8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________

FORM 8-K
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): January 25, 2005

MTS SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA	0-2382	41-0908057
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

14000 TECHNOLOGY DRIVE, EDEN PRAIRIE, MN 55344
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(952) 937-4000
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.   Entry into a Material Definitive Agreement

On January 25, 2005, each non-employee director of MTS Systems Corporation (the “Company”) was granted 2,500 shares of restricted stock. The following describes compensation payments to non-employee members of the Company’s Board of Directors.

Directors who are not otherwise directly or indirectly compensated by the Company are each paid directors’ fees in the form of an annual retainer of $40,000, with no additional per Board meeting fee. Committee members who attend committee meetings are compensated at a rate of $1,000 per meeting. The Chair of the Audit Committee receives an additional $10,000 annual retainer and Chairs of the Human Resources Committee and the Governance and Nominating Committee receive an additional $3,000 annual retainer. Non-employee directors are also reimbursed for travel expenses to Board of Directors’ meetings.

Each non-employee director receives a grant of 2,500 shares of restricted stock upon his or her election or re-election to the Board of Directors at the Company’s Annual Meeting of Shareholders. One third of these restricted shares vest annually commencing on the first anniversary of the date of grant. The Board has waived its rights to receive stock options under the annual grant provisions of the 1997 Stock Option Plan in lieu of the restricted stock grants. The Board has established an objective that each director own an amount of the Company’s Common Stock equal to five times the annual cash retainer.

Item 9.01.   Financial Statements and Exhibits

(c) Exhibits

Exhibit 99.1 – Form of Restricted Stock Agreement for non-employee directors of MTS Systems Corporation.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MTS SYSTEMS CORPORATION (Registrant)
Date:   January 28, 2005	By:	/s/   Susan E. Knight
		Susan E. Knight
		Vice President and Chief Financial Officer

3

MTS SYSTEMS CORPORATION
FORM 8-K REPORT

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Form of Restricted Stock Agreement for non-employee directors of MTS Systems Corporation.

4

EX-99.1

Exhibit 99.1

Notice of Grant of Restricted Stock	MTS SYSTEMS CORPORATION
And Restricted Stock Agreement - Director	ID: 41-0908057
	14000 Technology Drive
	Eden Prairie, MN 55344
<<First>><<MI>><<Last>>	Award Number:	<<Number>>
<<Address>>	Plan:	<<Plan>>
<<M_2nd_Line>>	ID:	<<ID>>
<<City>><<Rg>><<Postal_code>>

Effective <<Grant_Date>> , you have been granted <<Shares>> shares of MTS SYSTEMS CORPORATION (the Company) stock pursuant to the Company's 1994 Stock Plan (the "Plan"), subject to restrictions on your right to transfer the Shares.

The per Share value on the date of grant is $                        and the total market value based on the number of Shares granted is $                        .

Restriction on Shares under this Grant will lapse with respect to the number of Shares on the dates shown subject to earlier lapse as described below:

Shares	Date Restriction Lapse
<<M_112503>>	Merge_Vesting

By accepting this grant via this website, you and the Company agree that the Restricted Stock evidenced by this Restricted Stock Agreement is subject to the following:

A. This Agreement and the Shares are governed by all the terms, provisions and conditions set forth in the Company’s 1994 Stock Plan, as amended, and by Uniform Terms and Conditions Applicable to Restricted Stock Grants adopted by the Human Resource Committee of the Board of Directors of the Company, which are incorporated herein.

B. If you serve as a director of the Company for ten or more years, all restrictions shall lapse immediately on the date you cease to be a director for any reason other than your voluntary resignation that is effective on a date earlier than the last day of your regular term as a director.

C. All restrictions shall lapse upon or immediately prior to the occurrence of an Event as set forth in the Uniform Terms and Conditions Applicable to Restricted Stock Grants.

D. The Company may amend or terminate the Plan and this Agreement at any time, provided that no such action shall impair any rights that have accrued at the time of amendment or termination without your consent.

E. This electronic document and your acceptance are the only evidence of this grant and no paper copy will be sent to you to evidence the grant and your acceptance.

/s/ Barbara J. Carpenter	Today's date
MTS SYSTEMS CORPORATION	Date

UNIFORM TERMS AND CONDITIONS APPLICABLE TO
RESTRICTED STOCK GRANTS UNDER
THE MTS SYSTEMS CORPORATION 1994 STOCK PLAN

Pursuant to the authority set forth in Section 2 of the MTS Systems Corporation 1994 Stock Plan (“1994 Stock Plan”) for the Human Resources Committee of the Board of Directors to adopt, alter and repeal administrative rules, guidelines, and practices governing the Plan as it shall, from time to time, deem advisable, and in accordance with the terms of the 1994 Stock Plan, the following terms and conditions apply to any and all awards of Restricted Stock granted under the Plan to employees and directors (the “Recipient”):

1. The terms and conditions set forth below govern the issuance to the respective Recipient of the number of shares of the Company’s Common Stock, $.25 par value per share (the “Shares”) set forth in a separate Notice of Grant of Restricted Stock (the “Notice”). This document and the Notice constitute the Restricted Stock Agreement. Until lapse of the restriction period described herein and in the Notice (the “Restriction Period”), Recipient shall not sell, transfer, pledge or otherwise encumber any of the Shares, whether voluntarily, involuntarily or by operation of law. Any purported transfer, pledge or encumbrance shall be void and unenforceable against the Company, and no purported transferee shall acquire any right or interest with respect to the Shares as a result.

2. The restrictions described in Section 1 above and in this Agreement shall commence on the date hereof and shall lapse and be of no further force and effect on the dates set forth in the Notice, or upon earlier lapse as set forth herein and as otherwise determined by the Committee; provided that the Recipient is employed by MTS or its subsidiaries (if an employee) or is serving as a director of MTS (if a non-employee director) on the date on which the restrictions lapse. Except as provided in the Notice, all Shares for which the Restriction Period has not lapsed shall be forfeited to the Company, without payment therefor, if during the Restriction Period the Recipient ceases to be employed (if an employee) or ceases to be a director (if a non-employee director) for any reason.

3. Notwithstanding Section 2, all restrictions on Shares for which the Restriction Period has not earlier lapsed in accordance with Section 2 and the Notice shall immediately lapse upon the occurrence of an Event. For purposes of the Restricted Stock Agreement, “Event” shall mean the occurrence of any of the following: (a) dissolution or liquidation of the Company other than in conjunction with a bankruptcy of the Company or any similar occurrence, (b) any merger, consolidation, acquisition, separation, reorganization, or similar occurrence, where the Company will not be the surviving entity or (c) the transfer of substantially all of the assets of the Company or 20% or more of the outstanding Shares of Common Stock of the Company.

4. The certificate or certificates representing the Shares, together with stock powers or other instruments of transfer appropriately endorsed in blank by the Recipient, will be held on deposit with the Company until the Restriction Period shall have lapsed with respect to such Shares pursuant to Section 2 above. If the Shares are maintained in uncertificated form, the Company shall denote such Shares as being subject to restrictions as set forth above as part of the book entry of the Shares on the Company’s stock records. After the Restriction Period lapses, the Company shall promptly cause the certificate or certificates for the Shares and the stock powers relating thereto, to be delivered to the Recipient, or shall mark its records that the Recipient is the owner of Shares.

5. While any Shares are subject to the restrictions during the Restriction Period, the certificate representing such Shares shall contain a legend substantially in the following form:

“The transferability of this certificate and the Shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the MTS Systems Corporation 1994 Stock Plan and an Agreement (consisting of the Notice and Uniform Terms and Conditions Applicable to Restricted Stock Grants) governing the grant of Restricted Stock. Copies of such Plan and Agreement are on file in the offices of MTS Systems Corporation, 14000 Technology Drive, Eden Prairie, MN 55344.”

6. During the Restriction Period, the Recipient shall have all the rights of a stockholder of the Company with respect to the Shares, including the right to vote the Shares and to receive all cash dividends or other distributions (other than in the form of Shares of the Company) paid or made with respect to the Shares.

7. The Company may make an equitable adjustment in the number of Shares for which the Restriction Period has not lapsed in the event of (a) a subdivision or combination of the shares of capital stock of the Company, (b) a dividend payable in shares of capital stock of the Company, (c) a reclassification of any shares of capital stock of the Company, or (d) any other change in the capital structure of the Company. Any additional Shares issued to the Recipient as a result of any of the foregoing events shall continue to be subject to the terms set forth herein to the same extent as the Shares giving rise to the right to receive such additional Shares.

8. A Recipient who is an employee may elect by written notice to the Company to satisfy part or all of any withholding tax requirements associated with the grant by authorizing the Company to retain from the number of shares of Stock that would otherwise be deliverable to the Recipient; or (b) delivering to the Company from Stock already owned by the Recipient that number of shares having an aggregate Fair Market Value equal to part or all of the tax payable by the Recipient under this Section, and in the event shares of Stock are withheld or delivered, the amount withheld shall not exceed the statutory minimum required federal, state FICA and other payroll taxes.

9. Any “affiliate” (as defined in Rule 144 under the Securities Exchange Act) shall resell any Shares acquired under the Plan only in accordance with the applicable requirements of the Company’s Insider Trading Policy, as amended from time to time, Rule 144 and any other applicable requirements of the Securities Exchange Act.

10. If any Recipient, who is an employee, is on a Company approved leave of absence for more than 90 days, other than a leave that qualifies as a military leave, and does not return to employment with the Company within 30 days of the end of the approved leave, the Recipient will incur a termination of employment for purposes of the Plan as of the last day of the approved leave. The Human Resources department of the Company is hereby delegated the authority to approve all such leaves of absence and to enter into such agreements for purposes of the Plan.

11. Nothing in this Agreement shall be construed as constituting a commitment, guaranty, agreement or understanding of any kind or nature that the Company or its subsidiaries to retain the services of the Recipient, and this Agreement shall not affect in any way the right of the Company, its subsidiaries or the Recipient to terminate the relationship as employee or director, as the case may be, at any time or for any reason in accordance with the procedures governing such termination, without any liability or claim under the Plan or this Agreement. The grant of Restricted Stock hereunder shall not be considered to be part of the Recipient’s wages or salary as an employee for purposes of any severance or similar pay or be part of any claim for damages arising out of any action for wrongful termination or otherwise.

12. With respect to Shares held by a Recipient who is an employee, the Company may, in its sole discretion, repurchase for cash or other immediately available funds all or any portion of any Shares issued under the Plan, provided, however, that this right to repurchase shall not be exercised with respect to any Shares until such Shares have been held by the Recipient for a period of six months and one day after the date of exercise. The repurchase price shall be the then Fair Market Value of the shares if the Recipient’s termination of employment with the Company or any of its subsidiaries was other than for Cause (as defined in the 1994 Stock Plan); if the Recipient’s termination of employment with the Company or any of its subsidiaries was for Cause, or if the Recipient directly or indirectly competes with or is employed by a competitor of the Company within six months after the Recipient’s termination of employment, the repurchase price shall be the lesser of the then Fair Market Value or the Fair Market Value of the Shares on the date of grant. The Committee hereby delegates to the Chief Executive Officer the authority and discretion to exercise this right of repurchase with respect to Shares held by persons other than the executive officers of the Company.

Except to the extent specifically provided in this Agreement, this grant shall be subject to and governed by the terms and conditions of the Plan, which shall be incorporated as though fully set forth herein. The foregoing terms and conditions shall remain in effect until further modified by action of this Committee or by the Board of Directors, either in the form of a modification of these terms and conditions or by a written term or condition set forth in any individual grant approved by the Committee subsequent to the date of adoption of these terms and conditions, provided that no change shall adversely affect any accrued right of the Recipient without the Recipient’s written consent.