CTS CORPORATION PERFORMANCE SHARE AGREEMENT
CTS
Corporation
Form
10-Q
Third
Quarter 2007
CTS
CORPORATION
THIS
AGREEMENT (this “Agreement”), made by and between CTS CORPORATION, an Indiana
corporation (together with any successors to all or substantially all of the
business of such corporation, the "Company"), and Xxxxx X. Xxxxxxxx (the
"Grantee"). Except as expressly provided herein, capitalized terms
used herein shall have the meaning ascribed to such terms under the Company's
2004 Omnibus Long-Term Incentive Plan (the "Plan").
The
execution of a Performance Share Agreement substantially in the form hereof
has
been authorized by the Compensation Committee (the “Committee”) of the Company’s
Board of Directors. The Company hereby confirms to the Grantee, effective as
of
the Date of Grant, pursuant to the Plan, the grant of Performance Shares
described below in Section 1 of this Agreement subject to the terms and
conditions of the Plan and the terms and conditions described
below.
1. Grant.
Subject to the terms set forth in this Agreement and in the Plan, the Company
hereby grants to the Grantee three awards of 8,333, 8,333 and 8,334 Performance
Shares respectively, together with the opportunity to earn up to an additional
approximately 50% of such Performance Shares (the “Award”), which the Grantee
may earn during each of three separate performance periods (the “Tranches”),
subject to a maximum of 25,000 Shares that may be earned in the
aggregate.
2. Performance
Periods. The performance periods will commence on July 2, 2007,
July 2, 2008 and July 2, 2009 respectfully, the performance periods will end
on
July 1, 2010 (the “First Performance Period”), July 1, 2011 (the “Second
Performance Period”), and July 1, 2012 (the “Third Performance Period”),
respectively. The term “Performance Period” refers to any of the
First Performance Period, the Second Performance Period or the Third Performance
Period, as applicable, and the term “Vesting Date” refers to any of July 1,
2010, July 1, 2011 or July 1, 2012, as applicable.
3. Performance
Measure. For purposes of this Agreement, “Performance Measure”
means the Relative Total Stockholder Return goals established by the Committee
for the Performance Period based on the Total Stockholder Return of the Company
during each Performance Period relative to the Total Stockholder Return of
a
benchmark peer group comprised of the 32 entities set forth on Exhibit A
(each, a “Peer”). For purposes of this Agreement, “Total Stockholder
Return” means the appreciation in the price of a share of common stock plus
reinvested dividends (including dividends paid in cash or other property) over
a
specified period of time. Such peer group of entities (the “Peer
Group”) will be adjusted during the Performance Period, if necessary, as
determined by the Committee, according to the protocol set forth on Exhibit
A.
The
Performance Measure for the Performance Period covered by this Agreement is
set
forth on Exhibit B. The following applies with respect to the
Performance Measure:
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(a)
|
The
Total Stockholder Return of the Company and each Peer will be determined
and the Performance Measure evaluated separately for each Performance
Period, and the Award will be determined based on the matrix set
forth on
Exhibit B (the “RTSR Matrix”);
and
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(b)
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In
no event shall the Grantee be entitled to receive more than 25,000
Shares
under this Agreement in the
aggregate.
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4. Earning
Performance Shares; Settlement of Award. Performance Shares will
be earned and become non-forfeitable on the respective Vesting Date for each
Performance Period in accordance with the RTSR Matrix; provided,
however, that, except as otherwise provided in this Section 4, the
Grantee remains in the continuous employ of the Company during the applicable
Performance Period and is an employee of the Company on the applicable Vesting
Date. Each Tranche of Performance Shares will be forfeited to the
extent that they are not earned at the end of the applicable Performance Period
or, except as otherwise provided in this Agreement, if the Grantee ceases to
be
employed by the Company at any time prior to the end of the Performance
Period.
Performance
Shares will be settled on the basis of one Share for each Performance Share
that
vests and is earned during the applicable Performance Period. Shares
will be issued or transferred to the Grantee in settlement of Performance Shares
that vest and are earned during an applicable Performance Period, less
applicable taxes, as soon as practicable after the determination by the
Committee of the level of attainment of Relative Total Stockholder Return for
each Performance Period (but in no case later than 60 days after the applicable
Vesting Date) (“Settlement Date”). The Company’s obligations to the
Grantee with respect to earned and vested Performance Shares will be satisfied
in full upon the distribution of one Share for each Performance Share earned
and
vesting during the applicable Performance Period. On each Settlement
Date, the Company may, at its election, either:
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(a)
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credit
the number of Shares to be issued or transferred to the Grantee as
of that
Settlement Date to a book-entry account in the name of the Grantee
held by
the Company’s transfer agent; or
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(b)
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deliver
to the Grantee a certificate representing the number of Shares transferred
or issued to the Grantee as of that Settlement
Date.
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Subject
to Section 3(b) of this
Agreement, upon the first to occur of the following events while the Grantee
is
employed by the Company, all 25,000 Performance Shares granted hereunder and
that have not been previously earned or forfeited shall vest and be deemed
earned under this Agreement:
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(a)
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the
Grantee becomes disabled;
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(b)
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the
Grantee dies; or
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(c)
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a
change in ownership or effective control of the Company, or a change
in
the ownership of a substantial portion of the assets of the
Company.
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5. Tax
Withholding. The Company shall have the right to deduct from any
compensation due the Grantee from the Company any federal, state, local or
foreign taxes required by law to be withheld in connection with the issuance
of
Shares or vesting of any Performance Shares pursuant to this
Agreement. To the extent that the amounts payable to the Grantee are
insufficient for such withholding, it shall be a condition to the issuance
of
Shares or vesting of the Performance Shares, as the case may be, that the
Grantee shall pay such taxes or make provisions that are satisfactory to the
Company for the payment thereof within the 60-day payment period.
Unless
otherwise determined by the Committee, the Company shall retain Shares otherwise
deliverable on any Settlement Date in an amount sufficient to satisfy the amount
of tax required to be withheld; provided, that such amounts shall not
exceed the statutorily required minimum withholding. The determination of the
number of Shares retained for this purpose shall be based on the Fair Market
Value of the Shares on the Settlement Date.
6. Rights
Not Conferred. The Grantee shall have none of the rights of a
stockholder with respect to the Performance Shares, including the right to
receive dividends or vote stock, until such time, if any, that Shares are
distributed to the Grantee in settlement thereof. The Grantee is
further advised that until distribution, the Company’s obligation will be merely
that of an unfunded and unsecured promise of the Company to deliver Shares
in
the future, and the rights of the Grantee will be no greater than that of an
unsecured general creditor. No assets of the Company will be held as
collateral security for the obligations of the Company hereunder, and all assets
of the Company will be subject to the claims of the Company’s
creditors.
7. Agreement
Not Assignable. This Agreement and the Performance Shares awarded
hereunder are not transferable or assignable by the Grantee; provided,
that no provision herein shall prevent the distribution of Shares to the
Grantee’s estate or designated beneficiary, in the event of the Grantee’s
death.
8. Adjustments. In
the event of any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split, reverse stock split, spin-off, combination, repurchase
or
exchange of Shares or other securities of the Company, or corporate transaction
or event having an effect similar to the foregoing, the Committee shall adjust
the Award, as provided by the Plan.
9. Governing
Law. This Agreement shall be construed in accordance with and
governed by the internal substantive laws of the State of Indiana.
10. Amendments. Any
amendment to the Plan shall be deemed to be an amendment to this Agreement
to
the extent that the amendment is applicable hereto; provided,
however, that no amendment to the Plan or the Agreement shall adversely
affect the value or number of the Grantee’s Performance Shares without the
Grantee’s written consent, except to the extent necessary to comply with the
provisions of Section 409A of the Code.
2
11. Administration. The
Committee shall have the power to interpret the Plan and this Agreement and
to
adopt such rules for the administration, interpretation, and application of
the
Plan as are consistent therewith and to interpret or revoke any such
rules. All actions taken and all interpretations and determinations
made by the Committee shall be final and binding upon the Grantee, the Company
and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.
It
is intended that this Agreement and
its administration comply with the provisions of Section 409A of the
Code. Accordingly, notwithstanding any provision in this Agreement or
in the Plan to the contrary, this Agreement and the Plan will be interpreted
and
applied in a manner consistent with such intention. As used herein,
“Code” means the Internal Revenue Code of 1986 as amended from time to time, and
any interpretations thereof issued by the U.S. Treasury Department on which
the
Company is permitted to rely.
12. Effect
on Other Employee Benefit Plans. The value of the Performance
Shares granted pursuant to this Agreement shall not be included as compensation,
earnings, salary or other similar terms used when calculating the Grantee’s
benefits under any employee benefit plan sponsored by the Company or any
subsidiary, except as such plan otherwise expressly provides. The
Company expressly reserves its rights to amend, modify, or terminate any of
the
Company’s employee benefit plans.
13. Severability. If
any provision of the Plan or this Agreement is, becomes, or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or would disqualify the
Plan or award hereunder under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws,
or
if it cannot be so construed or deemed amended without, in the determination
of
the Committee, materially altering the purpose or intent of the Plan or award,
such provision shall be stricken as to such jurisdiction or award, and the
remainder of the Plan or Agreement shall be in full force and
effect.
14. Construction. The
Performance Shares granted hereunder are being issued pursuant to Sections
3(s),
7 and 11 of the Plan (“Performance Awards”) and are subject to the terms of the
Plan. A copy of the Plan has been given to the Grantee, and
additional copies of the Plan are available upon request during normal business
hours at the principal executive offices of the Company. To the
extent that any provision of this Agreement violates or is inconsistent with
an
express provision of the Plan, the Plan provision shall govern and any
inconsistent provision in this Agreement shall be of no force or
effect.
15. Data
Protection. By signing below, the Grantee expressly consents to
the transfer and use of personal data by the Company and its agents in
connection with the administration of this Award.
16. Binding
Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
The
undersigned hereby acknowledges
receipt of an executed original of this Performance Share Agreement and accepts
the Performance Shares granted thereunder on the terms and conditions set forth
herein and in the Plan.
Date: August
1, 2007 /s/
Xxxxx X. Xxxxxxxx
________________________________
Xxxxx
X.
Xxxxxxxx
Executed
in the name and on behalf of
the Company at Elkhart, Indiana as of the 1 day of August,
2007.
CTS
CORPORATION
By:
/s/ Xxxxx X. Xxxxxxx
___________________________________
Xxxxx
X.
Xxxxxxx
Senior
Vice President Administration
3
EXHIBIT
A
CTS
CORPORATION
Relative
Total Stockholder Return — Peer Group (32 Peers)
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NAME
|
SYMBOL
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STOCK
EXCHANGE
|
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Aeroflex
Incorporated
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ARXX
|
Nasdaq
Global Select Market
|
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ArvinMeritor,
Inc.
|
ARM
|
New
York Stock Exchange
|
|
AVX
Corporation
|
AVX
|
New
York Stock Exchange
|
|
Benchmark
Electronics, Inc.
|
BHE
|
New
York Stock Exchange
|
|
BorgWarner
Inc.
|
BWA
|
New
York Stock Exchange
|
|
Celestica
Inc.
|
CLS
|
New
York Stock Exchange
|
|
EPCOS
AG
|
EPC
|
New
York Stock Exchange
|
|
Flextronics
International Ltd.
|
FLEX
|
Nasdaq
Global Select Market
|
|
Frequency
Electronics, Inc.
|
FEIM
|
Nasdaq
Global Market
|
|
Gentex
Corporation
|
GNTX
|
Nasdaq
Global Select Market
|
|
Jabil
Circuit, Inc.
|
JBL
|
New
York Stock Exchange
|
|
KEMET
Corporation
|
KEM
|
New
York Stock Exchange
|
|
Key
Tronic Corporation
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KTCC
|
Nasdaq
Global Market
|
|
Xxxxxxx
International, Inc.
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KBALB
|
Nasdaq
Global Select Market
|
|
XxXxxxx,
Inc.
|
LB
|
American
Stock Exchange
|
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Xxxx
Corporation
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LEA
|
New
York Stock Exchange
|
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LittelFuse,
Inc.
|
LFUS
|
Nasdaq
Global Select Market
|
|
Methode
Electronics, Inc.
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METH
|
Nasdaq
Global Select Market
|
|
Molex
Incorporated
|
MOLX
|
Nasdaq
Global Select Market
|
|
Plexus
Corp.
|
PLXS
|
Nasdaq
Global Select Market
|
|
RF
Micro Devices, Inc.
|
RFMD
|
Nasdaq
Global Select Market
|
|
Sanmina-Sci
Corporation
|
SANM
|
Nasdaq
Global Select Market
|
|
Sirenza
Microdevices, Inc.
|
SMDI
|
Nasdaq
Global Market
|
|
Solectron
Corporation
|
SLR
|
New
York Stock Exchange
|
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Sparton
Corporation
|
SPA
|
New
York Stock Exchange
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Spectrum
Control, Inc.
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SPEC
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Nasdaq
Global Market
|
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Stoneridge,
Inc.
|
SRI
|
New
York Stock Exchange
|
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Sypris
Solutions, Inc.
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SYPR
|
Nasdaq
Global Market
|
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Technitrol,
Inc.
|
TNL
|
New
York Stock Exchange
|
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Triquint
Semiconductors, Inc.
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TQNT
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Nasdaq
Global Select Market
|
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Vishay
Intertechnology, Inc.
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VSH
|
New
York Stock Exchange
|
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Xxxxxxxx
Controls, Inc.
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WMCO
|
Nasdaq
Global Market
|
4
Peer
Group Adjustment Protocol
If,
as of
the last date of any Performance Period, all of the common equity of any Peer
has been delisted from the stock exchange on which any of its common equity
was
listed as of the date of this Agreement (and all such common equity (or the
common equity of a successor to all or substantially all of the business of
such
Peer) has not been, within 30 days of such delisting, subsequently listed on
any
of the New York Stock Exchange, the Nasdaq Stock Market LLC, the London Stock
Exchange or the American Stock Exchange), then:
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·
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such
Peer will be removed from the Peer Group for purposes of such Performance
Period and any subsequent Performance Periods;
and
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·
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the
Relative Total Stockholder Return for such Performance Period and
any
subsequent Performance Periods will be calculated as if such Peer
had
never been a member of the Peer
Group.
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For
purposes of this Agreement, Peer includes any successor to all or substantially
all of the business of an entity as set forth on Exhibit A, whether or
not the same legal entity at end of any Performance Period.
If
a
company files for bankruptcy or is operating under bankruptcy protection, it
clearly shows bad performance and will, therefore, stay in the Peer Group as
a
bottom performer.
5
EXHIBIT
B
CTS
CORPORATION
Determining
Relative Total Stockholder Return
(for each Performance
Period)
For
purposes of calculating Relative
Total Stockholder Return (rounding shall be to the nearest tenth of a percent,
with all hundredths of a percent equal to or greater than 5 rounded up to the
nearest tenth of a percent):
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·
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Company
Return. For each Performance Period, the Company’s Total
Stockholder Return will be a percentage amount determined based on
(1) the
average closing price of the Shares for the 20 business days immediately
preceding the respective Vesting Date (including aggregate dividends
for
the Performance Period) compared to (2) the average closing price
of the
Shares for the 20 business days immediately preceding July 2,
2007.
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·
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Peer
Return.
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For
each Performance Period, each Peer’s Total Stock Return will be a
percentage amount determined based on (1) the closing stock price
on the
last trading day of the Performance Period (adjusted for stock splits)
compared to (2) the closing stock price on the first trading day
of the
Performance Period (adjusted for stock
splits.)
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·
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Company
Ranking. For each Performance Period, the Company’s and
each Peer’s Total Stockholder Return will be ranked in decreasing
order. Relative Total Stockholder Return equals the percentile
rank (expressed as a percentage) of the Company’s Total Stockholder Return
when compared to the rankings, from lowest to highest, of the Total
Stockholder Returns of the Peers comprising the Peer Group for the
Performance Period.
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6
RTSR
Matrix
Relative
Total Stockholder
Return Earned
and Vested Performance
(RTSR)
for a Performance
Period
Shares for the Performance
Period
Less
than
33%
0 Performance Shares
Greater
than or equal to 33% and
less
50% of Performance Shares (or 4,166 than or equal to 49.9%Shares)
Greater
than 49.9% and less than
or
100% of Performance Shares (or 8,333 equal to 66.6%Shares)
Greater
than
66.6%
150% of Performance Shares (or 12,500 Shares)
* Provided,
that in no event shall the Grantee be entitled to receive more than 25,000
Shares during the Performance Period under this Agreement.
Examples:
1. Hypothetical
results for First Performance Period:
Company
Ranking: 15th out of
34
RTSR: 55.9
percentile of Peer Group
Payout: 100%,
or 8,333 Shares
2. Hypothetical
results for Second Performance Period:
Company
Ranking: 21st out of
34
RTSR: 38.2
percentile of Peer Group
Period
Payout: 50%,
or 4,166 Shares
Cumulative
Payout: 12,499
Shares
3. Hypothetical
results for Third Performance Period:
Company
Ranking: 10th out of
34
RTSR:
70.6 percentile of Peer Group
Period
Payout: 150%,
or 12,500 Shares
Total
Payout: 24,999
4. Alternative
hypothetical results for Third Performance Period (where 100% of payout received
for First Performance Period and 150% of payout received for Second Performance
Period, for a total of 20,833 previously earned Shares):
Company
Ranking: 8th out of
34
RTSR: 76.5
percentile of Peer Group
Payout: 150%,
but overall cap applies – only 4,167additional Shares are earned
Total
Payout: 25,000
7
