether or not an officer or member of the Board, but excluding any temporary employee and any person serving the Company only in the capacity of a member of the Board of Directors.

2.7

“Named Executive” means, as of the last day of the Company’s fiscal year in which the Performance Period ends, the persons serving as the Company’s Chief Executive Officer and the three highest paid officers of the Company other than the Chief Executive Officer and the Chief Financial Officer of the Company.

2.8

“Outside Director” means a Director of the Company who: (a) is not a current employee of the Company or Affiliate; (b) is not a former employee of the Company or Affiliate who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year; (c) has not been an officer of the Company; (d) does not receive remuneration (including any payment in exchange for goods or services) from the Company, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under §162(m) of the Code and regulations thereunder.

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2.9

“Participant” means an Employee who is eligible and is selected by the Committee to participate in the Plan.

2.10

“Performance Goals” means the level(s) of achievement of one or more Performance Measures that will determine whether any Bonus Award is earned and the amount of the Bonus Award.

2.11

“Performance-Based Award” is defined in Section 6.1 of the Plan.

2.12

“Performance Measures” is defined in Section 5.1 of the Plan.

2.13

“Performance Period” means the measuring period of time determined by the Committee, consisting of a period of any length, over which the Performance Goals established by the Committee must be achieved to earn a Bonus Award under the Plan.

2.14

“Plan” means the MTS Systems Corporation Executive Variable Compensation (EVC) Plan.

Section 3.

Administration

3.1

Composition of the Committee. The Compensation Committee of the Board of Directors shall administer the Plan, except that, with respect to any Bonus Award to any Named Executive that constitutes a Performance-Based Award, the Committee administering the Plan, or a subcommittee thereof, shall be composed solely of two or more persons who are Outside Directors.

3.2

Power and Authority of the Committee. The Committee is authorized to make all decisions as required in the administration of the Plan and to exercise its discretion to establish, amend, suspend, terminate, define, interpret, construe, apply, approve, withdraw and make any exceptions to the terms of the Plan it deems necessary or advisable for the proper administration of the Plan not inconsistent with the terms of the Plan. The Committee shall have the power and authority to grant Bonus Awards, including Performance-Based Awards, to Participants, including Named Executives, pursuant to the terms of the Plan. In particular, the Committee shall have the authority:

to select eligible Employees to whom Bonus Awards may from time to time be granted hereunder;

to determine the Performance Period, the Performance Measures, Performance Goals, and the criteria to determine the amount due under the Bonus Award (including, but not limited to, the degree to which the Performance Goals are met, the base salary or other compensation on which the Bonus Award is paid), and with respect to Participants who are not Named Executives, any other criteria or factors on which part or all of the Bonus Award will be based;

to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Bonus Award granted hereunder (including, but not limited to, any restriction on, forfeiture of, or repayment of any Bonus Award); and

to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.

3.3

Delegation of Authority. Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate to the Chief Executive Officer of the Company the authority to exercise the powers specified in Section 3.2; provided, however, that no such authority shall be delegated to the Chief Executive Officer with respect to any Bonus Award that constitutes a Performance-Based Award to a Named Executive.

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3.4

Rule Making and Interpretations. The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any Bonus Award granted under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.

Section 4.

Eligibility and Participation

4.1

Eligibility. The Company maintains the Plan primarily for Employees who are executive officers or senior management employees. The Committee shall select, from among the executive officers and senior management employees those Employees who will be eligible to participate in the Plan from time to time, in its sole discretion. Employees eligible for other variable compensation (i.e. commissions) are not eligible to participate in the Plan.

4.2

Participation. The Committee shall determine the date as of which each eligible Employee shall commence to participate in the Plan and the Bonus Award to which the Employee is then eligible. Selection as an eligible Employee to be a Participant in the Plan with respect to any designated Performance Period does not guarantee that the Employee will be selected to be a Participant in any other Bonus Award under the Plan, and the Committee shall not have any obligation for uniformity of treatment among eligible Employees.

4.3

Effect on Employment. In the absence of any specific agreement to the contrary, no Participant’s eligibility for a Bonus Award under the Plan shall affect any right of the Company or any Affiliate, to terminate, with or without cause, the Participant’s employment with the Company or any Affiliate at any time. Neither the establishment of the Plan, nor the granting of any Bonus Award hereunder, shall give any Participant (a) any rights to remain employed by the Company or any Affiliate; (b) any benefits not specifically provided for herein or in any Bonus Award granted hereunder; or (c) any rights to prevent the Company or any Affiliate from modifying, amending or terminating any of its other benefit plans of any nature whatsoever.

Section 5.

Performance Measures, Performance Goals and Performance Periods

5.1

Performance Measures. 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 setting Performance Goals under the Plan 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).

5.2

Performance Goals. In setting Bonus Awards based on Performance Measures set forth in Section 5.1, the Committee may establish Performance Goals on an absolute basis, rate basis, or relative to a peer group performance or other benchmark, and the Performance Goals may contain a threshold, target and maximum in determining the range of a Bonus Award. The determination of a Performance Goal 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, subject to the limitations under Section 6.

5.3

Performance Period. The Committee shall establish the Performance Period over which the Performance Goals shall be achieved in order to earn the Bonus Award. The Performance Periods may run concurrently and may contain interim dates during the Performance Period on which the achievement of the Performance Goals will be determined. A Performance 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 or after the achievement has become substantially certain).

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5.4

Modifications to Performance Goals. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the Performance Goals, subject to the limitations under Section 6.

Section 6.

Qualified Performance-Based Compensation

6.1

Compliance With Code Section 162(m). Unless the Committee irrevocably designates otherwise at the time the Bonus Award is granted, each Bonus Award to a Named Executive shall constitute “qualified performance-based compensation” within the meaning of §162(m) of the Code and regulations and other guidance promulgated thereunder (hereinafter referred to as a “Performance-Based Award”). Each of the provisions of Sections 6.2 to 6.7, and all of the other terms and conditions of the Plan as applied to any Performance-Based Award, shall be interpreted in such a fashion so as to qualify as “qualified performance-based compensation” within the meaning of §162(m) of the Code.

6.2

Shareholder Approval. Any Performance-Based Award shall be null and void and have no effect whatsoever unless the Plan shall have been approved by the shareholders of the Company at the Company’s 2015 Annual Meeting of Shareholders and periodically thereafter as may be required under §162(m) of the Code.

6.3

Limit of Performance Goals. The right to receive a Performance-Based Award shall be determined solely on account of the attainment of one or more pre-established, objective Performance Goals based upon one or more Performance Measures included in Section 5.1 of the Plan, as selected by the Committee in connection with the grant of the Performance-Based Award.

6.4

Maximum Performance-Based Award. The maximum bonus that may be paid to any Participant pursuant to any Performance-Based Award with respect to any fiscal year shall not exceed $2,000,000.

6.5

Timing of Performance-Based Award. The Committee shall, not later than the date set forth in Section 5.3 for each Performance Period:

designate the Named Executives who will be Participants eligible for such Performance-Based Awards; and

establish the Performance Goals for each Named Executive for that Performance Period based solely on those Performance Measures set forth in Section 5.1 above.

6.6

Certification. No later than 90 days following the end of the Performance Period and prior to payment of any Performance-Based Award to any Named Executive under the Plan, the Committee shall certify in writing as to the attainment of the Performance Goals upon which any Performance-Based Award is based.

6.7

Discretionary Reduction. The Committee, in its sole discretion, may reduce, in whole or in part, the payout otherwise payable to any Named Executive under any Performance-Based Award. The Committee shall have no authority or discretion to change any Performance-Based Award with respect to any Named Executive after the establishment of the Performance-Based Award that would result in the increase of any amount payable under the Plan.

Section 7.

Payment of Bonus Awards; Recoupment

7.1

Payouts; Deferral. Payouts of Bonus Awards will be made in cash or other readily-available funds within 90 days of the end of the Performance Period and, with respect to Performance-Based Awards, after the Committee’s certification as provided in Section 6.6, but in no event later than 75 days after the end of the later of the Company’s fiscal year or the Participant’s tax year in which the Bonus Award is earned. To the extent permitted under the terms of any qualified pension or nonqualified deferred compensation plan maintained by the Company and §409A of the Code and regulations promulgated thereunder, the Participant may elect to defer payment of part or all of the Bonus Award, which to the extent deferred, shall thereafter be governed by the terms and conditions of that qualified pension or nonqualified deferred compensation plan.

Table of Contents

7.2

Taxes. In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Company may take such action, and may require a Participant to take such action, as it deems appropriate to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant.

7.3

Nontransferability. Except as otherwise determined by the Committee, no right under any Bonus Award shall be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the time in which the requirement of continued employment or attainment of Performance Goals has not been achieved and prior to the date of actual payout.

7.4

Impact of Restatement of Financial Statements. If any of the Company’s financial statements are required to be restated resulting from errors, omissions or fraud, the Committee may (in its sole discretion, but acting in good faith) direct that the Company recover all or a portion of any Bonus Award with respect to any fiscal year of the Company the financial results of which are negatively affected by such restatement. The amount to be recovered from the Participant shall be the amount by which the Bonus Award exceeded the amount that would have been payable to the Participant had the financial statements been initially filed as restated, or any greater or lesser amount (including, but not limited to, the entire award) that the Committee shall determine. The Committee may limit the application of this Section 7.4 to those responsible for the misstatement or to the Named Executives but in no event shall the amount to be recovered by the Company be less than the amount required to be recovered as a matter of law. The Committee shall determine whether the Company shall effect any such recovery (a) by seeking repayment from the Participant, (b) 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, (c) 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, or (d) by any combination of the foregoing.

7.5

Forfeiture and Recoupment. Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of a Bonus Award consistent with law, and for greater clarity, the Committee may specify that the Participant’s rights, payments, and benefits with respect to a Bonus Award under the 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. Such events shall include, but shall not be limited to, termination of employment or services under certain or all circumstances, violation of material Company policies, 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.

Section 8.

Amendment and Termination

8.1

Term of Plan. The Plan shall continue in operation indefinitely, subject to the right of the Committee to terminate the Plan at any time; provided, however, that no Performance-Based Awards shall be granted after the fiscal year ending in 2020 unless and until the material terms of the Plan have been reapproved by the Company prior to that time.

Table of Contents

8.2

Amendments to and Termination of Plan. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan, the Committee may amend, alter, suspend, discontinue or terminate the Plan.

8.3

Correction of Defects, Omissions and Inconsistencies. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan, the Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Bonus Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.

Section 9.

Miscellaneous

9.1

Governing Law. Except as otherwise set forth herein the Plan and all of the Participants’ rights thereunder shall be governed by and construed in accordance with the internal laws of the State of Minnesota.

9.2

Severability. If any provision of the Plan, or any Bonus Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan, or any Bonus Award 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 and the Bonus Award, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan, any such Bonus Award shall remain in full force and effect.

9.3

No Trust or Fund Created. Neither the Plan nor any obligations to pay a Bonus Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to a Bonus Award, such right shall be no greater than the right of any unsecured general creditor of the Company or of any Affiliate.

9.4

Nature of Payments. Any and all cash payments pursuant to any Bonus Award granted hereunder shall constitute special incentive payments to the Participant, and, except to the extent that such plan or agreement expressly provides to the contrary, such payments shall not be taken into account in computing the amount of the Participant’s salary or compensation for purposes of determining any pension, retirement, death or other benefits under:

any pension, retirement, profit sharing, bonus, life insurance or other employee benefit plan of the Company or any Affiliate or

any agreement between the Company (or any Affiliate) and the Participant

9.5

Headings. Headings are given to the Sections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

Table of Contents

MTS SYSTEMS CORPORATION
14000 TECHNOLOGY DRIVE
EDEN PRAIRIE, MN 55344

VOTE BY INTERNET
Before The Meeting - Go towww.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 9, 2015. 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.

During The Meeting - Go towww.virtualshareholdermeeting.com/MTSC2015

You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.

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 9, 2015. 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.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:x


	M79487-P56923	KEEP THIS PORTION FOR YOUR RECORDS
		DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

~~THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.~~

~~For~~

~~All~~

~~Withhold~~

~~All~~

MTS SYSTEMS CORPORATION

For

Withhold

For All

~~Except~~

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.

The Board of Directors recommends you vote
FOR the following:

All

Except

Election of Directors

~~Nominees~~

Nominees:

01) David J. Anderson

06) Barb J. Samardzich

02) Jeffrey A. Graves

07) Michael V. Schrock

03) David D. Johnson

08) Gail P. Steinel

04) Emily M. Liggett

09) Chun Hung (Kenneth) Yu

~~02) Jean-Lou Chameau~~

05) Randy J. Martinez

~~05) William V. Murray~~

~~03) Brendan C. Hegarty~~

~~06) Barb J. Samardzich~~

~~07) Gail P. Steinel~~

The Board of Directors recommends you vote FOR proposals 2, 3 and 3.4:

For

Against

Abstain

~~For~~

~~Against~~

~~Abstain~~

To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal ~~2012.~~2015.

~~To hold a~~

A non-binding, advisory vote ~~regarding~~to approve the compensation of the Company’s named executive officers.

To approve the Company’s Executive Variable Compensation Plan.

NOTE: 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, ~~AND 3.~~3 and 4. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.

For address ~~change/~~changes and/or comments, ~~mark here. (see reverse for instrutions)~~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. IfJointly owned shares ~~are held by joint tenants or~~will be voted as ~~community property, both should sign.~~directed unless another owner instructs to the contrary, in which case, the shares will not be voted.

Signature [PLEASE SIGN WITHIN BOX]

Date

~~Date~~

Signature (Joint Owners)

Date

~~Date~~

Table of Contents

~~Table of Contents~~

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement, Annual Report ~~Notice & Proxy Statement is/~~and Form 10-K are available at www.proxyvote.com.

M64857-P43576



	PROXY

	MTS SYSTEMS CORPORATION

	Proxy for the Annual Meeting of Shareholders
	February ~~8, 2012~~10, 2015

	SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

	The undersigned shareholder of MTS Systems Corporation, a Minnesota corporation (the ~~"Company"~~“Company”), hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement and hereby appoints David J. Anderson and ~~William V. Murray,~~Jeffrey A. Graves, 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 ~~14, 2011,~~16, 2014, at the ANNUAL MEETING OF SHAREHOLDERS to be held on February ~~8, 2012,~~10, 2015, and any adjournments or postponements thereof.

	~~Address change/comments:~~

		Address Changes/Comments:


	(If you noted any Address ~~Changes and / or~~ Changes/Comments above, please mark corresponding box on the reverse side.)

	Card to be signed on the reverse side


o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
x	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12


Payment of Filing Fee (Check the appropriate box):
x	No fee required
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	1)	Title of each class of securities to which transaction applies:


	2)	Aggregate number of securities to which transaction applies:


	3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


	4)	Proposed maximum aggregate value of transaction:


	5)	Total fee paid:


o	Fee paid previously with preliminary materials.

o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	1)	Amount Previously Paid:


	2)	Form, Schedule or Registration Statement No.:


	3)	Filing Party:


	4)	Date Filed:

	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


	December ~~27, 2011~~30, 2014


	Dear MTS Shareholder:

	~~Dear~~ MTS ~~Shareholder:~~is holding a Virtual Annual Meeting of Shareholders this year on Tuesday, February 10, 2015, at 11:45 a.m. Central Standard Time. You may attend the Annual Meeting, vote, and submit a question during the Annual Meeting by visiting www.virtualshareholdermeeting.com/MTSC2015. You will need to provide your 12-digit control number that is on your Notice of Internet Availability of Proxy Materials or on your proxy card if you receive materials by mail.

	~~On behalf~~Your vote is important to us. Last year, approximately 94% of the ~~Board of Directors, you are invited to attend the~~ Company’s ~~annual meeting of shareholders. The meeting will be held on Wednesday, February 8, 2012, at 3:00 p.m., Central Standard Time,~~shares were voted at the ~~Company’s headquarters in Eden Prairie, Minnesota.~~ ~~We would like all of our shareholders to be represented at the meeting, in person or by proxy. Last year, 90% of the shares were voted,~~Annual Meeting, and we thank our shareholders for their response. We urge you to cast your vote, as instructed in the Notice of Internet Availability of Proxy Materials, over the Internet or by telephone as promptly as possible. You may also request a paper proxy card to submit your vote by mail, if you prefer. And, as indicated above, you may vote during the Annual Meeting online at www.virtualshareholdermeeting.com/MTSC2015. Please help us to achieve another high response rate for the meeting on February ~~8, 2012. Please vote your proxy even if~~10, 2015.

	I encourage you ~~plan~~ to attend ~~the meeting.~~ our Virtual Annual Meeting of Shareholders on February 10, 2015, at 11:45 a.m. Central Standard Time by visiting www.virtualshareholdermeeting.com/MTSC2015.


~~Jean-Lou Chameau~~Jeffrey A. Graves – Age 5853 Director since ~~1998~~2012	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. Mr. Chameau currently serves as Trustee, Board of Trustees of the California Institute of Technology, Director of John Wiley & Sons and of Safran, member of InterWest Partners Advisory Committee, member of the Executive Committee, Council on Competitiveness, and member of the Academic Research Council, Singapore. He is a member of the U.S. National Academy of Engineering and the French Académie des Technologies. Mr. 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.
~~Brendan C. Hegarty – Age 69~~ ~~Director since 1998~~	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. Mr. Hegarty’s qualifications to sit on our Board include his over 44 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.


	MTS SYSTEMS CORPORATION
		(Name of Registrant as Specified in Its Charter)


		(Name of Person(s) Filing Proxy Statement, if other than the Registrant)


		For the Board of Directors,



	~~Louis L. Ainsworth~~	Steven G. Mahon
		Secretary


		Page
GENERAL		1

PROPOSAL 1: ELECTION OF DIRECTORS		1

General Information		1
Nominees		2
Voting Information and Board Voting Recommendation		5
Other Information Regarding the Board		5
Non-Employee Director Compensation		9

PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		12

Fees and Services		12
Pre-Approval Policy		12
Board Voting Recommendation		13

AUDIT COMMITTEE REPORT		13

EXECUTIVE COMPENSATION		14

Compensation Discussion and Analysis		14
Compensation Committee Report		26
Risk Considerations in Our Compensation Programs		26
Conflict of Interest Analysis		27
Summary Compensation Table		27
Grants of Plan-Based Awards in Fiscal 2014		28
Outstanding Equity Awards at 2014 Fiscal Year End		30
Option Exercises and Stock Vested in Fiscal 2014		30
Non-Qualified Deferred Compensation		31
Potential Payments Upon Termination or Change in Control		31

PROPOSAL 3: NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS		33

General Information		33
Board Voting Recommendation		33

PROPOSAL 4: APPROVAL OF THE MTS SYSTEMS EXECUTIVE VARIABLE COMPENSATION (“EVC”) PLAN		34

Summary of the EVC Plan		34
Future Awards		36
Board Voting Recommendation		36

OTHER INFORMATION		37

Security Ownership of Principal Shareholders and Management		37
Related Party Transactions		38
Section 16(a) Beneficial Ownership Reporting Compliance		38
Information Regarding Equity Compensation Plans		38
Compensation Committee Interlocks and Insider Participation		39
Shareholder Proposals		39


ABOUT THE ANNUAL MEETING AND PROXY MATERIALS	1	40

What is the purpose of the Annual Meeting?	1	40
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?	1	40
Who is entitled to vote?	1	40
Who can attend the Annual Meeting?	2	40
What constitutes a quorum?	2	40
How do I vote?	2	41
When do I vote?	3	41
Can I change my vote after I vote electronically or return my proxy card?	3	41
What does the Board recommend?	3	41
What vote is required to approve each ~~Proposal?~~proposal?	3	42
Who will count the vote?	4	42
What does it mean if I receive more than one Notice of Internet Availability?	4	42
How will voting on any other business be conducted?	4	43
How are proxies solicited?	4	43
What is “householding”?	4	43
Who pays for the cost of this proxy solicitation?	5

~~PROPOSAL 1: ELECTION OF DIRECTORS~~	5

~~General Information~~	5
~~Nominees~~	5
~~Voting Information and Board Voting Recommendation~~	8
~~Other Information Regarding the Board~~	8
~~Non-Employee Director Compensation~~	12

~~PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~	14

~~Fees and Services~~	14
~~Pre-Approval Policy~~	14
~~Board Voting Recommendation~~	15

~~AUDIT COMMITTEE REPORT~~	15

~~Risk Considerations in Our Compensation Programs~~	15

~~EXECUTIVE COMPENSATION~~	16

~~Compensation Discussion and Analysis~~	16
~~Compensation Committee Report~~	30
~~Summary Compensation Table~~	31
~~Grants of Plan-Based Awards in Fiscal 2011~~	32
~~Outstanding Equity Awards at 2011 Fiscal Year End~~	34
~~Option Exercises and Stock Vested in Fiscal 2011~~	35
~~Pension Benefits for Fiscal 2011~~	35
~~Non-Qualified Deferred Compensation~~	35
~~Potential Payments Upon Termination or Change In Control~~	36

~~PROPOSAL 3: NON-BINDING ADVISORY VOTE REGARDING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS~~	40

~~General Information~~	40
~~Board Voting Recommendation~~	40

~~OTHER INFORMATION~~	41

~~Security Ownership of Principal Shareholders and Management~~	41
~~Related Party Transactions~~	42
~~Section 16(a) Beneficial Ownership Reporting Compliance~~	42
~~Compensation Committee Interlocks and Insider Participation~~	42
~~Shareholder Proposals~~	43


David J. Anderson – Age 6467 Director since 2009 Chair since ~~August~~ 2011		Director of Modine Manufacturing Company (developer and manufacturer of thermal management systems and components) since 2010 and a member of its Corporate Governance and Nominating Committee, Compensation Committee and Audit ~~Committee since 2010;~~Committee; Director of Schnitzer Steel Industries, Inc. (metals recycler and steel manufacturer) since 2009 and Chair of its Nominating and Corporate Governance Committee and Audit Committee ~~member since 2009;~~member; 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~~serve on our Board and to serve as the Chair of the Board include his more than 40 years of international, industrial business experience and his chief executive officer and operations experience. He also has technology and engineering experience, the ability to formulate and execute strategy and financial expertise.

~~Emily M. Liggett – Age 56~~ ~~Director since 2010~~	President and Chief Executive Officer of ~~Novatorque,~~the Company since May 2012; President, Chief Executive Officer and a director of C&D Technologies, Inc. (a manufacturer, marketer and distributer of electrical power storage systems for the standby power storage market) from July 2005 until May 2012; various executive positions at Kemet Electronics Corporation (a manufacturer of high-performance capacitor solutions) from 2001 to 2005, including Chief Executive Officer; various leadership positions with General Electric Company’s Power Systems Division and Corporate Research & Development Center from 1995 to 2001; prior to 1995, held various positions of increasing responsibility at Rockwell International Corporation and Howmet Corporation. Mr. Graves has served as a director of Teleflex Incorporated and Hexcel Corporation since 2007, and he served on the board of Technitrol, Inc. from January 2006 through May 2007. As the only member of management serving on our Board, Mr. Graves contributes an in-depth understanding of the opportunities and challenges facing our Company. His experience in both executive and board positions at various technology companies gives him insight into strategic, financial and personnel matters, as well as the considerations particular to public companies.

David D. Johnson – Age 58 Director since 2013		Executive Vice President, Treasurer and Chief Financial Officer of Molex Incorporated (manufacturer of electronic connectors) since 2005; Vice President, Treasurer and Chief Financial Officer of Sypris Solutions, Inc., from 1996 to 2005; served as Regional Controller for Molex’s Far East Region; Financial Director for New Ventures and Acquisitions; and Financial Director for the Far East South Region from 1984 to 1996. Mr. Johnson’s qualifications to serve on our Board include his chief financial officer experience for a global industrial company. Mr. Johnson has had executive-level responsibility for financial and accounting matters in a number of settings, including international contexts.


Emily M. Liggett – Age 59 Director since 2010		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; and 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 UCT Corporation, a public company, and the Advisory Board of the Purdue University ~~School~~College of ~~Engineering Advisory Board.~~Engineering. She has served on the board of directors of Immersion Corporation, a public company, within the last five years. Ms. Liggett’s qualifications to ~~sit~~serve 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.

~~William V. Murray~~Randy J. Martinez – Age 5159 Director since ~~2010~~2014		~~Interim Chief Executive Officer of the Company since August 2011;~~Group Vice President, Aviation Services, and President and Chief Executive Officer, AAR Airlift Group, a subsidiary of ~~ReShape Medical, Inc. (an early stage medical device company developing a non-surgical treatment for obesity)~~AAR Corp from ~~2008 until he voluntarily resigned effective December 10, 2010;~~2009 to present. Prior to his current role, Mr. Martinez held other leadership roles within AAR Corporation, including Group Vice President, Government and Defense Services, and Senior Vice President, Government and Defense Programs. Before joining AAR in 2009, Mr. Martinez was the Chief Executive Officer at World Air Holdings, Inc. (NASDAQ). As a graduate of ~~Murray Consulting, Inc. (provider of executive management consulting and interim executive management services~~the United States Air Force Academy, Mr. Martinez served with distinction in the ~~medical technology/life science industries) from 2006 to 2007; Division President~~U.S. Air Force for over 21 years, holding a wide variety 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. (now part of CareFusion) from 2003 to 2004; held variousleadership roles, including both line command and senior executive positions at Medtronic, Inc. (a medical products company) from 1992 to 2003, including President Pacing Business; held various product development and engineering management positions at Medtronic, Inc. from 1985 to 1992; design engineer at Motorola, Inc. from 1983 to 1985. staff positions. Mr. ~~Murray~~Martinez currently serves on the ~~board~~Board of ~~LifeSync Corporation.~~the National Defense Transportation Association (NDTA), serving as Chair for the Aviation Sector. Mr. ~~Murray’s~~Martinez’s qualifications to ~~sit~~serve on our Board include his ~~over 19 years of senior~~experience as a chief executive ~~positions in various technical~~officer at a public company and ~~manufacturing companies, including~~ his ~~role as interim Chief Executive Officer~~particular knowledge of the ~~Company, with significant~~aviation and defense industries. His diverse industry experience assists in ~~product~~helping to understand our customers who are also diverse by industry and ~~business development, operations, business growth strategies and global profit and loss responsibilities.~~geography.


Barb J. Samardzich – Age 5356 Director since 2001		~~Vice President, Product Development~~Chief Operating Officer of Ford of Europe for Ford Motor Company (car and truck manufacturer) since November 2013; Vice President, Product Development of Ford Motor Company from September ~~2011;~~2011 to November 2013; Vice President of Global Product Programs of Ford Motor Company from January 2011 to September 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; and 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~~serve 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.

Michael V. Schrock – Age 61 Director since 2014		Advisor for Oak Hill Capital Partners, a private equity investment firm since March 2014; President and Chief Operating Officer from 2006 until his retirement in December 2013 for Pentair LLC, a global water, fluid, thermal management, and equipment protection company based in Schaffhausen, Switzerland. Prior to that role, Mr. Schrock held several leadership positions at Pentair over his 16-year career, including President of Water Technologies Americas, President of the Pump and Pool Group and President/COO of Pentair Technical Products. Before joining Pentair, Mr. Schrock held numerous senior leadership roles in both the US and Europe at Honeywell International Inc. Mr. Schrock is currently on the boards of Plexus Corporation, Berlin Packaging and The National MS Society, as well as serving on the Board of Governors of the St. Thomas School of Engineering. Mr. Schrock’s experience includes more than 35 years in senior roles at major industrial companies. His deep management and operating experience both domestically and internationally and strong track record leading and integrating strategic acquisitions gives our Board valuable insight into global business and acquisition matters.


Gail P. Steinel – Age 5457 Director since 2009		Owner of Executive Advisors (provider of leadership development services and ~~strategic /~~ 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; and 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~~serve on our Board include her global managing partner experience running a large global business, more than 2630 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.

Chun Hung (Kenneth) Yu – Age 65 Director since 2013		Retired; Vice President, Global Channel Services, International Operations for 3M Company (diversified manufacturer of consumer, industrial and health products) from May 2013 to December 2013; President, China Region and 3M China from 2000 to May 2013; President, 3M Taiwan from 1999 to 2000; served in several Director and leadership roles within the 3M organization from 1969 to 1999, located in St. Paul, Minnesota, and the Asian-Pacific region. Mr. Yu’s qualifications to serve on our Board include his extensive operations experience in the Asian-Pacific region, a market we have identified as a growth opportunity for our Company’s products and services. Mr. Yu also contributes significant leadership, planning and management skills developed during his long tenure with a successful and growing global manufacturing company.


Role	Annual Cash Retainer

Chairman of the Board	$	110,000
All other non-employee directors	$	45,000

Additional retainers for committee participation
Audit Committee
Chair	$	18,000
All other committee members	$	8,000
Compensation Committee
Chair	$	10,000
All other committee members	$	4,000
Governance and Nominating Committee
Chair	$	11,000
All other committee members	$	5,000


Name	Fees earned or paid in cash ($) (1)		Stock Awards ($) (2)(3)		All Other Compensation ($) (4)		Total ($)		Fees Earned or Paid in Cash ($)		Stock Awards ($) (1)(2)		All Other Compensation ($) (3)		Total ($)
David J. Anderson		90,000		80,033		3,619		173,652		118,000		134,051		5,644		257,695
Jean-Lou Chameau		119,000		80,033		4,009		203,042		54,000		95,063		3,985		153,048
Brendan C. Hegarty		93,000		80,033		4,009		177,042
Emily M. Liggett ��		48,000		80,033		2,249		130,282
William V. Murray (5)		50,000		80,033		2,249		132,282
Brendan C. Hegarty (4)										13,500		—		945		14,445
David D. Johnson										55,000		95,063		2,173		152,236
Emily M. Liggett										56,000		95,063		3,985		155,048
Randy J. Martinez										34,081		82,510		772		117,363
William V. Murray (4)										25,000		—		1,552		26,552
Barb J. Samardzich		50,750		80,033		4,009		134,792		55,000		95,063		3,985		154,048
Michael V. Schrock										32,081		82,510		772		115,363
Gail P. Steinel		197,000		80,033		2,675		279,708		67,000		95,063		3,986		166,049
Kenneth Yu										50,000		95,063		1,191		146,254

	Fiscal Year ($000’s)
					Fiscal Year ($000’s)
	2010		2011		2013		2014
Audit Fees(1)	$	1,192	$	1,565	$	1,478	$	1,637
Audit-Related Fees(2)		15		15		15		58
Tax Fees(3)		21		20		27		266
All Other Fees (4)		—		—		–		–
Total fees	$	1,228	$	1,600	$	1,520	$	1,961

	●	~~Our use of different types of compensation provides a balance of short-term and long-term incentives with fixed and variable components;~~
Gail P. Steinel (Chair)	David J. Anderson	David D. Johnson	Randy J. Martinez


	Actuant Corporation	Graco, Inc.
	Arctic Cat Inc.	Hurco Companies Inc.
~~Arctic Cat~~	Axcelis Technologies Inc.	Measurement Specialties Inc.
~~Axcelis Technologies~~	Badger Meter Inc.	Methode Electronics, Inc.
	Brooks Automation Inc.	Mettler-Toledo International Inc.
~~Badger Meter Inc.~~	Cabot Microelectronics Corporation	MKS Instruments Inc.
~~Brooks Automation Inc.~~	Cognex Corporation	Moog Inc.
~~Cabot Microelectronics Corp~~	Cohu Inc.	National Instruments Corporation
~~Cohu Inc.~~	CTS Corporation	Perceptron Inc.
~~CyberOptics Corporation~~	~~Roper Industries~~ESCO Technologies Inc.
~~Dionex Corporation~~	Symmetricom Inc.
~~ESCO~~	FARO Technologies Inc.	Tennant Company
~~FARO Technologies Inc.~~	FEI Company	Teradyne Inc.
~~Graco, Inc.~~

	~~How Component Was Determined~~
Element of Compensation	Why Component isIs Paid & Basis for Component		for	How Component Is Determined for Named Executive Officers ~~for Fiscal 2011~~

Base Salary	To provide a fixed level of competitive income, based on:			Within range of competitive pay, targeted to median of market data

	●	the individual’s scope of responsibility

	●	the individual’s level of performance and experience

	~~Element of~~ ~~Compensation~~		~~Why Component is Paid & Basis for Component~~		~~How Component Was Determined~~ ~~for Named Executive Officers~~ ~~for Fiscal 2011~~

	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 Corporate and Test for fiscal ~~2011:~~ 2014:

			—	Earnings Per Share (“EPS”) weighted at 30%

			—	Earnings Before Interest and Taxes (“EBIT”) weighted at 30% ~~— Revenue weighted at 25%~~ ~~— Working Capital as a Rate to Revenue (“WCRR”) weighted at 15%~~
			~~Performance based~~
			—	Revenue weighted at 25%

			—	Orders weighted at 15%

		●	Performance goals for Sensors for fiscal 2014:

			—	EPS weighted at 30%

			—	EBIT weighted at 30%

			—	Revenue weighted at 40%

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 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~~ ● ~~Delivered through stock options, restricted stock units (RSUs), or a combination thereof, each vesting in equal installments over a 3-year period~~				Value of equity awards designed to be within the range of competitive pay, targeted to median of market ~~data~~ ~~Award consisted~~data; award values aligned with individual and company performance during the fiscal year

		●	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

		●	Delivered through a combination of stock options ~~only so~~and restricted stock units (“RSUs”), each vesting in equal installments over a 3-year period for the grants made in December 2013 for fiscal 2014

		●	The performance RSUs that were granted in December 2014 for fiscal 2015 will vest based on the ~~named executive officers’ equity ownership results will be aligned with the results~~performance measure of ~~our shareholders regardless~~ROIC instead of ~~the outcome of the U.S. Department of Commerce investigation~~time-based vesting


Element of Compensation	Why Component isIs Paid & Basis for Component		How Component Is Determined for Named Executive Officers
		~~How Component Was Determined~~ ~~for Named Executive Officers~~ ~~for Fiscal 2011~~

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 salaried 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.				~~Based upon competitive market~~
~~Perquisites~~	~~To provide limited executive perquisites~~ ~~•All of our named executive officers received either a car allowance or use of a Company-owned automobile~~		~~Based upon competitive market~~

Perquisites	To provide limited executive perquisites			Based upon competitive market and, in the case of the physical examinations, to promote vitality and succession in the executive team

	●	All of our named executive officers receive a car allowance

	●	Any named executive officer who receives an executive physical examination can be reimbursed for amounts not covered by insurance up to $3,000

Named Executive Officer	Fiscal 2011 Annualized Base Salary	Fiscal 2011 Annualized Base Salary as a Percent of Median of Base Salary Comparable
Laura B. Hamilton	$550,000	90	%

Susan E. Knight	$333,342	111	%

Joachim Hellwig (1)	€244,940	104	%

Kathleen M. Staby	$254,177	104	%


Named Executive Officer	Fiscal 2014 Annualized Base Salary	Fiscal 2014 Annualized Base Salary as a Percent of Median of Base Salary Comparable
Jeffrey A. Graves	$637,000	102%

Susan E. Knight	$361,000	103%

William E. Bachrach	$309,000	124%

Michael B. Jost	$330,000	110%

Steven G. Mahon	$345,000	110%


Goal	Description	Weight for Messrs. Graves, Jost and Mahon and Ms. Knight	Weight for Mr. Bachrach

EPS	Earnings per share for fiscal 2014	30%	30%

EBIT	Earnings before interest and taxes for fiscal 2014	30%	30%

Revenue	Revenue for fiscal 2014	25%	40%

Orders	The total contractual intentions to sell products and services in fiscal 2014	15%	—

~~Goal~~	~~Description~~	~~Weight~~
~~EPS~~	~~Earnings per share for fiscal 2011~~	~~30%~~

~~EBIT~~	~~Earnings before interest~~ For Messrs. Graves and Mahon and ~~taxes for fiscal 2011~~	~~30%~~

~~Revenue~~	~~Revenue for fiscal 2011~~	~~25%~~

~~WCRR~~	~~Working capital as a rate to revenue for fiscal 2011 (as a percentage, calculated by dividing working capital by revenue)~~	~~15%~~

Named Executive Officer	% of Fiscal 2011 Base Salary at Target Achievement		% of Fiscal 2011 Base Salary at Maximum Achievement
Laura B. Hamilton	70	%	140	%

Joachim Hellwig	35	%	70	%

Susan E. Knight	50	%	100	%

Kathleen M. Staby	35	%	70	%


Named Executive Officer	% of Fiscal 2014 Base Salary at Target Achievement	% of Fiscal 2014 Base Salary at Maximum Achievement

Jeffrey A. Graves	75%	150%

Susan E. Knight	50%	100%

William E. Bachrach	50%	100%

Michael B. Jost	50%	100%

Steven G. Mahon	50%	100%


Corporate Goal (1)	Minimum			Target			Maximum			Result			Percent of Target Achieved			Threshold(2)	Target	Maximum	Result	Percent of Target Performance Achieved
EPS	$	1.36		$	1.98		$	3.96		$	3.24			164	%	$3.09	$3.63	$4.36	$3.01	0%

EBIT (in 000)	$	33,500		$	48,000		$	96,000		$	74,220			155	%	$72,335	$85,100	$102,120	$65,471	0%

Revenue (in 000)	$	350,000		$	409,000		$	560,000		$	467,368			139	%	$505,580	$594,800	$713,760	$564,328	83%

WCRR		23.6	% (2)		19.3	%		9.7	%		20.1	%		91	%
Orders (in 000)																$500,650	$589,000	$706,800	$615,586	123%

				Named Executive Officer and Potential Payout Attributable to Performance Goal (1)
Performance Goal	% Achieved				Susan E. Knight			Joachim Hellwig (2)			Kathleen M. Staby
EPS		164	%		$	81,088		$	56,553		$	43,156

EBIT		155	%		$	76,624		$	42,418		$	40,780

Revenue		139	%		$	57,254		$	34,660		$	30,472

WCRR		91	%		$	22,497		$	0		$	11,973

Total		144	%		$	237,463		$	133,631		$	126,381

Total as % of Target						144	%		116	%		144	%

Named Executive Officer	Number of Shares Underlying Stock Options		Value of Award		Value of Award as Percent of Target Award Value
Laura B. Hamilton(1)		80,000	$	755,696		100	%

Joachim Hellwig		12,000	$	113,354		120	%

Susan E. Knight		16,000	$	151,139		80	%

Kathleen M. Staby		10,000	$	94,462		100	%

	●	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 top and bottom line growth measures;

	●	Our bonus plans impose threshold and maximum payout levels on bonus awards to ensure that we are rewarding desired performance and limiting windfalls;

	●	Commission-based plans are aligned to drive business growth and support achievement of short- and long-term strategic objectives;

	●	Incentive programs for executive officers include clawback provisions and allow the use of negative discretion;

	●	Our stock ownership guidelines encourage a prudent contribution to shareholder value and discourage excessive risk taking; and

	●	Our system of internal controls places a strong focus on avoiding undue financial risk through rigorous review processes.