CTS CORPORATION 2001 STOCK OPTION PLAN: EMPLOYEE STOCK OPTION AGREEMENT, AS AMENDED
CTS
Corporation
CTS
CORPORATION 2001 STOCK OPTION PLAN:
EMPLOYEE
STOCK OPTION AGREEMENT, AS AMENDED
THIS
EMPLOYEE STOCK OPTION AGREEMENT (hereafter, “Agreement”) made this 1st day of
October, 2001, (herein-after, "Option Date") by and between CTS Corporation,
an
Indiana corporation (hereinafter, "CTS"), and Xxxxxx
X.
Xxxxxxx, an employee of CTS or a subsidiary or division of CTS (hereinafter,
"Employee").
WHEREAS,
CTS desires to create an additional incentive for the Employee to continue
his
or her services with CTS and to stimulate his or her interest in the growth
and
profitability of CTS, and
WHEREAS,
CTS desires to increase the Employee's personal participation in the success
of
CTS through the acquisition of an equity interest in CTS;
W
I T N E
S S E T H
Section
1: Option Grant
CTS
hereby grants to the Employee the right and option to purchase all or any part
of an aggregate of 100,000 shares of CTS Common Stock, without par value, on
the
terms and conditions set forth below (hereinafter the ྿Option࿀).
Section
2: Purchase Price
The
purchase price per share for CTS Common Stock subject to this Option shall
be
$14.02, the reported closing price per share on the New York Stock Exchange
on
the date this Option is granted.
Section
3: Option Exercise Period
Except
as
provided in Section 6, this Option is not exercisable until one year after
the
Option Date. This Option is exercisable in installments as follows; on October
1, 2005, 33,333 shares (“Installment 1”); on December 31, 2005, 33,333 shares
(“Installment 2”), on December 31, 2005, 33,334 shares (“Installment 3”). In the
event that Employee exercises Installment 2 prior to October 1, 2006 or
Installment 3 prior to October 1, 2007, unless an installment would have
otherwise become exercisable pursuant to the occurrence of an event described
in
Section 6, Employee agrees that he shall not sell, contract to sell, grant
any
option to purchase, transfer the economic risk of ownership in, make any short
sale of, pledge or otherwise transfer or dispose of any shares obtained upon
exercise, until the shares have been released from the foregoing Resale
Restrictions (hereinafter referred to as the “Resale Restrictions”). Shares
obtained upon the exercise of Installment 2 shall be released from the Resale
Restrictions on October 1, 2006 and shares obtained upon the exercise of
Installment 3 shall be released on October 1, 2007. The Employee understands
and
agrees that CTS may cause the legend set forth below or a legend substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of
shares that are subject to Resale Restrictions:
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON
TRANSFER AS SET FORTH IN THE OPTION AGREEMENT BETWEEN THE ISSUER AND THE HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE
ISSUER.
This
Option and all rights hereunder shall expire on September 30, 2011.
1
Section
4: Payment
Payment
for this Option must be made at the time of exercise and may be made in cash
or
in previously acquired CTS Common Stock, which has been held for at least six
months, or a combination thereof. If payment is made in whole or part by
previously acquired CTS Common Stock, then the value per share of such stock
is
the reported closing price per share of CTS Common Stock on the New York Stock
Exchange on the date the Option is exercised or, if not reported on such date,
the next preceding date for which such a closing price is reported. Payment
may
be made by surrender of shares or by attestation by submission of the prescribed
Attestation Form. Subsequent to the use of previously owned shares of CTS Common
Stock as consideration for the exercise of all or a part of this Option, the
shares so utilized may not be used again in payment for the exercise of this
Option or any other option for CTS stock for a period of one year.
Section
5: Nontransferability of Option
This
Option may not be assigned or transferred by the Employee other than by will
or
by the laws of descent and distribu-tion, and is exercisable, during the
Employee's lifetime, only by him or her. Any attempt by the Employee to assign
or transfer this Option will be null, void and without effect.
Section
6: Separation from Employment or Change of Control
In
the
event of the termination of employment of the Employee with CTS due to
Employee’s qualified retirement (as used herein, a qualified retirement means
that Employee’s date of termination occurs after completing at least five years
of service and attaining age 62), he may exercise the Option only to the extent
permitted by the Option terms on the date of retirement, any time before the
Option expires. All shares subject to this Option which are not exercisable
as
of the Employee’s date of termination will be canceled.
In
the
event of the termination of employment of the Employee with CTS for any reason
other than qualified retirement, he may exercise the Option only to the extent
permitted by the Option terms on the date of termination, and only within the
three month period immediately following Employee’s date of termination. All
shares subject to this Option which are not exercisable as of the Employee’s
date of termination will be canceled.
Upon
a
Change of Control of CTS Corporation, as defined herein, all unexercised and
unexpired installments of this Option, vested and unvested, will immediately
become exercisable in full and may be exercised anytime before the Option
expires. As used herein, Change of Control means the occurrence of any of the
following events: (i) the attainment by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act ) (a "Person")
of aggregate beneficial ownership (within the meaning of Rule 13d-2 of the
Exchange Act) of 25% or more of the combined voting power of the then
outstanding securities (the "Voting Stock") of CTS entitled to vote generally
in
the election of directors; provided, however, that for purposes of this
Subsection (i), the following will not be deemed to result in a Change in
Control: (A) any acquisition directly from CTS that is approved by the Incumbent
Board (defined below), (B) any acquisition by CTS and any change in the
percentage ownership of Voting Stock of CTS that results from such acquisition,
(C) any acquisition by any employee benefit plan or related trust sponsored
or
maintained by CTS or any subsidiary of CTS, or (D) any acquisition by any Person
pursuant to a Business Combination (defined below) that complies with clauses
(I), (II) and (III) of Subsection (iii) below; or (ii) individuals who, as
of
the effective date of the Plan constitute the Board of Directors of CTS (the
"Incumbent Board") cease for any reason to constitute at least two-thirds of
the
Board of Directors of CTS; provided, however, that any individual becoming
a
director subsequent to the effective date of the Plan whose election, or
nomination for election by CTS' shareholders, was approved by a vote of at
least
two-thirds of the directors then comprising the Incumbent Board (either by
a
specific vote or by approval of the proxy statement of CTS in which such person
is named as a nominee for director, without objection to such nomination) will
be deemed to have been a member of the Incumbent Board, but excluding, for
this
purpose, any such individual becoming a director as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11 of the Exchange
Act) 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 of Directors of CTS; or (iii) consummation of (A) a
reorganization, merger or consolidation, or (B) a sale or other disposition
of
all or substantially all of the assets of CTS (such reorganization, merger,
consolidation or sale each , a "Business Combination"), unless, in each case,
immediately following such Business Combination, (I) all or substantially all
of
the individuals and entities who were the beneficial owners of Voting Stock
of
CTS immediately prior to such Business Combination beneficially own, directly
or
indirectly, more than two-thirds of the then outstanding shares of common stock
and the combined voting power of the then outstanding Voting Stock of CTS
entitled to vote generally in the election of directors of the entity resulting
from such Business Combination (including, without limitation, an entity which
as a result of such transaction owns CTS, or all or substantially all of CTS'
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 Stock of CTS, (II) no individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (other than CTS, such entity resulting from such Business Combination,
or
any employee benefit plan or related trust sponsored or maintained by CTS,
any
subsidiary of CTS or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of the then outstanding
shares of Voting Stock of the entity resulting from such Business Combination,
and (III) at least two-thirds 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 of the action
of
the CTS Board of Directors providing for such Business Combination; or (iv)
approval by the shareholders of CTS of a complete liquidation or dissolution
of
CTS, except pursuant to a Business Combination that complies with clauses (I),
(II) and (III) of Subsection (iii) hereof.
2
Section
7: Adjustment for Capital Change
The
number, kind and price of shares subject to this Option will be proportionately
and appropriately adjusted by the Compensation Committee of CTS to reflect
the
effects of stock splits, stock dividends and any other change in the capital
structure of CTS or to reflect any merger, consolidation or exchange or sale
of
assets or shares of CTS.
Section
8: Controlling Feature of Plan
Inconsistencies,
if any, between this Agreement and the CTS Corporation 2001 Stock Option Plan,
will be resolved according to the terms of the Plan.
Section
9: Rights of Employee as Option Holder
The
Employee has no rights as a shareholder of CTS with respect to shares subject
to
this Option until such shares are issued upon exercise.
Section
10: Consideration for Option
In
consideration for the grant of this Option, Employee acknowledges and agrees
as
follows:
Option
gain and unexercised options will be forfeited if Employee engages in certain
activities. If, at any time within one year after termination of Employee’s
employment with CTS, Employee engages in any activity in competition with any
activity of CTS, or contrary or harmful to the interests of CTS, including,
but
not limited to: (i) accepting employment with or serving as a consultant,
advisor or in any other capacity to an employer that is in competition with
or
acting against the interests of CTS, including employing or recruiting any
present, former or future employee of CTS; or (ii) disclosing or misusing any
confidential information or material concerning CTS or relating to any of its
businesses, then (A) this Option shall terminate effective on the date on which
Employee enters into such activity, unless terminated sooner by operation of
another term or condition of this Option, or the Plan, and (B) any option gain
realized by Employee from any exercise of this Option, during the six month
period prior to the termination of Employee’s employment with CTS or after
Employee’s employment with CTS ends, shall be paid by Employee to
CTS.
By
accepting this Agreement, Employee consents to a deduction from any amounts
CTS
may owe him or her from time to time (including amounts owed as wages or other
compensation, fringe benefits, or vacation pay, as well as any other amounts
owed to Employee by CTS), to the extent of the amount Employee owes CTS under
this Section. Whether or not CTS elects to make any set-off in whole or in
part,
if CTS does not recover by means of set-off the full amount Employee owes,
calculated as set forth above, Employee agrees to pay immediately the unpaid
balance to CTS.
Section
11: Construction of this Agreement
This
Agreement is made pursuant to and will be construed, interpreted and governed
by
the laws of the State of Indiana without regard to the conflict of law
provisions of any jurisdiction.
Section
12: Severability
If
any
provision of this Agreement is held to be invalid, illegal or unenforceable,
that will not affect or impair, in any way, the validity, legality or
enforceability of the remainder of this Agreement.
IN
WITNESS WHEREOF, Employee has signed this Employee Stock Option Agreement,
and
CTS has caused this Employee Stock Option Agreement to be signed by a duly
authorized officer of CTS, as of the date first written above.
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| By: | /s/ Xxxxxx X. Xxxxxxx | |
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Xxxxxx X. Xxxxxxx |
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| CTS Corporation | ||
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| By: | /s/ Xxxxxxxx X. Xxxxx | |
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Xxxxxxxx X. Xxxxx |
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Executive
Vice President
Administration and
Secretary
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