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April 5, 2018
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Dear CTS Shareholder:
You are cordially invited to attend the 2018 Annual Meeting of Shareholders of CTS Corporation. The meeting will be held on
Thursday, May 17, 2018, at 9:30 a.m. Central Time, at the Hotel Arista located at 2139 City Gate Lane, Naperville, Illinois 60563
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We are pleased to continue to take advantage of the Securities and Exchange Commission rules allowing us to furnish proxy materials to shareholders on the Internet. We believe that these rules provide you with proxy materials more quickly and reduce the environmental impact of our Annual Meeting. Accordingly, we are mailing to shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review our 2018 Proxy Statement and Annual Report to Shareholders for the year ended December 31, 2017, and to vote online or by telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions for requesting these materials on page 3 of the 2018 Proxy Statement.
We hope you will attend the meeting in person. Whether you plan to attend the meeting or not, we encourage you to read this proxy statement and to vote your shares. The vote of every shareholder is important.
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Kieran O’Sullivan
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Chairman, President and Chief Executive Officer
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NOTICE OF THE 2018 ANNUAL MEETING OF SHAREHOLDERS
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Preamble
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2018 ANNUAL MEETING OF SHAREHOLDERS
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PROPOSAL 1: ELECTION OF DIRECTORS
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PROPOSAL 2: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF CTS’ NAMED EXECUTIVE OFFICERS
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PROPOSAL 3: RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT AUDITOR FOR 2018
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PROPOSAL 4: APPROVAL OF THE CTS CORPORATION 2018 EQUITY AND INCENTIVE COMPENSATION PLAN
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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COMMITTEES OF THE BOARD OF DIRECTORS
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Compensation Committee
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Nominating and Governance Committee
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Audit Committee
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Technology and Transactions Committee
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FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS
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Attendance
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Director Independence
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Meetings of Non‑Management Directors
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Board Leadership Structure
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Board of Directors’ Role in Risk Oversight
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Director Education
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Stock Ownership Guidelines for Executives and Directors
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Director Resignation Policy
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Code of Ethics
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Communications to Directors
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STOCK OWNERSHIP INFORMATION
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Five Percent Owners of CTS Common Stock
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Directors’ and Officers’ Stock Ownership
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COMPENSATION DISCUSSION AND ANALYSIS
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Executive Summary
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Compensation Objectives
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Compensation Philosophy
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Role of Management in 2017 Named Executive Officer Compensation Decisions
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How Final 2017 Named Executive Officer Compensation was Determined
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Overall Mix and Structure of 2017 Named Executive Officer Compensation
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Benchmarking for 2017
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Elements of 2017 Named Executive Officer Compensation
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Agreements with Named Executive Officers
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Stock Ownership Guidelines
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CTS Securities Hedging/Pledging Policy
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Policy on Recovery of Awards
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COMPENSATION COMMITTEE REPORT
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CTS Corporation 2017 Compensation Committee
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EXECUTIVE COMPENSATION
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2017 Summary Compensation Table
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2017 Grants of Plan‑Based Awards
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PROPOSAL 1
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Election of seven directors for a one‑year term;
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PROPOSAL 2
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Approval, on an advisory basis, of the compensation of CTS’ named executive officers;
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PROPOSAL 3
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Ratification of the appointment of Grant Thornton LLP as CTS’ independent auditor for 2018;
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PROPOSAL 4
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Approval of the CTS Corporation 2018 Equity and Incentive Compensation Plan
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(the “2018 Plan”); and
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Any other business properly presented at the meeting.
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By Order of the Board of Directors,
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Luis F. Machado
Corporate Secretary |
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 2018.
The Notice, 2018 Proxy Statement, Form of Proxy
and 2017 Annual Report to Shareholders are available at
http://www.ctscorp.com/investors
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PROXY STATEMENT
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2018 ANNUAL MEETING OF SHAREHOLDERS
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Q:
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Upon what may I vote?
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A:
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(1) Election of director nominees to serve on the Board;
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(2)
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Approval, on an advisory basis, of the compensation of CTS’ named executive officers;
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(3)
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Ratification of the appointment of Grant Thornton LLP as CTS’ independent auditor for 2018; and
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(4)
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Approval of the CTS Corporation 2018 Equity and Incentive Compensation Plan (the “2018 Plan”).
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Q:
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How does the Board recommend that I vote?
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A:
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The Board recommends that you vote:
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(1)
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FOR each of the director nominees identified in this proxy statement;
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(2)
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FOR advisory approval of CTS’ named executive officer compensation;
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(3)
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FOR ratification of the appointment of Grant Thornton LLP as CTS’ independent auditor for 2018; and
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(4)
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FOR approval of the 2018 Plan.
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Q:
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How will voting on any other business be conducted?
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A:
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We are not aware of any other business to be brought before the shareholders at the Annual Meeting other than as described in this proxy statement. However, if any other business is properly presented for shareholder consideration, your signed proxy card gives authority to Kieran O’Sullivan, Chairman, President and Chief Executive Officer, and Luis F. Machado, Vice President, General Counsel and Corporate Secretary, to vote on those matters at their discretion.
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Q:
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How many votes are needed for approval of each proposal presented in this proxy statement?
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A:
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Assuming that at least a majority of the shares of CTS common stock are represented at the Annual Meeting, either in person or by proxy:
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(1)
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The seven director nominees receiving the most votes will be elected. Only votes cast for a nominee will have an impact on the election of directors. Abstentions, broker non‑votes and instructions on your proxy to withhold authority to vote for one or more of the nominees will have no impact as they will only result in those nominees receiving fewer votes;
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(2)
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An affirmative vote of a majority of votes cast is necessary to approve, on an advisory basis, the compensation of CTS’ named executive officers, although such vote will not be binding on CTS. Abstentions and broker non‑votes will have no impact on the outcome of this proposal;
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(3)
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The Audit Committee’s appointment of Grant Thornton LLP as CTS’ independent auditor for 2018 will be ratified if a majority of the votes cast support the appointment. Your broker or other nominee will be able to vote your shares with respect to this proposal without your instructions because the proposal to ratify the appointment of Grant Thornton LLP is considered “routine.” Abstentions will have no impact on the outcome of this proposal; and
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(4)
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An affirmative vote of a majority of votes cast is necessary to approve the 2018 Plan. Abstentions and broker non-votes will have no impact on the outcome of this proposal.
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Q:
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Who is entitled to vote?
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A:
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Shareholders of record at the close of business on March 19, 2018, which is referred to in this proxy statement as the Record Date, are entitled to vote at the Annual Meeting. As of close of business on the Record Date, there were 33,017,770 shares of CTS common stock issued and outstanding. Every shareholder is entitled to one vote for each share of CTS common stock held on the Record Date.
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Q:
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How do I vote?
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A:
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Please follow the instructions on your Notice of Internet Availability of Proxy Materials to vote online or by telephone up until 11:59 p.m. Eastern Time on May 16, 2018. Of course, you may always vote in person at the meeting. You may revoke your proxy at any time before it is exercised by giving us written notice, sent to our principal executive offices, by submitting a duly executed proxy card to us bearing a later date, or by giving notice to us at the Annual Meeting.
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Q:
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How can I vote shares of CTS common stock that I hold under the CTS Corporation Retirement Savings Plan?
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A:
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The CTS Corporation Retirement Savings Plan is CTS’ 401(k) plan. Vanguard Fiduciary Trust Company ("Vanguard"), the plan trustee, will vote the shares of CTS common stock in your account according to your instructions. You may use the proxy card provided or go online at www.proxyvote.com to instruct Vanguard. You must provide instructions or make changes to your instructions on how to vote shares of CTS common stock in your CTS Corporation Retirement Savings Plan on or before 11:59 p.m. Eastern Time on May 15, 2018. After that time, your instructions will be transmitted to the plan trustee and cannot be changed. If Vanguard does not receive your instructions to vote your shares of CTS common stock, they will not be voted.
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Q:
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Who is entitled to attend the Annual Meeting?
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A:
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Attendance at the Annual Meeting will be limited to our shareholders as of the Record Date and to pre‑approved guests of CTS. All shareholder guests must be pre‑approved by CTS and will be limited to spouses, persons required for medical assistance and properly authorized representatives of our shareholders as of the Record Date. Additionally, if you are not the record holder of your shares, to attend the Annual Meeting you must first obtain a legal proxy form from your broker or other organization that holds your shares. Please contact your broker or organization for instructions regarding obtaining a legal proxy. If you do obtain a legal proxy and plan to attend the Annual Meeting, you will be required to present a valid form of identification.
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Q:
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Who solicits proxies on behalf of the Board and how much will this proxy solicitation cost?
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A:
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Broadridge, Inc. distributes proxy materials on CTS’ behalf and is compensated by CTS for mailing and distribution expenses. Proxies may also be solicited by executive officers of CTS, for which no additional compensation is paid.
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Q:
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How can I receive paper or email copies of the proxy materials?
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A:
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Shareholders wishing to receive paper or email copies of the proxy materials for the Annual Meeting and for future annual meetings of shareholders may request to receive proxy materials in printed form by mail, or electronically by email, by directing written or oral requests to CTS Corporation, Corporate Secretary, 4925 Indiana Avenue, Lisle, Illinois 60532, by calling (630) 577‑8800 and leaving a message for our Corporate Secretary, by sending an email to shareholder.services@ctscorp.com by May 4, 2018, or by following the directions on your proxy card.
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Q:
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How may a shareholder nominate a candidate for election to the Board?
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A:
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Director nominees for the 2019 Annual Meeting of Shareholders may be nominated by shareholders by sending a written notice to the corporate office to the attention of the Corporate Secretary for CTS. Pursuant to the CTS Corporation Bylaws, all nominations must be received no earlier than January 2, 2019, and no later than February 16, 2019. The notice of nomination is required to contain certain representations and information about the nominee, which are described in CTS’ Bylaws. Copies of the Bylaws may be obtained free of charge from CTS’ Corporate Secretary, or from CTS’ website at
http://www.ctscorp.com/wp-content/uploads/BL.pdf.
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Q:
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When are shareholder proposals for the 2018 Annual Meeting of Shareholders due?
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A:
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CTS’ advance notice Bylaw provisions require that in order to be presented at the 2019 Annual Meeting of Shareholders, any shareholder proposal, including the nomination of a candidate for director, must be in writing and mailed to the corporate office to the attention of the Corporate Secretary for CTS, and must be received no earlier than January 2, 2019 and no later than February 16, 2019. Certain information is required to be included with shareholder proposals, which is described in CTS’ Bylaws. Copies of the Bylaws may be obtained free of charge from CTS’ Corporate Secretary, or from CTS’ website at
http://www.ctscorp.com/wp-content/uploads/BL.pdf
. To be included in our proxy materials relating to the 2019 Annual Meeting of Shareholders proposals must be received by us on or before December 6, 2018, (or, if the date of the 2019 Annual Meeting of Shareholders is more than 30 days before or after the date of the 2018 Annual Meeting of Shareholders, a reasonable time before we begin to print and send our proxy materials).
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PATRICIA K. COLLAWN
Age 59
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Director since 2003
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Ms. Collawn is the Chairman, President and Chief Executive Officer of PNM Resources, Inc., a multi‑state utilities corporation serving electricity customers. Ms. Collawn was named Chairman effective January 1, 2012, and President and Chief Executive Officer from March 1, 2010 to December 31, 2011. In March 2010, she was made a director of PNM Resources, Inc. She was President and Chief Operating Officer since August 2008 and Utilities President at PNM Resources, Inc. from June 2007 to August 2008. Prior to that, Ms. Collawn was President and Chief Executive Officer of Public Service Company of Colorado, an Xcel Energy, Inc. subsidiary, from October 2005. The Board believes that Ms. Collawn’s experience as a sitting President and Chief Executive Officer of a publicly traded corporation, as well as substantial operations experience, make her well qualified to serve as a director. Ms. Collawn received 98.99% of votes cast at the 2017 Annual Meeting.
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GORDON HUNTER
Age 66
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Director Since 2011
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Mr. Hunter is the Chairman of Littelfuse, Inc., a global electronics company. Mr. Hunter has served as a director of Littelfuse, Inc. since June 2002, and joined the company as Chief Operating Officer in November 2003. He assumed the role as Chairman, President and Chief Executive Officer of Littelfuse, Inc. on January 1, 2005 until January 2017. He served as Executive Chairman from January 1, 2017 until December 31, 2017. He is currently a member of the Board of Directors of Veeco Instruments, Inc., where he serves on its Compensation Committee and on the Board of Directors of SMC Company. Mr. Hunter also serves on the Council of Advisors of Shure Incorporated. The Board believes that Mr. Hunter's experience as a President and Chief Executive Officer of a publicly traded corporation serving global markets, as well as substantial experience in the electronics industry, make him well qualified to serve as a director. Mr. Hunter received 98.18% of votes cast at the 2017 Annual Meeting.
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WILLIAM S. JOHNSON
Age 61
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Director Since 2015
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Mr. Johnson is Senior Advisor of Cabot Microelectronics Corporation, a global supplier of specialty materials to the semiconductor industry. He joined the company as Chief Financial Officer in April 2003, was named an Executive Vice President in April 2013, and then served as Executive Vice President and Chief Financial Officer until January 2018. Prior to 2003, he was Executive Vice President and Chief Financial Officer for Budget Group, Inc. from August 2000 to March 2003. Before that, Mr. Johnson worked for 16 years at BP Amoco in various finance and management positions. The Board believes that Mr. Johnson’s experience as a Chief Financial Officer of a publicly traded corporation serving global markets, in addition to his financial expertise in a range of industries, substantial risk management skills and broad international business experience, make him well qualified to serve as a director. Mr. Johnson received 99.13% of votes cast at the 2017 Annual Meeting.
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DIANA M. MURPHY
Age 61
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Director since 2010
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Ms. Murphy is the Managing Director of Rocksolid Holdings, LLC, a private equity firm, serving in that capacity since January 2007. She was the managing director of the Georgia Research Alliance Venture Fund, a private investment fund created to help finance promising companies emerging from Georgia’s research universities, serving in that capacity from 2012 until 2015. Prior to joining Rocksolid, she was a Managing Director at Chartwell Capital Management Company, a private equity firm. She is Chairman of the Board of Directors of Landstar System, Inc., and a Director of Georgia Research Alliance Venture Fund, LLC and the Coastal Bank of Georgia, along with other private and non-profit boards. She is immediate Past President of the United States Golf Association. The Board believes that Ms. Murphy’s extensive experience in business management, strategic planning, marketing, public relations and experience on the boards of other companies make her well qualified to serve as a director. Ms. Murphy received 98.44% of votes cast at the 2017 Annual Meeting.
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KIERAN O’SULLIVAN
Age 56
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Director since 2013
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Mr. O’Sullivan is the Chairman, President and Chief Executive Officer of CTS. Prior to assuming this role on January 7, 2013, Mr. O’Sullivan served as Executive Vice President of Continental AG’s Global Infotainment and Connectivity Business and led the NAFTA Interior Division, having joined Continental AG, a global automotive supplier, in 2006. Mr. O'Sullivan is a member of the Board of Directors and Chairman of the Compensation Committee, and a member of the Risk Committee of LCI Industries, a supplier of components for manufacturers of recreational vehicles, manufactured homes and for the related aftermarkets of those industries. The Board believes that Mr. O’Sullivan’s more than twenty‑six years of leadership experience in operations, strategy, mergers and acquisitions, and finance roles in the manufacturing services, electronics and automotive business segments make him well qualified to serve as a director. Mr. O’Sullivan received 97.64% of votes cast at the 2017 Annual Meeting.
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ROBERT A. PROFUSEK
Age 68
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Director since 1998
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Mr. Profusek is the global chairman of the mergers & acquisitions department of Jones Day, a global law firm which he joined in 1975. Mr. Profusek also serves as the Lead Director of Valero Energy Corporation and is a member of the Compensation Committee of Valero's Board of Directors. He previously served as a director of two other NYSE‑listed companies. The Board believes that Mr. Profusek’s substantial experience in mergers and acquisitions, corporate governance and experience serving as a director of other publicly traded companies make him well qualified to serve as a director. Mr. Profusek received 99.11% of votes cast at the 2017 Annual Meeting.
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ALFONSO G. ZULUETA
Age 55
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Director since 2018
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Mr. Zulueta is Senior Vice President with Eli Lilly and Company and President of Lilly International. He has been with Eli Lilly and Company since 1988, holding various roles of increasing responsibility. Prior to his current role, Mr. Zulueta served as President of Emerging Markets, President of Eli Lilly Japan, and President of Asian Operations. The Board believes that Mr. Zulueta’s broad global management experience, his exposure to a range of cultures, and his deep experience in medical markets make him well qualified to serve as a director. Mr. Zulueta was appointed to the board of directors effective April 2, 2018.
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balancing fixed pay versus incentive‑based compensation appropriately;
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selecting appropriate and broad‑based performance metrics;
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establishing reasonable performance thresholds;
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capping performance‑based compensation awards at certain maximum levels;
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requiring multiple‑year performance periods for certain performance‑based awards; and
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vesting a significant amount of equity compensation over multi‑year periods.
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Total outstanding full-value awards (RSUs), assuming that the outstanding awards achieve maximum performance: 739,711 Common Shares (2.24 percent of outstanding Common Shares);
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Outstanding stock options: 295,000 Common Shares (.89 percent of outstanding Common Shares) (outstanding stock options have a weighted average exercise price of $18.37 and an average remaining term of 2.2 years);
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Total Common Shares subject to outstanding awards as described above (stock options and RSUs): 1,034,711 Common Shares (3.13 percent of outstanding Common Shares);
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Total Common Shares currently available for future awards under the 2014 Plan: 50,057 Common Shares (.15 percent of outstanding Common Shares);
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The total number of Common Shares subject to outstanding awards (1,034,711 Common Shares), plus the total number of Common Shares currently available for future awards under the 2014 Plan (50,057 Common Shares), represents a current overhang percentage of 3.29 percent (potential dilution represented by the 2014 Plan);
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Proposed Common Shares available for awards under the 2018 Plan: Our new Common Share request is for 2,500,000 Common Shares. This would essentially encompass the 50,057 Common Shares currently remaining available for awards under the 2014 Plan and an additional 2,449,943 Common Shares. A request for 2,500,000 Common Shares represents about 7.6 percent of our outstanding Common Shares, this percentage reflects the dilution of our shareholders that could occur if the 2018 Plan is approved; and
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The total Common Shares subject to outstanding awards as of March 19, 2018 (739,711 Common Shares), plus the proposed Common Shares available for awards under the 2018 Plan (2,500,000 Common Shares), represent a total overhang of 3,239,711 Common Shares (9.8 percent of outstanding Common Shares) under the 2018 Plan.
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the maximum number of Common Shares that may be issued or transferred upon the exercise of Incentive Stock Options (as defined below) will not exceed the total Common Share pool for the 2018 Plan as described above; and
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in no event will any non-employee director in any calendar year be granted compensation for such service having an aggregate maximum value (measured at the date of grant as applicable, and calculating the value of any equity awards based on the grant date fair value for financial reporting purposes) in excess of $500,000.
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Stock Options
: Stock options represent rights to purchase Common Shares at a specified exercise price. The exercise price of stock options granted under the 2018 Plan may not be less than the fair market value of a common share on the date of grant, unless such grant is in substitution or assumption of another stock option in accordance with plan terms. Options may take the form of incentive stock options or nonqualified stock options, but incentive stock options may only be granted to employees under Section 3401(c) of the Internal Revenue Code of 1986, as amended (the “Code”). Options may not have a term of more than 10 years, and may not provide for any dividends or dividend equivalents.
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SARs
: SARs represent rights to receive the difference between the fair market value of a Common Share on the date of exercise and the exercise price, payable in cash or Common Shares. The exercise price of SARs granted under the 2018 plan may not be less than the fair market value of a common share on the date of grant, unless such grant is in substitution or assumption of another SAR in accordance with plan terms. SARs may not have a term of more than 10 years and may not provide for any dividends or dividend equivalents.
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Restricted Stock
: Restricted stock represents Common Shares subject to certain terms and restrictions and the risk of forfeiture. Any dividends or other distributions on Restricted Stock (but only to the extent such award itself provides for dividends or other distributions thereon) will be deferred until and paid contingent upon the earning or vesting of the underlying award.
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Restricted Stock Units
: RSUs represent the right to receive Common Shares or an amount equal to the fair market value of such Common Shares, payable in cash or Common Shares, subject to certain restrictions and/or the risk of forfeiture. Any dividends or other distributions on RSUs (but only to the extent such award itself provides for dividends or other distributions thereon) will be deferred until and paid contingent upon the earning or vesting of the underlying award.
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Performance Shares
: Performance shares represent an award, denominated in Common Shares, which is earned during a specified performance period subject to the attainment of one or more performance measures. Any dividends or other distributions on performance shares (but only to the extent such award itself provides for dividends or other distributions thereon) will be deferred until and paid contingent upon the earning or vesting of the underlying award.
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Performance Units
: Performance units represent an award, denominated in currency-valued units, which is earned during a specified performance period subject to the attainment of one or more performance measures. Any dividends or other distributions on performance units (but only to the extent such award itself provides for dividends or other distributions thereon) will be deferred until and paid contingent upon the earning or vesting of the underlying award.
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Cash Incentive Awards
: Cash incentive awards are cash awards that are earned during a specified performance period subject to the attainment of one or more performance criteria.
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Other Stock Awards
: Other stock awards are awards of Common Shares or other awards based in whole or in part on the value of a Common Share (such as dividend equivalents) or related to Common Shares, payable in Common Shares, cash, other securities, or other property. Any dividends or other distributions on other stock awards (but only to the extent such award itself provides for dividends or other distributions thereon) will be deferred until and paid contingent upon the earning or vesting of the underlying award.
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The 2018 Plan shall not be construed to give a Participant the right to continue as an employee or director of CTS and a Participant will not have any rights as a shareholder unless and until Common Shares are actually issued.
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Any rights under the 2018 Plan are not assignable by a Participant except by will or by the applicable laws of descent and distribution, unless otherwise determined by the Compensation Committee. In no event will any award granted under the 2018 Plan be transferred for value.
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Subject to the approval of the Board where required, the Compensation Committee may amend or terminate the 2018 Plan in whole or in part; provided that no amendment or termination may be made without shareholder approval that would materially increase the maximum number of Common Shares that may be issued under the 2018 Plan (except for adjustments permitted under the 2018 Plan), materially change the class of eligible Participants, permit the repricing of outstanding options or SARs (other than as provided for in the 2018 Plan) or otherwise require shareholder approval. Except for adjustments permitted under the 2018 Plan, no amendment of an award by the Compensation Committee (as permitted under the 2018 Plan) may materially impair any right of a Participant under an award without that Participant’s consent, except as necessary to comply with changes in law or accounting rules applicable to CTS.
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The Compensation Committee may adopt, amend, or terminate arrangements to make tax or other benefits available to Participants subject to laws of a foreign jurisdiction or to conform with such laws.
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The 2018 Plan shall be governed by the laws of the State of Indiana, without regard to its conflict of laws principles.
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CTS reserves the right to make certain amendments to the 2018 Plan related to compliance with Section 409A of the Code.
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The 2018 Plan provides that award agreements may contain an award “clawback” feature or reference a clawback policy or provisions.
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Plan Category
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(a)
Number of Securities to be issued Upon Exercise of Outstanding Options, Warrants and Rights
(1)
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(b)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
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(c)
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a))
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Equity compensation plans approved by security holders
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970,114
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$18.37
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303,020
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Equity compensation plans not approved by security holders
(2)
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9,620
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—
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—
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Total
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979,734
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—
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303,020
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(1)
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The first and total rows of this column include 661,032 restricted stock units representing service-based and performance-based awards assuming achievement at target, which are settled in CTS common stock. Achievement of the maximum performance-based awards would total 1,200,750 shares of CTS common stock as settlement. Restricted stock units have no bearing on the weighted-average exercise price in column (b).
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(2)
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In 1990, CTS adopted the Stock Retirement Plan for Non-Employee Directors. Prior to December 1, 2004, CTS annually credited an account for each non-employee director with 800 CTS common stock units. CTS also annually credited each deferred stock account with an additional number of CTS common stock units representing the amount of dividends which would have been paid on an equivalent number of shares of CTS common stock for each quarter during the preceding calendar year. As of December 1, 2004, this plan was amended to preclude crediting any additional CTS common stock units under the plan. Upon retirement, a participating non-employee director is entitled to receive one share of CTS common stock for each CTS common stock unit in his deferred stock account.
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Is not an employee of CTS and has not been an employee of CTS for at least five years;
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Is not an affiliate of CTS other than in the capacity as a director, and has not been an affiliate of CTS for at least five years;
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Is not an employee or affiliate of CTS’ present auditing firm or an auditing firm retained by CTS within the past five years and has not been an employee or affiliate of such a firm for at least five years;
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Is not an employee of a company on whose board an executive of CTS presently serves as a director or has served as a director within the past five years and has not been an employee of such a company for at least five years;
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Is not an employee of a company that accounts for at least 2% or $1 million, whichever is greater, of CTS’ consolidated gross revenues, and has not been an employee of such a company for at least five years;
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Is not an employee of any company which made payments to or received payments from CTS which exceeded 2% or $1 million, whichever is greater, of that company’s consolidated gross revenues, and has not been an employee of such a company for at least five years;
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Is not an employee or director of any company that makes direct material investments or trades in CTS stock or that regularly advises investors concerning CTS stock;
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Does not presently receive any direct or material indirect compensation from CTS other than compensation attributable to the director’s service as a member of the Board and its committees;
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Has not received more than $10,000 per year in direct compensation from CTS during the past five years, excluding compensation attributable to the director’s service as a member of the Board and its committees;
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Does not have any other relationship with CTS or any other entity, including charitable and civic organizations that in the opinion of the Board could be considered to effect the director’s ability to exercise his independent judgment as a director; and
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Is not an immediate family member of any individual who would fail to meet the criteria for independence set forth above.
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Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
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Approve meeting agendas and schedules for the Board;
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Review key strategic initiatives presented to the Board;
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Serve as a liaison between the Chairman and the independent directors. To that end, ensure personal availability for consultation and communication with independent directors and with the Chief Executive Officer, as appropriate;
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•
|
Call special meetings of the independent directors, as the Lead Independent Director may deem to be appropriate;
|
•
|
Be available, at the request of major shareholders, for consultation and direct communication. Respond directly to shareholder and other stakeholder questions and comments that are directed to the Lead Independent Director or to the independent directors as a group, consulting on such with the Chief Executive Officer or other directors as the Lead Independent Director may deem appropriate;
|
•
|
Act as a sounding board for the Chief Executive Officer and/or independent directors with respect to strategies, plans, organization, relationships, accountabilities, and other issues;
|
•
|
Between regularly scheduled Board meetings discuss with the Chief Executive Officer key corporate risks and current issues and plans for presentations on such to the full Board or its committees;
|
•
|
Lead the independent directors in appraising the Chief Executive Officer’s performance at least annually; and
|
•
|
Lead the directors in appraising the Board’s performance at least annually.
|
|
NAME AND ADDRESS
|
|
NUMBER OF SHARES
|
|
PERCENT OF CLASS
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(1)
55 East 52nd Street New York, New York 10022 |
|
4,175,414
|
|
12.7%
|
|
|
|
|
|
|
|
|
|
GAMCO Investors, Inc.
(2)
One Corporate Center Rye, New York 10580 |
|
3,080,355
|
|
9.4%
|
|
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP
(3)
Building One 6300 Bee Cave Road Austin, Texas 78746 |
|
2,723,993
|
|
8.3%
|
|
|
|
|
|
|
|
|
|
Wellington Management Group LLP
(4)
280 Congress Street Boston, Massachusetts 02210 |
|
2,535,671
|
|
7.7%
|
|
|
|
|
|
|
|
|
|
The Vanguard Group
(5)
100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
|
1,848,998
|
|
5.6%
|
|
|
|
|
|
|
|
|
|
Janus Henderson Group plc
(6)
201 Bishopsgate EC2M 3AE, London, United Kingdom |
|
1,755,175
|
|
5.3%
|
|
(1)
|
As reported on Schedule 13G filed on January 19, 2018, BlackRock, Inc., a parent holding company, has sole voting power with respect to 4,111,040 shares and sole dispositive power with respect to 4,175,414 shares.
|
(2)
|
As reported on Schedule 13F filed on February 2, 2018, GAMCO Investors, Inc., Gabelli Funds, LLC and their affiliates have sole voting and dispositive power with respect to 3,080,355 shares. The Reporting Persons beneficially own those shares as follows: GAMCO Investors, Inc. had sole voting and sole dispositive power with respect to 2,314,355; and Gabelli Funds LLC has sole voting and dispositive power with respect to 766,000 shares.
|
(3)
|
As reported on Schedule 13G filed on February 9, 2018, Dimensional Fund Advisors LP has sole voting power with respect to 2,666,642 and sole dispositive power with respect to 2,723,993 shares. Dimensional Fund Advisors LP disclaims beneficial ownership of these shares, which are owned by funds for which it acts as investment manager.
|
(4)
|
As reported on Schedule 13G filed on February 8, 2018, Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP have shared voting power with respect to 2,024,421 shares and shared dispositive and voting power with respect to 2,535,671 shares. Wellington Management Company LLP has shared voting power with respect to 2,011,001 shares and shared dispositive power with respect to 2,522,251 shares.
|
(5)
|
As reported on Schedule 13G filed on February 8, 2018, The Vanguard Group has sole voting power with respect to 36,674 shares; shared voting power with respect to 8,433 shares; sole dispositive power with respect to 1,807,358 shares; and shared dispositive power with respect to 41,640 shares.
|
(6)
|
As reported on Schedule 13G filed on February 13, 2018, Janus Henderson Group plc has shared voting and dispositive power with respect to 1,755,175 shares. Janus Henderson Group plc also reported that it did not have the right to receive any dividends from, or the proceeds from the sale of, the shares and disclaims any ownership associated with such rights.
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Name
|
|
Beneficially
Owned Shares (1) |
|
Options
Exercisable within 60 days |
|
Shares
Held in 401(k) |
|
Directors’
Deferred Common Stock Units (2) |
|
Total
(3)
|
|
% of Shares
Outstanding |
|
|
Ashish Agrawal
|
|
38,394
|
|
—
|
|
—
|
|
0
|
|
38,394
|
|
*
|
|
|
Walter S. Catlow
|
|
66,539
|
|
—
|
|
—
|
|
4,098
|
|
70,637
|
|
*
|
|
|
Patricia K. Collawn
|
|
71,420
|
|
—
|
|
—
|
|
800
|
|
72,220
|
|
*
|
|
|
Gordon Hunter
|
|
39,700
|
|
—
|
|
—
|
|
0
|
|
39,700
|
|
*
|
|
|
William S. Johnson
|
|
19,500
|
|
—
|
|
—
|
|
0
|
|
19,500
|
|
*
|
|
|
Luis F. Machado
|
|
8,839
|
|
—
|
|
—
|
|
0
|
|
8,839
|
|
*
|
|
|
Diana Murphy
|
|
42,700
|
|
—
|
|
—
|
|
0
|
|
42,700
|
|
*
|
|
|
Kieran O’Sullivan
|
|
242,128
|
|
—
|
|
—
|
|
0
|
|
242,128
|
|
*
|
|
|
Robert A. Profusek
(4)
|
|
74,542
|
|
—
|
|
—
|
|
4,722
|
|
79,264
|
|
*
|
|
|
All Current Directors and Officers as a Group
(5)
|
|
603,762
|
|
—
|
|
—
|
|
9,620
|
|
613,382
|
|
1.86%
|
|
*
|
Represents less than 1% of the outstanding shares of CTS common stock
|
(1)
|
Includes shares of CTS common stock which will vest within 60 days of March 19, 2018.
|
(2)
|
Includes Restricted Stock Units that are distributable upon the director’s separation from service and convert on a one‑to‑one basis to shares of CTS common stock upon distribution.
|
(3)
|
No director or executive officer has pledged his or her shares of CTS common stock.
|
(4)
|
Excludes 1,800 shares held by Mr. Profusek’s spouse. Mr. Profusek disclaims any beneficial interest with respect to these shares.
|
(5)
|
Mr. Zulueta had not yet been appointed a director as of March 19, 2018.
|
•
|
Mr. Kieran O’Sullivan, Chairman, President and Chief Executive Officer;
|
•
|
Mr. Ashish Agrawal, Vice President and Chief Financial Officer; and
|
•
|
Mr. Luis F. Machado, Vice President, General Counsel and Secretary.
|
•
|
Offer Competitive Compensation.
CTS seeks to provide a competitive level of compensation in order to attract, retain, and motivate highly qualified and talented executives;
|
•
|
Link Compensation to Performance.
CTS seeks to optimize the performance of each executive by tying a substantial portion of compensation to achievement of financial and operational goals; and
|
•
|
Align Compensation with Shareholder Interests.
CTS seeks to align the interests of its executives with shareholders by paying a significant portion of compensation in the form of equity that vests over time.
|
|
Elements of Total Compensation
|
|
Purpose
|
|
|
|
● Base Salary
● Retirement Benefits ● Health and Welfare Benefits ● Limited Perquisites |
|
●
|
Fixed cash and other customary compensation to attract and retain high‑quality executive talent.
|
|
|
● Annual Performance‑Based Cash Incentives
|
|
●
|
At‑risk, variable incentive compensation to promote the achievement of specific financial and operational performance objectives; and
|
|
|
|
|
●
|
Attraction, retention, and motivation of high‑quality executive talent.
|
|
|
● Performance‑Based Equity Awards
|
|
●
|
At‑risk, variable incentive compensation to promote the achievement of specific goals;
|
|
|
|
|
●
|
Align executives’ interests with shareholder interests; and
|
|
|
|
|
●
|
Attraction, retention, and motivation of high‑quality executive talent.
|
|
|
● Service‑Based Equity Awards
|
|
●
|
Fixed equity awards for long‑term retention of executive talent; and
|
|
|
|
|
●
|
Align executives’ interests with shareholder interests.
|
|
•
|
apportioning fixed pay versus incentive‑based compensation in an appropriate balance;
|
•
|
selecting appropriate and broad‑based performance metrics;
|
•
|
establishing reasonable performance thresholds;
|
•
|
capping performance‑based compensation awards at certain maximum levels;
|
•
|
requiring multiple‑year performance periods for certain performance‑based awards; and
|
•
|
vesting a significant portion of equity compensation over multiple‑year periods.
|
|
2017 Management Incentive Plan
Performance Goals at Target |
|
2017 Management Incentive Plan
Performance Results |
||||||||
Executive
|
2017
Base Salary ($) (1) |
2017
Annual Target Award (%) |
Adjusted EPS
($) |
Controllable
Working Capital as a Percentage of Annual Sales (%) |
Sales/
Order Intake (000s) ($) |
|
Adjusted EPS
($) |
Controllable
Working Capital as a Percentage of Annual Sales (%) |
Sales/
Order Intake (000s) ($) |
2017
Annual Incentive Earned (%) |
2017
Annual Incentive Earned ($) |
Kieran O’Sullivan
|
707,600
|
100
|
1.17
|
11.2
|
412,000
|
|
1.22
|
11.7
|
422,993
|
144%
|
1,016,704
|
Ashish Agrawal
|
338,256
|
65
|
1.17
|
11.2
|
412,000
|
|
1.22
|
11.7
|
422,993
|
144%
|
318,409
|
Luis Machado
|
303,000
|
55
|
1.17
|
11.2
|
412,000
|
|
1.22
|
11.7
|
422,993
|
144%
|
244,980
|
(1)
|
Amounts shown reflect regular base earnings for the calendar year 2017, and will vary from the base salary referenced elsewhere in this report as result of effective date of increases.
|
|
Three‑Year Sales Growth (Weight 35%)
|
|
Award Level
|
|
|
Three‑Year Sales Growth less than 6.0%
|
|
0% (No Award)
|
|
|
Three‑Year Sales Growth greater than or equal to 6.0%, but less than 12%
|
|
50%‑99% of Target Award
|
|
|
Three‑Year Sales Growth greater than or equal to 12%, but less than 18%
|
|
100%‑149% of Target Award
|
|
|
Three‑Year Sales Growth greater than or equal to 18%, but less than 24%
|
|
150%‑199% of Target Award
|
|
|
Three‑Year Sales Growth greater than or equal to 24%
|
|
200% of Target Award
|
|
|
Three‑Year Free Cash Flow (Weight 30%)
|
|
Award Level
|
|
|
Three‑Year Free Cash Flow less than $60,000,000
|
|
0% (No Award)
|
|
|
Three‑Year Free Cash Flow
≥
$60,000,000, but less than $75,000,000
|
|
50%‑99% of Target Award
|
|
|
Three‑Year Free Cash Flow
≥
$75,000,000, but less than $90,000,000
|
|
100%‑149% of Target Award
|
|
|
Three‑Year Free Cash Flow
≥
$90,000,000, but less than $105,000,000
|
|
150%‑199% of Target Award
|
|
|
Three‑Year Free Cash Flow
≥
$105,000,000
|
|
200% of Target Award
|
|
|
Relative Total Stockholder Return (Weight 35%)
|
|
Award Level
|
|
|
RTSR
<
30% of Peer Group
|
|
0% (No Award)
|
|
|
RTSR
≥
30% of Peer Group but less than 50% of Peer Group
|
|
50%‑99% of Target Award
|
|
|
RTSR
≥
50% of Peer Group but less than 70% of Peer Group
|
|
100%‑149% of Target Award
|
|
|
RTSR
≥
70% of Peer Group but less than 90% of Peer Group
|
|
150%‑199% of Target Award
|
|
|
RTSR
≥
90% of Peer Group
|
|
200% of Target Award
|
|
Patricia K. Collawn, Chairman
|
Walter S. Catlow
|
Diana M. Murphy
|
Gordon Hunter
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
Salary
(1)
($) |
Bonus
($) |
Stock
Awards (2) ($) |
Option
Awards ($) |
Non-
Equity Incentive Plan Compensation (3) ($) |
Change in
Pension Value and Non- Qualified Deferred Compensation Earnings ($) |
All Other
Compensation (4) ($) |
Total
($) |
Kieran M. O'Sullivan
|
2017
|
707,600
|
-
|
1,462,301
|
-
|
1,016,704
|
-
|
31,911
|
3,218,516
|
President and
|
2016
|
702,849
|
-
|
1,595,887
|
-
|
1,073,941
|
-
|
22,460
|
3,395,137
|
Chief Executive Officer
|
2015
|
708,046
|
-
|
1,197,052
|
541,000
|
-
|
-
|
16,600
|
2,462,698
|
|
|
|
|
|
|
|
|
|
|
Ashish Agrawal
|
2017
|
338,256
|
-
|
495,914
|
-
|
318,409
|
-
|
14,536
|
1,167,115
|
Vice President and
|
2016
|
327,308
|
-
|
502,510
|
-
|
315,866
|
-
|
4,164
|
1,149,848
|
Chief Financial Officer
|
2015
|
318,567
|
-
|
350,522
|
189,350
|
-
|
-
|
128,463
|
986,902
|
|
|
|
|
|
|
|
|
|
|
Luis F. Machado
|
2017
|
303,000
|
-
|
378,013
|
-
|
244,980
|
-
|
16,934
|
942,927
|
Vice President and
|
2016
|
279,615
|
-
|
346,903
|
80,600
|
247,354
|
-
|
13,209
|
967,681
|
General Counsel & Secretary
|
2015
|
96,827
|
-
|
145,440
|
54,100
|
-
|
-
|
165,253
|
461,620
|
(1)
|
Numbers shown reflect regular base earnings for each calendar year which varies from the base salary referenced elsewhere in this report.
|
(2)
|
The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of stock awards granted during the year. Amounts reflected consist of service‑based and performance‑based awards. For the performance‑based awards reported in this column for 2017, such amounts are based on the probable outcome of the relevant performance conditions as of the grant date and therefore are at target. Assuming that the highest level of performance is achieved for these awards, the grant date fair value of these awards would be: Mr. O’Sullivan, $1,770,923; Mr. Agrawal, $583,163; Mr. Machado, $447,595.
|
(3)
|
Amounts represent payments earned under the MIP in respect of that year's performance and paid in the subsequent year.
|
(4)
|
Amounts in this column for 2017 reflect values for financial planning, tax preparation services and a CTS match under the 401(k) Plan.
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts
Under Equity Incentive Plan Awards |
All
Other Stock Awards: Number of Shares of Stock or Units (#) |
All Other
Option Awards: Number of Securities Underlying Options (#) |
Exercise or
Base Price Of Option Awards ($/Sh) |
Grant
Date Fair Value of Stock and Option Awards ($) |
||||
Name
|
Grant Date
|
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
||||
Kieran M. O'Sullivan
|
|
|
|
|
|
|
|
|
|
|
|
2017 Management Incentive Plan
(1)
|
|
353,800
|
707,600
|
1,415,200
|
|
|
|
|
|
|
|
2017-2019 Performance Restricted
Stock Unit Plan (2) |
2/9/2017
|
|
|
|
18,210
|
36,420
|
72,840
|
|
|
|
885,461
|
2014 Performance and Incentive Compensation Plan
|
2/9/2017
|
|
|
|
|
|
|
25,080
|
|
|
576,840
|
|
|
|
|
|
|
|
|
|
|
|
|
Ashish Agrawal
|
|
|
|
|
|
|
|
|
|
|
|
2017 Management Incentive Plan
(1)
|
|
109,933
|
219,866
|
439,732
|
|
|
|
|
|
|
|
2017-2019 Performance Restricted
Stock Unit Plan (2) |
2/9/2017
|
|
|
|
5,997
|
11,993
|
23,986
|
|
|
|
291,582
|
2014 Performance and Incentive Compensation Plan
|
2/9/2017
|
|
|
|
|
|
|
8,884
|
|
|
204,332
|
|
|
|
|
|
|
|
|
|
|
|
|
Luis F. Machado
|
|
|
|
|
|
|
|
|
|
|
|
2017 Management Incentive Plan
(1)
|
|
83,325
|
166,650
|
333,300
|
|
|
|
|
|
|
|
2017-2019 Performance Restricted
Stock Unit Plan (2) |
2/9/2017
|
|
|
|
4,603
|
9,205
|
18,410
|
|
|
|
223,798
|
2014 Performance and Incentive Compensation Plan
|
2/9/2017
|
|
|
|
|
|
|
6,705
|
|
|
154,215
|
(1)
|
The 2017 Management Incentive Plan is governed by the 2014 Performance and Incentive Compensation Plan.
|
(2)
|
In February of 2017, the Compensation Committee established terms applicable to performance‑based equity compensation awards for fiscal years 2017‑2019 under the CTS Corporation 2014 Performance and Incentive Compensation Plan. Restricted stock units for achievement of the performance goals will be issued in 2020 following certification of 2019 fiscal year results by CTS’ independent auditors.
|
|
Option Awards
|
|
Stock Awards
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Number of
Securities Underlying Unexercised Options Exercisable (#) |
|
Number of
Securities Underlying Unexercised Options Unexercisable (#) (1) |
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
Number of
Shares or Units of Stock That Have Not Vested (#) |
|
Market Value
of Shares or Units of Stock That Have Not Vested ($) |
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (2) |
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Kieran M. O’Sullivan
|
—
|
|
100,000
|
|
18.37
|
|
5/26/2020
|
|
57,246
(3)
|
|
1,474,085
|
|
127,620
|
|
3,286,215
|
Ashish Agrawal
|
—
|
|
35,000
|
|
18.37
|
|
5/26/2020
|
|
18,717
(4)
|
|
481,963
|
|
39,953
|
|
1,028,790
|
Luis F. Machado
|
—
|
|
30,000
|
|
18.37
|
|
5/26/2020
|
|
15,344
(5)
|
|
395,108
|
|
23,205
|
|
597,529
|
(1)
|
In May of 2015, the Compensation Committee established terms applicable to the Performance Vesting Stock Option Plan under the CTS Corporation 2014 Performance and Incentive Compensation Plan. These Performance Options will vest only upon achievement of $600 million in revenue in any trailing four quarters within the five year performance period. If the performance metric is not met within the five year performance period, the Options will not vest and be forfeited.
|
(2)
|
Any award issued under the three-year performance program will vest following certification of the Company’s financial results for the last year of the measurement period.
|
(3)
|
Mr. O’Sullivan’s 57,246 service‑based Restricted Stock Units have vested or will vest as follows: 8,360 on February 9, 2018; 20,634 on February 16, 2018; 8,360 on February 9, 2019; 11,532 on February 16, 2019; and 8,360 on February 9, 2020.
|
(4)
|
Mr. Agrawal’s 18,717 service‑based Restricted Stock Units have vested or will vest as follows: 2,961 on February 9, 2018; 6,251 on February 16, 2018; 2,962 on February 9, 2019; 3,582 on February 16, 2019; and 2,961 on February 9, 2020.
|
(5)
|
Mr. Machado’s 15,344 service‑based Restricted Stock Units will vest as follows: 2,235 on February 9, 2018; 2,987 on February 16, 2018; 2,666 on October 30, 2018; 2,235 on February 9, 2019; 2,986 on February 16, 2019; and 2,235 on February 9, 2020.
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
||||
|
Name
|
|
Number of
Shares Acquired on Exercise (#) |
|
Value Realized
on Exercise ($) |
|
Number of
Shares Acquired on Vesting (#) |
|
Value Realized
on Vesting ($) (1) |
|
|
Kieran M. O’Sullivan
|
|
—
|
|
—
|
|
86,248
|
|
1,991,999
|
|
|
Ashish Agrawal
|
|
—
|
|
—
|
|
30,104
|
|
694,437
|
|
|
Luis F. Machado
|
|
—
|
|
—
|
|
8,299
|
|
200,819
|
|
Name
|
|
Severance:
Base Salary & Incentive Pay ($) |
|
Welfare
Benefits Equivalent ($) |
|
Pension
Plan & SERP Benefit Equivalent ($) |
|
401(k)
Match Equivalent ($) |
|
Perquisites:
Outplacement, Legal, Tax & Estate Placement ($) |
|
Pro Rata
Target Incentive ($) |
|
Accelerated
Vesting & Exercise Rights/Lapse of Restriction On Equity Awards (1) ($) |
|
280G
Reduction ($) |
|
Total
($) |
|
Kieran M. O’Sullivan
|
|
4,245,600
|
|
34,834
|
|
—
|
|
—
|
|
30,000
|
|
—
|
|
5,498,300
|
|
447,199
|
|
9,361,535
|
|
Ashish Agrawal
|
|
1,125,069
|
|
33,666
|
|
—
|
|
—
|
|
30,000
|
|
—
|
|
1,769,053
|
|
460,340
|
|
2,497,448
|
|
Luis F. Machado
|
|
961,000
|
|
33,340
|
|
—
|
|
—
|
|
30,000
|
|
—
|
|
980,108
|
|
139,587
|
|
1,864,861
|
|
(1)
|
Assuming that only a change‑in‑control event occurred on December 31, 2017, in terms of their equity awards, our named executive officers would have received the following value for the "single trigger" acceleration of their outstanding time-based Restricted Stock Units, performance-based RSUs and performance options, respectively: Mr. O'Sullivan, $1,474,085, $3,286,215, and $738,000; Mr. Agrawal, $481,963, $1,028,790, and $258,300; and Mr. Machado, $395,108, $360,500, and $224,500.
|
Name
|
Severance
($)
|
Health and
Dental
Benefits
($)
|
Vesting of
Unvested
Time-Based
Equity Awards
($)
|
Vesting and
Pro-Rata
Settlement of
Performance-
Based Equity
Awards
($)
|
Outplacement
($)
|
Total
($)
|
Kieran M.
O'Sullivan |
2,830,400
|
17,417
|
4,760,300
|
3,286,215
|
30,000
|
10,924,332
|
Ashish Agrawal
|
340,900
|
16,883
|
—
|
—
|
30,000
|
387,783
|
Luis F. Machado
|
310,000
|
16,670
|
—
|
—
|
30,000
|
356,670
|
|
Name
|
|
Fees Earned
or Paid in Cash (1) ($) |
|
Stock
Awards (2) ($) |
|
Total
($) |
|
|
Walter S. Catlow
|
|
60,000
|
|
96,940
|
|
156,940
|
|
|
Patricia K. Collawn
|
|
72,500
|
|
96,940
|
|
169,440
|
|
|
Gordon Hunter
|
|
70,000
|
|
96,940
|
|
166,940
|
|
|
William S. Johnson
|
|
75,000
|
|
96,940
|
|
171,940
|
|
|
Diana M. Murphy
|
|
70,000
|
|
96,940
|
|
166,940
|
|
|
Robert A. Profusek
|
|
80,000
|
|
96,940
|
|
176,940
|
|
(1)
|
Certain Director's compensation for Committee Services is prorated based on election in May of 2017.
|
(2)
|
On November 8, 2017, 3,700 Restricted Stock Units were awarded to each then serving non‑employee director for 2018 service based on an average closing price of CTS common stock of $26.20 per share. The dollar amounts reported in this column represent the grant date fair value of such awards as computed in accordance with FASB ASC Topic 718, equal to the number of units awarded multiplied by the $26.20 closing price of CTS’ common stock on the date of grant. These awards will vest on the first anniversary of the grant date and will be distributed upon vesting absent a deferral election by the director. All directors elected to defer distribution until their retirement from the Board. The non‑employee directors had no other unvested stock awards outstanding at 2017 fiscal year‑end.
|
|
Audit Fees
|
Audit‑Related Fees
(1)
|
Tax Fees
(2)
|
All Other Fees
(3)
|
2017
|
$1,370,345
|
$46,200
|
$18,455
|
$16,125
|
2016
|
$1,363,253
|
$210,823
|
$22,335
|
—
|
|
By Order of the Board of Directors,
|
|
|
|
Luis F. Machado
Corporate Secretary |
(a)
|
“Affiliate” shall mean any entity that, directly or indirectly, controls, is controlled by, or is under common control with, the Company.
|
(b)
|
“Award” shall mean a grant of an Option, SAR, Restricted Stock Award, Performance Award or Other Stock Award pursuant to the Plan, which may, as determined by the Committee, be in lieu of other compensation owed to a Participant.
|
(c)
|
“Award Agreement” shall mean an agreement, certification, resolution or other type or form of writing or other evidence approved by the Committee that evidences the terms and conditions of an Award granted under the Plan. An Award Agreement may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant.
|
(d)
|
“Board of Directors” or “Board” shall mean the board of directors of the Company.
|
(e)
|
“Cash Incentive Award” shall mean a cash award granted pursuant to Section 10 of this Plan.
|
(f)
|
“Change in Control” shall have the meaning set forth in Section 14 of this Plan.
|
(g)
|
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any references to a particular section of the Code shall be deemed to include any successor provision thereto.
|
(h)
|
“Committee” shall mean the Compensation Committee of the Board (or its successor(s)), or any other Board committee designated by the Board to administer this Plan, and to the extent of any delegation by the Committee to a subcommittee pursuant to this Plan, such subcommittee.
|
(i)
|
“Company” shall mean CTS Corporation, an Indiana corporation, and its successors.
|
(j)
|
“Date of Grant” shall mean the date provided for by the Committee on which a grant of Options, SARs or Performance Awards, or a grant or sale of Restricted Stock Awards or Other Stock Awards pursuant to the Plan, will become effective (which date will not be earlier than the date on which the Committee or applicable authority takes action with respect thereto).
|
(k)
|
“Employee” shall mean an employee of the Company or any Affiliate.
|
(l)
|
“Exercise Price” shall mean an amount, as provided for by the Committee, at which an Option or SAR can be exercised by a Participant, which amount shall not be less than the Fair Market Value of a Share on the Date of Grant, unless such Option or SAR is granted pursuant to an assumption or substitution of another Option or SAR in a manner that satisfies the requirements of Section 424(a) of the Code.
|
(m)
|
“Existing Plan” shall mean the CTS Corporation 2014 Performance and Incentive Compensation Plan.
|
(n)
|
“Fair Market Value” shall mean, as of a given date, the closing sale price for a Share as reported on a national securities exchange on such date if the Shares are then being traded on such an exchange. If no closing sale price was reported for such date, the closing sale price on the last preceding day on which such a price was reported shall be used. If there is no regular public trading market for the Shares, the Fair Market Value for a Share shall be the fair market value of a Share as determined in good faith by the Committee. The Committee is authorized to adopt another fair market value pricing method, provided such method is stated in the Award Agreement and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.
|
(o)
|
“Incentive Stock Option” shall mean an Option which is intended to meet the requirements set forth in Section 422 of the Code or any successor provision.
|
(p)
|
“Nonqualified Stock Option” shall mean an Option not intended to qualify as an Incentive Stock Option.
|
(q)
|
“Option” shall mean the right to purchase Shares granted pursuant to Section 7 of this Plan, which may take the form of either an Incentive Stock Option or a Nonqualified Stock Option and which shall not have a term of more than 10 years.
|
(r)
|
“Other Stock Award” shall mean an award of Shares or other awards that are denominated or payable in, valued in whole or in part by reference to, or that are otherwise based on or related to, Shares, including but not limited to dividend equivalents or amounts which are equivalent to any federal, state, local, domestic, foreign or other taxes relating to an Award, which may be payable in Shares, cash, other securities, or any other form of property as the Committee shall determine, subject to the terms and conditions set forth by the Committee and granted pursuant to Section 11 of this Plan.
|
(s)
|
“Participant” shall mean an Employee or non-employee member of the Board selected by the Committee to receive Awards under the Plan.
|
(t)
|
“Performance Awards” shall mean awards of Performance Shares or Performance Units or Cash Incentive Awards.
|
(u)
|
“Performance Measures” shall mean the performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Awards or, when so determined by the Committee, Options, SARs, Restricted Stock Awards or Other Stock Awards.
|
(v)
|
“Performance Period” shall mean, in respect of a Performance Award, a period of time established by the Committee pursuant to Section 10 within which the Performance Measures relating to such Performance Award are to be evaluated or measured.
|
(w)
|
“Performance Share” shall mean an award denominated in Shares, which is earned with respect to a Performance Period subject to the terms and conditions as determined by the Committee and granted pursuant to Section 10 of this Plan.
|
(x)
|
“Performance Unit” shall mean an award denominated in units having a value in dollars or such other currency, as determined by the Committee, which is earned with respect to a Performance Period subject to the terms and conditions as determined by the Committee and granted pursuant to Section 10 of this Plan.
|
(y)
|
“Plan” shall mean the CTS Corporation 2018 Equity and Incentive Compensation Plan, as may be amended, or amended and restated, from time to time.
|
(z)
|
“Restricted Stock” shall mean an award of Shares, subject to such terms and conditions as determined by the Committee and granted pursuant to Section 9 of this Plan, as to which neither the substantial risk of forfeiture nor any prohibition on transfer has expired.
|
(aa)
|
“Restricted Stock Award” shall mean an Award consisting of Restricted Stock or Restricted Stock Units.
|
(bb)
|
“Restricted Stock Unit” shall mean an Award consisting of a bookkeeping entry representing the right to receive one Share or an amount equivalent to the fair market value of one Share, payable in cash or Shares, and representing an unfunded and unsecured obligation of the Company, except as otherwise provided by the Committee, subject to such terms and conditions as determined by the Committee and granted pursuant to Section 9 of this Plan.
|
(cc)
|
“Shares” shall mean the common stock, without a par value, of the Company or any security into which such common stock may be changed by reason of any transaction or event of the type referred to in Section 5(g) of this Plan.
|
(dd)
|
“Stock Appreciation Right” or “SAR” shall mean an award which represents the right to receive the difference between the fair market value of a Share on the date of exercise and an Exercise Price, payable in cash or Shares, subject to such terms and conditions as determined by the Committee and granted pursuant to Section 8 and which shall not have a term of more than 10 years.
|
(ee)
|
“Voting Power” shall mean at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of members of the Board in the case of the Company, or members of the board of directors or similar body in the case of another entity.
|
(a)
|
Subject to adjustment as provided in Section 5(g) and the share counting rules set forth in this Plan, the maximum number of Shares available under the Plan for Awards will not exceed in the aggregate 2,500,000 Shares. The aggregate number of Shares available under this Plan will be reduced by one Share for every one Share subject to an Award granted under this Plan, subject to the share counting rules set forth in this Plan.
|
(b)
|
If any Shares subject to an Award granted under this Plan are forfeited, or if any Award granted under this Plan is cancelled or forfeited, expires or is settled for cash (in whole or in part), or is unearned (in whole or in part), the Shares subject to such Award will, to the extent of such cancellation, forfeiture, expiration, cash settlement or unearned amount, again be available for Awards under this Plan. Notwithstanding anything to the contrary contained herein: (i) Shares withheld, tendered or otherwise used in payment of the Exercise Price of an Option
|
(c)
|
Unless otherwise determined by the Committee, Awards that are designed to operate in tandem with other Awards shall not be counted against the maximum number of Shares available under this Plan in order to avoid double counting.
|
(d)
|
Notwithstanding the foregoing, the maximum number of Shares that may be issued or transferred upon the exercise of Incentive Stock Options shall equal the aggregate maximum number of Shares available under this Plan, subject to adjustment as provided in Section 5(g) to the extent that such adjustment does not affect the ability to grant or the qualification of Incentive Stock Options under the Plan.
|
(e)
|
Any Shares issued or transferred under the Plan shall consist, in whole or in part, of authorized and unissued Shares, Shares purchased in the open market or otherwise, Shares in treasury, or any combination thereof, as the Committee or, as appropriate, the Board may determine.
|
(f)
|
Subject to adjustment as provided in Section 5(g), in no event will any non-employee member of the Board in any calendar year be granted compensation for such service having an aggregate maximum value (measured at the Date of Grant as applicable, and calculating the value of any equity awards based on the grant date fair value for financial reporting purposes) in excess of $500,000.
|
(g)
|
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, extraordinary cash dividend, stock split, reverse stock split, spin-off, split-off, spin-out, split-up, combination, repurchase or exchange of Shares or other securities of the Company, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing, the Committee shall make or provide for such adjustments in the number and kind of shares available for Awards under the Plan and any Plan limits, the number and kind of shares covered by outstanding Awards, the Exercise Price for outstanding Awards, Cash Incentive Awards, and in other Award terms, as the Committee, in its sole discretion, exercised in good faith, determines is equitably required to prevent dilution or enlargement of the rights of Participants or the benefits or potential benefits intended to be made available under the Plan. In the case of any stock split, including a stock split effected by means of a stock dividend, and in the case of any other dividend paid in shares of the Company, such adjustments shall be made automatically without the necessity of Committee action, on the customary arithmetical basis. Any fractional Share resulting from an adjustment pursuant to this Section 5(g) shall be disregarded except as may be required for compliance with Section 409A of the Code. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee may provide in substitution for any or all outstanding Awards under this Plan such alternative consideration (including cash) as it may determine to be equitable and may in connection therewith require the surrender of all or part of any Award to be replaced in a manner that complies with Section 409A of the Code. In addition, for each Option or SAR with an Exercise Price greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its sole discretion elect to cancel such Option or SAR without any payment to the person holding such Option or SAR.
|
(a)
|
the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 25% or more of the then Voting Power; provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company that is approved by the Incumbent Board (as defined below); (ii) any acquisition by the Company or any Affiliate and any change in the percentage ownership of the Voting Power of the Company that results from such acquisition; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate; or (iv) any acquisition by any Person pursuant to a transaction that complies with clauses (i), (ii) and (iii) of Section 14(c) below; or
|
(b)
|
individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of a majority of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual was a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
|
(c)
|
consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Voting Power immediately prior to such Business Combination beneficially own, directly or indirectly, more than 75% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership immediately prior to such Business Combination of the Voting Power, (ii) no Person (excluding the Company, any entity resulting from such Business Combination, or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination, and (iii) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or the action of the Board providing for such Business Combination; or
|
(d)
|
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clauses (i), (ii) and (iii) of Section 14(c).
|
(a)
|
materially increase the maximum number of Shares that may be issued or transferred under the Plan, except as provided in Section 5(g);
|
(b)
|
materially change the class of eligible Participants;
|
(c)
|
permit the repricing of outstanding Options or SARs, as provided in Section 12; or
|
(d)
|
require approval of the Company’s shareholders under any applicable law, regulation, stock exchange listing rule, or other rule.
|
(a)
|
To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder shall be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
|
(b)
|
Neither a Participant nor any of a Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Affiliates.
|
(c)
|
If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant shall be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the first business day of the seventh month after such separation from service.
|
(d)
|
Solely with respect to any award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that is payable on account of a Change in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time and form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for any purpose in respect of such award.
|
(e)
|
Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its affiliates shall have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
|
(a)
|
Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code. The Awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.
|
(b)
|
In the event that a company acquired by the Company or any subsidiary or with which the Company or any subsidiary merges has shares available under a pre-existing plan previously approved by stockholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for Awards made after such acquisition or merger under the Plan; provided, however, that Awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of the Company or any subsidiary prior to such acquisition or merger.
|
(c)
|
Any Shares that are issued or transferred by, or that are subject to any Awards that are granted by, or become obligations of, the Company under Sections 29(a) or 29(b) above will not reduce the Shares available for issuance or transfer under the Plan or otherwise count against the limits contained in the Plan. In addition, no Shares that are issued by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 29(a) or 29(b) above will be added to the maximum number of Shares available under this Plan.
|