Document:

EXHIBIT 10.x

[LOGO] MTS(R)

MTS SYSTEMS CORPORATION
14000 Technology Drive
Eden Prairie, MN 55344-2290
Telephone 612-937-4000
Fax 612-937-4515                                     CHANGE IN CONTROL AGREEMENT

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         AGREEMENT made as of this 18th day of June, 2001 by and between MTS
Systems Corporation, a Minnesota corporation ("MTS") and LAURA B. HAMILTON (the
"Executive").

         WHEREAS, MTS considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of MTS and its shareholders; and

         WHEREAS, the Executive has made and is expected to make, due to
Executive's intimate knowledge of the business and affairs of MTS, its policies,
methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of MTS; and

         WHEREAS, MTS, as a publicly held corporation, recognizes that the
possibility of a Change in Control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of the Executive in the performance of the Executive's
duties to the detriment of MTS and its shareholders; and

         WHEREAS, Executive is becoming employed by MTS upon the understanding
that MTS will provide income security if the Executive's employment is
terminated under certain terms and conditions; and

         WHEREAS, it is in the best interests of MTS and its stockholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction and
to ensure the continued availability to MTS of the Executive in the event of a
Change in Control;

         THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:

         1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until the earlier of (A) the date that any and all
benefits due to Executive under this Agreement upon the happening of the events
set forth herein have been paid and satisfied and all obligations of MTS to the
Executive have been performed or (B) the date the Executive and MTS agree in
writing to terminate this Agreement. Notwithstanding the preceding sentence, if
a Change in Control occurs, this Agreement shall remain in effect for a period
of 36 months from the date of the occurrence of a Change in Control.

         2. Change in Control. If a Change in Control shall have occurred during
the term of this Agreement, the provisions of this Agreement shall become
operative and MTS agrees to employ the Executive and to provide the benefits
stated in this Agreement.

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Change in Control Agreement
Page 2

                  (a) Change in Control, shall, for purposes of this Agreement,
         means a change in control of MTS which would be required to be reported
         in response to Item 1 of Form 8-K promulgated under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
         MTS is then subject to such reporting requirement, including, without
         limitation, if:
                           (i) any "person" (as such term is used in Sections
                  13(d) and 14(d) of the Exchange Act, including any affiliate
                  or associate as defined in Rule 12(b)-2 under the Exchange Act
                  of such person, other than MTS, any trustee or other fiduciary
                  holding securities under an employee benefit plan of MTS, or
                  any corporation owned, directly or indirectly, by the
                  stockholders of MTS in substantially the same proportions as
                  their ownership of stock of MTS) becomes a "beneficial owner"
                  (as defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of MTS representing 35% or more of
                  the combined voting power of MTS' then outstanding securities;
                  or

                           (ii) the Board of Directors is comprised of fewer
                  than 65% of the individuals described in subsection (b) below;
                  or

                           (iii) the stockholders of MTS approve a definitive
                  agreement to merge or consolidate MTS with or into another
                  corporation or other enterprise in which the holders of
                  outstanding stock of MTS entitled to vote in elections of
                  directors immediately before such merger or consolidation hold
                  less than 80% of the voting power of the survivor of such
                  merger or consolidation or its parent, or approve a plan of
                  liquidation; or

                           (iv) at least 60% of MTS' assets are sold or
                  transferred (other than as security for a loan) to any person
                  (as defined above) in one or a series of related transactions;
                  or

                           (v) the Board of Directors of MTS determines, by a
                  vote of a majority of its entire membership, that a tender
                  offer statement by any person (as defined above) indicates an
                  intention on the part of such person to acquire control of
                  MTS.

                  (b) Board of Directors shall, for purposes of subsection (a),
         mean:

                           (i) individuals who on the date hereof constituted
                  the Board of MTS, and

                           (ii) any new director who subsequently was elected or
                  nominated for election by a majority of the directors who held
                  such office immediately prior to a Change in Control.

                  (c) Friendly Change in Control shall mean a Change in Control
         which arises from a transaction or series of transactions authorized,
         recommended or approved at the time by formal action of the Board of
         Directors.

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Change in Control Agreement
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                  (d) Unfriendly Change in Control shall mean a Change in
         Control that is not a "Friendly Change in Control" as defined above. An
         Unfriendly Change in Control shall not thereafter become a Friendly
         Change in Control.

         3. Termination by Reason of Death or Disability. If Executive's
employment shall be terminated by MTS by reason of death or disability, MTS
shall immediately commence payment to the Executive (or Executive's designated
beneficiaries or estate, if no beneficiary is designated) of any and all
benefits to which the Executive is entitled under MTS retirement and insurance
programs them in effect. Except for such benefits, MTS shall have no further
obligations to Executive under this Agreement.

         4. Termination for Cause.

                  (a) If Executive's employment with MTS shall be terminated by
         MTS for Cause as defined below, MTS shall pay to Executive his full
         base salary through the Date of Termination at the rate in effect at
         the time Notice of Termination is given and MTS shall have no further
         obligation to Executive under this Agreement.

                  (b) Termination by MTS of Executive's employment for "Cause"
         shall mean termination as a result of:

                           (i) the conviction of the Executive by a court of
                  competent jurisdiction for felony criminal conduct; or

                           (ii) willful gross misconduct or gross negligence in
                  the performance of his duties by the Executive; or

                           (iii) material violation by the Executive of any
                  employment agreement applicable to the Executive.

         5. Termination Following Friendly Change in Control.

                  (a) If, after a Friendly Change in Control, Executive's
         employment with MTS shall be terminated (1) by MTS other than for
         cause, death or disability or (2) by Executive for Good Reason, then
         Executive shall be entitled to the following benefits:

                           (i) Severance. MTS shall pay the Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 18 multiplied by the Executive's Monthly Gross
                  Income as defined below. The Severance Payment shall be made
                  in a single lump sum within 30 days after the Date of
                  Termination, subject to all applicable federal and state
                  withholding.

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Change in Control Agreement
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                  For purposes of this Agreement, Monthly Gross Income shall
                  mean the sum of the following amounts:

                                    (A) 1/12 of the highest average base salary
                           for any 12-consecutive month period during the 36
                           calendar month period ending immediately prior to the
                           Date of Termination (without taking into account any
                           reduction in such base salary that would constitute
                           Good Reason); plus

                                    (B) the monthly average of the total
                           Management Variable Compensation (MVC) earned during
                           the lesser of the 3 most recent or the actual number
                           of fiscal years participating in the MVC plan ending
                           immediately prior to the Date of Termination; plus

                                    (C) the product of the average percentage of
                           MTS profit sharing contributions to the MTS Systems
                           Corporation Profit Sharing Retirement Plan and Trust
                           (as a percent of Compensation as defined in the Plan
                           up to the federal limit) for the lesser of the 3 most
                           recent or the actual number of participating Plan
                           Years ending immediately prior to the Date of
                           Termination multiplied by the sum of (A) and (B)
                           above.

                           (ii) Benefits. For an 18-month period after the Date
                  of Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the respective percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive during
                  this period, and any such benefits actually received by
                  Executive shall be reported to MTS. At the expiration of said
                  18-month period, Executive shall be entitled to continue any
                  of said benefits which qualify as group insurance benefits for
                  continuation coverage under the Comprehensive Omnibus
                  Reconciliation Act ("COBRA") or applicable state law.

                  (b) Good Reason. Executive shall be entitled to terminate his
         employment for Good Reason. For purposes of this Agreement, "Good
         Reason" shall mean, without Executive's express written consent, any of
         the following:

                           (i) the assignment to Executive of any duties
                  inconsistent with Executive's status or position with MTS, or
                  a substantial alteration in the nature or status of
                  Executive's responsibilities; or

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Change in Control Agreement
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                           (ii) a reduction by MTS in Executive's annual base
                  salary other than a reduction comparable to other senior
                  Executives of MTS in connection with a company-wide cost
                  reduction program; or

                           (iii) the relocation of MTS' principal executive
                  offices to a location more than fifty miles from Eden Prairie,
                  Minnesota or MTS requiring Executive to be based anywhere
                  other than MTS' principal executive offices except for
                  required travel on MTS' business to an extent substantially
                  consistent with Executive's prior business travel obligations;
                  or

                           (iv) the failure by MTS to continue to provide
                  Executive with benefits at least as favorable to those enjoyed
                  by Executive under any of MTS' pension, life insurance,
                  medical, health and accident, disability, deferred
                  compensation, incentive awards, incentive stock options, or
                  savings plans in which Executive was participating at the time
                  of the Change in Control, the taking of any action by MTS
                  which would directly or indirectly materially reduce any of
                  such benefits or deprive Executive of any material fringe
                  benefit enjoyed by him at the time of the Change in Control,
                  or the failure by MTS to provide Executive with the number of
                  paid vacation days to which Executive is entitled at the time
                  of the Change in Control, provided, however, that MTS may
                  amend any such plan or programs as long as such amendments do
                  not reduce any benefits to which Executive would be entitled
                  upon termination; or

                           (v) the failure of MTS to obtain a satisfactory
                  agreement from any successor to assume and agree to perform
                  this Agreement, as contemplated in Section 12; or

                           (vi) MTS requests Executive's resignation from
                  employment; or

                           (vii) any purported termination of Executive's
                  employment which is not made pursuant to a Notice of
                  Termination satisfying the requirements of this Agreement; for
                  purposes of this Agreement, no such purported termination
                  shall be effective; or

                           (viii) any material violation by MTS of this
                  Agreement.

                  (c) Voluntary Termination Deemed Good Reason. Notwithstanding
         anything herein to the contrary, during the period commencing on the
         30th day following a Change in Control (whether Friendly or Unfriendly)
         and ending on the 180th day following a Change in Control, Executive
         may voluntarily terminate his employment for any reason, and such
         termination shall be deemed "Good Reason" for all purposes of this
         Agreement.

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Change in Control Agreement
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         6. Termination - Unfriendly Change in Control.

                  (a) If, after an Unfriendly Change in Control, Executive's
         employment with MTS is terminated (1) by MTS other than for Cause,
         death or disability, or (2) by Executive for Good Reason, the Executive
         shall be entitled to the following benefits:

                            (i) Severance. MTS shall pay the Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 36 multiplied by the Executive's Monthly Gross
                  Income as defined in Section 5(a)(i) above. The Severance
                  Payment shall be made in a single lump sum within 30 days
                  after the Date of Termination, subject to all applicable
                  federal and state withholding.

                           (ii) Benefits. For a 36-month period after the Date
                  of Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the responsive percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive shall
                  be reported to MTS. At the expiration of said 36-month period,
                  Executive shall be entitled to continue any of said benefits
                  which qualify as group insurance benefits for continuation
                  coverage under the Comprehensive Omnibus Budget Reconciliation
                  Act ("COBRA") or applicable state law.

                  (b) If the Executive voluntarily terminates his employment
         other than for Good Reason but more than 180 days after an Unfriendly
         Change in Control, Executive shall be entitled to the following
         benefits:

                           (i) Severance. MTS shall pay to Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 18 multiplied by the Executive's monthly Gross
                  Income as defined in Section 5(a)(i) above. The Severance
                  Payment shall be made in a single lump sum within 30 days
                  after the Date of Termination, subject to all applicable
                  federal and state withholding.

                           (ii) Benefits. For 18-month period after the Date of
                  Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the respective percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive during
                  such period, and any such benefits actually received by
                  Executive shall be reported to

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Change in Control Agreement
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                  MTS. At the expiration of said 18-month period, Executive
                  shall be entitled to continue any of said benefits which
                  qualify as group insurance benefits for continuation coverage
                  under the Comprehensive Omnibus Budget Reconciliation Act
                  ("COBRA") or applicable state law.

         7. Additional Benefits. In addition to all other amounts payable and
benefits receivable to Executive upon termination of employment covered under
this Agreement, Executive shall be entitled to the following benefits:

                  (a) Legal Fees. In the event of any termination of employment
         under this Agreement, other than termination for Cause, MTS shall pay
         to Executive all legal fees and expenses reasonably incurred by
         Executive in contesting or disputing any such termination or in seeking
         to obtain or enforce any right or benefit provided by this Agreement.

                  (b) Retirement Plan. Executive shall, upon termination of
         employment, be entitled to receive all benefits payable to the
         Executive under the MTS Systems Corporation Profit Sharing Retirement
         Plan and any other plan or agreement relating to retirement benefits.

                  (c) Employee Stock Option Certificate. The Executive's rights
         under any existing Employee Stock Option Agreement and any future such
         agreements, including particularly his right to exercise his option
         rights following his termination of employment, shall continue to be
         fully effective hereunder.

         8. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits after the Date of
Termination, or except as otherwise provided in this Agreement.

         9. Potential Excise Tax; Indemnification

                  (a) Excise Tax. Should any payments hereunder or contemplated
         hereby be subject to excise tax pursuant to Section 4999 of the
         Internal Revenue Code of 1986, as may be amended, or any successor or
         similar provision thereto, or comparable state or local tax laws, MTS
         shall pay to the Executive such additional compensation as is necessary
         (after taking into account all federal, state and local income taxes
         payable by the Executive as a result of the receipt of such
         compensation) to place the Executive in the same after-tax position he
         would have been in had no such excise tax (or any interest or penalties
         thereon) been paid or incurred. MTS shall pay such additional
         compensation upon the earlier of:

                           (i) the time at which MTS withholds such excise tax
                  from any payments to the Executive; or

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Change in Control Agreement
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                           (ii) 30 days after the Executive notifies MTS that
                  the Executive has paid such excise tax pursuant to a tax
                  return filed by the Executive which takes the position that
                  such excise tax is due and payable in reliance on a written
                  opinion of the Executive's tax counsel that it is more likely
                  than not that such excise tax is due and payable, or, if
                  later, the date the IRS notifies Executive that such amount is
                  due and payable.

         Without limiting the obligation of MTS hereunder, the Executive agrees,
         in the event the Executive makes any payment pursuant to the preceding
         sentence, to negotiate with MTS in good faith with respect to
         procedures reasonably requested by MTS which would afford MTS the
         ability to contest the imposition of such excise tax; provided,
         however, that the Executive will not be required to afford MTS any
         right to contest the applicability of any such excise tax to the extent
         that the Executive reasonably determines that such contest is
         inconsistent with the overall tax interests of the Executive.

         MTS agrees to hold in confidence and not to disclose, without the
         Executive's prior written consent, any information with regard to the
         Executive's tax position which MTS obtains pursuant to this subsection.

                  (b) Indemnification. MTS will indemnify the Executive (and his
         legal representative or other successors) to the fullest extent
         permitted (including payment of expenses in advance of final
         disposition of the proceeding) by the laws of the State of Minnesota,
         as in effect at the time of the subject act or omission, or the
         Articles of Incorporation and By-Laws of MTS as in effect at such time
         or on the date of this Agreement, whichever affords or afforded greater
         protection to the Executive; and the Executive shall be entitled to the
         protection of any insurance policies MTS may elect to maintain
         generally for the benefit of its directors and officers, against all
         costs, charges and expenses whatsoever incurred or sustained by him or
         his legal representatives in connection with any action, suit or
         proceeding to which he (or his legal representative or other
         successors) may be made a party by reason of his being or having been a
         director, officer or employee of MTS or any of its subsidiaries or his
         serving or having served any other enterprise as a director, officer or
         employee at the request of MTS, provided that MTS shall cause to be
         maintained in effect for not less than six years from the date of a
         Change in Control (to the extent available) policies of directors' and
         officers' liability insurance of at least the same coverage as those
         maintained by MTS on the date of this Agreement and containing terms
         and conditions which are no less advantageous than such policies.

         10. Non-Competition and Confidentiality.

                  (a) Noncompetition. Except as provided in subsection (c)
         below, Executive agrees that, as a condition of receiving benefits
         under this Agreement, he will not render services directly or
         indirectly to any competing organization, wherever located, for a
         period of one year following the Date of Termination, in connection
         with the design, implementation, development, manufacture, marketing,
         sale, merchandising, leasing,

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Change in Control Agreement
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         servicing or promotion of any "Conflicting Product" which as used
         herein means any product, process, system or service of any person,
         firm, corporation, organization other than MTS, in existence or under
         development, which is the same as or similar to or competes with, or
         has a usage allied to, a product, process, system, or service produced,
         developed, or used by MTS. Executive agrees that violation of this
         covenant not to compete with MTS shall result in immediate cessation of
         all benefits hereunder, other than insurance benefits, which Executive
         may continue where permitted under federal and state law at his own
         expense.

                   (b) Confidentiality. Executive further agrees and
         acknowledges his existing obligation that at all times during and
         subsequent to his employment with MTS, he will not divulge or
         appropriate to his own use or the uses of others any secret or
         confidential information or knowledge pertaining to the business of
         MTS, or any of its subsidiaries, obtained during his employment by MTS
         or any of its subsidiaries.

                  (c) Waiver - Unfriendly Change in Control. Notwithstanding
         anything herein to the contrary: the restriction on competition under
         subsection (a) shall not apply if the Executive's employment terminates
         following an Unfriendly Change in Control. Furthermore, in such event,
         MTS waives any other restriction on Executive's employment and consents
         unconditionally to any employment Executive may subsequently obtain.

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

         12. Successors; Binding Agreement.

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Change in Control Agreement
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                  (a) Successors. MTS will require any successor (whether direct
         or indirect, by purchase, merger, consolidation or otherwise) to all or
         substantially all of the business and/or assets of MTS to expressly
         assume and agree to perform this Agreement in the same manner and to
         the same extent that MTS would be required to perform it if no such
         succession had taken place. Failure of MTS to obtain such assumption
         and agreement prior to the effectiveness of any such succession shall
         be a breach of this Agreement and shall entitle Executive to
         compensation from MTS in the same amount and on the same terms as he
         would be entitled hereunder if he terminated his employment for Good
         Reason following a Change in Control, except that for purposes of
         implementing the foregoing, the date on which any such succession
         becomes effective shall be deemed the Date of Termination.

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

         13. Notice.

                  (a) Form and Delivery. All notices and other communications
         provided for in the Agreement shall be in writing and shall be deemed
         to have been duly given when delivered or mailed by United States
         registered or certified mail, return receipt requested, postage
         prepaid, addressed to the last known residence address of the Executive
         or in the case of MTS, to its principal office to the attention of each
         of the then directors of MTS with a copy to its Secretary, or to such
         other address as either party may have furnished to the other in
         writing in accordance herewith, except that notice of change of address
         shall be effective only upon receipt.

                  (b) Notice of Termination. Any purported termination of
         Executive's employment by MTS or by Executive shall be communicated by
         written Notice of Termination to the other party hereto, which shall
         indicate the specific termination provision in this Agreement relied
         upon and shall set forth the facts and circumstances claimed to provide
         a basis for termination of Executive's employment.

                  (c) Date of Termination. For purposes of this Agreement, "Date
         of Termination" shall mean the date specified in the Notice of
         Termination which shall not be less than 10 nor more than 30 days,
         respectively, from the date such Notice of Termination is given.

                  (d) Dispute of Termination. If, within 10 days after any
         Notice of Termination is given, the party receiving such Notice of
         Termination notifies the other party that a dispute exists concerning
         the termination, the Date of Termination shall be the date on which the
         dispute is finally determined, either by mutual written agreement of
         the parties, or by a final

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Change in Control Agreement
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         judgment, order or decree of a court of competent jurisdiction (which
         is not appealable or the time for appeal therefrom having expired and
         no appeal having been perfected); provided, that the Date of
         Termination shall be extended by a notice of dispute only if such
         notice is given in good faith and the party giving such notice pursues
         the resolution of such dispute with reasonable diligence in accordance
         with Section 14 below. Notwithstanding the pendency of any such
         dispute, MTS shall continue to pay Executive full compensation in
         effect when the notice giving rise to the dispute was given (including,
         but not limited to, base salary) and continue Executive as a
         participant in all compensation, benefit and insurance plans in which
         the Executive was participating when the notice giving rise to the
         dispute was given, until the dispute is finally resolved in accordance
         with this subsection or at the end of a period of 180 days, whichever
         first occurs. Amounts paid under this subsection are in addition to all
         other amounts due under this Agreement and shall not be offset against
         or reduce any other amounts under this Agreement.

         14. Arbitration. Any dispute arising under or in connection with this
Agreement (including without limitation, the making of this Agreement or the
Executive's termination of employment) shall be resolved by final and binding
arbitration to be held in Minneapolis, Minnesota in accordance with the rules
and procedures of the American Arbitration Association. The parties shall select
a mutually acceptable single arbitrator to resolve the dispute or if they fail
or are unable to do so, each side shall within the following ten business days
select a single arbitrator and the two so selected shall select a third
arbitrator within the following ten business days. The arbitrator shall have no
power to award any punitive or exemplary damages. The arbitrator may construe or
interpret, but shall not ignore or vary the terms of this Agreement, and shall
be bound by controlling law. The arbitration award or other resolution may be
entered as a judgment at the request of the prevailing party by any court of
competent jurisdiction in Minnesota or elsewhere.

         15. Miscellaneous.

                  (a) Modification and Waiver. Except as otherwise specifically
         provided in this Agreement, no provision of this Agreement may be
         modified, waived or discharged unless such waiver, modification or
         discharge is agreed to in writing and signed by the parties. No waiver
         by either party hereto at any time of any breach by the other party to
         this Agreement of, or compliance with, any other party shall be deemed
         a waiver of similar or dissimilar provisions or conditions at the same
         or at any prior or similar time.

                  (b) Entire Agreement. No agreements or representations, oral
         or otherwise, express or implied, with respect to the subject matter
         hereof have been made by either party which are not expressly set forth
         in this Agreement.

                  (c) Governing Law. The validity, interpretation, construction
         and performance of this Agreement shall be governed by the laws of the
         State of Minnesota.

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                  (d) Severability. The invalidity or unenforceability or any
         provision of this Agreement shall not affect the validity or
         enforceability of any other provision of this Agreement, which shall
         remain in full force and effect.

         IN WITNESS WHEREOF, MTS, through its authorized officer, and the
Executive have executed this Agreement as of the day and date first above
written.

EXECUTIVE:                               MTS SYSTEMS CORPORATION

/s/ Laura B. Hamilton                    By /s/ Sidney W. Emery Jr.
---------------------------------          ---------------------------------

                                         Its  Chairman and CEO
                                              ----------------EXHIBIT 10.y

[LOGO] MTS(R)

MTS SYSTEMS CORPORATION
14000 Technology Drive
Eden Prairie, MN 55344-2290
Telephone 612-937-4000
Fax 612-937-4515                                     CHANGE IN CONTROL AGREEMENT

--------------------------------------------------------------------------------

         AGREEMENT made as of this 25th day of June, 2001 by and between MTS
Systems Corporation, a Minnesota corporation ("MTS") and KELLY H. DONALDSON (the
"Executive").

         WHEREAS, MTS considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best interests
of MTS and its shareholders; and

         WHEREAS, the Executive has made and is expected to make, due to
Executive's intimate knowledge of the business and affairs of MTS, its policies,
methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of MTS; and

         WHEREAS, MTS, as a publicly held corporation, recognizes that the
possibility of a Change in Control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of the Executive in the performance of the Executive's
duties to the detriment of MTS and its shareholders; and

         WHEREAS, Executive is becoming employed by MTS upon the understanding
that MTS will provide income security if the Executive's employment is
terminated under certain terms and conditions; and

         WHEREAS, it is in the best interests of MTS and its stockholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction and
to ensure the continued availability to MTS of the Executive in the event of a
Change in Control;

         THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:

         1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until the earlier of (A) the date that any and all
benefits due to Executive under this Agreement upon the happening of the events
set forth herein have been paid and satisfied and all obligations of MTS to the
Executive have been performed or (B) the date the Executive and MTS agree in
writing to terminate this Agreement. Notwithstanding the preceding sentence, if
a Change in Control occurs, this Agreement shall remain in effect for a period
of 36 months from the date of the occurrence of a Change in Control.

         2. Change in Control. If a Change in Control shall have occurred during
the term of this Agreement, the provisions of this Agreement shall become
operative and MTS agrees to employ the Executive and to provide the benefits
stated in this Agreement.

<PAGE>

Change in Control Agreement
Page 2

                  (a) Change in Control, shall, for purposes of this Agreement,
         means a change in control of MTS which would be required to be reported
         in response to Item 1 of Form 8-K promulgated under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
         MTS is then subject to such reporting requirement, including, without
         limitation, if:
                           (i) any "person" (as such term is used in Sections
                  13(d) and 14(d) of the Exchange Act, including any affiliate
                  or associate as defined in Rule 12(b)-2 under the Exchange Act
                  of such person, other than MTS, any trustee or other fiduciary
                  holding securities under an employee benefit plan of MTS, or
                  any corporation owned, directly or indirectly, by the
                  stockholders of MTS in substantially the same proportions as
                  their ownership of stock of MTS) becomes a "beneficial owner"
                  (as defined in Rule 13d-3 under the Exchange Act), directly or
                  indirectly, of securities of MTS representing 35% or more of
                  the combined voting power of MTS' then outstanding securities;
                  or

                           (ii) the Board of Directors is comprised of fewer
                  than 65% of the individuals described in subsection (b) below;
                  or

                           (iii) the stockholders of MTS approve a definitive
                  agreement to merge or consolidate MTS with or into another
                  corporation or other enterprise in which the holders of
                  outstanding stock of MTS entitled to vote in elections of
                  directors immediately before such merger or consolidation hold
                  less than 80% of the voting power of the survivor of such
                  merger or consolidation or its parent, or approve a plan of
                  liquidation; or

                           (iv) at least 60% of MTS' assets are sold or
                  transferred (other than as security for a loan) to any person
                  (as defined above) in one or a series of related transactions;
                  or

                           (v) the Board of Directors of MTS determines, by a
                  vote of a majority of its entire membership, that a tender
                  offer statement by any person (as defined above) indicates an
                  intention on the part of such person to acquire control of
                  MTS.

                  (b) Board of Directors shall, for purposes of subsection (a),
         mean:

                           (i) individuals who on the date hereof constituted
                  the Board of MTS, and

                           (ii) any new director who subsequently was elected or
                  nominated for election by a majority of the directors who held
                  such office immediately prior to a Change in Control.

                  (c) Friendly Change in Control shall mean a Change in Control
         which arises from a transaction or series of transactions authorized,
         recommended or approved at the time by formal action of the Board of
         Directors.

<PAGE>

Change in Control Agreement
Page 3

                  (d) Unfriendly Change in Control shall mean a Change in
         Control that is not a "Friendly Change in Control" as defined above. An
         Unfriendly Change in Control shall not thereafter become a Friendly
         Change in Control.

         3. Termination by Reason of Death or Disability. If Executive's
employment shall be terminated by MTS by reason of death or disability, MTS
shall immediately commence payment to the Executive (or Executive's designated
beneficiaries or estate, if no beneficiary is designated) of any and all
benefits to which the Executive is entitled under MTS retirement and insurance
programs them in effect. Except for such benefits, MTS shall have no further
obligations to Executive under this Agreement.

         4. Termination for Cause.

                  (a) If Executive's employment with MTS shall be terminated by
         MTS for Cause as defined below, MTS shall pay to Executive his full
         base salary through the Date of Termination at the rate in effect at
         the time Notice of Termination is given and MTS shall have no further
         obligation to Executive under this Agreement.

                  (b) Termination by MTS of Executive's employment for "Cause"
         shall mean termination as a result of:

                           (i) the conviction of the Executive by a court of
                  competent jurisdiction for felony criminal conduct; or

                           (ii) willful gross misconduct or gross negligence in
                  the performance of his duties by the Executive; or

                           (iii) material violation by the Executive of any
                  employment agreement applicable to the Executive.

         5. Termination Following Friendly Change in Control.

                  (a) If, after a Friendly Change in Control, Executive's
         employment with MTS shall be terminated (1) by MTS other than for
         cause, death or disability or (2) by Executive for Good Reason, then
         Executive shall be entitled to the following benefits:

                           (i) Severance. MTS shall pay the Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 18 multiplied by the Executive's Monthly Gross
                  Income as defined below. The Severance Payment shall be made
                  in a single lump sum within 30 days after the Date of
                  Termination, subject to all applicable federal and state
                  withholding.

<PAGE>

Change in Control Agreement
Page 4

                  For purposes of this Agreement, Monthly Gross Income shall
                  mean the sum of the following amounts:

                                    (A) 1/12 of the highest average base salary
                           for any 12-consecutive month period during the 36
                           calendar month period ending immediately prior to the
                           Date of Termination (without taking into account any
                           reduction in such base salary that would constitute
                           Good Reason); plus

                                    (B) the monthly average of the total
                           Management Variable Compensation (MVC) earned during
                           the lesser of the 3 most recent or the actual number
                           of fiscal years participating in the MVC plan ending
                           immediately prior to the Date of Termination; plus

                                    (C) the product of the average percentage of
                           MTS profit sharing contributions to the MTS Systems
                           Corporation Profit Sharing Retirement Plan and Trust
                           (as a percent of Compensation as defined in the Plan
                           up to the federal limit) for the lesser of the 3 most
                           recent or the actual number of participating Plan
                           Years ending immediately prior to the Date of
                           Termination multiplied by the sum of (A) and (B)
                           above.

                           (ii) Benefits. For an 18-month period after the Date
                  of Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the respective percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive during
                  this period, and any such benefits actually received by
                  Executive shall be reported to MTS. At the expiration of said
                  18-month period, Executive shall be entitled to continue any
                  of said benefits which qualify as group insurance benefits for
                  continuation coverage under the Comprehensive Omnibus
                  Reconciliation Act ("COBRA") or applicable state law.

                  (b) Good Reason. Executive shall be entitled to terminate his
         employment for Good Reason. For purposes of this Agreement, "Good
         Reason" shall mean, without Executive's express written consent, any of
         the following:

                           (i) the assignment to Executive of any duties
                  inconsistent with Executive's status or position with MTS, or
                  a substantial alteration in the nature or status of
                  Executive's responsibilities; or

<PAGE>

Change in Control Agreement
Page 5

                           (ii) a reduction by MTS in Executive's annual base
                  salary other than a reduction comparable to other senior
                  Executives of MTS in connection with a company-wide cost
                  reduction program; or

                           (iii) the relocation of MTS' principal executive
                  offices to a location more than fifty miles from Eden Prairie,
                  Minnesota or MTS requiring Executive to be based anywhere
                  other than MTS' principal executive offices except for
                  required travel on MTS' business to an extent substantially
                  consistent with Executive's prior business travel obligations;
                  or

                           (iv) the failure by MTS to continue to provide
                  Executive with benefits at least as favorable to those enjoyed
                  by Executive under any of MTS' pension, life insurance,
                  medical, health and accident, disability, deferred
                  compensation, incentive awards, incentive stock options, or
                  savings plans in which Executive was participating at the time
                  of the Change in Control, the taking of any action by MTS
                  which would directly or indirectly materially reduce any of
                  such benefits or deprive Executive of any material fringe
                  benefit enjoyed by him at the time of the Change in Control,
                  or the failure by MTS to provide Executive with the number of
                  paid vacation days to which Executive is entitled at the time
                  of the Change in Control, provided, however, that MTS may
                  amend any such plan or programs as long as such amendments do
                  not reduce any benefits to which Executive would be entitled
                  upon termination; or

                           (v) the failure of MTS to obtain a satisfactory
                  agreement from any successor to assume and agree to perform
                  this Agreement, as contemplated in Section 12; or

                           (vi) MTS requests Executive's resignation from
                  employment; or

                           (vii) any purported termination of Executive's
                  employment which is not made pursuant to a Notice of
                  Termination satisfying the requirements of this Agreement; for
                  purposes of this Agreement, no such purported termination
                  shall be effective; or

                           (viii) any material violation by MTS of this
                  Agreement.

                  (c) Voluntary Termination Deemed Good Reason. Notwithstanding
         anything herein to the contrary, during the period commencing on the
         30th day following a Change in Control (whether Friendly or Unfriendly)
         and ending on the 180th day following a Change in Control, Executive
         may voluntarily terminate his employment for any reason, and such
         termination shall be deemed "Good Reason" for all purposes of this
         Agreement.

<PAGE>

Change in Control Agreement
Page 6

         6. Termination - Unfriendly Change in Control.

                  (a) If, after an Unfriendly Change in Control, Executive's
         employment with MTS is terminated (1) by MTS other than for Cause,
         death or disability, or (2) by Executive for Good Reason, the Executive
         shall be entitled to the following benefits:

                            (i) Severance. MTS shall pay the Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 36 multiplied by the Executive's Monthly Gross
                  Income as defined in Section 5(a)(i) above. The Severance
                  Payment shall be made in a single lump sum within 30 days
                  after the Date of Termination, subject to all applicable
                  federal and state withholding.

                           (ii) Benefits. For a 36-month period after the Date
                  of Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the responsive percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive shall
                  be reported to MTS. At the expiration of said 36-month period,
                  Executive shall be entitled to continue any of said benefits
                  which qualify as group insurance benefits for continuation
                  coverage under the Comprehensive Omnibus Budget Reconciliation
                  Act ("COBRA") or applicable state law.

                  (b) If the Executive voluntarily terminates his employment
         other than for Good Reason but more than 180 days after an Unfriendly
         Change in Control, Executive shall be entitled to the following
         benefits:

                           (i) Severance. MTS shall pay to Executive as a
                  severance payment (the "Severance Payment") an amount equal to
                  the product of 18 multiplied by the Executive's monthly Gross
                  Income as defined in Section 5(a)(i) above. The Severance
                  Payment shall be made in a single lump sum within 30 days
                  after the Date of Termination, subject to all applicable
                  federal and state withholding.

                           (ii) Benefits. For 18-month period after the Date of
                  Termination, MTS shall continue to pay its portion of
                  Executive's life and health insurance benefits which the
                  Executive is receiving immediately prior to the Notice of
                  Termination. Executive shall be responsible for payment of his
                  portion of the premiums for such benefits. The MTS portion and
                  the Executive's portion shall be the respective percentages of
                  such premiums paid immediately prior to the Date of
                  Termination. Benefits otherwise receivable by Executive
                  pursuant to this paragraph shall be reduced to the extent
                  comparable benefits are actually received by Executive during
                  such period, and any such benefits actually received by
                  Executive shall be reported to

<PAGE>

Change in Control Agreement
Page 7

                  MTS. At the expiration of said 18-month period, Executive
                  shall be entitled to continue any of said benefits which
                  qualify as group insurance benefits for continuation coverage
                  under the Comprehensive Omnibus Budget Reconciliation Act
                  ("COBRA") or applicable state law.

         7. Additional Benefits. In addition to all other amounts payable and
benefits receivable to Executive upon termination of employment covered under
this Agreement, Executive shall be entitled to the following benefits:

                  (a) Legal Fees. In the event of any termination of employment
         under this Agreement, other than termination for Cause, MTS shall pay
         to Executive all legal fees and expenses reasonably incurred by
         Executive in contesting or disputing any such termination or in seeking
         to obtain or enforce any right or benefit provided by this Agreement.

                  (b) Retirement Plan. Executive shall, upon termination of
         employment, be entitled to receive all benefits payable to the
         Executive under the MTS Systems Corporation Profit Sharing Retirement
         Plan and any other plan or agreement relating to retirement benefits.

                  (c) Employee Stock Option Certificate. The Executive's rights
         under any existing Employee Stock Option Agreement and any future such
         agreements, including particularly his right to exercise his option
         rights following his termination of employment, shall continue to be
         fully effective hereunder.

         8. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by Executive as the result
of employment by another employer or by retirement benefits after the Date of
Termination, or except as otherwise provided in this Agreement.

         9. Potential Excise Tax; Indemnification

                  (a) Excise Tax. Should any payments hereunder or contemplated
         hereby be subject to excise tax pursuant to Section 4999 of the
         Internal Revenue Code of 1986, as may be amended, or any successor or
         similar provision thereto, or comparable state or local tax laws, MTS
         shall pay to the Executive such additional compensation as is necessary
         (after taking into account all federal, state and local income taxes
         payable by the Executive as a result of the receipt of such
         compensation) to place the Executive in the same after-tax position he
         would have been in had no such excise tax (or any interest or penalties
         thereon) been paid or incurred. MTS shall pay such additional
         compensation upon the earlier of:

                           (i) the time at which MTS withholds such excise tax
                  from any payments to the Executive; or

<PAGE>

Change in Control Agreement
Page 8

                           (ii) 30 days after the Executive notifies MTS that
                  the Executive has paid such excise tax pursuant to a tax
                  return filed by the Executive which takes the position that
                  such excise tax is due and payable in reliance on a written
                  opinion of the Executive's tax counsel that it is more likely
                  than not that such excise tax is due and payable, or, if
                  later, the date the IRS notifies Executive that such amount is
                  due and payable.

         Without limiting the obligation of MTS hereunder, the Executive agrees,
         in the event the Executive makes any payment pursuant to the preceding
         sentence, to negotiate with MTS in good faith with respect to
         procedures reasonably requested by MTS which would afford MTS the
         ability to contest the imposition of such excise tax; provided,
         however, that the Executive will not be required to afford MTS any
         right to contest the applicability of any such excise tax to the extent
         that the Executive reasonably determines that such contest is
         inconsistent with the overall tax interests of the Executive.

         MTS agrees to hold in confidence and not to disclose, without the
         Executive's prior written consent, any information with regard to the
         Executive's tax position which MTS obtains pursuant to this subsection.

                  (b) Indemnification. MTS will indemnify the Executive (and his
         legal representative or other successors) to the fullest extent
         permitted (including payment of expenses in advance of final
         disposition of the proceeding) by the laws of the State of Minnesota,
         as in effect at the time of the subject act or omission, or the
         Articles of Incorporation and By-Laws of MTS as in effect at such time
         or on the date of this Agreement, whichever affords or afforded greater
         protection to the Executive; and the Executive shall be entitled to the
         protection of any insurance policies MTS may elect to maintain
         generally for the benefit of its directors and officers, against all
         costs, charges and expenses whatsoever incurred or sustained by him or
         his legal representatives in connection with any action, suit or
         proceeding to which he (or his legal representative or other
         successors) may be made a party by reason of his being or having been a
         director, officer or employee of MTS or any of its subsidiaries or his
         serving or having served any other enterprise as a director, officer or
         employee at the request of MTS, provided that MTS shall cause to be
         maintained in effect for not less than six years from the date of a
         Change in Control (to the extent available) policies of directors' and
         officers' liability insurance of at least the same coverage as those
         maintained by MTS on the date of this Agreement and containing terms
         and conditions which are no less advantageous than such policies.

         10. Non-Competition and Confidentiality.

                  (a) Noncompetition. Except as provided in subsection (c)
         below, Executive agrees that, as a condition of receiving benefits
         under this Agreement, he will not render services directly or
         indirectly to any competing organization, wherever located, for a
         period of one year following the Date of Termination, in connection
         with the design, implementation, development, manufacture, marketing,
         sale, merchandising, leasing,

<PAGE>

Change in Control Agreement
Page 9

         servicing or promotion of any "Conflicting Product" which as used
         herein means any product, process, system or service of any person,
         firm, corporation, organization other than MTS, in existence or under
         development, which is the same as or similar to or competes with, or
         has a usage allied to, a product, process, system, or service produced,
         developed, or used by MTS. Executive agrees that violation of this
         covenant not to compete with MTS shall result in immediate cessation of
         all benefits hereunder, other than insurance benefits, which Executive
         may continue where permitted under federal and state law at his own
         expense.

                   (b) Confidentiality. Executive further agrees and
         acknowledges his existing obligation that at all times during and
         subsequent to his employment with MTS, he will not divulge or
         appropriate to his own use or the uses of others any secret or
         confidential information or knowledge pertaining to the business of
         MTS, or any of its subsidiaries, obtained during his employment by MTS
         or any of its subsidiaries.

                  (c) Waiver - Unfriendly Change in Control. Notwithstanding
         anything herein to the contrary: the restriction on competition under
         subsection (a) shall not apply if the Executive's employment terminates
         following an Unfriendly Change in Control. Furthermore, in such event,
         MTS waives any other restriction on Executive's employment and consents
         unconditionally to any employment Executive may subsequently obtain.

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

         12. Successors; Binding Agreement.

<PAGE>

Change in Control Agreement
Page 10

                  (a) Successors. MTS will require any successor (whether direct
         or indirect, by purchase, merger, consolidation or otherwise) to all or
         substantially all of the business and/or assets of MTS to expressly
         assume and agree to perform this Agreement in the same manner and to
         the same extent that MTS would be required to perform it if no such
         succession had taken place. Failure of MTS to obtain such assumption
         and agreement prior to the effectiveness of any such succession shall
         be a breach of this Agreement and shall entitle Executive to
         compensation from MTS in the same amount and on the same terms as he
         would be entitled hereunder if he terminated his employment for Good
         Reason following a Change in Control, except that for purposes of
         implementing the foregoing, the date on which any such succession
         becomes effective shall be deemed the Date of Termination.

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

         13. Notice.

                  (a) Form and Delivery. All notices and other communications
         provided for in the Agreement shall be in writing and shall be deemed
         to have been duly given when delivered or mailed by United States
         registered or certified mail, return receipt requested, postage
         prepaid, addressed to the last known residence address of the Executive
         or in the case of MTS, to its principal office to the attention of each
         of the then directors of MTS with a copy to its Secretary, or to such
         other address as either party may have furnished to the other in
         writing in accordance herewith, except that notice of change of address
         shall be effective only upon receipt.

                  (b) Notice of Termination. Any purported termination of
         Executive's employment by MTS or by Executive shall be communicated by
         written Notice of Termination to the other party hereto, which shall
         indicate the specific termination provision in this Agreement relied
         upon and shall set forth the facts and circumstances claimed to provide
         a basis for termination of Executive's employment.

                  (c) Date of Termination. For purposes of this Agreement, "Date
         of Termination" shall mean the date specified in the Notice of
         Termination which shall not be less than 10 nor more than 30 days,
         respectively, from the date such Notice of Termination is given.

                  (d) Dispute of Termination. If, within 10 days after any
         Notice of Termination is given, the party receiving such Notice of
         Termination notifies the other party that a dispute exists concerning
         the termination, the Date of Termination shall be the date on which the
         dispute is finally determined, either by mutual written agreement of
         the parties, or by a final

<PAGE>

Change in Control Agreement
Page 11

         judgment, order or decree of a court of competent jurisdiction (which
         is not appealable or the time for appeal therefrom having expired and
         no appeal having been perfected); provided, that the Date of
         Termination shall be extended by a notice of dispute only if such
         notice is given in good faith and the party giving such notice pursues
         the resolution of such dispute with reasonable diligence in accordance
         with Section 14 below. Notwithstanding the pendency of any such
         dispute, MTS shall continue to pay Executive full compensation in
         effect when the notice giving rise to the dispute was given (including,
         but not limited to, base salary) and continue Executive as a
         participant in all compensation, benefit and insurance plans in which
         the Executive was participating when the notice giving rise to the
         dispute was given, until the dispute is finally resolved in accordance
         with this subsection or at the end of a period of 180 days, whichever
         first occurs. Amounts paid under this subsection are in addition to all
         other amounts due under this Agreement and shall not be offset against
         or reduce any other amounts under this Agreement.

         14. Arbitration. Any dispute arising under or in connection with this
Agreement (including without limitation, the making of this Agreement or the
Executive's termination of employment) shall be resolved by final and binding
arbitration to be held in Minneapolis, Minnesota in accordance with the rules
and procedures of the American Arbitration Association. The parties shall select
a mutually acceptable single arbitrator to resolve the dispute or if they fail
or are unable to do so, each side shall within the following ten business days
select a single arbitrator and the two so selected shall select a third
arbitrator within the following ten business days. The arbitrator shall have no
power to award any punitive or exemplary damages. The arbitrator may construe or
interpret, but shall not ignore or vary the terms of this Agreement, and shall
be bound by controlling law. The arbitration award or other resolution may be
entered as a judgment at the request of the prevailing party by any court of
competent jurisdiction in Minnesota or elsewhere.

         15. Miscellaneous.

                  (a) Modification and Waiver. Except as otherwise specifically
         provided in this Agreement, no provision of this Agreement may be
         modified, waived or discharged unless such waiver, modification or
         discharge is agreed to in writing and signed by the parties. No waiver
         by either party hereto at any time of any breach by the other party to
         this Agreement of, or compliance with, any other party shall be deemed
         a waiver of similar or dissimilar provisions or conditions at the same
         or at any prior or similar time.

                  (b) Entire Agreement. No agreements or representations, oral
         or otherwise, express or implied, with respect to the subject matter
         hereof have been made by either party which are not expressly set forth
         in this Agreement.

                  (c) Governing Law. The validity, interpretation, construction
         and performance of this Agreement shall be governed by the laws of the
         State of Minnesota.

<PAGE>

Change in Control Agreement
Page 12

                  (d) Severability. The invalidity or unenforceability or any
         provision of this Agreement shall not affect the validity or
         enforceability of any other provision of this Agreement, which shall
         remain in full force and effect.

         IN WITNESS WHEREOF, MTS, through its authorized officer, and the
Executive have executed this Agreement as of the day and date first above
written.

EXECUTIVE:                               MTS SYSTEMS CORPORATION

/s/ Kelly H. Donaldson                   By /s/ Sidney W. Emery Jr.
---------------------------------          ---------------------------------

                                         Its  Chairman and CEO
                                              ----------------

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