Item
5.02. Departure of Directors or Certain Officers; Election of Directors, Appointment of Certain Officers, Compensatory Arrangements
of Certain Officers
As
previously disclosed, on December 8, 2020, MTS Systems Corporation, a Minnesota corporation (the “Company”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with Amphenol Corporation, a Delaware corporation (“Parent”),
and Moon Merger Sub Corporation, a Minnesota corporation and wholly-owned subsidiary of Parent (“Merger Sub”). On
the terms, and subject to the conditions, of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”),
with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent.
On
December 18, 2020, each of the following named executive officers of the Company entered into a retention agreement
with the Company regarding a grant under a retention bonus pool relating to the Merger that was previously approved by the
Compensation and Leadership Development Committee of the Board of Directors of the Company (the “Board”), with
allocations of awards under such bonus pool in the following amounts: Randy J. Martinez, President and Chief
Executive Officer, $1,440,000; Brian T. Ross, Executive Vice President and Chief Financial Officer, $500,000; Steven B.
Harrison, Executive Vice President and President, Test & Simulation, $500,000; and David T. Hore, Executive Vice
President and President, Sensors, $500,000. Each retention bonus will be subject to the terms and conditions of the
retention agreement, including: (i) 50% of the retention bonus will be paid shortly after the date the Merger Agreement
is signed and will be subject to a clawback obligation in the event the executive resigns without “good reason”
or is terminated for “cause”, but no clawback will be required if the consummation of the transactions
contemplated by the Merger Agreement (the “Closing”) does not occur, and (ii) 50% of the retention bonus will be
payable on or around the first anniversary of the Closing (subject to the executive’s continued employment through such
anniversary or, in the case of the Company’s Chief Executive Officer, an earlier qualifying termination (including
resignation for “good reason” or termination “without cause”) on or after the Closing). The
Company’s Chief Executive Officer’s retention agreement also includes a requirement for the executing and
non-revocation of a release of claims in favor of the Company on certain terminations of employment.
On
December 17, 2020, following a recommendation from the Nominating and Governance Committee of the Board, Randy J. Martinez’s
appointment as President and Chief Executive Officer of the Company by the Board was effective. Mr. Martinez has served as the
Company’s Interim President and Chief Executive Officer since May 23, 2020. Mr. Martinez will remain a member of the Company’s
Board. The Board determined to appoint Mr. Martinez as President and Chief Executive Officer during the pendency of the proposed
acquisition by Parent as part of the Company’s efforts to continue to operate in ordinary course and to assist in maintaining
stability within the Company’s workforce. From and after the Closing, Parent will make all determinations with respect to
the officers of the Company, including the position of Chief Executive Officer of the Company.
Mr.
Martinez brings an exceptional track record of executive and director-level leadership in billion-dollar public corporations in
aviation, aerospace, defense and industrials. He joined the Company’s Board as an independent director in March 2014.
From 2009 to 2017, Mr. Martinez served in several leadership roles at AAR Corporation (NYSE), a provider of aviation services
to the worldwide commercial aviation and aerospace, defense industries, most notably President & Chief Executive
Officer of the Airlift Group and Group Vice President, Aviation Services. Before joining AAR, Mr. Martinez was the Chief
Executive Officer at World Air Holdings, Inc. (NASDAQ). As a graduate of the United States Air Force Academy, Mr. Martinez
served with distinction in the U.S. Air Force for 21 years, retiring as a Colonel and Command Pilot and having held a wide variety
of leadership roles, including command and senior staff positions.
Mr.
Martinez was not appointed pursuant to any arrangement or understanding with any person, and Mr. Martinez does not have any family
relationships with any directors or executive officers of the Company. Mr. Martinez has not had a direct or indirect material
interest in any transaction with the Company since September 30, 2018, nor is any such transaction currently proposed, that would
be reportable under Item 404(a) of Regulation S-K.
On
December 13, 2020, in connection with Mr. Martinez’s appointment as President and Chief Executive Officer of the Company,
the Compensation and Leadership Development Committee of the Board approved a one-time equity award to Mr. Martinez equal in value
to approximately $2,000,000 on the date of grant, which is expected to be granted on or about December 22, 2020, and will be provided
in the form of 50% restricted stock units and 50% performance restricted stock units. Mr. Martinez’s
base salary will remain at $720,000. On December 17, 2020, in connection with his appointment as President and Chief Executive
Officer of the Company, Mr. Martinez and the Company entered into an Offer Letter, as previously approved by the Compensation
and Leadership Development Committee of the Board, reflecting such terms.