Exhibit 10.1





	
  

 
	
 

 



EXECUTION VERSION 


	
  

 	
  

 
	
  

 	
 September 7,
 2012 

 



MTS Systems
Corporation 

14000 Technology Drive 

Eden Prairie, MN 55344 


Ladies and
Gentlemen: 


          The
purpose of this letter agreement (this “Confirmation”) is to confirm the terms
and conditions of the Transaction entered into between J.P. Morgan Securities
LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (the
“Seller”), and MTS Systems Corporation, a Minnesota corporation (the
“Purchaser”), on the Trade Date specified below (the “Transaction”). This
Confirmation constitutes a “Confirmation” as referred to in the Agreement
specified below.  


          This
Confirmation evidences a complete and binding agreement between the Seller and
the Purchaser as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement in the form of the ISDA 2002 Master Agreement (the “Agreement”) as
if the Seller and the Purchaser had executed an agreement in such form (but
without any Schedule except for the election of the laws of the State of New
York as the governing law but without regard to its choice of law provisions),
on the Trade Date. In the event of any inconsistency between provisions of the
Agreement and this Confirmation, this Confirmation will prevail for the purpose
of the Transaction to which this Confirmation relates. The parties hereby agree
that no Transaction other than the Transaction to which this Confirmation
relates shall be governed by the Agreement.  


ARTICLE 1


DEFINITIONS


          Section
1.01. Definitions. (a) As used in
this Confirmation, the following terms shall have the following meanings: 


          “10b-18 VWAP” means, (A) for any Trading Day
described in clause (x) of the definition of Trading Day hereunder, the
volume-weighted average price at which the Common Stock trades as reported in
the composite transactions for United States exchanges and quotation systems,
during the regular trading session for the Exchange (or, if applicable, the
Successor Exchange on which the Common Stock has been listed in accordance with
Section 7.01(c)) on such Trading Day, excluding (i) trades that do not settle
regular way, (ii) opening (regular way) reported trades in the consolidated
system on such Trading Day, (iii) trades that occur in the last ten minutes
before the scheduled close of trading on the Exchange on such Trading Day and
ten minutes before the scheduled close of the primary trading in the market
where the trade is effected, and (iv) trades on such Trading Day that do not
satisfy the requirements of Rule 10b-18(b)(3), as determined in good faith by
the Calculation Agent, or (B) for any Trading Day that is described in clause
(y) of the definition of Trading Day hereunder, an amount determined in good
faith by the Calculation Agent as 10b-18 VWAP. The Purchaser acknowledges that
the Calculation Agent may refer to the Bloomberg Page “MTSC US <Equity>
AQR SEC” (or any successor thereto), in its judgment, for such Trading Day to determine
the 10b-18 VWAP. 


          “Additional Termination Event” has the
meaning set forth in Section 7.01. 


JPMorgan Chase Bank, National Association 

Organised
under the laws of the United States as a National Banking Association. 

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271 

Registered as a branch in England & Wales branch No. BR000746.

Registered Branch Office 125 London Wall, London EC2Y 5AJ 

Authorised and regulated by the Financial Services Authority






          “Affected Party” has the meaning set forth
in Section 14 of the Agreement. 


          “Affected Transaction” has the meaning set
forth in Section 14 of the Agreement. 


          “Affiliated Purchaser” means any “affiliated
purchaser” (as such term is defined in Rule 10b-18) of the Purchaser. 


          “Agreement” has the meaning set forth in the
second paragraph of this Confirmation. 


          “Alternative Termination Delivery Unit”
means (i) in the case of a Termination Event (other than following consummation
of a Merger Event or Nationalization) or Event of Default (as defined in the
Agreement), one share of Common Stock and (ii) in the case of consummation of a
Merger Event or Nationalization, a unit consisting of the number or amount of
each type of property received by a holder of one share of Common Stock in such
Merger Event or Nationalization; provided
that if such Merger Event involves a choice of consideration to be received by
holders of the Common Stock, an Alternative Termination Delivery Unit shall be
deemed to include the amount of cash received by a holder who had elected to
receive the maximum possible amount of cash as consideration for his shares. 


          “Bankruptcy Code” has the meaning set forth
in Section 9.07. 


          “Business Day” means any day on which the
Exchange is open for trading. 


          “Calculation Agent” means JPMorgan Chase
Bank, National Association. 


          “Capped Delivery Shares” means, for any
date, (i) 8,054,585 shares of Common Stock minus
(ii) the number of shares of Common Stock delivered by the Seller to the
Purchaser in respect of this Transaction on or prior to such date, subject to
appropriate adjustments pursuant to Section 8.02. 


          “Cash Distribution” has the meaning set
forth in Section 7.01(f). 


          “Cash Distribution Amount” means, for any “Reference Period” set forth in the Pricing
Supplement, the amount specified in the Pricing Supplement for such Reference
Period. 


          “Cash Settlement Amount” has the meaning set
forth in Section 3.01(d). 


          “Cash Settlement Fee” means the amount
specified as such in the Pricing Supplement. 


          “Cash Settlement Purchase Period” means the
period during which the Seller purchases shares of Common Stock to unwind its
hedge position following the Valuation Completion Date. 


          “Common Stock” has the meaning set forth in
Section 2.01. 


          “Communications Procedures” has the meaning
set forth in Annex C hereto. 


          “Confirmation” has the meaning set forth in
the first paragraph of this letter agreement. 


          “Contract Fee” means the amount specified as
such in the Pricing Supplement. 


          “Contract Period” means the period
commencing on and including the Trade Date and ending on and including the date
all payments or deliveries of shares of Common Stock pursuant to Section 3.01
or Section 7.03 have been made. 


          “Default Notice Day” has the meaning set
forth in Section 7.02. 


          “De-Listing” has the meaning set forth in
Section 7.01(c). 


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          “Discount” means the amount specified as
such in the Pricing Supplement. 


          “Distribution Termination Event” has the
meaning set forth in Section 7.01(f). 


          “Early Termination Date” has the meaning set
forth in Section 14 of the Agreement. 


          “Event of Default” has the meaning set forth
in Section 14 of the Agreement. 



          “Exchange” means the NASDAQ Global Select
Market 



          “Exchange Act” means the Securities Exchange
Act of 1934, as amended.


          “Expiration Date” means the 172nd Trading Day following the Trade
Date. 


          “Extraordinary Cash Dividend” means the per
share cash dividend or distribution, or a portion thereof, declared by the
Purchaser on shares of Common Stock that is classified by the board of
directors of the Purchaser as an “extraordinary” dividend. 


          “Floor Price” has the meaning specified as
such in the Pricing Supplement. 



          “Indemnified Person” has the meaning set forth
in Section 9.02. 


          “Indemnifying Party” has the meaning set forth in Section
9.02. 


          “Initial Delivery Percentage” means the
percentage specified as such in the Pricing Supplement. 


          “Initial Number of Shares” means the number
of shares of Common Stock, rounded down to the nearest integer, equal to the
product of (i) the Initial Delivery Percentage and (ii) the Purchase Price divided by the Initial Share Price. 


          “Initial Payment Date” means the first
Business Day immediately following the Trade Date. 



          “Initial Settlement Date”
has the meaning set forth in Section 2.02. 



          “Initial Share Price” means $52.53. 


          “Maximum Delivery Shares” means, for any
date, (i) 2,039,000 shares of Common Stock, minus
(ii) the net number of shares of Common Stock delivered by the Purchaser to the
Seller in respect of this Transaction on or prior to such date, plus (iii) the net number of shares of
Common Stock delivered by the Seller to the Purchaser in respect of this
Transaction on or prior to such date, subject to appropriate adjustments
pursuant to Section 8.02(x). 


          “Merger Event” has the meaning set forth in
Section 7.01(d). 



          “Nationalization” has the meaning set forth in Section
7.01(e). 


          “Number of Shares” has the meaning set forth
in Section 2.01. 




          “Obligations” has the meaning set forth in Section 9.02. 


          “Ordinary Cash Dividend” has the meaning set
forth in Section 8.01(b). 


          “Pricing Supplement” means the Pricing
Supplement attached hereto as Annex D. 


          “Private Placement Agreement” has the
meaning set forth in Annex A hereto. 


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          “Private Placement Price” means the private
placement value of a share of Common Stock as determined in accordance with
Annex A hereto. 


          “Private Placement Shares” has the meaning
set forth in Section 3.01(b).




          “Private Placement Procedures” has the meaning
set forth in Annex A hereto. 



          “Private Securities” has the meaning set forth in
Annex A hereto. 


          “Purchase Price” has the meaning set forth in Section 2.01.


          “Purchaser” has the meaning set forth in the first paragraph of this
Confirmation. 


          “Reference Period” means, for any
corresponding “Cash Distribution Amount”
specified in the Pricing Supplement, the period specified in the Pricing
Supplement for such Cash Distribution Amount. 


          “Registered Shares” has the meaning set
forth in Section 3.01(b). 


          “Registered Shares Fee” means the amount
specified as such in the Pricing Supplement. 



          “Registration Procedures” has the
meaning set forth in Annex B hereto. 



          “Regulation M” means Regulation M under
the Exchange Act. 


          “Rule 10b-18” means Rule 10b-18 promulgated
under the Exchange Act (or any successor rule thereto). 


          “SEC” means the Securities and Exchange
Commission. 


          “Securities Act” means the Securities Act of
1933, as amended. 


          “Seller” has the meaning set forth in the
first paragraph hereto. 


          “Seller Termination Share Purchase Period”
has the meaning set forth in Section 7.03. 


          “Settlement Date” means (i) if Section 3.01
is applicable, the fourth Business Day following the Valuation Completion Date;
(ii) if settlement in cash is applicable pursuant to Section 3.01(d), the date
of such cash payment determined in accordance with Section 3.01(d)(ii); (iii)
if Section 3.01(e) is applicable, the Business Day immediately following the
day on which the Seller informs the Purchaser, pursuant to Annex A hereto, of
the number of Private Placement Shares required to be delivered; and (iv) if
Section 3.01(f) is applicable, each of the dates so advised by the Seller
pursuant to Annex B hereto. 


          “Settlement Number” means a number of shares
of Common Stock, rounded down to the nearest integer and which number may be
negative, equal to (i) the Valuation Number minus
(ii) the Initial Number of Shares. 


          “Settlement Purchase Amount” means an amount
in cash equal to (i) the absolute value of the Settlement Number multiplied by (ii) (x) the arithmetic
average of 10b-18 VWAP for each of the Trading Days in the Cash Settlement
Purchase Period plus (y) $0.05. 


          “Settlement Shares” has the meaning set
forth in Section 3.01(b). 



          “Share De-listing Event” has the meaning set forth in
Section 7.01(c). 



          “Successor Exchange” has the meaning set forth in Section
7.01(c). 



          “Termination Amount” has the meaning set forth in Section 7.02. 


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          “Termination Event” has the meaning set
forth in Section 14 of the Agreement. 


          “Termination Price” means the value of an
Alternative Termination Delivery Unit to the Seller (determined as provided in
Annex A hereto). 


          “Termination Settlement Date” has the
meaning set forth in Section 7.03. 


          “Trade Date” has the meaning set forth in
Section 2.01. 


          “Trading Day” means (x) any day (i) other
than a Saturday, a Sunday or a day on which the Exchange is not open for
business, (ii) during which trading of any securities of the Purchaser on any
national securities exchange has not been suspended, (iii) during which there
has not been, in the Seller’s judgment, a material limitation in the trading of
Common Stock or any options contract or futures contract related to the Common
Stock, and (iv) during which there has been no suspension pursuant to Section
4.02 of this Confirmation, or (y) any day that, notwithstanding the occurrence
of events contemplated in clauses (ii), (iii) and (iv) of this definition, the
Seller determines to be a Trading Day. 


          “Transaction” has the meaning set forth in
the first paragraph of this Confirmation. 


          “Valuation Completion Date” has the meaning
set forth in the Pricing Supplement. 


          “Valuation Number” means (i) the Purchase
Price divided by (ii) the
arithmetic average of the 10b-18 VWAPs for all of the Trading Days in the
Valuation Period minus the
Discount, as determined by the Calculation Agent in its sole judgment; provided that if the result of the
calculation in clause (ii) is equal to or less than the Floor Price, then the
Valuation Number shall be the Purchase Price divided
by the Floor Price. For the avoidance of doubt, if the Discount is a
negative number, the difference in clause (ii) of the immediately preceding
sentence shall be equal to the arithmetic average of the 10b-18 VWAPs for all
of the Trading Days in the Valuation Period plus
the absolute value of the Discount. 


          “Valuation Period” means the period of
consecutive Trading Days commencing on and including the first Trading Day
following the Trade Date and ending on and including the Valuation Completion
Date. 


ARTICLE 2

Purchase of the Stock


          Section
2.01. Purchase of the Stock. Subject
to the terms and conditions of this Confirmation, the Purchaser agrees to
purchase from the Seller, and the Seller agrees to sell to the Purchaser, on
September 7, 2012 or on such other Business Day as the Purchaser and the Seller
shall otherwise agree (the “Trade Date”),
a number of shares (the “Number of Shares”)
of the Purchaser’s common stock, par value $0.25 per share (“Common Stock”), for a purchase price equal
to $35,000,000 (the “Purchase Price”).
The Number of Shares purchased by the Purchaser hereunder shall be determined
in accordance with the terms of this Confirmation. 


          Section
2.02. Delivery and Payments. On
the second Business Day immediately following the Trade Date (such day, the “Initial Settlement Date”), the Seller shall
deliver the Initial Number of Shares to the Purchaser, following payment by the
Purchaser on the Initial Payment Date of (i) an amount equal to the Purchase
Price to the Seller and (ii) the Contract Fee to J.P. Morgan Securities LLC; provided that if the Seller is unable to
borrow or otherwise acquire a number of shares of Common Stock equal to the
Initial Number of Shares for delivery to the Purchaser on the Initial
Settlement Date, the Initial Number of Shares shall be reduced to such number
of shares of Common Stock as the Seller is able to borrow or otherwise acquire
and any amounts payable by the Purchaser pursuant to this Article 2 shall be
reduced correspondingly. Such delivery and payment shall be effected in
accordance with the Seller’s customary procedures. 


          Section
2.03. Conditions to Seller’s Obligations. The
Seller’s obligation to deliver the Initial Number of Shares to the Purchaser on
the Initial Settlement Date is subject to the condition that the
representations and warranties made by the Purchaser in the Agreement shall
be true and correct as of the date hereof and the Initial Settlement Date. 


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ARTICLE 3

Subsequent Payments or Share Deliveries 


          Section
3.01. Subsequent Payments or Share
Deliveries. (a) (i) If the Settlement Number is greater than zero,
the Seller shall deliver to the Purchaser a number of shares of Common Stock
equal to the Settlement Number on the Settlement Date in accordance with the
Seller’s customary procedures; and 


	
  

 	
  

 
	
  

 	
                (ii)     if
 the Settlement Number is less than zero, the Purchaser shall make a payment
 of cash or delivery of shares of Common Stock to the Seller in respect of the
 absolute value of the Settlement Number, as provided in this Section 3.01. 

 



          (b)     Subject
to Section 3.01(c), payment of the absolute value of the Settlement Number by
the Purchaser to the Seller shall be in cash or validly issued shares of Common
Stock (“Settlement Shares”), and
if in shares of Common Stock, then in shares to be sold in a private placement
(“Private Placement Shares”) or
registered shares (“Registered Shares”),
as the Purchaser shall elect in its sole discretion, which binding election
shall be made by written notice to the Seller no later than the close of
business on the second Business Day following the Valuation Completion Date; provided that by making an election to
deliver Settlement Shares pursuant to this Section 3.01(b), the Purchaser shall
be deemed to make the representations and warranties in Section 5.01 as if made
on the date of the Purchaser’s election; and provided
further that if the Purchaser fails to make such election by such
date, the Purchaser shall be deemed to have elected settlement in cash. 


            (c)          (i)     Any
election by the Purchaser to deliver the absolute value of the Settlement
Number in Settlement Shares pursuant to clause (b) of this Section 3.01 shall
not be valid, and settlement in cash shall apply, if the representations and
warranties made by the Purchaser to the Seller in Section 5.01 are not true and
correct in all material respects as of the date the Purchaser makes such
election. 


	
  

 	
  

 
	
  

 	
                (ii)     Notwithstanding
 any election by the Purchaser to make payment of the absolute value of the
 Settlement Number in Settlement Shares, at any time prior to the time the
 Seller (or any affiliate of the Seller) has contracted to resell all or any
 portion of such Settlement Shares, the Purchaser may elect to deliver in lieu
 of such Settlement Shares an amount in cash equal to the absolute value of
 the Settlement Number with respect to any Settlement Shares not yet
 contracted to be sold, in which case the provisions of Section 3.01(d) shall
 apply with respect to such amount; provided
 that any such election by the Purchaser pursuant to this clause (ii) shall
 not be valid and settlement in Settlement Shares shall continue to apply if
 the representations and warranties made by the Purchaser to the Seller in
 Section 5.01(a) are not true and correct in all material respects as of the
 date the Purchaser makes such election. 

 
	
  

 	
  

 
	
  

 	
                (iii)     If
 the Purchaser elects to make payment of the absolute value of the Settlement
 Number (A) in Private Placement Shares and fails to comply with the
 requirements set forth in Section 3.01(e) or Annex A hereto or takes any
 action that would make unavailable either (1) the exemption set forth in
 Section 4(2) of the Securities Act for the sale of any Private Placement
 Shares by the Purchaser to the Seller or (2) an exemption from the
 registration requirements of the Securities Act reasonably acceptable to the
 Seller for resales of Private Placement Shares by the Seller, or (B) in
 Registered Shares and fails to comply with the requirements set forth in
 Section 3.01(f) or Annex B hereto; then in the case of either (A) or (B), the
 Purchaser shall deliver in lieu of any Private Placement Shares or Registered
 Shares an amount in cash equal to the absolute value of the Settlement Number
 with respect to any Settlement Shares not yet sold, in which case the provisions
 of Section 3.01(d) shall apply with respect to such amount. 

 



          (d)          (i)     If
the Purchaser elects to pay the absolute value of the Settlement Number in
cash, if settlement in cash is otherwise applicable in accordance with this Section
3.01, or if the Purchaser elects to make payment of the absolute value of the
Settlement Number in Private Placement Shares pursuant to Section 3.01(e), then
the Calculation Agent shall determine an amount in cash (the “Cash Settlement Amount”) equal to (i) the
Settlement Purchase Amount plus
(ii) the Cash Settlement Fee. 


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                (ii)     If
 cash settlement is applicable, payment of the Cash Settlement Amount shall be
 made by wire transfer of immediately available U.S. dollar funds on the first
 Business Day immediately following the date of notification by the Seller to
 the Purchaser of the Cash Settlement Amount or such later Business Day as
 determined by the Seller in its sole discretion. 

 



          (e)          If
the Purchaser elects to make payment of the absolute value of the Settlement
Number in Private Placement Shares, then on the Settlement Date, the Purchaser
shall deliver to the Seller a number of Settlement Shares equal to (A) the Cash
Settlement Amount divided by (B)
the Private Placement Price (determined by the Calculation Agent in accordance
with the Private Placement Procedures contained in Annex A hereto). 


          (f)          If
the Purchaser elects to make payment of the absolute value of the Settlement
Number in Registered Shares, then the Purchaser shall deliver to the Seller a
number of Settlement Shares equal to (A) the absolute value of the Settlement
Number plus (B) an additional
number of Settlement Shares to take into account the Registered Shares Fee on
the absolute value of the Settlement Number. Such Settlement Shares shall be
delivered in such numbers and on such dates on or following the Valuation
Completion Date as are specified by the Seller in accordance with the
Registration Procedures contained in Annex B hereto. 


          Section
3.02. Private Placement Procedures and
Registration Procedures. If the Purchaser elects to deliver Private
Placement Shares pursuant to Section 3.01(b) or elects to deliver Alternative
Termination Delivery Units pursuant to Section 7.02, the Private Placement
Procedures contained in Annex A hereto shall apply, and if the Purchaser elects
to deliver Registered Shares pursuant to Section 3.01(b), the Registration
Procedures contained in Annex B hereto shall apply. 


          Section
3.03. Continuing Obligation to Deliver
Shares. (a) If at any time, as a result of provisions limiting
deliveries of shares of Common Stock to the number of Maximum Delivery Shares,
the Purchaser fails to deliver to the Seller any shares of Common Stock, the
Purchaser shall, to the extent that the Purchaser has at such time authorized
but unissued shares of Common Stock not reserved for other purposes, promptly
notify the Seller thereof and deliver to the Seller a number of shares of
Common Stock not previously delivered as a result of such provisions. 


          (b)       The
Purchaser agrees to use its best efforts to cause the number of authorized but
unissued shares of Common Stock to be increased, if necessary, to an amount sufficient
to permit the Purchaser to fulfill its obligations under this Section 3.03. 


ARTICLE 4

Market Transactions


          Section
4.01. Transactions by the Seller. (a)
The parties agree and acknowledge that: 


	
  

 	
  

 
	
  

 	
                (i)     During
 any Cash Settlement Purchase Period and any Seller Termination Share Purchase
 Period, the Seller (or its agent or affiliate) may purchase shares of Common
 Stock in connection with this Confirmation. The timing of such purchases by
 the Seller, the price paid per share of Common Stock pursuant to such
 purchases and the manner in which such purchases are made, including without
 limitation whether such purchases are made on any securities exchange or
 privately, shall be within the sole judgment of the Seller; provided that the Seller shall use good
 faith efforts to make all purchases of Common Stock in a manner that would
 comply with the limitations set forth in clauses (b)(2), (b)(3), (b)(4) and
 (c) of Rule 10b-18 (but without regard to clause (a)(13)(iv) of Rule 10b-18)
 as if such rule were applicable to such purchases. 

 
	
  

 	
  

 
	
  

 	
                (ii)     During
 the Valuation Period, the Seller (or its agent or affiliate) may effect
 transactions in shares of Common Stock in connection with this Confirmation.
 The timing of such transactions by the Seller, the price paid or received per
 share of Common Stock pursuant to such transactions and the manner in which
 such transactions are made, including without limitation whether such
 transactions are made on any securities exchange or privately, shall be
 within the sole judgment of the Seller. 

 


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                (iii)     The
 Purchaser shall, at least one day prior to the first day of the Valuation
 Period, any Cash Settlement Purchase Period and any Seller Termination Share
 Purchase Period, notify the Seller of the total number of shares of Common
 Stock purchased in Rule 10b-18 purchases of blocks pursuant to the
 once-a-week block exception set forth in Rule 10b-18(b)(4) by or for the
 Purchaser or any of its Affiliated Purchasers during each of the four
 calendar weeks preceding such day and during the calendar week in which such
 day occurs (“Rule 10b-18 purchase”
 and “blocks” each being used as
 defined in Rule 10b-18), which notice shall be substantially in the form set
 forth as Exhibit A hereto.

 



          (b)       The
Purchaser acknowledges and agrees that (i) all transactions effected pursuant
to Section 4.01 hereunder shall be made in the Seller’s sole judgment and for
the Seller’s own account and (ii) the Purchaser does not have, and shall not
attempt to exercise, any influence over how, when or whether to effect such
transactions, including, without limitation, the price paid or received per
share of Common Stock pursuant to such transactions whether such transactions
are made on any securities exchange or privately. It is the intent of the
Seller and the Purchaser that this Transaction comply with the requirements of
Rule 10b5-1(c) of the Exchange Act and that this Confirmation shall be
interpreted to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) and the Seller
shall take no action that results in the Transaction not so complying with such
requirements. 


          (c)       Notwithstanding
anything to the contrary in this Confirmation, the Purchaser acknowledges and
agrees that, on any day, the Seller shall not be obligated to deliver or
receive any shares of Common Stock to or from the Purchaser and the Purchaser
shall not be entitled to receive any shares of Common Stock from the Seller on
such day, to the extent (but only to the extent) that after such transactions
the Seller’s ultimate parent entity would directly or indirectly beneficially
own (as such term is defined for purposes of Section 13(d) of the Exchange Act)
at any time on such day in excess of 8.0% of the outstanding shares of Common
Stock. Any purported receipt or delivery of shares of Common Stock shall be
void and have no effect to the extent (but only to the extent) that after any
receipt or delivery of such shares of Common Stock the Seller’s ultimate parent
entity would directly or indirectly so beneficially own in excess of 8.0% of
the outstanding shares of Common Stock. If, on any day, any delivery or receipt
of shares of Common Stock by the Seller is not effected, in whole or in part,
as a result of this provision, the Seller’s and Purchaser’s respective
obligations to make or accept such receipt or delivery shall not be
extinguished and such receipt or delivery shall be effected over time as
promptly as the Seller determines, in the reasonable determination of the
Seller, that after such receipt or delivery its ultimate parent entity would
not directly or indirectly beneficially own in excess of 8.0% of the
outstanding shares of Common Stock. 


          Section
4.02. Adjustment of Transaction for
Securities Laws. (a) Notwithstanding anything to the contrary in
Section 4.01(a), if, based on the advice of counsel, the Seller reasonably
determines that on any Trading Day, the Seller’s trading activity in order to
manage its economic hedge in respect of the Transaction would not be advisable
in respect of applicable securities laws, then the Seller may extend the
Expiration Date, modify the Valuation Period or otherwise adjust the terms of
the Transaction in its good faith reasonable discretion to ensure Seller’s
compliance with such laws and to preserve the fair value of the Transaction to
the Seller. The Seller shall notify the Purchaser of the exercise of the
Seller’s rights pursuant to this Section 4.02(a) upon such exercise. 


          (b)       The
Purchaser agrees that, during the Contract Period, neither the Purchaser nor
any of its affiliates or agents shall make any distribution (as defined in
Regulation M) of Common Stock, or any security for which the Common Stock is a
reference security (as defined in Regulation M) or take any other action that
would, in the view of the Seller, preclude purchases by the Seller of the
Common Stock or cause the Seller to violate any law, rule or regulation with
respect to such purchases. 


          Section
4.03. Purchases of Common Stock by the
Purchaser. Without the prior written consent of the Seller, the
Purchaser shall not, and shall cause its affiliates and affiliated purchasers
(each as defined in Rule 10b-18) not to, directly or indirectly (including,
without limitation, by means of a derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any shares of Common Stock (or
equivalent interest, including a unit of beneficial interest in a trust or
limited partnership or a depository share) or any security convertible into or
exchangeable for shares of Common Stock during the Contract Period; provided, however, that the foregoing
shall not prohibit (i) the Purchaser’s ability (or the ability of any “agent
independent of the issuer” (as defined in Rule 10b-18)), pursuant to any plan
(as defined in Rule 10b-18) of the Purchaser, to re-acquire shares of Common
Stock in connection with any equity transaction related to such plan or to
limit the Purchaser’s ability to withhold shares of Common Stock to cover tax
liabilities associated with such equity transactions, so long as any
re-acquisition, withholding or repurchase does not constitute a “Rule 10b-18
purchase” (as defined in Rule 10b-18) or (ii) delivery of shares of Common
Stock of or to the Purchaser’s affiliates or affiliated purchasers pursuant to
the terms of convertible securities, warrants, options or other similar
securities outstanding as of the Trade Date. 


8





ARTICLE 5 

Representations,
Warranties and Agreements


          Section
5.01. Repeated Representations, Warranties
and Agreements of the Purchaser. The Purchaser represents and
warrants to, and agrees with, the Seller, on the date hereof and on any date
pursuant to which the Purchaser makes an election to deliver Settlement Shares
pursuant to Section 3.01, to pay cash in lieu of Settlement Shares pursuant to
Section 3.01(c)(ii) or to receive or deliver Alternative Termination Delivery
Units pursuant to Section 7.03, that: 


          (a)     Disclosure; Compliance with Laws. The
reports and other documents filed by the Purchaser with the SEC pursuant to the
Exchange Act when considered as a whole (with the more recent such reports and
documents deemed to amend inconsistent statements contained in any earlier such
reports and documents), do not contain any untrue statement of a material fact
or any omission of a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances in which they
were made, not misleading. The Purchaser is not in possession of any material
nonpublic information regarding the Purchaser or the Common Stock. 


          (b)     Rule 10b5-1. The Purchaser acknowledges
that (i) the Purchaser does not have, and shall not attempt to exercise, any
influence over how, when or whether to effect purchases of Common Stock by the
Seller (or its agent or affiliate) in connection with this Confirmation and
(ii) the Purchaser is entering into the Agreement and this Confirmation in good
faith and not as part of a plan or scheme to evade compliance with federal
securities laws including, without limitation, Rule 10b-5 promulgated under the
Exchange Act. The Purchaser also acknowledges and agrees that any amendment,
modification, waiver or termination of this Confirmation must be effected in
accordance with the requirements for the amendment or termination of a “plan”
as defined in Rule 10b5-1(c) under the Exchange Act. Without limiting the
generality of the foregoing, any such amendment, modification, waiver or
termination shall be made in good faith and not as part of a plan or scheme to
evade the prohibitions of Rule 10b-5 under the Exchange Act, and no amendment,
modification or waiver shall be made at any time at which the Purchaser or any
officer or director of the Purchaser is aware of any material nonpublic
information regarding the Purchaser or the Common Stock. 


          (c)     Nature of Shares Delivered. Any shares of
Common Stock or Alternative Termination Delivery Units delivered to the Seller
pursuant to this Confirmation, when delivered, shall have been duly authorized
and shall be duly and validly issued, fully paid and nonassessable and free of
preemptive or similar rights, and such delivery shall pass title thereto free
and clear of any liens or encumbrances. 


          (d)     No Manipulation. The Purchaser is not
entering into this Confirmation to create actual or apparent trading activity
in the Common Stock (or any security convertible into or exchangeable for
Common Stock) or to manipulate the price of the Common Stock (or any security
convertible into or exchangeable for Common Stock). 


          (e)     Regulation M. The Purchaser is not engaged
in a distribution, as such term is used in Regulation M, that would preclude
purchases by the Purchaser or the Seller of the Common Stock or cause the
Seller to violate any law, rule or regulation with respect to such purchases. 


          (f)     Board Authorization. The Purchaser is
entering into this Transaction in connection with its share repurchase program,
which was approved by its board of directors and publicly disclosed, solely for
the purposes stated in such board resolution and public disclosure. There is no
internal policy of the Purchaser, whether written or oral, that would prohibit
the Purchaser from entering into any aspect of this Transaction, including, but
not limited to, the purchases of shares of Common Stock to be made pursuant
hereto. 


9





          (g)     Due Authorization and Good Standing. The
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. This Confirmation has been
duly authorized, executed and delivered by the Purchaser and (assuming due
authorization, execution and delivery thereof by the Seller) constitutes a
valid and legally binding obligation of the Purchaser. The Purchaser has all
corporate power to enter into this Confirmation and to consummate the
transactions contemplated hereby and to purchase the Common Stock and deliver
any Settlement Shares in accordance with the terms hereof. 


          (h)     Certain Transactions. There has not been
any public announcement (as defined in Rule 165(f) under the Securities Act) of
any merger, acquisition, or similar transaction involving a recapitalization
relating to the Purchaser that would fall within the scope of Rule
10b-18(a)(13)(iv), where such announcement was within the Purchaser’s control. 


          Section
5.02. Initial Representations, Warranties
and Agreements of the Purchaser. The Purchaser represents and
warrants to, and agrees with the Seller, as of the date hereof, that: 


          (a)     Solvency. The assets of the Purchaser at
their fair valuation exceed the liabilities of the Purchaser, including
contingent liabilities; the capital of the Purchaser is adequate to conduct the
business of the Purchaser and the Purchaser has the ability to pay its debts
and obligations as such debts mature and does not intend to, or does not
believe that it will, incur debt beyond its ability to pay as such debts
mature. 


          (b)     Required Filings. The Purchaser has made,
and will use its best efforts to make, all filings required to be made by it
with the SEC, any securities exchange or any other regulatory body with respect
to the Transaction contemplated hereby. 


          (c)     No Conflict. The execution and delivery by
the Purchaser of, and the performance by the Purchaser of its obligations
under, this Confirmation and the consummation of the transactions herein
contemplated do not conflict with or violate (i) any provision of the articles
of incorporation, by-laws or other constitutive documents of the Purchaser,
(ii) any statute or order, rule, regulation or judgment of any court or
governmental agency or body having jurisdiction over the Purchaser or any of
its subsidiaries or any of their respective assets or (iii) any contractual
restriction binding on or affecting the Purchaser or any of its subsidiaries or
any of its assets. 


          (d)     Consents. All governmental and other
consents that are required to have been obtained by the Purchaser with respect
to performance, execution and delivery of this Confirmation have been obtained
and are in full force and effect and all conditions of any such consents have
been complied with. 


          (e)     Investment Company Act. The Purchaser is
not and, after giving effect to the transactions contemplated in this
Confirmation, will not be required to register as an “investment company” as
such term is defined in the Investment Company Act of 1940, as amended. 


          (f)     Commodity Exchange Act. The Purchaser is an
“eligible contract participant”, as such term is defined in Section 1a(12) of
the Commodity Exchange Act, as amended. 


          (g)     Suitability. The Purchaser (A) is capable
of evaluating investment risks independently, both in general and with regard
to all transactions and investment strategies involving a security or
securities; (B) will exercise independent judgment in evaluating the
recommendations of any broker-dealer or its associated persons, unless it has
otherwise notified the broker-dealer in writing; and (C) has total assets of at
least $50 million as of the date hereof.


          Section
5.03. Additional Representations, Warranties
and Agreements. The Purchaser and the Seller represent and warrant
to, and agree with, each other that: 


          (a)     Agency. Each party agrees and acknowledges
that (i) J.P. Morgan Securities LLC, an affiliate of the Seller (“JPMS”), has acted solely as agent and not
as principal with respect to this Transaction and (ii) JPMS has no obligation
or liability, by way of guaranty, endorsement or otherwise, in any manner in
respect of this Transaction (including, if applicable, in respect of the
settlement thereof). Each party agrees it will look solely to the other party
(or any guarantor in respect thereof) for performance of such other party’s
obligations under this Transaction. JPMS is authorized to act as agent for the
Seller. 


10





          (b)     Non-Reliance. Each party has entered into
this Transaction solely in reliance on its own judgment. Neither party has any
fiduciary obligation to the other party relating to this Transaction. In
addition, neither party has held itself out as advising, or has held out any of
its employees or agents as having the authority to advise, the other party as
to whether or not the other party should enter into this Transaction, any
subsequent actions relating to this Transaction or any other matters relating
to this Transaction. Neither party shall have any responsibility or liability
whatsoever in respect of any advice of this nature given, or views expressed,
by it or any such persons to the other party relating to this Transaction,
whether or not such advice is given or such views are expressed at the request
of the other party. The Purchaser has conducted its own analysis of the legal,
accounting, tax and other implications of this Transaction and consulted such
advisors, accountants and counsel as it has deemed necessary. 


          Section
5.04. Representations and Warranties of the
Seller. The Seller represents and warrants to the Purchaser that: 


          (a)     Due Authorization. This Confirmation has
been duly authorized, executed and delivered by the Seller and (assuming due
authorization, execution and delivery thereof by the Purchaser) constitutes a
valid and legally binding obligation of the Seller. The Seller has all
corporate power to enter into this Confirmation and to consummate the
transactions contemplated hereby and to deliver the Common Stock in accordance
with the terms hereof. 


          (b)     Right to Transfer. The Seller will, at the
Initial Settlement Date and on any other day on which it is required to deliver
shares of Common Stock to the Purchaser hereunder, have the free and
unqualified right to transfer the Number of Shares of Common Stock to be
delivered by the Seller pursuant to Sections 2.01 and 3.01 hereof, free and
clear of any security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind. 


          (c)     Commodity Exchange Act. The Seller is an
“eligible contract participant”, as such term is defined in Section 1a(12) of
the Commodity Exchange Act, as amended.


ARTICLE 6

Additional Covenants


          Section
6.01. Purchaser’s Further Assurances. The
Purchaser hereby agrees with the Seller that the Purchaser shall cooperate with
the Seller, and execute and deliver, or use its best efforts to cause to be
executed and delivered, all such other instruments, and to obtain all consents,
approvals or authorizations of any person, and take all such other actions as
the Seller may reasonably request from time to time, consistent with the terms
of this Confirmation, in order to effectuate the purposes of this Confirmation
and the Transaction contemplated hereby. 


          Section
6.02. Purchaser’s Hedging Transactions. The
Purchaser hereby agrees with the Seller that the Purchaser shall not, during
the Contract Period, enter into or alter any corresponding or hedging transaction
or position with respect to the Common Stock (including, without limitation,
with respect to any securities convertible or exchangeable into the Common
Stock) and agrees not to alter or deviate from the terms of this Confirmation. 


          Section
6.03. No Communications. The
Purchaser hereby agrees with the Seller that the Purchaser shall not, directly
or indirectly, communicate any information relating to the Common Stock or this
Transaction (including any notices required by Section 6.05) to any employee of
the Seller or J.P. Morgan Securities LLC, other than as set forth in the
Communications Procedures attached as Annex C hereto. 


          Section
6.04. Maximum Deliverable Number of Shares
of Common Stock. (a)Notwithstanding
any other provision of this Confirmation, the Purchaser shall not be required
to deliver Settlement Shares, or shares of Common Stock or other securities
comprising the aggregate Alternative Termination Delivery Units, in excess of
the number of Maximum Delivery Shares, in each case except to the extent that
the Purchaser has available at such time authorized but unissued shares of such
Common Stock or other securities not expressly reserved for any other uses
(including, without limitation, shares of Common Stock reserved for issuance
upon the exercise of options or convertible debt). The Purchaser shall not
permit the sum of (i) the number of Maximum Delivery Shares plus (ii) the aggregate number of shares
expressly reserved for any such other uses, in each case whether expressed as
caps or as numbers of shares reserved or otherwise, to exceed at any time the
number of authorized but unissued shares of Common Stock. 


11





          (b)     Notwithstanding
any other provision of this Confirmation, the Seller shall not be required to
deliver Settlement Shares, or shares of Common Stock or other securities
comprising the aggregate Alternative Termination Delivery Units, in excess of
the number of Capped Delivery Shares. 


          Section
6.05. Notice of Certain Transactions. If
at any time during the Contract Period, the Purchaser makes, or expects to be
made, or has made, any public announcement (as defined in Rule 165(f) under the
Securities Act) of any merger, acquisition, or similar transaction involving a
recapitalization relating to the Purchaser (other than any such transaction in
which the consideration consists solely of cash and there is no valuation
period, or as to which the completion of such transaction or the completion of
the vote by target shareholders has occurred), then the Purchaser shall (i)
notify the Seller prior to the opening of trading in the Common Stock on any
day on which the Purchaser makes, or expects to be made, or has made any such
public announcement, (ii) notify the Seller promptly following any such
announcement (or, if later, prior to the opening of trading in the Common Stock
on the first day of any Seller Termination Share Payment Period) that such
announcement has been made and (iii) promptly deliver to the Seller following
the making of any such announcement (or, if later, prior to the opening of
trading in the Common Stock on the first day of any Seller Termination Share
Payment Period) a certificate indicating (A) the Purchaser’s average daily Rule
10b-18 purchases (as defined in Rule 10b-18) during the three full calendar
months preceding the date of such announcement and (B) the Purchaser’s block
purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of
Rule 10b-18 during the three full calendar months preceding the date of such
announcement. In addition, the Purchaser shall promptly notify the Seller of
the earlier to occur of the completion of such transaction and the completion
of the vote by target shareholders. Accordingly, the Purchaser acknowledges
that its actions in relation to any such announcement or transaction must
comply with the standards set forth in Section 6.03. 


ARTICLE 7

Termination


          Section
7.01. Additional Termination Events. (a)
An Additional Termination Event shall occur in respect of which the Purchaser
is the sole Affected Party and this Transaction is the sole Affected
Transaction if, on any day, the Seller determines, in its sole reasonable
judgment, that it is unable to establish, re-establish or maintain any hedging
transactions reasonably necessary in the normal course of such party’s business
of hedging the price and market risk of entering into and performing under this
Transaction, due to market illiquidity, illegality or lack of availability of
hedging transaction market participants. 


          (b)     An
Additional Termination Event shall occur in respect of which the Purchaser is
the sole Affected Party and this Transaction is the sole Affected Transaction
if (i) a Share De-listing Event occurs; (ii) a Merger Event occurs; (iii) a
Nationalization occurs, (iv) a Distribution Termination Event occurs or (v) an
event described in paragraph III of Annex C occurs. 


          (c)     A
“Share De-listing Event” means
that at any time during the Contract Period, the Common Stock ceases to be
listed, traded or publicly quoted on the Exchange for any reason (other than a
Merger Event, a “De-Listing”) and
is not immediately re-listed, traded or quoted as of the date of such
de-listing, on another U.S. national securities exchange or a U.S. automated
interdealer quotation system (a “Successor
Exchange”); provided
that it shall not constitute an Additional Termination Event if the Common
Stock is immediately re-listed on a Successor Exchange upon its De-Listing from
the Exchange, and the Successor Exchange shall be deemed to be the Exchange for
all purposes. In addition, in such event, the Seller shall make any
commercially reasonable adjustments to the terms of the Transaction that the
Seller determines appropriate in its reasonable good faith judgment to preserve
the fair value of the Transaction to the Seller. 


12





          (d)     A
“Merger Event” means the public
announcement, including any public announcement as defined in Rule 165(f) of
the Securities Act (by the Purchaser or otherwise) at any time during the
Contract Period of any (i) planned recapitalization, reclassification or change
of the Common Stock that will, if consummated, result in a transfer of more
than 20% of the outstanding shares of Common Stock, (ii) planned consolidation,
amalgamation, merger or similar transaction of the Purchaser with or into
another entity (other than a consolidation, amalgamation or merger in which the
Purchaser will be the continuing entity and which does not result in any such
recapitalization, reclassification or change of more than 20% of such shares
outstanding), (iii) other takeover offer for the shares of Common Stock that is
aimed at resulting in a transfer of more than 20% of such shares of Common
Stock (other than such shares owned or controlled by the offeror), (iv)
intention to solicit or enter into, or to explore strategic alternatives or
other similar undertaking that may include, any of the foregoing or (v)
irrevocable commitment to any of the foregoing. 


          (e)     A
“Nationalization” means that all
or substantially all of the outstanding shares of Common Stock or assets of the
Purchaser are nationalized, expropriated or are otherwise required to be
transferred to any governmental agency, authority or entity. 


          (f)     A
“Distribution Termination Event”
means a declaration by the Purchaser of any cash dividend or distribution on
shares of Common Stock, other than an Extraordinary Cash Dividend (a “Cash Distribution”), that has a record date
during the Contract Period, the amount of which, together with all prior
declared Cash Distributions that have a record date during the same Reference
Period of the Purchaser, exceeds the Cash Distribution Amount specified in the
Pricing Supplement for such Reference Period, and in respect of which the
Calculation Agent has not made an adjustment pursuant to Section 8.01(b). 


          Section
7.02. Consequences of Additional Termination
Events. (a) In the event of the occurrence or effective designation
of an Early Termination Date under the Agreement, cash settlement, as set forth
in Section 7.02(b), shall apply unless (i) the Purchaser elects (which election
shall be binding), in lieu of payment or receipt, as applicable, of the amount
payable in respect of this Transaction pursuant to Section 6(d)(ii) of the
Agreement (the “Termination Amount”),
to deliver or to receive Alternative Termination Delivery Units pursuant to
Section 7.03, and (ii) notifies the Seller of such election by delivery of
written notice to the Seller on the Business Day immediately following the
Purchaser’s receipt of a notice (as required by Section 6(d) of the Agreement
following the designation of an Early Termination Date in respect of this
Transaction) setting forth the amounts payable by the Purchaser or by the
Seller with respect to such Early Termination Date (the date of such delivery,
the “Default Notice Day”); provided that the Purchaser shall not have
the right to elect the delivery or receipt of the Alternative Termination
Delivery Units pursuant to Section 7.03 if: 


	
  

 	
  

 
	
  

 	
                (i)     the
 representations and warranties made by the Purchaser to the Seller in Section
 5.01 are not true and correct as of the date the Purchaser makes such
 election, as if made on such date, or 

 
	
  

 	
  

 
	
  

 	
                (ii)     in
 the event that the Termination Amount is payable by the Purchaser to the
 Seller, (A) the Purchaser has taken any action that would make unavailable
 (x) the exemption set forth in Section 4(2) of the Securities Act, for the
 sale of any Alternative Termination Delivery Units by the Purchaser to the
 Seller or (y) an exemption from the registration requirements of the
 Securities Act reasonably acceptable to the Seller for resales of Alternative
 Termination Delivery Units by the Seller, and (B) such Early Termination Date
 is in respect of an Event of Default which is within Purchaser’s control
 (including, without limitation, failure to execute a Private Placement
 Agreement or otherwise comply with the requirements applicable to Purchaser
 set forth in Annex A hereto). 

 



           For
the avoidance of doubt, upon the Purchaser’s making an election to deliver
Alternative Termination Delivery Units pursuant to this Section 7.02, the
Purchaser shall be deemed to make the representations and warranties in Section
5.01 hereof as if made on the date of the Purchaser’s election. Notwithstanding
the foregoing, at any time prior to the time the Seller (or any affiliate of
the Seller) has contracted to resell the property to be delivered upon
alternative termination settlement, the Purchaser may deliver in lieu of such
property an amount in cash equal to the Termination Amount in the manner set
forth in Section 6(d) of the Agreement. 


          (b)     If
cash settlement applies in respect of an Early Termination Date, Section 6 of
the Agreement shall apply. 


13





          Section
7.03. Alternative Termination Settlement. (a)
Subject to Section 7.02, if the Termination Amount shall be payable by the
Purchaser to the Seller and the Purchaser elects to deliver the Alternative Termination
Delivery Units to the Seller, the Purchaser shall, as soon as directed by the
Seller after the Default Notice Day (such date, the “Termination Settlement Date”), deliver to the Seller a number
of Alternative Termination Delivery Units equal to the quotient of (A) the
Termination Amount divided by (B)
the Termination Price. 


          (b)     Subject
to Section 7.02, if the Termination Amount shall be payable by the Seller to
the Purchaser and the Purchaser elects to receive the Alternative Termination
Delivery Units from the Seller, (i) the Seller shall, beginning on the first
Trading Day following the Default Notice Day and ending when the Seller shall
have satisfied its obligations under this clause (the “Seller Termination Share Purchase Period”),
purchase (subject to the provisions of Section 4.01 and Section 4.02 hereof) a
number of Alternative Termination Delivery Units equal to the quotient of (A)
the Termination Amount divided by
(B) the Termination Price; and (ii) the Seller shall deliver such Alternative
Termination Delivery Units to the Purchaser on the settlement dates relating to
such purchases. 


          Section
7.04. Notice of Default. If an
Event of Default occurs in respect of the Purchaser, the Purchaser will,
promptly upon becoming aware of it, notify the Seller specifying the nature of
such Event of Default. 


ARTICLE 8

Adjustments


          Section
8.01. Cash Dividends. (a) If the
Purchaser declares any Extraordinary Cash Dividend that has a record date
during the Contract Period, then prior to or on the date on which such
Extraordinary Cash Dividend is paid by the Purchaser to holders of record, the
Purchaser shall pay to the Seller an amount in cash equal to the product of (i)
the amount of such Extraordinary Cash Dividend and (ii) the theoretical short
delta number of shares as of the opening of business on the related ex-dividend
date, as determined by the Calculation Agent, required for the Seller to hedge
its exposure to the Transaction. 


          (b)     If
the Purchaser declares any cash dividend on shares of Common Stock that is not
an Extraordinary Cash Dividend (an “Ordinary
Cash Dividend”) and that has a record date during the Contract
Period, and the amount of such Ordinary Cash Dividend, together with all prior
declared Ordinary Cash Dividends that have a record date during the same
Reference Period, exceeds the Cash Distribution Amount specified in the Pricing
Supplement for such Reference Period, the Calculation Agent may make
corresponding adjustments with respect to the Floor Price as the Calculation
Agent determines appropriate to preserve the fair value of the Transaction to
the Seller, and shall determine the effective date of such adjustment.


          Section
8.02. Other Dilution Adjustments. If
(x) any corporate event occurs having a dilutive or concentrative effect on the
theoretical value of the Common Stock (other than any cash dividend but
including, without limitation, a spin-off, a stock split, stock or other
dividend or distribution, reorganization, rights offering or recapitalization),
or (y) as a result of the definition of Trading Day (whether because of a
suspension of transactions pursuant to Section 4.02 or otherwise), any day that
would otherwise be a Trading Day during the Contract Period is not a Trading
Day or on such Trading Day, pursuant to Section 4.02, the Seller effects
transactions with respect to shares of Common Stock at a volume lower than
originally anticipated with respect to this Transaction, or (z) as a result of
market conditions, the Seller incurs additional costs in connection with
maintaining its hedge position with respect to this Transaction resulting from
the insufficient availability of stock lenders willing and able to lend shares
of Common Stock with a borrow cost not significantly greater than the cost as
of the date hereof and otherwise on terms consistent with those as of the date
hereof, then in any such case, the Calculation Agent shall make corresponding
adjustments with respect to any variable relevant to the terms of the
Transaction, as the Calculation Agent determines appropriate in its reasonable
good faith judgment to preserve the fair value of the Transaction to the
Seller, and shall determine the effective date of such adjustment. 


14





ARTICLE 9

Miscellaneous


          Section
9.01. Successors and Assigns. All
covenants and agreements in this Confirmation made by or on behalf of either of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not. 


          Section
9.02. Purchaser Indemnification. The
Purchaser (the “Indemnifying Party”)
agrees to indemnify and hold harmless the Seller and its officers, directors,
employees, affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any
and all losses, claims, damages and liabilities, joint or several
(collectively, “Obligations”),
resulting from a breach by Purchaser of this Confirmation or any claim,
litigation, investigation or proceeding relating thereto, and to reimburse,
within 30 days, upon written request, each such Indemnified Person for any
reasonable legal or other expenses incurred in connection with investigating,
preparation for, providing evidence for or defending any of the foregoing, provided, however, that the Indemnifying
Party shall not have any liability to any Indemnified Person to the extent that
such Obligations (i) are finally determined by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of such Indemnified Person (and in such case, such Indemnified Person shall
promptly return to the Indemnifying Party any amounts previously expended by
the Indemnifying Party hereunder) or (ii) are trading losses incurred by the Seller
as part of its purchases or sales of shares of Common Stock pursuant to this
Confirmation (unless the Purchaser has breached any agreement, term or covenant
herein). 


          Section
9.03. Assignment and Transfer. Notwithstanding
the Agreement, the Seller may assign any of its rights or duties hereunder to
any one or more of its affiliates without the prior written consent of the
Purchaser. Notwithstanding any other provision in this Confirmation to the
contrary requiring or allowing Seller to purchase, sell, receive or deliver any
shares of Common Stock or other securities to or from the Purchaser, Seller may
designate any of its affiliates to purchase, sell, receive or deliver such
shares of Common Stock or other securities and otherwise to perform the
Seller’s obligations in respect of this Transaction and any such designee may
assume such obligations. The Seller may assign the right to receive Settlement
Shares to any third party who may legally receive Settlement Shares. The Seller
shall be discharged of its obligations to the Purchaser only to the extent of
any such performance. For the avoidance of doubt, Seller hereby acknowledges
that notwithstanding any such designation hereunder, to the extent any of
Seller’s obligations in respect of this Transaction are not completed by its
designee, Seller shall be obligated to continue to perform or to cause any
other of its designees to perform in respect of such obligations. 


          Section
9.04. Calculation Agent. Whenever
the Calculation Agent is required to act or to exercise judgment in any way
with respect to this Transaction, it will do so in good faith and in a
commercially reasonable manner. 


          Section
9.05. Non-confidentiality. The
Seller and the Purchaser hereby acknowledge and agree that, subject to Section
6.03, each is authorized to disclose every aspect of this Confirmation and the
transactions contemplated hereby to any and all persons, without limitation of
any kind, and there are no express or implied agreements, arrangements or
understandings to the contrary. 


          Section
9.06. Unenforceability and Invalidity. To
the extent permitted by law, the unenforceability or invalidity of any
provision or provisions of this Confirmation shall not render any other
provision or provisions herein contained unenforceable or invalid. 


          Section
9.07. Securities Contract. The
parties hereto agree and acknowledge as of the date hereof that (i) the Seller
is a “financial institution” within the meaning of Section 101(22) of Title 11
of the United States Code (the “Bankruptcy
Code”) and (ii) this Confirmation is a “securities contract,” as
such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Sections 362(b)(6) and 555 of the Bankruptcy Code. 


          Section
9.08. No Collateral, Netting or Setoff. Notwithstanding
any provision of the Agreement, or any other agreement between the parties, to
the contrary, the obligations of the Purchaser hereunder are not secured by any
collateral. Obligations under this Transaction shall not be netted, recouped or
set off (including pursuant to Section 6 of the Agreement) against any other
obligations of the parties, whether arising under the Agreement, this
Confirmation, under any other agreement between the parties hereto, by
operation of law or otherwise, and no other obligations of the parties shall be
netted, recouped or set off (including pursuant to Section 6 of the Agreement)
against obligations under this Transaction, whether arising under the Agreement,
this Confirmation, under any other agreement between the parties hereto, by
operation of law or otherwise, and each party hereby waives any such right of
setoff, netting or recoupment. 


15





          Section
9.09. Equity Rights. The Seller
acknowledges and agrees that this Confirmation is not intended to convey to it
rights with respect to the Transaction that are senior to the claims of holders
of Common Stock in the event of the Purchaser’s bankruptcy. 


          Section
9.10. Notices. Unless otherwise specified
herein, any notice, the delivery of which is expressly provided for in this
Confirmation, may be made by telephone, to be confirmed in writing to the
address below. Changes to the information below must be made in writing. 


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 If to the
 Purchaser:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 MTS Systems
 Corporation

 
	
  

 	
  

 	
 14000
 Technology Drive

 
	
  

 	
  

 	
 Eden
 Prairie, MN 55344

 
	
  

 	
  

 	
 Attention:
 Tim Radermacher

 
	
  

 	
  

 	
 Title:
 Treasurer and Director of Tax

 
	
  

 	
  

 	
 Telephone
 No: (952) 937-4004

 
	
  

 	
  

 	
 Facsimile
 No: (952) 937-4515

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 If to the
 Seller:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 JPMorgan
 Chase Bank, National Association

 
	
  

 	
  

 	
 c/o J.P.
 Morgan Securities LLC

 
	
  

 	
  

 	
 EDG
 Marketing Support

 
	
  

 	
  

 	
 Email:
 EDG_OTC_HEDGING_MS@jpmorgan.com

 
	
  

 	
  

 	
 Fax:
 1-866-886-4506

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 With a copy
 to:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Sudheer
 Tegulapalle

 
	
  

 	
  

 	
 Executive
 Director

 
	
  

 	
  

 	
 383 Madison
 Avenue, Floor 05

 
	
  

 	
  

 	
 New York,
 NY, 10179, United States

 
	
  

 	
  

 	
 Telephone
 No: (212) 622-2100

 
	
  

 	
  

 	
 Facsimile
 No: (212) 622-0398

 
	
  

 	
  

 	
 Email:
 sudheer.r.tegulapalle@jpmorgan.com

 


16





          Please
confirm that the foregoing correctly sets forth the terms of our agreement by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us. 


Yours
sincerely, 


 


	
  

 	
  

 	
  

 
	
 J.P. MORGAN
 SECURITIES LLC, as agent for JPMorgan

 Chase Bank, National Association, London Branch

 	
  

 
	
  

 	
  

 	
  

 
	
 By:

 	
  



 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 






	
  

 	
  

 	
  

 
	
 Confirmed as
 of the date first

 	
  

 
	
 above
 written:

 	
  

 
	
  

 	
  

 	
  

 
	
 MTS SYSTEMS
 CORPORATION

 	
  

 
	
  

 	
  

 	
  

 
	
 By:

 	
  



 	
  

 
	
  

 	
 Name:

 	
  

 
	
  

 	
 Title:

 	
  

 


JPMorgan Chase Bank, National Association 

Organised under the laws of the United States as a National Banking
Association.

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746.

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority 







	
  

 	
  

 
	
  

 	
 

 


ANNEX A 


PRIVATE PLACEMENT PROCEDURES


	
  

 	
  

 	
  

 
	
  

 	
 I.

 	
 Introduction  

 



          MTS
Systems Corporation, a Minnesota corporation (the “Purchaser”) and J.P. Morgan Securities LLC, as agent for
JPMorgan Chase Bank, National Association, London Branch (the “Seller”) have agreed to these procedures
(the “Private Placement Procedures”)
in connection with entering into the Confirmation (the “Confirmation”) dated as of September 7,
2012 between JPMorgan and the Purchaser relating to the sale by JPMorgan to the
Purchaser of common stock, par value $0.25 per share, or security entitlements
in respect thereof (the “Common Stock”)
of the Purchaser. These Private Placement Procedures supplement, form part of,
and are subject to the Confirmation and all terms used and not otherwise
defined herein shall have the meanings assigned to them in the Confirmation. 


	
  

 	
  

 	
  

 
	
  

 	
 II.

 	
 Procedures  

 



          If
the Purchaser elects to deliver Private Placement Shares pursuant to Section
3.01(b) of the Confirmation or elects to deliver Alternative Termination
Delivery Units pursuant to Section 7.02 of the Confirmation, the Purchaser
shall effect such delivery in compliance with the private placement procedures
provided herein. 


          (a)          The
Purchaser shall afford the Seller, and any potential buyers of the Private
Placement Shares (or, in the case of alternative termination settlement,
Alternative Termination Delivery Units) (collectively, the “Private Securities”)
designated by the Seller a reasonable opportunity to conduct a due diligence
investigation with respect to the Purchaser customary in scope for private
offerings of such type of securities (including, without limitation, the
availability of senior management to respond to questions regarding the
business and financial condition of the Purchaser and the right to have made
available to them for inspection all financial and other records, pertinent
corporate documents and other information reasonably requested by them), and
the Seller (or any such potential buyer) shall be satisfied in all material
respects with such opportunity and with the resolution of any disclosure issues
arising from such due diligence investigation of the Purchaser. 


          (b)          Prior
to or contemporaneously with the determination of the Private Placement Price
(as described below), the Purchaser shall enter into an agreement (a “Private Placement Agreement”) with the
Seller (or any affiliate of the Seller designated by the Seller) providing for
the purchase and resale by the Seller (or such affiliate) in a private
placement (or other transaction exempt from registration under the Securities
Act) of the Private Securities, which agreement shall be on commercially
reasonable terms and in form and substance reasonably satisfactory to the Seller
(or such affiliate) and (without limitation of the foregoing) shall: 


	
  

 	
  

 
	
  

 	
           (i)          contain
 customary conditions, and customary undertakings, representations and
 warranties (to the Seller or such affiliate, and if requested by the Seller
 or such affiliate, to potential purchasers of the Private Securities); 

 
	
  

 	
  

 
	
  

 	
           (ii)          contain
 indemnification and contribution provisions in connection with the potential
 liability of the Seller and its affiliates relating to the resale by the Seller
 (or such affiliate) of the Private Securities; 

 
	
  

 	
  

 
	
  

 	
           (iii)          provide
 for all reasonable steps within the Purchaser’s control to be taken to
 provide for the delivery of related certificates and representations,
 warranties and agreements of the Purchaser, including those necessary or
 advisable to establish and maintain the availability of an exemption from the
 registration requirements of the Securities Act for the Seller and resales of
 the Private Securities by the Seller (or such affiliate); and

 


A-1









	
  

 	
  

 
	
  

 	
           (iv)          provide
 for all reasonable steps within the Purchaser’s control to be taken to
 provide for the delivery to the Seller (or such affiliate) of customary
 opinions (including, without limitation, opinions relating to the due
 authorization, valid issuance and fully paid and non-assessable nature of the
 Private Securities, the availability of an exemption from the Securities Act
 for the Seller and resales of the Private Securities by the Seller (or such
 affiliate), and the lack of material misstatements and omissions in the
 Purchaser’s filings under the Exchange Act).

 
	
  

 	
  

 
	
           (c)          The
 Seller shall determine the Private Placement Price (or, in the case of
 alternative termination settlement, the Termination Price) in its judgment by
 commercially reasonable means, which may include (without limitation): 

 
	
  

 	
  

 
	
  

 	
           (i)          basing
 such price on indicative bids from investors; 

 
	
  

 	
  

 
	
  

 	
           (ii)          taking
 into account any factors that are customary in pricing private sales for
 similarly situated issuers or securities, including, without limitation, a
 reasonable placement fee or spread to be retained by the Seller (or such
 affiliate); and 

 
	
  

 	
  

 
	
  

 	
           (iii)          providing
 for the payment by the Purchaser of all reasonable fees and expenses in
 connection with such sale and resale, including all fees and expenses of
 counsel for the Seller or such affiliate.

 
	
  

 	
  

 
	
           (d)          The
 Seller shall notify the Purchaser of the number of Private Securities
 required to be delivered by the Purchaser and the Private Placement Price
 (or, in the case of alternative termination settlement, the Termination
 Price) by 6:00 p.m. on the day such price is determined. 

 
	
  

 	
  

 
	
           (e)          The
 Purchaser agrees not to take or cause to be taken any action that would make
 unavailable either (i) the exemption set forth in Section 4(2) of the
 Securities Act, for the sale of any Private Securities by the Purchaser to
 the Seller or (ii) an exemption from the registration requirements of the
 Securities Act reasonably acceptable to the Seller for resales of Private
 Securities by the Seller. 

 
	
  

 	
  

 
	
           (f)          The
 Purchaser expressly agrees and acknowledges that the public disclosure of all
 material information relating to the Purchaser is within the Purchaser’s
 control and that the Purchaser shall promptly so disclose all such material
 information during the period from the Valuation Completion Date to and
 including the Settlement Date. 

 
	
  

 	
  

 
	
 The Purchaser agrees to use
 its best efforts to make any filings required to be made by it with the SEC,
 any securities exchange or any other regulatory body with respect to the
 Transaction contemplated hereby and the issuance of the Private Securities.

 


A-2









	
  

 	
  

 
	
  

 	
 

 


ANNEX B 


REGISTRATION PROCEDURES


	
  

 	
  

 	
  

 
	
  

 	
 I.

 	
 Introduction  

 



          MTS
Systems Corporation, a Minnesota corporation (the “Purchaser”) and J.P. Morgan Securities LLC, as agent for
JPMorgan Chase Bank, National Association, London Branch (the “Seller”) have agreed to these procedures
(the “Registration Procedures”) in
connection with entering into the Confirmation (the “Confirmation”) dated as of September 7, 2012 between JPMorgan
and the Purchaser relating to the sale by JPMorgan to the Purchaser of common
stock, par value $0.25 per share, or security entitlements in respect thereof
(the “Common Stock”) of the
Purchaser. These Registration Procedures supplement, form part of, and are
subject to the Confirmation and all terms used and not otherwise defined herein
shall have the meanings assigned to them in the Confirmation. 


	
  

 	
  

 	
  

 
	
  

 	
 II.

 	
 Procedures  

 



          If
the Purchaser elects to deliver Registered Shares pursuant to Section 3.01(b)
of the Confirmation, the Purchaser shall effect such delivery in compliance
with the registration procedures provided herein. 


          (a)
          The Purchaser shall
take all actions within its control to make available to the Seller and its
affiliates an effective primary registration statement under the Securities Act
and one or more prospectuses as necessary or advisable to allow the Seller and
its affiliates to comply with the applicable prospectus delivery requirements
(the “Prospectus”) for the sale by
Seller or its affiliates of the Registered Shares to be delivered by the
Purchaser pursuant to the Confirmation (the “Registration
Statement”), such Registration Statement to be effective and
Prospectus to be current until all such sales by the Seller (or its affiliates)
have been settled. The Purchaser shall take all actions reasonably requested by
the Seller to facilitate the disposition of any Registered Shares to be sold
pursuant to such Registration Statement. 


          (b)          The
Purchaser shall use commercially reasonable efforts to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Prospectus and, if any such
order is issued, to obtain the lifting thereof as soon thereafter as is
reasonably possible. If the Registration Statement, the Prospectus or any
document incorporated therein by reference contains a misstatement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make any statement therein not misleading, the Purchaser shall
as promptly as reasonably practicable file any required document and prepare
and furnish to the Seller a reasonable number of copies of such supplement or
amendment thereto as may be necessary so that the Prospectus, as thereafter delivered
to the purchasers in connection with sales of Registered Shares thereunder,
will not contain any misstatement of a material fact or omit to state a
material fact required to be stated therein or necessary to make any statement
therein not misleading. 


          (c)          The
Purchaser shall afford the Seller (and its agents and affiliates) a reasonable
opportunity to conduct a due diligence investigation with respect to the
Purchaser customary in scope for registered offerings of such type of securities
(including, without limitation, the availability of senior management and
external advisors to respond to questions regarding the business and financial
condition of the Purchaser and the right to have made available to them for
inspection all financial and other records, pertinent corporate documents and
other information reasonably requested by them), and such opportunity and the
resolution of any disclosure issues arising from such due diligence
investigation of the Purchaser shall be satisfactory to Seller in all material
respects. The Purchaser shall reimburse the Seller for all reasonable
out-of-pocket expenses it incurs in connection with such diligence and
otherwise in connection with the preparation of the Registration Statement and
Prospectus, including, without limitation, the reasonable fees and expenses of
outside counsel to the Seller incurred in connection therewith. 


B-1





          (d)           The Purchaser shall enter into an
agreement (a “Registration Agreement”)
with the Seller (or any affiliate of the Seller designated by the Seller)
providing for the registration of the Registered Shares, which agreement shall
be on commercially reasonable terms and in form and substance reasonably
satisfactory to the Seller (or such affiliate) and (without limitation of the
foregoing) shall: 


	
  

 	
  

 
	
  

 	
           (i)            contain
 customary conditions, and customary undertakings, representations and
 warranties (to the Seller or such affiliate); 

 
	
  

 	
  

 
	
  

 	
           (ii)          contain
 indemnification and contribution provisions in connection with the potential
 liability of the Seller and its affiliates relating to the sale by the Seller
 (or such affiliate) of the Registered Shares; 

 
	
  

 	
  

 
	
  

 	
           (iii)          provide
 for the delivery of related certificates and representations, warranties and
 agreements of the Purchaser;

 
	
  

 	
  

 
	
  

 	
           (iv)          provide
 for the delivery of accountants’ “comfort letters” to the Seller in form and
 substance satisfactory to the Seller, containing statements and information
 of the type customarily included in such letters to “underwriters” with
 respect to the financial statements and certain financial information
 contained, or incorporated by reference, in the Registration Statement and
 the Prospectus; and

 
	
  

 	
  

 
	
  

 	
         (v)          provide
 for the delivery to the Seller (or such affiliate) of customary opinions,
 including, without limitation, opinions relating to the due authorization,
 valid issuance and fully paid and non-assessable nature of the Registered
 Shares and the lack of material misstatements and omissions in the
 Registration Statement (including any documents incorporated by reference
 therein). 

 



        (e)          The
Seller shall notify the Purchaser of the numbers of Registered Shares to be
delivered by the Purchaser on the Settlement Dates, as necessary in light of
the Seller’s unwinding of its hedge positions in connection with the
Transaction and sales of Registered Shares in accordance with these
Registration Procedures, and the Purchaser shall deliver such Shares to the
Seller on such Settlement Dates in accordance with the Seller’s customary
procedures. The parties understand and acknowledge that (i) the Seller or its
affiliates expect to make contemporaneous or nearly contemporaneous (A)
purchases of Common Stock to unwind its hedge and (B) sales of Registered
Shares in accordance with these Registration Procedures, (ii) the Seller or its
affiliates intend to make such sales of Registered Shares in a manner that is
not a distribution for purposes of Regulation M, and (iii) accordingly, the
length of the period during which the Seller or its affiliates make such
purchases and sales will depend in part on prevailing trading volumes for the
Common Stock. 


          (f)          In
the event that (i) the Purchaser fails to comply with the requirements set
forth in this Annex B, (ii) the Registration Statement is not effective on or
prior to the date that is 30 days after the Valuation Completion Date, or fails
to remain effective until all Registered Shares have been sold hereunder, (ii)
the opportunity to conduct a due diligence investigation with respect to the
Purchaser and the resolution of any issues arising therefrom is not
satisfactory to Seller and its affiliates in all material respects, or does not
continue to be satisfactory to the Seller and its affiliates in all material
respects until all Registered Shares have been sold hereunder, (iv) the Seller
or its affiliates are not able to make sales of Registered Shares in a manner
that permits the contemporaneous or nearly contemporaneous purchase by the
Seller or its affiliates of Common Stock in accordance with Regulation M or (v)
the Registration Procedures otherwise become unavailable for the sale by the
Seller and its affiliates of the Registered Shares delivered by the Purchaser
hereunder prior to the completion of the sale thereof, then in any such event,
the provisions of Section 3.01(d) of the Confirmation providing for cash
settlement with respect to any unsold Registered Shares shall apply, appropriately
modified to take into account any Registered Shares theretofore delivered and
sold pursuant to these Registration Procedures. 


B-2









	
  

 	
  

 
	
  

 	
 

 



ANNEX C 


COMMUNICATIONS PROCEDURES


September 7, 2012 


	
  

 	
  

 	
  

 
	
  

 	
 I.

 	
 Introduction  

 



          MTS
Systems Corporation, a Minnesota corporation (“Counterparty”) and J.P. Morgan Securities LLC, as agent for
JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”) have adopted these
communications procedures (the “Communications
Procedures”) in connection with
entering into the Confirmation (the “Confirmation”)
dated as of September 7, 2012 between JPMorgan and Counterparty relating to the
sale by JPMorgan to Counterparty of common stock, par value $0.25 per share, or
security entitlements in respect thereof (the “Common Stock”) of
the Counterparty. These Communications Procedures supplement, form part of, and
are subject to the Confirmation. 


	
  

 	
  

 	
  

 
	
  

 	
 II.

 	
 Communications Rules  

 



          From
the date hereof until the end of the Contract Period, Counterparty and its
Employees and Designees shall not engage in any Program-Related Communication
with, or disclose any Material Non-Public Information to, any EDG Trading
Personnel. Except as set forth in the preceding sentence, the Confirmation
shall not limit Counterparty and its Employees and Designees in their
communication with Affiliates and Employees of JPMorgan, including without
limitation Employees who are EDG Permitted Contacts. 


	
  

 	
  

 	
  

 
	
  

 	
 III.

 	
 Termination  

 



          If,
in the sole judgment of any EDG Trading Personnel or any affiliate or Employee
of JPMorgan participating in any Communication with Counterparty or any
Employee or Designee of Counterparty, such Communication would not be permitted
by these Communications Procedures, such EDG Trading Personnel or affiliate or
Employee of JPMorgan shall immediately terminate such Communication. In such
case, or if such EDG Trading Personnel or affiliate or Employee of JPMorgan
determines following completion of any Communication with Counterparty or any
Employee or Designee of Counterparty that such Communication was not permitted
by these Communications Procedures, such EDG Trading Personnel or such
affiliate or Employee of JPMorgan shall promptly consult with his or her
supervisors and with counsel for JPMorgan regarding such Communication. If, in
the reasonable judgment of JPMorgan’s counsel following such consultation,
there is more than an insignificant risk that such Communication could
materially jeopardize the availability of the affirmative defenses provided in
Rule 10b5-1 under the Exchange Act with respect to any ongoing or contemplated
activities of JPMorgan or its affiliates in respect of the Confirmation, it
shall be an Additional Termination Event with respect to the Confirmation. 


	
  

 	
  

 	
  

 
	
  

 	
 IV.

 	
 Definitions  

 



          Capitalized
terms used and not otherwise defined herein shall have the meanings ascribed to
them in the Confirmation. As used herein, the following words and phrases shall
have the following meanings: 


          “Communication” means any contact or
communication (whether written, electronic, oral or otherwise) between
Counterparty or any of its Employees or Designees, on the one hand, and
JPMorgan or any of its affiliates or Employees, on the other hand. 


          “Designee” means a person designated, in
writing or orally, by Counterparty to communicate with JPMorgan on behalf of
Counterparty. 


C-1





          “EDG Permitted Contact” means any of Mr.
David Aidelson, Mr. Gregory Batista, Mr. Elliot Chalom, Mr. James Rothschild,
Mr. David Seaman, Mr. Steven Seltzer, Mr. James F. Smith, Mr. Sudheer
Tegulapalle and Mr. Jason M. Wood or any of their designees; provided that JPMorgan may amend the list
of EDG Permitted Contacts by delivering a revised list of EDG Permitted
Contacts to Counterparty. 


          “EDG Trading Personnel” means Graham Orton,
Michael Tatro and any other Employee of the public side of the Equity
Derivatives Group or the Special Equities Group of J.P. Morgan Chase & Co.;
provided that JPMorgan may amend
the list of EDG Trading Personnel by delivering a revised list of EDG Trading
Personnel to Counterparty; and provided
further that, for the avoidance of doubt, the persons listed as EDG
Permitted Contacts are not EDG Trading Personnel. 


          “Employee” means, with respect to any
entity, any owner, principal, officer, director, employee or other agent or
representative of such entity, and any affiliate of any of such owner,
principal, officer, director, employee, agent or representative. 


          “Material Non-Public Information” means
information relating to the Counterparty or the Common Stock that (a) has not
been widely disseminated by wire service, in one or more newspapers of general
circulation, by communication from the Counterparty to its shareholders or in a
press release, or contained in a public filing made by the Counterparty with
the Securities and Exchange Commission and (b) a reasonable investor might
consider to be of importance in making an investment decision to buy, sell or
hold shares of Common Stock. For the avoidance of doubt and solely by way of
illustration, information should be presumed “material” if it relates to such
matters as dividend increases or decreases, earnings estimates, changes in
previously released earnings estimates, significant expansion or curtailment of
operations, a significant increase or decline of orders, significant merger or
acquisition proposals or agreements, significant new products or discoveries,
extraordinary borrowing, major litigation, liquidity problems, extraordinary
management developments, purchase or sale of substantial assets and similar
matters. 


          “Program-Related Communication” means any
Communication the subject matter of which relates to the Confirmation or any
Transaction under the Confirmation or any activities of JPMorgan (or any of its
affiliates) in respect of the Confirmation or any Transaction under the
Confirmation.


C-2









	
  

 	
  

 
	
  

 	
 

 



ANNEX D 


PRICING SUPPLEMENT


          This
Pricing Supplement is subject to the Confirmation dated as of September 7, 2012
(the “Confirmation”)
between J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National
Association, London Branch (the “Seller”),
and MTS Systems Corporation, a Minnesota corporation (the “Purchaser”). Capitalized terms used herein have
the meanings set forth in the Confirmation. 


	
  

 	
  

 	
  

 	
  

 	
  

 
	
 1

 	
 Discount:

 	
  

 	
 $0.58

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 2

 	
 Initial
 Delivery Percentage

 	
  

 	
 80%

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 3

 	
 Contract
 Fee:

 	
  

 	
 $0.00

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 4

 	
 Floor
 Price:

 	
  

 	
 $0.01

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 5

 	
 Registered
 Shares Fee:

 	
  

 	
 $0.05

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 6

 	
 Valuation
 Completion Date:

 	
  

 	
 The Trading Day, occurring
 during the period commencing on and including the 115th Trading
 Day following the Trade Date and ending on and including the Expiration Date,
 specified as such by the Seller, in its sole judgment, by delivering a notice
 designating such Trading Day as a Valuation Completion Date by the close of
 business on the Business Day immediately following such Trading Day; provided that if the Seller fails to
 validly designate the Valuation Completion Date prior to the Expiration Date,
 the Valuation Completion Date shall be the Expiration Date.

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 7

 	
 Cash
 Settlement Fee:

 	
  

 	
 $0.00

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 8

 	
 Cash
 Distribution Amount:

 	
  

 	
  

 	
  

 






	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Cash Distribution Amount

 	
  

 	
 Reference Period

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 $0.00 per share of Common
 Stock

 	
  

 	
 Trade
 Date – December 16, 2012

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 $0.30 per share of Common
 Stock

 	
  

 	
 December
 17, 2012 – March 10, 2013

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 $0.30 per share of Common
 Stock

 	
  

 	
 Any
 period after March 11, 2013

 	
  

 


D-1





EXHIBIT A 


[Letterhead of Purchaser]


JPMorgan Chase Bank, National
Association

c/o J.P. Morgan Securities LLC

383 Madison Avenue

5th Floor

New York, New York 10172 


Re:          Accelerated
Purchase of Equity Securities 


Ladies and Gentlemen: 


          In
connection with our entry into the Confirmation dated as of September 7, 2012
(the “Confirmation”), we hereby
represent that set forth below is the total number of shares of our common
stock purchased by or for us or any of our affiliated purchasers in Rule 10b-18
purchases of blocks (all defined in Rule 10b-18 under the Securities Exchange
Act of 1934) pursuant to the once-a-week block exception set forth in Rule
10b-18(b)(4) during the four full calendar weeks immediately preceding the
first day of the [Valuation Period] [Cash Settlement Purchase Period] [Seller
Termination Share Purchase Period] (as defined in the Confirmation) and the
week during which the first day of the Valuation Period occurs. 


          Number
of Shares: __________________ 


          We
understand that you will use this information in calculating trading volume for
purposes of Rule 10b-18. 


Very truly yours, 


MTS SYSTEMS CORPORATION 


	
  

 	
  

 	
  

 
	
 By: 

 	
  



 	
  

 
	
  

 	
 Name: 

 	
  

 
	
  

 	
 Title:

 	
  

 


Exh-A-1