EXHIBIT 99.1
MTS SYSTEMS CORPORATION
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
SECTION PAGE
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1. General Purpose of Plan; Definitions............................1
2. Administration..................................................3
3. Stock Subject to Plan...........................................4
4. Eligibility.....................................................4
5. Stock Options...................................................4
6. Transfer, Leave of Absence, etc.................................8
7. Amendments and Termination......................................9
8. General Provisions..............................................9
MTS SYSTEMS CORPORATION
1997 STOCK OPTION PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the MTS Systems Corporation 1997 Stock Option
Plan (the "Plan"). The purpose of the Plan is to enable MTS Systems Corporation
(the "Company") and its Subsidiaries to retain and attract executives, managers,
key technical and functional employees, directors and consultants who contribute
to the Company's success by their ability, ingenuity and industry, and to enable
such individuals to participate in the long-term success and growth of the
Company by giving them a proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "Agreement" means an agreement by and between the Company and an
optionee or recipient of an award under the Plan setting forth the terms and
conditions of the option or award.
b. "Board" means the Board of Directors of the Company as it may be
comprised from time to time.
c. "Cause" means a felony conviction of a participant or the failure of
a participant to contest prosecution for a felony, willful misconduct,
dishonesty or intentional violation of a statute, rule or regulation, any of
which, in the judgment of the Company, is harmful to the business or reputation
of the Company.
d. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute.
e. "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board, unless the Plan
specifically states otherwise.
f. "Company" means MTS Systems Corporation, a corporation organized
under the laws of the State of Minnesota (or any successor corporation).
g. "Consultant" means any person, including an advisor, engaged by the
Company or a Parent Corporation or Subsidiary of the Company to render services
and who is compensated for such services and who is not an employee of the
Company or any Parent Corporation or Subsidiary of the Company. A Non-Employee
Director may serve as a Consultant.
h. "Disability" means a physical or mental condition resulting from a
bodily injury or disease or mental disorder rendering such person incapable of
continuing to perform the employment
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duties of such person at the Company as such duties existed immediately prior to
the bodily injury, disease or mental disorder.
i. "Fair Market Value" of Stock on any given date shall be determined
by the Committee as follows: (a) if the Stock is listed for trading on one of
more national securities exchanges, or is traded on the Nasdaq Stock Market, the
last reported sales price on the principal such exchange or the Nasdaq Stock
Market on the date in question, or if such Stock shall not have been traded on
such principal exchange on such date, the last reported sales price on such
principal exchange or the Nasdaq Stock Market on the first day prior thereto on
which such Stock was so traded; or (b) if the Stock is not listed for trading on
a national securities exchange or the Nasdaq Stock Market, but is traded in the
over-the-counter market, including the Nasdaq Small Cap Market, the closing bid
price for such Stock on the date in question, or if there is no such bid price
for such Stock on such date, the closing bid price on the first day prior
thereto on which such price existed; or (c) if neither (a) or (b) is applicable,
by any means fair and reasonable by the Committee, which determination shall be
final and binding on all parties.
j. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
k. "Non-Employee Director" means a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
l. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as a
"Non-Qualified Stock Option."
m. "Outside Director" means a Director who: (a) is not a current
employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the Company; (d) does
not receive remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under Code
Section 162(m) and regulations thereunder. For this purpose, remuneration
includes any payment in exchange for good or services. This definition shall be
further governed by the provisions of Code Section 162(m) and regulations
promulgated thereunder.
n. "Parent Corporation" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if each of the
corporations (other than the Company) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
o. "Retirement" means retirement from active employment with the
Company and any Subsidiary or Parent Corporation of the Company on or after age
55.
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p. "Stock" means the Common Stock, $.25 par value per share, of the
Company.
q. "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 5 below.
r. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Outside Directors and Non-Employee
Directors, who shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant Stock Options
to eligible employees, Consultants and members of the Board pursuant to the
terms of the Plan. In particular, the Committee shall have the authority:
(i) to select the members of the Board, officers and other key
employees of the Company and its Subsidiaries and other eligible
persons to whom Stock Options may from time to time be granted
hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options and Non-Qualified Stock Options are to be granted hereunder;
(iii) to determine the number of shares to be covered by each
such award granted hereunder; and
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, any restriction on any Stock Option); provided,
however, that in the event of a merger or asset sale, the applicable
provisions of Section 5(c) of the Plan shall govern the acceleration of
the vesting of any Stock Option.
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 award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to executive officers of the Company the authority to exercise the
powers specified in (i), (ii), (iii), and (iv) above with respect to persons who
are not either the chief executive officer of the Company or the four highest
paid officers of the Company other than the chief executive officer.
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All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 4,000,000. Such shares may consist, in
whole or in part, of authorized and unissued shares. Upon a stock-for-stock
exercise of a Stock Option or upon the withholding of stock for the payment of
the option price or taxes, only the net number of shares issued to the Optionee
shall be used to calculate the number of shares remaining available for
distribution under the Plan.
If any shares that have been optioned cease to be subject to Stock
Options, such shares shall again be available for distribution in connection
with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, as may be determined to
be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Executives, managers, key technical and functional employees of the
Company and Subsidiaries, members of the Board of Directors and Consultants who
are responsible for or contribute to the management, growth and profitability of
the business of the Company and its Subsidiaries are eligible to be granted
Stock Options under the Plan. The optionees under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
Notwithstanding the foregoing, no person shall receive grants of Stock
Options under this Plan which exceed 100,000 shares during any fiscal year of
the Company.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after November 22, 2006.
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The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options. To the
extent that any option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee at the time of grant. In no
event shall the option price per share of Stock purchasable under an Incentive
Stock Option or a Non-Qualified Stock Option be less than 100% of Fair Market
Value on the date the option is granted. If an employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than seven
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee at or after grant, subject to the
restrictions stated in Section 5(b) above. If the Committee provides, in its
discretion, that any option is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time. Notwithstanding
anything contained in the Plan to the contrary, the Committee may, in its
discretion, extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company, if such
action is deemed to be in the best interests of the Company; provided, however,
that in the event of a merger or sale of assets, the provisions of this Section
5(c) shall govern vesting acceleration. Notwithstanding the foregoing, unless
the Stock Option provides otherwise, any Stock Option granted under this Plan
shall be exercisable in full, without regard to any installment exercise
provisions, for a period specified by the Committee, but not to exceed sixty
(60) days, prior to the
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occurrence of any of the following events: (i) dissolution or liquidation of the
Company other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be the
surviving entity or (iii) the transfer of substantially all of the assets of the
Company or 20% or more of the outstanding Stock of the Company.
The grant of an option pursuant to the Plan shall not limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee at the time of grant
or exercise, in its sole discretion, payment in full or in part may also be made
in the form of unrestricted Stock already owned by the optionee (which in the
case of Stock acquired upon exercise of an option have been owned for more than
six months on the date of surrender), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted. No shares of
Stock shall be issued until full payment therefor has been made. An optionee
shall generally have the rights to dividends and other rights of a shareholder
with respect to shares subject to the option when the optionee has given written
notice of exercise, has paid in full for such shares, and, if requested, has
given the representation described in paragraph (a) of Section 8.
(e) Non-transferability of Options.
(i) Subject to Section 5(e)(ii) below, no Stock Option shall
be transferable by the optionee otherwise than by will or by the laws
of descent and distribution, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
(ii) The Committee may, in its discretion, authorize all or a
portion of the options to be granted to an optionee to be on terms
which permit transfer by such optionee to (a) the spouse, children or
grandchildren of the optionees ("Immediate Family Members"), (b) a
trust or trusts for the exclusive benefit of such Immediate Family
Members, or (c) a partnership or partnerships in which such Immediate
Family Members are the only partners, provided that (i) there may be no
consideration for any such transfer, (ii) the stock option agreement
pursuant to which such options are granted must be approved by the
Committee, and must expressly provide for transferability in a manner
consistent with this Section 5(e)(ii), and (iii)
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subsequent transfers of transferred options shall be prohibited except
those in accordance with Section 5(e)(i). Following transfer, any such
options shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer, provided that the
term "optionee" herein shall in such event be deemed to refer to the
transferee, except that the events of termination of employment of
Sections 5(f), 5(g), 5(h) and 5(i) hereof shall continue to be applied
with respect to the original optionee, following which the options
shall be exercisable by the transferee only to the extent, and for the
periods specified in such Sections.
(f) Termination by Death. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, any
Stock Option may thereafter be immediately exercised, without regard to any
vesting requirements or periods previously established, by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, for a period of three (3) years from the date of such death or
until the expiration of the stated term of the option, whichever period is
shorter. In the event of termination of employment by reason of death, if an
Incentive Stock Option (ISO) is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, the option will
thereafter be treated as a Non-Qualified Stock Option (NQO).
(g) Termination by Reason of Disability. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after three years from the date of such
termination of employment or the expiration of the stated term of the option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, the option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment by
the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
in full, but, except as provided in the next sentence, may not be exercised
after three years from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter.
Options granted on or after December 1, 1998, shall, upon termination by reason
of Retirement, be exercisable in full for the stated term of the option. In the
event of termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Other Termination. If an optionee's continuous status as an
employee terminates (other than upon the optionee's death, Disability or
Retirement), any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such termination, but may not be
exercised after 90 days after such termination, or the expiration of the stated
term of
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the option, whichever period is the shorter. In the event of termination of
employment by reason other than death, Disability or Retirement and if pursuant
to its terms an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, the option
will thereafter be treated as a Non-Qualified Stock Option. In the event an
Optionee's employment with the Company or any Subsidiary or Parent Corporation
is terminated for Cause, all unexercised Stock Options granted to such Optionee
shall immediately terminate.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Stock Option is granted) of the Common
Stock with respect to which an Incentive Stock Option under this Plan or any
other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
(k) Directors Who Are Not Employees. Each person who (i) is not an
employee of the Company, any Parent Corporation or any Subsidiary and (ii) is
elected or re-elected as a director by the Board or the shareholders subsequent
to November 22, 1996 and prior to December 1, 1998 shall automatically be
granted an Option to purchase up to 3,000 shares of Stock, and after December 1,
1998, 4,000 shares of Stock (the actual number of which shall be determined by
the Committee upon such election or re-election) as of the date of such election
or re-election, at an option price per share equal to 100% of the Fair Market
Value of a share of Stock on the date of such election or re-election. All such
Options shall be designated as Non-Qualified Stock Options and shall be subject
to the same terms and provisions as are then in effect with respect to the grant
of Non-Qualified Stock Options to officers and key employees of the Company,
except that (i) the term of each such Option shall be five (5) years (four (4)
years for options issued before December 3, 1997) after the date of grant, and
(ii) the Option shall become exercisable as to all or any part of the shares
subject to the Option beginning six (6) months after the date the option is
granted. Subject to the foregoing, all provisions of this Plan not inconsistent
with the foregoing shall apply to Options granted pursuant to this Section 5(k).
The maximum aggregate number of shares as to which Options may be granted to
Non-Employee Directors under this Plan shall be 180,000 shares.
SECTION 6. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
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(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 7. Amendments and Termination.
The Board may at any time amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made (i) which would impair
the rights of an optionee or participant under any award theretofore granted
without the optionee's or participant's consent, (ii) without the approval of
the stockholders of the Company, cause the Plan to no longer comply with Rule
16b-3 under the Securities Exchange Act of 1934, Section 422 of the Code or any
other regulatory requirements, or (iii) without the approval of the stockholders
of the Company, result in a repricing of any award or option theretofore granted
hereunder.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan.
SECTION 8. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
(b) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases. The adoption
of the Plan shall not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or a
Subsidiary to terminate the employment of any of its employees at any time.
(c) Each participant shall, no later than the date as of which any part
of the value of an award first becomes includable as compensation in the gross
income of the participant for Federal income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements and the Company and Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the participant. With respect to
any award under the Plan, if the terms of such award so permit, a
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participant may elect by written notice to the Company to satisfy part or all of
the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 8(c). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(d) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company,
pursuant to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any participant who, at any time within two years after termination
of employment with the Company or any Subsidiary or Parent Corporation, directly
or indirectly competes with, or is employed by a competitor of, the Company.
(e) The Plan is expressly made subject to the approval by shareholders
of the Company. If the Plan is not so approved by the shareholders on or before
one year after this Plan's adoption by the Board of Directors, this Plan shall
not come into effect. The offering of the shares hereunder shall be also subject
to the effecting by the Company of any registration or qualification of the
shares under any federal or state law or the obtaining of the consent or
approval of any governmental regulatory body which the Company shall determine,
in its sole discretion, is necessary or desirable as a condition to or in
connection with, the offering or the issue or purchase of the shares covered
thereby. The Company shall make every reasonable effort to effect such
registration or qualification or to obtain such consent or approval.
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Adopted by the Board of Directors on November 22, 1996.
Adopted by the Shareholders of the Company on January 28, 1997.
Amended Section 5(k) by Board of Directors on December 3, 1997.
Amended Section 5(h) and (k) by Board of Directors on December 1, 1998
Amended Section 5(f) and 5(d) by Board of Directors on August 17, 1999.
Amended Sections 7 and 3 by the Board of Directors on November 30, 1999 (and
Amendment to Section 3 adopted by the Shareholders of the Company on
January 25, 2000).
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