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CTS CORPORATION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
1997
FORM 10-K
ANNUAL REPORT
CTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for Fiscal Year Ended December 31, 1997
CTS CORPORATION
905 West Boulevard North
Elkhart, Indiana 46514
219-293-7511
Indiana 1-4639 35-0225010
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
The Company (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities and Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the
past 90 days.
The number of shares of the Company's Common Stock outstanding at
March 6, 1998 was 14,312,499.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For Fiscal Year Ended December 31, 1997
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 1-4639
CTS CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-0225010
(State or other jurisdiction of (IRS Employer Identifi-
incorporation or organization) cation Number)
905 West Boulevard North, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 219-293-7511
Web site address: http://www.ctscorp.com
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant has: (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
X
There were 14,312,499 shares of Common Stock, without par value,
outstanding on March 6, 1998. The aggregate market value of the
voting stock held by non-affiliates of CTS Corporation was
approximately $411.5 million on March 6, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the CTS Corporation 1997 Annual Report for the fiscal
year ended December 31, 1997, incorporated by reference in Part I
and Part II.
(2) Portions of the 1998 Proxy Statement for annual meeting of
shareholders to be held on April 24, 1998, incorporated by reference
in Part III.
(3) Certain portions of the CTS Corporation Form 10-K for the
1991 fiscal year ended December 31, 1991, incorporated by
reference in Part IV.
(4) Portions of the CTS Corporation Form 8-K filed October
20, 1997, incorporated by reference in Part IV.
(5) Portions of the CTS Corporation Form 14D-1 filed May 16,
1997, incorporated by reference in Part IV.
(6) Portions of the CTS Corporation Form 10-Q filed June 29,
1997, incorporated by reference in Part IV.
(7) Portions of the CTS Corporation Form 10-K for the year
ended December 31, 1995, incorporated by reference in
Part IV.
(8) Portions of the CTS Corporation Schedule 13D, filed on
July 18, 1997, incorporated by reference in Part IV.
(9) Portions of the DCA Corporation 10-Q for the quarter
ended March 31, 1997 incorporated by reference in Part
IV.
(10) Portions of the CTS Corporation form 10-Q for the quarter
ended March 30, 1997 incorporated by reference in Part
IV.
EXHIBIT INDEX -- PAGES 18-20
Part I
Item 1. Business
INTRODUCTION AND GENERAL DEVELOPMENT OF BUSINESS
The registrant, CTS Corporation (CTS or Company), is an Indiana
corporation incorporated in 1929 as a successor to a company
started in 1896. CTS' principal executive offices are located at
905 West Boulevard North, Elkhart, Indiana, 46514, telephone number
(219) 293-7511.
CTS designs, manufactures and sells electronic components and electronic
component assemblies as well as commercial and industrial products. The
engineering and manufacturing of CTS products is performed at 21 facilities
worldwide. CTS products are sold primarily through sales engineers, sales
representatives, agents and distributors.
During 1994, the Company purchased the assets of AT&T
Microelectronics' light emitting diode based optical data link
products business. The transaction also included sales contracts,
backlog, intellectual property, trademarks, and the design and
manufacturing technology. These products, manufactured in the
Company's West Lafayette, Indiana, Microelectronics facility, were being
phased out during 1997.
During 1996, the Company sold property in New Hope, Minnesota, for
$550,000 in cash and a promissory note. The Company recognized a
pretax gain of $35,000.
On October 16, 1997, the Company acquired Dynamics Corporation of
America ("DCA"), (the "merger" or "acquisition") including the
reacquisition of 6,909,300 CTS shares held by DCA, as described in
"Note B-Acquisition", page 19 of the CTS Corporation 1997 Annual
Report, and as incorporated herein by reference. CTS shareholders
on October 16, 1997, approved an increase in CTS' authorized
capitalization to 75,000,000 common shares and 25,000,000 preferred
shares. CTS shareholders also approved a 3-for-1 stock split in
the form of a stock dividend to CTS shareholders of record on
October 24, 1997.
During 1997, the Company sold assets in Baldwin, WI and property
and assets in Cokato, Minnesota for approximately $7,837,000. The
Company recognized a pretax profit of approximately $350,000 after
the write-off of associated goodwill.
The Company leased a facility in Dongguan, China during 1997 to
serve Taiwanese manufacturers establishing operations in China.
These manufacturers are purchasing the required components locally.
This facility is positioned to serve these customers and other
entrants to the Chinese manufacturing market.
During 1997, the Company announced the closing of its switch and
variable resistor manufacturing facility in Bentonville, Arkansas.
The Company plans to sell this property. The Bentonville
manufacturing and distribution operations will be relocated to the
Company's facilities in Kaohsiung, Taiwan, Matamoros, Mexico and
Brownsville, Texas.
Also during 1997, the Company leased a 20,000 square foot facility
in Hudson, New Hampshire to increase our electronic manufacturing
service capability. This location was selected to serve the
expanding North American electronic manufacturing requirements.
FINANCIAL INFORMATION ON INDUSTRY SEGMENTS
The Company's products include electronic components and assemblies,
electrical appliances, power and controlled environmental systems and
fabricated metal products and equipment. Sales to unaffiliated
customers operating earnings and identifiable assets, by
geographic area, are contained in "Note H - Business Segment and
Non-U.S. Operations," page 24, of the CTS Corporation 1997 Annual
Report, and is incorporated herein by reference.
PRINCIPAL BUSINESS AND PRODUCTS OF CTS
CTS is primarily in the business of developing, manufacturing and
selling a broad line of electronic products principally serving
the electronic needs of original equipment manufacturers (OEMs).
The Company sells classes of similar electronic products consisting of the
following:
Electronic components
Electronic component assemblies
A substantial portion of the products within these product classes
are manufactured by CTS from purchased raw materials or subassemblies.
Electronic products (components and assemblies) are typically
manufactured at the same locations and sold to similar OEM customers.
Some products sold by CTS are purchased and resold under the Company's name.
During the past three years, two product classes accounted for 10% or more of
consolidated revenue during one or more years, as follows:
Percent of
Consolidated Revenue
Product Classes 1997 1996 1995
Electronic components 57 67 73
Electronic component assemblies 36 32 26
Other 7 1 1
Total 100% 100% 100%
In addition to contributing to its line of electronic components,
the merger added products to the Company's "other" class.
"Other" includes electrical appliances, power and controlled
environmental systems and fabricated metal products.
MARKETS
CTS estimates that its products have been sold in the following
electronics markets and in the following percentages during the
preceding three fiscal years:
Percent of Consolidated Revenue
Markets 1997 1996 1995
Automotive 29 34 36
Computer Equipment 28 21 19
Communications Equipment 17 20 18
Other 26 25 27
100% 100% 100%
OEM products for the automotive market include throttle position
sensors, exhaust gas recirculation sensors, other automotive
application sensors, resistor networks, variable resistors, and
loudspeakers for automotive entertainment systems.
OEM products for the computer equipment market include flex cable
assemblies, backpanels, resistor networks, switches, frequency
control devices, fiber-optic transceivers, heat dissipators,
heatsinks and printed circuit board retainers. Products for this
market are principally used in computers and computer peripheral
equipment.
In the communications equipment market, CTS OEM products include
backpanels, frequency control devices, hybrid microcircuits, fiber-optic
transceivers, switches and resistor networks. Products for
this market are principally used in telephone equipment and
telephone switching systems.
"Other" markets, which encompass OEM and all distribution sales, include
the following products: resistor networks, hybrid microcircuits, variable
resistors, switches, electronic connectors, frequency control devices,
backpanels, electrical appliances, power and controlled environmental
systems and fabricated metal products and equipment.
End uses for these products include: medical electronic devices,
electronic testing, measuring and servicing instruments, electronic
and medical diagnostic equipment, home entertainment equipment,
appliances, defense and commercial construction.
MARKETING AND DISTRIBUTION
Sales of CTS electronic components to OEMs are principally by CTS
sales engineers and manufacturers' representatives. CTS maintains
sales offices in Elkhart, Indiana; Detroit, Michigan; the United Kingdom,
Hong Kong, Taiwan and Japan. Various regions of the United States are
serviced by sales engineers working out of their homes. The sale
of electronic components is relatively integrated such that most of
the product lines of CTS are sold through the same field sales
force. Approximately 52% of net sales in 1997 were attributable to
coverage by CTS sales engineers.
Generally, CTS sales engineers service the Company's largest
customers with application specific products. CTS sales engineers
work closely with major customers in determining customer
requirements and in designing CTS products to be provided to such
customers.
CTS utilizes the services of independent sales representatives and
distributors in the United States and other countries for customers
not serviced by CTS sales engineers. Sales representatives receive
commissions from CTS. During 1997, approximately 40% of net sales
were attributable to coverage by sales representatives.
Independent distributors purchase products from CTS for resale to
customers. In 1997, independent distributors and/or dealers
accounted for approximately 8% of net sales.
RAW MATERIALS
Generally, CTS' major raw materials are steel, copper, brass,
aluminum, certain precious metals, resistive and conductive inks,
passive electronic components and semiconductors, used in several
CTS products; ceramic materials used particularly in resistor
networks and hybrid microcircuits; synthetic quartz used in
frequency control devices; and laminate material used in printed
circuit boards. These raw materials are purchased from several
vendors, and except for certain semiconductors, CTS does not
believe that it is dependent on one or on a very few vendors. In
1997, all of these materials were available in adequate quantities
to meet CTS' production demands.
The Company does not presently anticipate any raw material
shortages which would significantly affect production. However,
the lead times between the placement of orders for certain raw
materials and actual delivery to CTS may vary significantly, and
the Company may from time to time be required to order raw
materials in quantities and at prices less than optimal to
compensate for the variability of lead times for delivery.
Precious metals prices have a significant effect on the
manufacturing cost and selling prices of many CTS products,
particularly some switches, interconnect products, resistor
networks and hybrid microcircuits. CTS has continuing programs to
reduce the precious metals content of several products, when
consistent with customer specifications.
WORKING CAPITAL
CTS does not usually buy inventories or manufacture products
without actual or reasonably anticipated customer orders, except
for some standard, off-the-shelf distributor products. The
Company is not generally required to carry significant amounts of
inventories to meet rapid delivery requirements because most
customer orders are for custom products. CTS has entered into
"just-in-time" arrangements with certain major customers in order
to meet their just-in-time delivery needs.
CTS carries raw materials, including certain semiconductors, and
certain work-in-process and finished goods inventories which are
unique to a particular customer or to a small number of
customers, and in the event of reductions in or cancellations of
orders, some inventories are not useable or cannot be returned to
vendors for credit. CTS generally imposes charges for the
reduction or cancellation of orders by customers, and these
charges are usually sufficient to cover the financial exposure of
CTS to inventories which are unique to a customer. CTS does not
customarily grant special return privileges or payment privileges
to customers, although CTS' distributor program permits certain
returns. CTS' working capital requirements are generally cyclical
but not seasonal.
Working capital requirements are generally dependent on the
overall business level. During 1997, working capital increased
to $93.4 million, primarily because of the increase in the
overall business level. During 1997, cash decreased due to the
requirements of the DCA acquisition, partially offset by
increased cash generated through financing and the higher level
of earnings. Cash represents a significant part of the Company's
working capital. Cash of various non-U.S. subsidiaries was held
in U.S.-denominated cash equivalents at December 31, 1997. This
cash, other than approximately $5.3 million, is generally
available to the Company. During 1997, the other changes in
working capital were primarily a result of the DCA acquisition
and higher business activity.
PATENTS, TRADEMARKS AND LICENSES
CTS maintains a program of obtaining and protecting U.S. and non-U.S.
patents and trademarks. CTS believes that the success of
its business is not materially dependent on the existence or
duration of any patent, group of patents or trademarks.
CTS licenses the right to manufacture several electronic products
to companies in the United States and non-U.S. countries. In
1997, license and royalty income was less than 1% of net sales.
CTS believes that the success of its business is not materially
dependent upon any licensing arrangement where CTS is either the
licensor or licensee.
MAJOR CUSTOMERS
CTS' 15 largest customers represented about 65%, 62% and 61% of
net sales in 1997, 1996 and 1995, respectively. Sales to General Motors
Corporation represented more than 10% of CTS' sales in each of the last
three years (ranging from 12% to 18% of net sales over such period).
Sales to Digital Equipment Corporation represented more than 10% of
CTS' net sales in one of the last three years. Sales to Seagate
Technology, Inc. represented more than 10% of CTS' net sales in one of the last
three years. The loss of, or reduction in, orders from one or more of
these customers could have a materially adverse effect on CTS.
BACKLOG OF ORDERS
Backlog of orders does not necessarily provide an accurate
indication of present or future business levels for CTS. For
many electronic components, the period between receipt of orders
and delivery is relatively short. For large orders from major
customers that may constitute backlog over an extended period of
time, production scheduling and delivery are subject to change or
cancellation by the customers on relatively short notice. At the
end of 1997, the Company's backlog of orders was $165 million,
which includes $82 million for DCA. This compares to $85
million at the end of 1996.
The backlog of orders at the end of 1997 will generally be filled
during the 1998 fiscal year.
GOVERNMENT CONTRACTS
CTS believes that about 7% of its net sales are associated with
purchases by the U.S. Government or non-U.S. governments,
principally for defense and aerospace applications. Because most
CTS products procured through government contractors and
subcontractors are for military end uses, the level of defense
and aerospace market sales by CTS is dependent upon government
budgeting and funding of programs utilizing electronic systems.
CTS is usually subject to contract provisions permitting
termination of the contract, usually with penalties payable by
the government; maintenance of specified accounting procedures;
limitations on and renegotiations of profits; priority production
scheduling; and possible penalties or fines against CTS for late
delivery or substandard quality. Such contract provisions have
not previously resulted in material uncertainties or disruptions
for CTS.
COMPETITION
CTS competes with many domestic and non-U.S. manufacturers
principally on the basis of product features, price, technology,
quality, reliability, delivery and service. Most product lines
of CTS encounter significant competition. The number of
significant competitors varies from product line to product line.
No single competitor competes with CTS in every product line, but
many competitors are larger and more diversified than CTS. Some
competitors are divisions or affiliates of customers. CTS is
subject to competitive risks inherent to the electronics industry
such as shorter product life cycles and technical obsolescence.
Some customers have reduced or plan to reduce the number of
suppliers while increasing the volume of purchases from
suppliers. Most customers are demanding higher quality,
reliability and delivery standards from CTS as well as
competitors. These trends may create opportunities for CTS while
also increasing the risk of loss of business to competitors.
The Company believes that it competes most successfully in custom
products manufactured to meet specific applications of major
OEMs.
CTS believes that it has some advantages over certain competitors
because of its ability to apply a broad range of technologies and
materials capabilities to develop products for the special
requirements of customers. CTS also believes that it has an
advantage over some competitors in its capability to sell a broad
range of products manufactured to relatively consistent standards
of quality and delivery. CTS believes that the relative breadth
of its product lines and relative consistency in quality and
delivery across product lines are advantages to CTS in selling
products to customers.
CTS believes that it is one of the largest manufacturers of
automotive throttle position sensors in the world.
FINANCIAL INFORMATION ABOUT NON-U.S. AND DOMESTIC
OPERATIONS AND EXPORT SALES
Information about revenue from sales to unaffiliated customers,
operating earnings and identifiable assets, by geographic area,
is contained in "Note H - Business Segment and Non-U.S.
Operations," pages 24-25, of the CTS Corporation 1997 Annual Report,
and is incorporated herein by reference.
In 1997, approximately 40% of net sales to unaffiliated
customers, after eliminations, were attributable to non-U.S.
operations. This is the same percentage as 1996. About 27% of
total CTS assets, after eliminations, are non-U.S. Except for
cash and equivalents, a substantial portion of these assets
cannot readily be liquidated. CTS believes that the business
risks attendant to its present non-U.S. operations, though
substantial, are normal risks for non-U.S. businesses, including
expropriation, currency controls and changes in currency exchange
rates and government regulations.
RESEARCH AND DEVELOPMENT ACTIVITIES
In 1997, 1996 and 1995, CTS expended $13.3, $10.7 and $8.0
million, respectively, for research and development. Most CTS
research and development activities relate to new product and
process developments or the improvement of product materials.
Many such research and development activities are for the benefit
of one or a limited number of customers or potential customers.
During 1997, the Company continued to introduce additional
versions of existing products in response to present and future
customer requirements.
ENVIRONMENTAL PROTECTION LAWS
In complying with federal, state and local environmental
protection laws, CTS has modified certain manufacturing processes
and expects to continue to make additional modifications. Such
modifications that have been performed have not materially
affected the capital expenditures, earnings or competitive
position of CTS.
Certain processes in the manufacture of the Company's current and
past products create hazardous waste by-products as currently
defined by federal and state laws and regulations. The Company
has been notified by the U.S. Environmental Protection Agency,
state environmental agencies and, in some cases, generator
groups, that it is or may be a Potentially Responsible Party
(PRP) regarding hazardous waste remediation at several non-CTS
sites. The factual circumstances of each site are different; the
Company has determined that its role as a PRP with respect to
these sites, even in the aggregate, will not have a material
adverse effect on the Company's business or financial condition,
based on the following: 1) the Company's status as a de minimis
party; 2) the large number of other PRPs identified; 3) the
identification and participation of many larger PRPs who are
financially viable; 4) defenses concerning the nature and limited
quantities of materials sent by the Company to certain of the
sites; and 5) the Company's experience to-date in relation to the
determination of its allocable share. In addition to these non-CTS sites,
the Company has an ongoing practice of providing
reserves for probable remediation activities at certain of its
manufacturing locations and for claims and proceedings against
the Company with respect to other environmental matters. In the
opinion of management, based upon presently available
information, either adequate provision for probable costs has
been made, or the ultimate costs resulting will not materially
affect the consolidated financial position or results of
operations of the Company.
There are claims against the Company with respect to
environmental matters which the Company contests. In the opinion
of management, based upon presently available information, either
adequate provision for potential costs has been made, or the
costs which ultimately might result will not materially affect
the consolidated financial position or results of operations of
the Company.
EMPLOYEES
CTS employed 5,044 persons at December 31, 1997. About 31% of
these persons were employed outside the United States at the end
of 1997. Approximately 700 CTS employees in the United States
were covered by collective bargaining agreements as of December
31, 1997. One of the four collective bargaining agreements
covering these employees will expire in 1999. The other three
agreements will expire in 2000.
Item 2. Properties
CTS operations or facilities are at the following locations. The
owned properties are not subject to material liens or
encumbrances.
Square Owned/
Location Feet Leased Expires
Elkhart, IN 412,000 Owned -
Scranton, PA 270,000 Owned -
Berne, IN 249,000 Owned -
New Hartford, CT 212,000 Owned -
Singapore 159,000 Owned* -
Batavia, OH 148,000 Owned -
Kaohsiung, Taiwan 133,000 Owned* -
Streetsville, Ontario, Canada 112,000 Owned -
West Lafayette, IN 106,000 Owned -
Bridgeport, CT 97,000 Owned -
Sandwich, IL 94,000 Owned -
Carlisle, PA 94,000 Leased February
2009
Brownsville, TX 85,000 Owned -
Carson, CA 76,000 Leased October
2007
Glasgow, Scotland 75,000 Owned -
McConnellsburg, PA 74,000 Owned -
Bentonville, AR 72,000 Owned -
New Hope, MN 55,000 Leased December
(Science Center Dr.) 1998
Winsted, CT 55,000 Owned -
Bangkok, Thailand 53,000 Owned -
Matamoros, Mexico 51,000 Owned* -
Baldwin, WI 39,000 Owned -
Burbank, CA 37,000 Leased** January
2000
Dongguan, China 23,000 Leased October
2002
Burbank, CA 21,000 Owned -
Hudson, NH 20,000 Leased September
1999
Greenwich, Ct 8,000 Leased December
2000
TOTAL 2,816,000
* Buildings are located on land leased under renewable leases.
** There is a ground lease on a parcel that expires in 2015.
The Company is currently seeking to sell the Bentonville,
Arkansas manufacturing facility.
A portion of the Brownsville facility is currently under a
leasing arrangement which expires in 1999. The annual rental
income is approximately $60,000. The New Hope, Minnesota facility
is currently under two separate sublease arrangements, each
expiring in 1998. The combined annual rental income is
approximately $170,000.
In 1994, the Company entered into a three-year lease of the
Bangkok, Thailand, property. In early 1997, this lease was
extended to March 31, 1999. The annual rental amount is
approximately U.S. $280,000.
During 1995, a lease for an initial term of two years with a two-year
renewal option was finalized with an international semiconductor manufacturer
for one floor of the Singapore facility. During 1997, the two-year renewal
option was exercised, with an annual rental amount of approximately $840,000.
The Company regularly assesses the adequacy of its manufacturing
facilities for manufacturing capacity, available labor and
location to the markets and major customers for the Company's
products. CTS also reviews the operating costs of its facilities
and may from time to time relocate facilities or certain
manufacturing activities in order to achieve operating cost
reductions and improved asset utilization and cash flow.
Item 3. Legal Proceedings
Contested claims involving various matters, including
environmental claims brought by government agencies, are being
litigated by CTS, both in legal and administrative forums. In
the opinion of management, based upon currently available
information, adequate provision for potential costs has been
made, or the costs which might ultimately result from such
litigation or administrative proceedings will not materially
affect the consolidated financial position of the Company or the
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of the shareholders of CTS Corporation was held
on October 16, 1997. At that meeting, two matters were submitted
to a vote of the shareholders: (1) The issuance of common stock
pursuant to the Amended and Restated Agreement and Plan of Merger
among the Company, a wholly-owned subsidiary of the Company, and
Dynamics Corporation of America ("DCA") and related amendments to
the Company's Articles of Incorporation; and (2) The grant of
employee stock options to certain executive officers of CTS and
DCA. Following are the tabulations of the voting results on
these issues, on which 4,229,589 shares were entitled to vote and
3,782,012 of such shares were represented at the meeting:
Issuance of Common Stock and Related Amendments to the
Articles of Incorporation
Votes Cast For Votes Cast Against Abstentions
3,709,196 69,545 3,271
Grant of Stock Options
Votes Cast For Votes Cast Against Abstentions
3,602,429 124,224 55,359
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
The principal market for CTS common stock is the New York Stock
Exchange. Information relative to the high and low trading
prices for CTS Common Stock for each quarter of the past two
years and the frequency and amount of dividends declared during
the previous two years can be located in "Shareholder
Information," page 12, of the CTS Corporation 1997 Annual Report,
incorporated herein by reference. On March 6, 1998, there were
approximately 1,435 holders of record of CTS common stock.
The Company intends to continue a policy of considering dividends
on a quarterly basis. The declaration of a dividend and the
amount of any such dividend is subject to earnings, anticipated
working capital, capital expenditure and other investment
requirements, the financial condition of CTS and such other
factors as the Board of Directors deems relevant.
Item 6. Selected Financial Data
A summary of selected financial data for CTS, for each of the
previous five fiscal years, is contained in the "Five-Year
Summary," page 13, of the CTS Corporation 1997 Annual Report,
incorporated herein by reference.
Certain divestitures and closures of businesses and certain
accounting changes affect the comparability of information
contained in the "Five-Year Summary."
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information about liquidity, capital resources and results of
operations, for the three previous fiscal years, is contained in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations (1995-1997)," pages 28-31, of the CTS
Corporation 1997 Annual Report, incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements, meeting the requirements of
Regulation S-X, and the Report of Independent Accountants, are
contained in pages 14-27 of the CTS Corporation 1997 Annual
Report, incorporated herein by reference. Quarterly per share
financial data is provided in "Shareholder Information," under
the subheadings, "Quarterly Results of Operations" and "Per Share
Data," on page 12 of the CTS Corporation 1997 Annual Report, and
is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
There were no disagreements.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information responsive to Items 401(a) and 401(e) of Regulation
S-K pertaining to directors of CTS is contained in the 1998 Proxy
Statement under the caption "Election of Directors," pages 6-7,
filed with the Securities and Exchange Commission, and is
incorporated herein by reference.
Information responsive to Item 405 of Regulation S-K pertaining
to compliance with Section 16(a) of the Securities Exchange Act
of 1934 is contained in the 1998 Proxy Statement under the
caption "Section 16(a) Beneficial Ownership Reporting
Compliance," page 8, filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
The individuals listed were elected as executive officers of CTS
at the annual meeting of the Board of Directors on April 25,
1997, except for William J. Kaska, who was elected at the August
13, 1997 meeting of the Board of Directors. They are expected to
serve as executive officers until the next annual meeting of the
Board of Directors, scheduled on April 24, 1998, at which time
the election of officers will be considered again by the Board of
Directors.
Name Age Position and Offices
Joseph P. Walker 59 Director, Chairman,
President and Chief
Executive Officer
William J. Kaska 56 Group Vice President
Stanley J. Aris 57 Vice President Finance and
Chief Financial Officer
Jeannine M. Davis 49 Vice President, Secretary
and General Counsel
James L. Cummins 42 Vice President, Human Resources
James N. Hufford 58 Vice President, Research,
Development and Engineering
Donald R. Schroeder 49 Vice President, Sales and
Marketing
George T. Newhart 55 Corporate Controller
Gary N. Hoipkemier 43 Treasurer
Joseph P. Walker has served as Chairman of the Board, President
and Chief Executive Officer of CTS since 1988. Mr. Walker is a
Director of NBD Bank, N.A.
William J. Kaska was elected Group Vice President on August 13,
1997. Prior to his appointment, he served as General Manager and
Vice President of CTS Automotive Products.
Stanley J. Aris has served as Vice President, Finance and Chief
Financial Officer since 1992. Prior to joining CTS, Mr. Aris
worked for two years as a business consultant.
Jeannine M. Davis has served as Vice President, Secretary and
General Counsel since 1988.
James L. Cummins has served as Vice President, Human Resources
since 1994. For the three years prior to this appointment, he
served as Director, Human Resources, CTS Corporation from 1991-1994.
James N. Hufford has served as Vice President, Research,
Development and Engineering since 1995. During the four years
prior to this appointment, Mr. Hufford served as Manager and then
Director of Corporate Research, Development and Engineering for
the Corporation.
Donald R. Schroeder has served as Vice President, Sales and
Marketing since 1995. During the six years prior to this
appointment, Mr. Schroeder served as Business Development Manager
for innovative and new technology for the CTS Microelectronics
business unit in West Lafayette, Indiana.
George T. Newhart has served as Corporate Controller since 1989.
Gary N. Hoipkemier has served as Treasurer since 1989.
Item 11. Executive Compensation
Information responsive to Item 402 of Regulation S-K pertaining
to management remuneration is contained in the 1998 Proxy
Statement in the captions "Executive Compensation," pages 9-12
and "Director Compensation," pages 17-18, filed with the
Securities and Exchange Commission, and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information responsive to Item 403 of Regulation S-K pertaining
to security ownership of certain beneficial owners and management
is contained in the 1998 Proxy Statement in the caption
"Securities Beneficially Owned by Principal Shareholders and
Management," pages 3-6, filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
On October 16, 1997, the Company acquired Dynamics Corporation of
America ("DCA"), including the reacquisition of CTS shares held
by DCA. Other transactions between DCA and CTS, prior to the
acquisition, were minimal.
Information responsive to Item 404 of Regulation S-K pertaining to
security ownership of certain beneficial owners and management is
contained in the 1998 Proxy Statment in the caption "Certain Relationships
and Related Transactions", pages 7-8, filed with the Securities and Exchange
Commission and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
The list of financial statements and financial statement
schedules required by Item 14(a)(1) and (2) is contained on page
S-1 herein.
(a) (3) Exhibits
(3)(a) Articles of Incorporation, as amended and restated
October 16, 1997, (incorporated by reference to
Exhibit (3) (a) to the Company's Current Report on
form 8-K, filed October 20, 1997).
(3)(b) Bylaws, effective October 31, 1997, filed
herewith.
(10)(a) Employment Agreement, dated as of May 9, 1997,
between the Company and Joseph P. Walker
(incorporated by reference to Exhibit (c)(2) to
the Schedule 14D-1 filed by the Company on May 16,
1997).
(10)(b) Prototype indemnification agreements, executed with
all officers and directors of the Corporation, incorporated
by reference to Exhibit (10)(b) to the Company's
Annual Report on Form 10-K for 1991).
(10)(c) CTS Corporation 1986 Stock Option Plan, approved
by the shareholders on May 30, 1986, as amended
and restated on May 9, 1997, (incorporated by
reference to Exhibit 10(d) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 29, 1997).
(10)(d) CTS Corporation 1988 Restricted Stock and Cash
Bonus Plan approved by the shareholders on April
28, 1989, as amended and restated on May 9, 1997,
(incorporated by reference to Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1997).
(10)(e) CTS Corporation 1996 Stock Option Plan, approved
by the shareholders on April 26, 1996, as amended
and restated on May 9, 1997, (incorporated by
reference to Exhibit 10(f) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 29, 1997).
(10)(f) Amended and Restated Agreement and Plan of Merger,
dated as of May 9, 1997, and amended and restated
on July 17, 1997, and further amended on October
15, 1997, among the Company, CTS First Acquisition
Corp., a wholly owned subsidiary of the Company
("Sub"), and DCA (incorporated by reference to
Exhibit (c)(6) to Amendment No. 3 to the Schedule
13D filed by the Company in respect of DCA on July
18, 1997, (the "Schedule 13-D") and Exhibit 2(a)
to the Company's Current Report on Form 8-K, filed
October 20, 1997).
(10)(g) Shareholders Agreement, dated as of July 17, 1997,
among the Company, Sub, WHX Corporation ("WHX")
and SB Acquisition Corp., a subsidiary of WHX
(incorporated by reference to Exhibit (c)(7) to
the Schedule 13-D).
(10)(h) Employment Agreement, dated as of May 9, 1997,
between the Company and Andrew Lozyniak
(incorporated by reference to Exhibit 10.5 of
DCA's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, (the "DCA 10-Q").
(10)(i) Employment Agreement, dated as of May 9, 1997,
between the Company and Patrick J. Dorme
(incorporated by reference to the DCA 10-Q).
(10)(j) Employment Agreement, dated as of May 9, 1997,
between the Company and Henry V. Kensing
(incorporated by reference to the DCA 10-Q).
(10)(k) The Form of Severance Agreement, dated April 11,
1997, between the Company and certain officers of
the Company (incorporated by reference to Exhibit
(a)(99) of the Company's Quarterly Report on Form
10-Q for the quarter ended March 30, 1997) and
amendment thereto, dated May 9, 1997,
(incorporated by reference to Exhibit 10(m) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1997.
(10) (l) Stock Option Agreements, with Stanley J. Aris,
Jeannine M. Davis, Andrew Lozyniak and Joseph P.
Walker, pursuant to option approval by
shareholders on October 16, 1997, filed herewith.
(21) Subsidiaries as of October 16, 1997, filed herewith.
(23) Consent of Price Waterhouse to incorporation by
reference of this Annual Report on Form 10-K for the
fiscal year 1997 to Registration Statement 33-27749 on
Form S-8 and Registration Statement 333-5730 on Form S-8.
(27) Financial Data Schedule (filed only electronically with
the SEC).
b. Reports on Forms 8-K
Announcements that the Effective Time for the Merger had
occurred on October 16, 1997, and describing related events;
filed October 20, 1997.
Indemnification Undertaking
For the purposes of complying with the amendments to the
rules governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration
Statements on Form S-8 Nos. 33-27749 (filed March 23,
1989)and 333-5730 (filed October 3, 1996):
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provision, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of
the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date By /S/ Stanley J. Aris
Stanley J. Aris,
Vice President Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Date By /S/ Lawrence J. Ciancia
Lawrence J. Ciancia,
Director
Date By /S/ Patrick J. Dorme
Patrick J. Dorme,
Director
Date By /S/ Gerald H. Frieling, Jr.
Gerald H. Frieling, Jr.,
Director
Date By /S/ Andrew Lozyniak
Andrew Lozyniak,
Director
Date By /S/ Robert A. Profusek
Robert A. Profusek,
Director
Date By /S/ Joseph P. Walker
Joseph P. Walker,
Director
Date By /S/ George T. Newhart
George T. Newhart,
Corporate Controller
and Principal Accounting
Officer
Date By /S/ Jeannine M. Davis
Jeannine M. Davis,
Vice President, Secretary
and General Counsel
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1997
CTS CORPORATION AND SUBSIDIARIES
ELKHART, INDIANA
FORM 10-K - ITEM 14(a) (1) AND (2) AND ITEM 14 (d)
CTS CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of CTS
Corporation and subsidiaries included in the annual report of the
registrant to its shareholders for the year ended December 31,
1997, are incorporated by reference in Item 8:
Consolidated balance sheets - December 31, 1997, and
December 31, 1996
Consolidated statements of earnings - Years ended
December 31, 1997, December 31, 1996, and December 31, 1995
Consolidated statements of shareholders' equity - Years
ended December 31, 1997, December 31, 1996, and December 31,
1995
Consolidated statements of cash flows - Years ended
December 31, 1997, December 31, 1996, and December 31, 1995
Notes to consolidated financial statements
The following consolidated financial statement schedules of CTS
Corporation and subsidiaries, are included in item 14(d):
Page
Schedule II - Valuation and qualifying accounts S-3
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
have been omitted because they are inapplicable, not required or
the information is included in the consolidated financial
statements or notes thereto.
S-1
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of CTS Corporation
Our audits of the consolidated financial statements referred to
in our report dated January 30, 1998, appearing on page 27 of the
CTS Corporation 1997 Annual Report (which report and consolidated
financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in item 14(a) of this Form 10-K. In
our opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 30, 1998
S-2
CTS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
Additions
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Classification Period Expenses Accounts Deductions(1) End of Period
Year ended December 31, 1997:
Allowance for
doubtful receivables $622 $(66) $522(2) $ 4 $1,074
Year ended December 31, 1996
Allowance for
doubtful receivables $774 $ 239 $ 0 $391 $622
Year ended December 31, 1995:
Allowance for
doubtful receivables $869 $1 $ 0 $96 $774
(1) Uncollectible accounts written off.
(2) Balance from DCA Merger.
S-3
CTS CORPORATION
BY LAWS
(As Amended and in Effect on October 31, 1997)
ARTICLE I.
Officers
The officers of CTS Corporation
(the "Corporation") shall be a President, one or more Vice Presidents, a
Secretary, a Treasurer and a Controller. The Board of Directors may also
elect one or more Assistant Secretaries, Assistant Treasurers and
Assistant Controllers, and such other officers as may be determined, from
time to time, by the Board of Directors.
The President shall be a director of the Corporation. Any offices, other
than those of President and Secretary, may be held by the same person.
The officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors for the term of
one year and until their successors have been elected and qualified. Any
vacancy occurring among the above offices may be filled for the remainder
of the term by the Board of Directors at any regular or special meeting,
and officers so elected shall hold office until the next annual meeting
of the Board of Directors and until their successors have been elected
and qualified.
ARTICLE II.
Board of Directors Organization
Section 1. The Board of Directors shall elect, from the members of
the Board of Directors who are not officers of the Corporation, an Audit
Committee consisting of not less than two members. The members of the
Audit Committee shall be elected at each annual meeting of the Board of
Directors to serve, while qualified, at the pleasure of the Board of
Directors, or if longer, for one year and until their successors have
been elected and qualified.
The Audit Committee shall be responsible directly to the Board of
Directors and, in addition to such authority and duties specifically
delegated by the Board of Directors, shall have the authority to review
the conduct and the report of the independent financial audit of the
Corporation and shall report to the Board of Directors the findings,
conclusions and recommendations of the Audit Committee regarding the
conduct and report of the independent financial audit.
Unless the Board of Directors designates a Chairman, a majority of
the members of the Audit Committee may designate one member of the Audit
Committee as Chairman of the Audit Committee to preside at all meetings
of the Audit Committee.
Section 2. The Board of Directors shall elect from members of the
Board of Directors, who are not officers of the Corporation, a
Compensation Committee consisting of not less than two members. The
members of the Compensation Committee shall be elected at each annual
meeting of the Board of Directors to serve, while qualified, at the
pleasure of the Board of Directors, or if longer, for one year and until
their successors have been elected and qualified.
The Compensation Committee shall be responsible directly to the Board
of Directors and, in addition to such authority and duties specifically
delegated by the Board of Directors, shall have authority to review, and
make recommendations to the Board of Directors regarding the
compensation, including fringe benefits and stock options, for the
officers of the Corporation.
Unless the Board of Directors designates a Chairman, a majority of
the members of the Compensation Committee may designate one member of the
Compensation Committee as Chairman of the Compensation Committee to
preside at all meetings of the Compensation Committee.
Section 3. The Board of Directors shall designate from members of
the Board of Directors, a Chairman of the Board, who shall preside at
meetings of shareholders and of the Board of Directors unless the
Chairman shall designate an officer or other director of the Corporation
to do so. The Chairman of the Board shall have such additional authority
as granted by the Board of Directors and shall perform such other duties
as are assigned from time to time by the Board of Directors.
ARTICLE III.
Corporate Officers
Section 1. The President shall exercise specific authority and
supervision over, and shall be responsible for the direction of, the
business and affairs of the Corporation, subject to the direction of the
Board of Directors. In addition, the President may be designated the
Chief Executive Officer and, if so, shall have the additional authority
and duties and responsibilities specified in these Bylaws. The President
shall also perform such other duties as may be assigned from time to
time, by the Board of Directors. The President shall perform all the
duties of the Chairman of the Board in the absence or during any
disability of the Chairman.
Section 2. The Board of Directors shall designate the Chairman of
the Board or the President as the Chief Executive Officer of the
Corporation. In addition to other duties as an officer, the Chief
Executive Officer shall exercise general authority and supervision over,
and shall be responsible for, management of the business and affairs of
the Corporation, subject to the direction of the Board of Directors.
The Chief Executive Officer shall determine the organization of the
officers of the Corporation, shall designate to whom such officers shall
report and be responsible, and subject to the direction of the Board of
Directors shall determine their respective duties and responsibilities.
Section 3. Each Vice President shall perform such duties as may be
assigned from time to time by the President and shall report to and be
responsible to such officer as the President shall designate. Each Vice
President shall also have such additional authority and shall perform
such other duties assigned from time to time, by the Board of Directors.
The Board of Directors may designate a word or words to be placed
before or after the title of Vice President to indicate organizational or
functional authority or duty.
Section 4. The Secretary shall attend all meetings of the
shareholders and Board of Directors and all committees, and shall keep
minutes of each meeting. The Secretary shall give proper notice of all
meetings of shareholders, directors and committees, required in these
Bylaws. The Secretary shall maintain proper records of ownership and
transfer of the stock of the Corporation. The Secretary shall have the
custody of, and affix, the seal of the Corporation and perform such other
duties as may be assigned from time to time by the Board of Directors.
Section 5. The Vice President Finance/Chief Financial Officer, shall
be responsible for the financial affairs of the Corporation, shall submit
to the annual meeting of shareholders a statement of the financial
condition of the Corporation, and whenever required by the Board of
Directors, shall give account of all transactions and of the financial
condition of the Corporation. The Treasurer shall report to the Vice
President Finance/Chief Financial Officer. The Treasurer shall establish
and maintain appropriate banking relations and arrangements on behalf of
the Corporation. The Treasurer shall receive and have custody of, and
shall disburse, all moneys of the Corporation, and in the name of the
Corporation, shall deposit all moneys in, and disburse all moneys from,
such bank, or banks, as the Board of Directors shall designate, from time
to time, as the depositories of the Corporation. The Treasurer shall
perform such other duties and render such services for, and on behalf of,
the Corporation as may be assigned from time to time by the Vice
President Finance, Chief Financial Officer.
Section 6. The Controller shall be the accounting officer of the
Corporation and shall formulate accounting procedures to record expenses,
losses, gains, assets and liabilities of the Corporation, to report and
interpret results of operations of the Corporation and to assure
protection of the assets of the Corporation. The Controller shall
prepare and submit to the Board of Directors and the Chief Executive
Officer such periodic balance sheets, profit and loss statements and
other financial statements as may be required to keep such persons
currently informed of the operations and the financial condition of the
Corporation. The Controller shall perform such other duties assigned
from time to time by the Chief Executive Officer.
Section 7. The Assistant Secretary or Secretaries, Assistant
Treasurer or Treasurers, and the Assistant Controller or Controllers
shall perform the duties of the Secretary, of the Treasurer, and of the
Controller, respectively, in the absence of those officers and shall have
such further authority and perform such other duties as may be assigned.
ARTICLE IV.
Duties of Officers Delegated
In the absence or disability of any officer of the Corporation, the
Board of Directors may delegate the powers and duties of any such officer
to any other officer or director of the Corporation for such period of
time as said Board of Directors may determine.
ARTICLE V.
Bonds
The Board of Directors or the Chief Executive Officer may require any
officer, agent, or employee of the Corporation to furnish the Corporation
a bond for the faithful performance of duties and for the accounting of
all moneys, securities, records, or other property of the Corporation
coming into the hands of such agent or employee.
ARTICLE VI.
Meetings of Shareholders
Section 1. Meetings of the shareholders of the Corporation shall be
held at the place, either within or without the State of Indiana, stated
in the notice of said meeting.
Section 2. The annual meeting of shareholders of the Corporation
shall be held on the last Friday in April of each year or at such other
time established for such meeting by 80% of the directors.
Section 3. A complete list of the shareholders entitled to vote at
any shareholders' meeting, arranged in alphabetical order and containing
the address and number of shares of stock so held by each shareholder who
is entitled to vote at said meeting, shall be prepared by the Secretary
and shall be subject to the inspection by any shareholder at the time and
place of an annual meeting and at the principal office of the Corporation
for five (5) days prior thereto.
Section 4. At all shareholders' meetings a quorum shall consist of a
majority of all of the shares of stock outstanding and entitled by the
Articles of Incorporation to vote on the business to be transacted at
said meeting, but a meeting composed of less than a quorum may adjourn
the meeting from day to day thereafter or until some future time.
Section 5. At the annual meeting of the shareholders, there shall be
elected, by plurality vote, a Board of Directors, who shall hold office
until the next annual meeting of shareholders and until their successors
have been elected and qualified.
Section 6. At all shareholders' meetings, each shareholder shall be
entitled to one (1) vote in person or by proxy for each share of common
stock registered in the shareholder's name on the books of the
Corporation as of the record date which shall be as fixed by the Board of
Directors and entitled, by the Articles of Incorporation, to vote on the
business to be transacted at said meeting.
Section 7. The shareholders may be represented at any meeting
thereof by their duly appointed Attorney-in-Fact provided the proxy so
appointing said Attorney-in-Fact shall be filed with the Secretary prior
to the meeting.
Section 8. Special meetings of the shareholders of the Corporation
may be called by the Chairman of the Board, by the President, by the
Board of Directors, or by the shareholders holding not less than one-fourth
of all of the shares of stock outstanding and entitled, by the
Articles of Incorporation, to vote on the business to be transacted at
said special meeting whenever in the opinion of such person or body such
meeting is necessary.
Whenever a special meeting of the shareholders shall be called by the
shareholders, the call shall be delivered to the Secretary who shall
issue the notice of said special meeting which is required to be given.
Section 9. Written notice of each meeting of the shareholders shall
be given by the Secretary to each shareholder of record at least ten (10)
days prior to the time fixed for the holding of such meeting; said notice
shall state the place, day and hour and the purpose for which said
meeting is called, and said notice shall be addressed to the last known
place of residence of each shareholder as shown by the stock books of the
Corporation. The ten (10) days shall be computed from the date upon
which said notice is deposited in the mails.
Section 10. Notice of any shareholders' meeting may be waived in
writing by any shareholder if the waiver sets forth in reasonable detail
the purpose or purposes for which the meeting is called and the time and
place thereof.
Section 11. No shares of stock shall be voted at any annual or
special meeting of shareholders upon which any installment is due and
unpaid or which are owned by the Corporation.
ARTICLE VII.
Directors
Section 1. The property and business affairs of the Corporation
shall be managed under the direction of the Board of Directors.
Directors shall be elected by a plurality vote at the annual meeting or a
special meeting of the shareholders and shall hold office for a term of
one year or until their successors are elected and qualified. In case of
the failure to hold the annual meeting on the date fixed herein for the
same to be held, the directors shall hold over until the next annual
meeting, unless prior to said meeting a special meeting of the
shareholders for the purpose of electing directors has been held.
Subject to the rights, if any, of any series of Preferred Stock to elect
additional directors under circumstances specified in the Articles of
Incorporation and to the minimum and maximum number of authorized
directors provided in the Articles of Incorporation, the authorized
number of directors will be as determined from time to time by the Board
of Directors. If no determination of the number of directors has been
made by the Board of Directors, the number of directors shall be [seven].
Section 2. Any vacancy occurring in the Board of Directors caused by
resignation, death or other incapacity, shall be filled by majority vote
of the remaining members of the Board until the next annual meeting of
shareholders; provided, however, that if the vote of the remaining
members of the Board of Directors shall result in a tie, such vacancy
shall be filled by the shareholders at the next annual meeting of the
shareholders or at a special meeting of the shareholders called for that
purpose.
Section 3. Any vacancy occurring in the Board of Directors, caused
by an increase in the number of directors, shall be filled by a majority
vote of the members of the Board until the next annual meeting of
shareholders; provided, however, that if the vote of the members of the
Board of Directors shall result in a tie, such vacancy shall be filled by
the shareholders at the next annual meeting of the shareholders or at a
special meeting of the shareholders called for that purpose.
Section 4. A person shall not be nominated, stand for election or be
elected as a director of the Corporation who (I) at the time of his
election shall be seventy (70) years of age or older, (ii) has retired
from employment by the Corporation and is sixty-five (65) years of age or
older or (iii) has retired from active business and professional
vocations.
Article VIII.
Meetings of Directors
Section 1. Following the annual meeting of shareholders, the annual
meeting of the Board of Directors shall be held without notice, each and
every year hereafter, at the time and place determined by the directors.
Section 2. Regular meetings of the Board of Directors shall be held
without notice at 9:00 A.M. on the last Friday of February, June, August,
October and December at the offices of the Corporation, unless another
time and place is designated.
Section 3. Special meetings of the Board of Directors may be called
by the Chairman of the Board, by the President, or by three (3) members
of the Board of Directors on three (3) days' notice by mail, or an
twenty-four (24) hours' notice by telegraph, telephone, facsimile or
other similar medium of communication to each director, which notice
shall be addressed to the last known place of business or residence of
each director, and said meetings may be held either at the office of the
Corporation or at such other place as may be designated in the notice of
said meeting.
Whenever a special meeting of the Board of Directors shall be called,
in accordance with the provision of this section, by members of the Board
of Directors, the call shall be in writing, signed by said directors and
delivered to the secretary who shall thereupon issue the notice calling
said meeting.
Section 4. Not less than one-half at the whole Board of Directors,
shall constitute a quorum for the transaction of any business except the
filling of vacancies, but a smaller number may adjourn, from time to
time, until a future date or until a quorum is secured.
For the purpose only of filling a vacancy or vacancies in the Board
of Directors, a quorum shall consist of a majority of the whole Board of
Directors, less the vacancy or vacancies therein.
The act of a majority at the directors present at a meeting duly
called, at which a quorum is present shall be the act of the Board of
Directors.
ARTICLE IX.
Compensation of Directors and
Members of Committees
The members of the Board of Directors and members of committees of
the Corporation, who are not salaried employees of the Corporation, shall
receive such compensation for their services to be rendered as members of
the Board of Directors, or of committees, as may, from time to time, be
fixed by the Board of Directors and the compensation so fixed shall
continue to be payable until the Board of Directors shall have thereafter
fixed a different compensation, which it may do at any annual, regular or
special meeting.
ARTICLE X.
Certificates of Stock
Section 1. Certificates of stock shall be issued to those legally
entitled thereto, as may be shown by the books of the Corporation, and
shall be signed by the President and attested by the Secretary.
Section 2. The Corporation may appoint one or more transfer agents
and/or registrars to issue, countersign, register, and transfer
certificates representing its capital stock and signatures of the
Corporation's officers and of the transfer agents on stock certificates
may be facsimiles. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction on its books.
Section 3. The holder of any stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or
mutilation of the certificate for any such stock. A new certificate or
certificates shall be issued upon the surrender of the mutilated
certificate or, in case of loss, theft, or destruction, upon (I) delivery
of an affidavit or affirmation, and (ii) delivery of a bond in such sum
and in such form and with such surety or sureties as the Board of
Directors (by general or specific resolutions) or the President may
approve, indemnifying the Corporation against any claim with respect to
the certificate or certificates alleged to have been lost, stolen or
destroyed. However, the Board may, in its discretion, refuse to issue new
certificate or certificates, save upon the order of some Court having
jurisdiction in such matters.
ARTICLE XI.
Transfer of Stock
Section 1. The stock transfer books of the Corporation may from time
to time be closed by order of the Board of Directors for any lawful
purpose and for such period consistent with law, but not exceeding thirty
(30) days at any one time, as the Board of Directors may deem advisable.
In lieu of closing the stock transfer books as aforesaid, the Board of
Directors may, in its discretion, fix in advance a date not exceeding
fifty (50) days or less than ten (10) days next preceding the date of any
meeting of shareholders or the date for the payment of any dividend or
the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect, as the
record date for the determination of the shareholders entitled to notice
of and to vote at any such meeting or entitled to receive any such
dividend or to any such allotment of rights or to exercise the rights of
any such change, conversion or exchange of capital stock; and, in such
case, only such shareholders as shall be shareholders of record at the
close of business on the date so fixed shall be entitled to notice of and
to vote at such meeting or to receive such payment of dividend or to
receive such allotment of rights or to exercise such rights as the case
may be, notwithstanding any transfer of stock on the books of the
Corporation after such record date fixed as aforesaid. In the event the
Board of Directors fails to fix in advance the record date for the
determination of the shareholders entitled to notice of and to vote at
any meeting, no share of stock transferred on the books of the
corporation within ten (10) days next preceding the date of a meeting
shall be voted at such meeting.
Section 2. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the legal owner thereof and
accordingly shall not be bound to recognize any equitable claim to or
interest in such share or shares on the part of any other person whether
or not it shall have express or other notice thereof, save as expressly
provided in the laws of the State of Indiana.
Section 3. The assignment of any certificate of stock shall
constitute an assignment to the assignee of the shares so assigned and of
all dividends on the shares assigned which are declared payable as of a
record date subsequent to the date the assignment is recorded on the
stock record books of the Corporation.
ARTICLE XII.
Fiscal Year
The fiscal year of the Corporation shall correspond to the calendar
year.
ARTICLE XIII.
Checks for Money
All checks, drafts or other orders for the payment of funds of the
Corporation shall be signed by either the Chairman of the Board, the
President, or the Treasurer, or by such other individual or individuals
as may hereafter, from time to time, be designated by the Board of
Directors. No check, draft or other order for the payment of funds of
the Corporation shall be signed in blank, either as to the amount of the
check, draft or other order, or as to the name of the payee.
ARTICLE XIV.
Dividends
The Board of Directors may declare and pay dividends out of the
unreserved and unrestricted earned surplus of the Corporation. Dividends
may be declared at any annual, regular or special meeting of the Board of
Directors. Dividends may be paid in cash, in property or in the shares
of the capital stock of the Corporation, as provided by the Articles of
Incorporation and the laws of the State of Indiana.
ARTICLE XV.
Notices
Section 1. A notice required to be given under the provisions of
these Bylaws to any shareholder, director, officer and member of any
committee shall not be construed to mean personal notice but may be given
in writing by depositing the same in a post office or letter box in a
postpaid sealed wrapper addressed to such shareholder, director, officer
and member of any committee at such address as appears upon the books of
the Corporation, and such notice shall be deemed to be given at the time
when the same shall be thus mailed.
Section 2. Any shareholder, director, officer and member of any
committee may waive, in writing, any notice required to be given by these
Bylaws, either before or after the time said notice should have been
issued.
ARTICLE XVI.
Compensation of Officers
The officers of the Corporation shall receive such compensation for
their services as may, from time to time, be fixed by the Board of
Directors, and the compensation so fixed shall continue to be payable
until the Board of Directors shall have fixed a different compensation,
which it may do at any annual, regular, or special meeting.
ARTICLE XVII.
Corporate Seal
The seal of the Corporation shall be a plain circular disk having
engraved thereon, near the outer edge thereof, at least the words, "CTS
Corporation" and in the center thereof the word, "Seal".
ARTICLE XVIII.
Indemnification
Section 1. General. Without limiting the generality or effect of
Article XI of the Articles of Incorporation, the Corporation shall, to
the fullest extent to which it is empowered to do so by the Indiana
Business Corporation Law (hereinafter the "IBCL"), or any other
applicable laws, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
such law permitted the Corporation to provide prior to such amendment),
indemnify and hold harmless any person who was or is involved in any
manner (including without limitation as a party or a witness), or is
threatened to be made so involved, in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal
(hereinafter a "proceeding"), by reason of the fact that such person is
or was a director or officer of the Corporation, or who is or was serving
at the request of the Board of Directors as a director, officer, partner
or trustee of another corporation or a partnership, joint venture, trust,
employee benefit plan or other entity, whether for profit or not for
profit, (any such person hereinafter an "indemnitee"), whether or not the
basis of such proceeding is alleged action in an official capacity while
serving as a director, or officer, against all expense, liability and
loss (including attorneys' fees and expenses, judgments, settlements,
penalties, fines, and excise taxes assessed with respect to employee
benefit plans) actually and reasonably incurred or suffered by such
person in connection therewith; provided, however, that, except as
provided in Section 3 of this Article XVIII with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any
such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses. The right to
indemnification conferred in Article XVIII shall include the right to be
paid by the Corporation the expenses (including, without limitation,
attorneys' fees and expenses) incurred in defending any such proceeding
in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the IBCL so requires, an
advancement of expenses incurred by an indemnitee in his or her capacity
as a director or officer (and not in any other capacity in which service
was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to
the Corporation of an undertaking (hereinafter an "undertaking"), by or
on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which
there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses
under this Section 2 or otherwise.
The rights to indemnification and to the advancement of expenses
conferred in Article XVIII shall be contract rights and such rights shall
continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators. For purposes of Article XVIII, references to "the
Corporation" shall include any domestic or foreign predecessor entity of
the Corporation in a merger or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
Section 3. Right of Indemnitee to Bring Suit. If a claim under
Section 1 or Section 2 of this Article XVIII is not paid in full by the
Corporation within 60 calendar days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be 20
calendar days, the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by
the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder
(but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit
brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has
not met any applicable standard for indemnification set forth in the
IBCL. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or shareholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee
has met the applicable standard of conduct set forth in the IBCL, nor an
actual determination by the Corporation (including its Board of
Directors, independent legal counsel or shareholders) that the indemnitee
has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or
brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the burden of proving that the indemnitee
is not entitled to be indemnified, or to such advancement of expenses,
under this Article XVIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights. The rights to
indemnification and to the advancement of expenses conferred in this
Article XVIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's
Articles of Incorporation, Bylaws, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer, employee or
agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the IBCL.
Section 6. Vested Right to Indemnification. The right of any
individual to indemnification under this Article XVIII shall vest at the
time of occurrence or performance of any event, act or omission giving
rise to any Proceeding and once vested, shall not later be impaired as a
result of any amendment, repeal, alteration or other modification of any
or all of these Bylaws. Notwithstanding the foregoing, the
indemnification afforded under this Article XVIII shall be applicable to
all alleged prior acts or omissions of any individual seeking
indemnification hereunder, regardless of the fact that such alleged acts
or omissions may have occurred prior to the adoption of these Bylaws, and
to the extent such prior acts or omissions cannot be deemed to be covered
by these Bylaws, the right of any individual to indemnification shall be
governed by the indemnification provisions in effect at the time of such
prior acts or omissions.
Section 7. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to
the advancement of expenses to any employee or agent of this corporation,
or to any individual who is or was serving at the request of the Board of
Directors as an employee or agent of another corporation or a
partnership, joint venture, trust, employee benefit plan or other entity,
whether for profit or not for profit, to the fullest extent of the
provisions of these Bylaws with respect to the indemnification and
advancement of expenses of directors and officers of this corporation.
Section 8. Business Expense. Any payments made to any indemnified
party under these Bylaws or under any other right to indemnification
shall be deemed to be an ordinary and necessary business expense of the
Corporation, and payment thereof shall not subject any person responsible
for the payment, or the Board, to any action for corporate waste or to
any similar action.
Section 9. Severability. If any provision or provisions of
Article XVIII is or are held to be invalid, illegal, or unenforceable for
any reason whatsoever: (I) the validity, legality, and enforceability of
the remaining provisions of such Article (including without limitation
all portions of any paragraph of such Article containing any such
provision held to be invalid, illegal, or unenforceable, that are not
themselves invalid, illegal, or unenforceable) will not in any way be
affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of such Article (including without limitation all portions of
any paragraph of such Article containing any such provision held to be
invalid, illegal, or unenforceable, that are not themselves invalid,
illegal, or unenforceable) will be construed so as to give effect to the
intent manifested by the provision held invalid, illegal, or illegal, or
unenforceable.
ARTICLE XIX.
Amendments
Section 1. These Bylaws may be amended, altered, repealed, or
added to at any annual or regular meeting of the directors, or at any
special meeting thereof.
Section 2. No amendment, alteration or addition to these Bylaws
shall become effective unless the same is adopted by the affirmative vote
of a majority of the members of the Board of Directors.
ARTICLE XX.
Control Share Acquisitions
As provided for in Section 5 thereof, Chapter 42 of the Indiana
Business Corporation Law, relating to control share acquisitions, shall
not apply to control share acquisitions of shares of the corporation made
after March 3, 1987.
CTS CORPORATION
Nonqualified Stock Option Agreement
RECITALS:
A. Joseph P. Walker (the "Optionee") is an employee of CTS Corporation,
an Indiana corporation, or a subsidiary thereof, (collectively, the
"Corporation").
B. The Board of Directors of the Corporation (the "Board") has on May
9, 1997 authorized the execution of a stock option agreement in the form
hereof ("Agreement"), as of such date (the "Date of Grant"), subject to
shareholder approval and certain other conditions which approval has been
obtained and conditions have been satisfied as of the date hereof.
C. The option granted hereby is intended to be a nonqualified stock
option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of
1986 (the "Code").
NOW, THEREFORE, subject to the terms and conditions herein set
forth, the Corporation hereby grants to the Optionee a nonqualified
option (the "Option") to purchase 600,000 Common Shares (the "Option
Shares") at an exercise price per Option Share equal to $20.83 (the
"Exercise Price").
1. Vesting of Option. (a) Unless terminated as hereinafter provided,
the Option will be fully exercisable as of the date of this Agreement.
2. Termination of Option. The Option will terminate automatically and
without further action on the earliest of the following dates:
(a) the date of the termination by the Corporation of the
Optionee's employment for Cause as defined herein;
(b) 60 days after the termination of the Optionee's employment
with the Corporation by reason of his or her death;
(c) 180 days after the termination of the Optionee's employment with
the Corporation by reason of his or her total and permanent disability;
(d) 30 days after the voluntary termination by the Optionee of his
employment with the Corporation for any reason or the termination by the
Corporation of the Optionee's employment with the Corporation for any
reason other than disability or Cause; or
(e) ten years after the Date of Grant, if the Optionee remains in
continuous employment with the Corporation during that ten-year period.
As used herein, "Cause" means that the Optionee:
(I) has been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his or her duties or in the
course of his or her employment with the Corporation; or
(ii) has intentionally and wrongfully disclosed secret processes,
trade secrets or confidential information of the Corporation
and any such act has been demonstrably and materially harmful to the
Corporation. For purposes of this Agreement, no act or failure to act on
the part of the Optionee will be deemed to be "intentional" if it was due
primarily to an error in judgment or negligence, and will be deemed to be
"intentional" only if done or omitted to be done by the Optionee not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Corporation.
3. Payment of Exercise Price. The Exercise Price may be paid (a)
in cash or check or other cash equivalent acceptable to the Corporation,
(b) by actual or constructive transfer to the Corporation of
nonforfeitable, nonrestricted Common Shares owned by the Optionee for a
minimum of six months prior to the date of such exercise, or (c) by any
combination of the foregoing methods of payment. Constructive, rather
than actual, surrender of Common Shares owned by the Optionee is
permitted, provided that the Internal Revenue Service deems such
constructive surrender as an actual exchange for tax purposes, and
further provided that Optionee provides evidence satisfactory to the
Corporation of his ownership of such constructively surrendered Common
Shares. Nonforfeitable, nonrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise Price will
be valued at 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 closing
price is reported. The requirement of payment in cash will be deemed
satisfied if the Optionee makes arrangements that are satisfactory to the
Corporation with a broker that is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the Option Shares
which are being purchased pursuant to the exercise so that the net
proceeds of the sale transaction will at least equal the amount of the
aggregate Exercise Price, plus interest at the "applicable Federal rate"
within the meaning of that term under Section 1274 of the Code, or any
successor provision thereto, for the period from the date of exercise to
the date of payment, and pursuant to which the broker undertakes to
deliver to the Corporation the amount of the aggregate Exercise Price,
plus such interest, not later than the date on which the sale transaction
will settle in the ordinary course of business.
As a further condition precedent to the exercise of this Option,
the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of, or supervision over, the issuance
of Common Shares and in connection therewith shall execute any documents
which the Compensation Committee shall in its sole discretion deem
necessary or advisable.
4. Compliance with Law. The Corporation will make reasonable
efforts to comply with all applicable securities laws; provided, however,
that notwithstanding any other provision of this agreement, the Option
will not be exercisable if the exercise thereof would result in a
violation of any such law.
5. Consideration for Option. In consideration for the grant of
this Option, Optionee agrees that for a period of one year following the
termination of his or her employment with the Corporation, he or she will
not render services of any kind to any business engaged in, or about to
become engaged in, research or development, marketing, leasing or selling
of any product, which is the same as, or similar to, a product of the
Corporation to which Optionee was exposed during the last two years of
his or her employment with the Corporation.
Optionee further agrees not to communicate or disclose to any
person, firm or corporation either directly or indirectly any knowledge
or information acquired during his or her employment with the
Corporation, or any subsidiary or division thereof, concerning business
plans and strategies, inventions, trade secrets, customer or price lists
or any other confidential information with respect to the property or
business of the Corporation or any subsidiary or division thereof.
6. Right to Terminate Employment or Service and Adjust
Compensation. No provision of this Agreement will limit in any way
whatsoever any right that the Corporation may otherwise have to terminate
the employment or adjust the compensation of the Optionee at any time.
7. Relation to Other Benefits. Any economic or other benefit to
the Optionee under this Agreement will not be taken into account in
determining any other benefits to which the Optionee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Corporation or under any employment agreement or
severance agreement between the Optionee and the Corporation, and will
not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the
Corporation.
8. Transferability. The Option may be transferred during the
lifetime of the Optionee, only to (i) a member of Optionee's immediate
family; (ii) a trust for the benefit of members of Optionee's immediate
family; or (iii) a partnership or other entity of which family members of
the Optionee are the sole owners; provided that such transfer is effected
by Optionee in strict compliance with all applicable laws and
regulations.
Notwithstanding the foregoing, this Section shall not be construed
to entitle the Optionee to compel the Corporation to file any
registration statement or take any other action which may be necessary to
enable the Optionee to exercise his right of transfer under this Section.
9. Withholding Taxes. To the extent that the Corporation is
required to withhold any federal, state, local or foreign taxes in
connection with any benefit realized by the Optionee under this
Agreement, and the amounts otherwise available to the Corporation for
such withholding are insufficient, it shall be a condition to the
realization of any such benefit that the Optionee make arrangements
satisfactory to the Corporation for payment of the balance of any taxes
required to be withheld. Subject to applicable law, any such
arrangements may without limitation include voluntary or mandatory
relinquishment of a portion of any such benefit or the surrender of
outstanding Common Shares. The Corporation and the Optionee may also
make similar arrangements with respect to the payment of any taxes on
which withholding is not required.
10. Adjustments. The number, type and price of Option Shares
covered by this Option shall be proportionately and appropriately
adjusted by the Compensation Committee of the Corporation in good faith
to reflect changes in the capital structure of the corporation by reason
of any stock split or dividend, recapitalization, merger, consolidation,
combination or exchange of shares for other securities or other similar
corporate change. In addition, in the event of any merger, consolidation
or other transaction or event having a similar effect, the Optionee may
elect to receive awards economically equivalent to the Option provided
hereunder in respect of securities of the surviving entity of such
transaction.
11. Severability. In the event that one or more of the
provisions of this Agreement may be invalidated for any reason by a
court, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will
continue to be valid and fully enforceable.
12. Governing Law. This Agreement is made under, and will be
construed in accordance with, the laws of the State of Indiana, without
giving effect to the principle of conflict of laws of such State.
This Agreement is executed by the Corporation on this 31st day
of October, 1997, effective as of the Date of Grant.
CTS CORPORATION
By: \S\Jeannine M. Davis
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Agreement and accepts the Option granted
hereunder, subject to the terms and conditions hereinabove set forth.
\S\Joseph P. Walker
Optionee
Date: October 31, 1997
CTS CORPORATION
Nonqualified Stock Option Agreement
RECITALS:
A. Stanley J. Aris (the "Optionee") is an employee of CTS
Corporation, an Indiana corporation, or a subsidiary thereof,
(collectively, the "Corporation").
B. The Board of Directors of the Corporation (the "Board") has on
May 9, 1997 authorized the execution of a stock option agreement in the
form hereof ("Agreement"), as of such date (the "Date of Grant"), subject
to shareholder approval and certain other conditions which approval has
been obtained and conditions have been satisfied as of the date hereof.
C. The option granted hereby is intended to be a nonqualified stock
option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of
1986 (the "Code").
NOW, THEREFORE, subject to the terms and conditions herein set
forth, the Corporation hereby grants to the Optionee a nonqualified
option (the "Option") to purchase 150,000 Common Shares (the "Option
Shares") at an exercise price per Option Share equal to $20.83 (the
"Exercise Price").
1. Vesting of Option. (a) Unless terminated as hereinafter
provided, the Option will be fully exercisable as of the date of this
Agreement.
(b) To the extent that the Option is exercisable in accordance
with the terms of this Section 1, it may be exercised in whole or in part
from time to time thereafter.
2. Termination of Option. The Option will terminate automatically
and without further action on the earliest of the following dates:
(a) the date of the termination by the Corporation of the
Optionee's employment for Cause as defined herein;
(b) 360 days after the termination of the Optionee's employment
with the Corporation by reason of his or her death;
(c) 180 days after the termination of the Optionee's employment
with the Corporation by reason of his or her total and permanent
disability;
(d) 30 days after the voluntary termination by the Optionee of
his employment with the Corporation for any reason or the termination by
the Corporation of the Optionee's employment with the Corporation for any
reason other than disability or Cause; or
(e) ten years after the Date of Grant, if the Optionee remains
in continuous employment with the Corporation during that ten-year
period.
As used herein, "Cause" means that the Optionee:
(I) has been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his or her duties or in the
course of his or her employment with the Corporation; or
(ii) has intentionally and wrongfully disclosed secret
processes, trade secrets or confidential information of the Corporation
and any such act has been demonstrably and materially harmful to the
Corporation. For purposes of this Agreement, no act or failure to act on
the part of the Optionee will be deemed to be "intentional" if it was due
primarily to an error in judgment or negligence, and will be deemed to be
"intentional" only if done or omitted to be done by the Optionee not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Corporation.
3. Payment of Exercise Price. The Exercise Price may be paid (a)
in cash or check or other cash equivalent acceptable to the Corporation,
(b) by actual or constructive transfer to the Corporation of
nonforfeitable, nonrestricted Common Shares owned by the Optionee for a
minimum of six months prior to the date of such exercise, or (c) by any
combination of the foregoing methods of payment. Constructive, rather
than actual, surrender of Common Shares owned by the Optionee is
permitted, provided that the Internal Revenue Service deems such
constructive surrender as an actual exchange for tax purposes, and
further provided that Optionee provides evidence satisfactory to the
Corporation of his ownership of such constructively surrendered Common
Shares. Nonforfeitable, nonrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise Price will
be valued at 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 closing
price is reported. The requirement of payment in cash will be deemed
satisfied if the Optionee makes arrangements that are satisfactory to the
Corporation with a broker that is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the Option Shares
which are being purchased pursuant to the exercise so that the net
proceeds of the sale transaction will at least equal the amount of the
aggregate Exercise Price, plus interest at the "applicable Federal rate"
within the meaning of that term under Section 1274 of the Code, or any
successor provision thereto, for the period from the date of exercise to
the date of payment, and pursuant to which the broker undertakes to
deliver to the Corporation the amount of the aggregate Exercise Price,
plus such interest, not later than the date on which the sale transaction
will settle in the ordinary course of business.
As a further condition precedent to the exercise of this Option,
the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of, or supervision over, the issuance
of Common Shares and in connection therewith shall execute any documents
which the Compensation Committee shall in its sole discretion deem
necessary or advisable.
4. Compliance with Law. The Corporation will make reasonable
efforts to comply with all applicable securities laws; provided, however,
that notwithstanding any other provision of this agreement, the Option
will not be exercisable if the exercise thereof would result in a
violation of any such law.
5. Consideration for Option. In consideration for the grant of
this Option, Optionee agrees that for a period of one year following the
termination of his or her employment with the Corporation, he or she will
not render services of any kind to any business engaged in, or about to
become engaged in, research or development, marketing, leasing or selling
of any product, which is the same as, or similar to, a product of the
Corporation to which Optionee was exposed during the last two years of
his or her employment with the Corporation.
Optionee further agrees not to communicate or disclose to any
person, firm or corporation either directly or indirectly any knowledge
or information acquired during his or her employment with the
Corporation, or any subsidiary or division thereof, concerning business
plans and strategies, inventions, trade secrets, customer or price lists
or any other confidential information with respect to the property or
business of the Corporation or any subsidiary or division thereof.
6. Right to Terminate Employment or Service and Adjust
Compensation. No provision of this Agreement will limit in any way
whatsoever any right that the Corporation may otherwise have to terminate
the employment or adjust the compensation of the Optionee at any time.
7. Relation to Other Benefits. Any economic or other benefit to
the Optionee under this Agreement will not be taken into account in
determining any other benefits to which the Optionee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Corporation or under any employment agreement or
severance agreement between the Optionee and the Corporation, and will
not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the
Corporation.
8. Transferability. The Option may be transferred during the
lifetime of the Optionee, only to (i) a member of Optionee's immediate
family; (ii) a trust for the benefit of members of Optionee's immediate
family; or (iii) a partnership or other entity of which family members of
the Optionee are the sole owners; provided that such transfer is effected
by Optionee in strict compliance with all applicable laws and
regulations.
Notwithstanding the foregoing, this Section shall not be
construed to entitle the Optionee to compel the Corporation to file any
registration statement or take any other action which may be necessary to
enable the Optionee to exercise his right of transfer under this Section.
9. Withholding Taxes. To the extent that the Corporation is
required to withhold any federal, state, local or foreign taxes in
connection with any benefit realized by the Optionee under this
Agreement, and the amounts otherwise available to the Corporation for
such withholding are insufficient, it shall be a condition to the
realization of any such benefit that the Optionee make arrangements
satisfactory to the Corporation for payment of the balance of any taxes
required to be withheld. Subject to applicable law, any such
arrangements may without limitation include voluntary or mandatory
relinquishment of a portion of any such benefit or the surrender of
outstanding Common Shares. The Corporation and the Optionee may also
make similar arrangements with respect to the payment of any taxes on
which withholding is not required.
10. Adjustments. The number, type and price of Option Shares
covered by this Option shall be proportionately and appropriately
adjusted by the Compensation Committee of the Corporation in good faith
to reflect changes in the capital structure of the corporation by reason
of any stock split or dividend, recapitalization, merger, consolidation,
combination or exchange of shares for other securities or other similar
corporate change. In addition, in the event of any merger, consolidation
or other transaction or event having a similar effect, the Optionee may
elect to receive awards economically equivalent to the Option provided
hereunder in respect of securities of the surviving entity of such
transaction.
11. Severability. In the event that one or more of the
provisions of this Agreement may be invalidated for any reason by a
court, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will
continue to be valid and fully enforceable.
12. Governing Law. This Agreement is made under, and will be
construed in accordance with, the laws of the State of Indiana, without
giving effect to the principle of conflict of laws of such State.
This Agreement is executed by the Corporation on this 31st day
of October, 1997, effective as of the Date of Grant.
CTS CORPORATION
By:\S\Jeannine M. Davis
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Agreement and accepts the Option granted
hereunder, subject to the terms and conditions hereinabove set forth.
\S\Stanley J. Aris
Optionee
Date: October 31, 1997
CTS CORPORATION
Nonqualified Stock Option Agreement
RECITALS:
A. Jeannine M. Davis (the "Optionee") is an employee of CTS
Corporation, an Indiana corporation, or a subsidiary thereof,
(collectively, the "Corporation").
B. The Board of Directors of the Corporation (the "Board") has on
May 9, 1997 authorized the execution of a stock option agreement in the
form hereof ("Agreement"), as of such date (the "Date of Grant"), subject
to shareholder approval and certain other conditions which approval has
been obtained and conditions have been satisfied as of the date hereof.
C. The option granted hereby is intended to be a nonqualified stock
option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of
1986 (the "Code").
NOW, THEREFORE, subject to the terms and conditions herein set
forth, the Corporation hereby grants to the Optionee a nonqualified
option (the "Option") to purchase 150,000 Common Shares (the "Option
Shares") at an exercise price per Option Share equal to $20.83 (the
"Exercise Price").
1. Vesting of Option. (a) Unless terminated as hereinafter
provided, the Option will be fully exercisable as of the date of this
Agreement.
(b) To the extent that the Option is exercisable in accordance with
the terms of this Section 1, it may be exercised in whole or in part from
time to time thereafter.
2. Termination of Option. The Option will terminate automatically
and without further action on the earliest of the following dates:
(a) the date of the termination by the Corporation of the Optionee's
employment for Cause as defined herein;
(b) 360 days after the termination of the Optionee's employment with
the Corporation by reason of his or her death;
(c) 180 days after the termination of the Optionee's employment with
the Corporation by reason of his or her total and permanent disability;
(d) 30 days after the voluntary termination by the Optionee of his
employment with the Corporation for any reason or the termination by the
Corporation of the Optionee's employment with the Corporation for any
reason other than disability or Cause; or
(e) ten years after the Date of Grant, if the Optionee remains in
continuous employment with the Corporation during that ten-year period.
As used herein, "Cause" means that the Optionee:
(i) has been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his or her duties or in the
course of his or her employment with the Corporation; or
(ii) has intentionally and wrongfully disclosed secret
processes, trade secrets or confidential information of the Corporation
and any such act has been demonstrably and materially harmful to the
Corporation. For purposes of this Agreement, no act or failure to act on
the part of the Optionee will be deemed to be "intentional" if it was due
primarily to an error in judgment or negligence, and will be deemed to be
"intentional" only if done or omitted to be done by the Optionee not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Corporation.
3. Payment of Exercise Price. The Exercise Price may be paid (a)
in cash or check or other cash equivalent acceptable to the Corporation,
(b) by actual or constructive transfer to the Corporation of
nonforfeitable, nonrestricted Common Shares owned by the Optionee for a
minimum of six months prior to the date of such exercise, or (c) by any
combination of the foregoing methods of payment. Constructive, rather
than actual, surrender of Common Shares owned by the Optionee is
permitted, provided that the Internal Revenue Service deems such
constructive surrender as an actual exchange for tax purposes, and
further provided that Optionee provides evidence satisfactory to the
Corporation of his ownership of such constructively surrendered Common
Shares. Nonforfeitable, nonrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise Price will
be valued at 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 closing
price is reported. The requirement of payment in cash will be deemed
satisfied if the Optionee makes arrangements that are satisfactory to the
Corporation with a broker that is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the Option Shares
which are being purchased pursuant to the exercise so that the net
proceeds of the sale transaction will at least equal the amount of the
aggregate Exercise Price, plus interest at the "applicable Federal rate"
within the meaning of that term under Section 1274 of the Code, or any
successor provision thereto, for the period from the date of exercise to
the date of payment, and pursuant to which the broker undertakes to
deliver to the Corporation the amount of the aggregate Exercise Price,
plus such interest, not later than the date on which the sale transaction
will settle in the ordinary course of business.
As a further condition precedent to the exercise of this Option,
the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of, or supervision over, the issuance
of Common Shares and in connection therewith shall execute any documents
which the Compensation Committee shall in its sole discretion deem
necessary or advisable.
4. Compliance with Law. The Corporation will make reasonable
efforts to comply with all applicable securities laws; provided, however,
that notwithstanding any other provision of this agreement, the Option
will not be exercisable if the exercise thereof would result in a
violation of any such law.
5. Consideration for Option. In consideration for the grant of
this Option, Optionee agrees that for a period of one year following the
termination of his or her employment with the Corporation, he or she will
not render services of any kind to any business engaged in, or about to
become engaged in, research or development, marketing, leasing or selling
of any product, which is the same as, or similar to, a product of the
Corporation to which Optionee was exposed during the last two years of
his or her employment with the Corporation.
Optionee further agrees not to communicate or disclose to any
person, firm or corporation either directly or indirectly any knowledge
or information acquired during his or her employment with the
Corporation, or any subsidiary or division thereof, concerning business
plans and strategies, inventions, trade secrets, customer or price lists
or any other confidential information with respect to the property or
business of the Corporation or any subsidiary or division thereof.
6. Right to Terminate Employment or Service and Adjust
Compensation. No provision of this Agreement will limit in any way
whatsoever any right that the Corporation may otherwise have to terminate
the employment or adjust the compensation of the Optionee at any time.
7. Relation to Other Benefits. Any economic or other benefit to
the Optionee under this Agreement will not be taken into account in
determining any other benefits to which the Optionee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Corporation or under any employment agreement or
severance agreement between the Optionee and the Corporation, and will
not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the
Corporation.
8. Transferability. The Option may be transferred during the
lifetime of the Optionee, only to (i) a member of Optionee's immediate
family; (ii) a trust for the benefit of members of Optionee's immediate
family; or (iii) a partnership or other entity of which family members of
the Optionee are the sole owners; provided that such transfer is effected
by Optionee in strict compliance with all applicable laws and
regulations.
Notwithstanding the foregoing, this Section shall not be
construed to entitle the Optionee to compel the Corporation to file any
registration statement or take any other action which may be necessary to
enable the Optionee to exercise his right of transfer under this Section.
9. Withholding Taxes. To the extent that the Corporation is
required to withhold any federal, state, local or foreign taxes in
connection with any benefit realized by the Optionee under this
Agreement, and the amounts otherwise available to the Corporation for
such withholding are insufficient, it shall be a condition to the
realization of any such benefit that the Optionee make arrangements
satisfactory to the Corporation for payment of the balance of any taxes
required to be withheld. Subject to applicable law, any such
arrangements may without limitation include voluntary or mandatory
relinquishment of a portion of any such benefit or the surrender of
outstanding Common Shares. The Corporation and the Optionee may also
make similar arrangements with respect to the payment of any taxes on
which withholding is not required.
10. Adjustments. The number, type and price of Option Shares
covered by this Option shall be proportionately and appropriately
adjusted by the Compensation Committee of the Corporation in good faith
to reflect changes in the capital structure of the corporation by reason
of any stock split or dividend, recapitalization, merger, consolidation,
combination or exchange of shares for other securities or other similar
corporate change. In addition, in the event of any merger, consolidation
or other transaction or event having a similar effect, the Optionee may
elect to receive awards economically equivalent to the Option provided
hereunder in respect of securities of the surviving entity of such
transaction.
11. Severability. In the event that one or more of the
provisions of this Agreement may be invalidated for any reason by a
court, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will
continue to be valid and fully enforceable.
12. Governing Law. This Agreement is made under, and will be
construed in accordance with, the laws of the State of Indiana, without
giving effect to the principle of conflict of laws of such State.
This Agreement is executed by the Corporation on this 31st day
of October, 1997, effective as of the Date of Grant.
CTS CORPORATION
By:\S\Joseph P. Walker
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Agreement and accepts the Option granted
hereunder, subject to the terms and conditions hereinabove set forth.
\S\Jeannine M. Davis
Optionee
Date: October 31, 1997
CTS CORPORATION
Nonqualified Stock Option Agreement
RECITALS:
A. Andrew Lozyniak (the "Optionee") is an employee of CTS
Corporation, an Indiana corporation, or a subsidiary thereof,
(collectively, the "Corporation").
B. The Board of Directors of the Corporation (the "Board") has on
May 9, 1997 authorized the execution of a stock option agreement in the
form hereof ("Agreement"), as of such date (the "Date of Grant"), subject
to shareholder approval and certain other conditions which approval has
been obtained and conditions have been satisfied as of the date hereof.
C. The option granted hereby is intended to be a nonqualified stock
option and will not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of
1986 (the "Code").
NOW, THEREFORE, subject to the terms and conditions herein set
forth, the Corporation hereby grants to the Optionee a nonqualified
option (the "Option") to purchase 300,000 Common Shares (the "Option
Shares") at an exercise price per Option Share equal to $20.83 (the
"Exercise Price").
1. Vesting of Option. (a) Unless terminated as hereinafter
provided, the Option will be fully exercisable as of the date of this
Agreement.
(b) To the extent that the Option is exercisable in accordance
with the terms of this Section 1, it may be exercised in whole or in part
from time to time thereafter.
2. Termination of Option. The Option will terminate automatically
and without further action on the earliest of the following dates:
(a) the date of the termination by the Corporation of the
Optionee's employment for Cause as defined herein;
(b) 360 days after the termination of the Optionee's employment
with the Corporation by reason of his or her death;
(c) 180 days after the termination of the Optionee's employment
with the Corporation by reason of his or her total and permanent
disability;
(d) 30 days after the voluntary termination by the Optionee of
his employment with the Corporation for any reason or the termination by
the Corporation of the Optionee's employment with the Corporation for any
reason other than disability or Cause; or
(e) ten years after the Date of Grant, if the Optionee remains
in continuous employment with the Corporation during that ten-year
period.
As used herein, "Cause" means that the Optionee:
(i) has been convicted of a criminal violation involving fraud,
embezzlement or theft in connection with his or her duties or in the
course of his or her employment with the Corporation; or
(ii) has intentionally and wrongfully disclosed secret
processes, trade secrets or confidential information of the Corporation
and any such act has been demonstrably and materially harmful to the
Corporation. For purposes of this Agreement, no act or failure to act on
the part of the Optionee will be deemed to be "intentional" if it was due
primarily to an error in judgment or negligence, and will be deemed to be
"intentional" only if done or omitted to be done by the Optionee not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Corporation.
3. Payment of Exercise Price. The Exercise Price may be paid (a)
in cash or check or other cash equivalent acceptable to the Corporation,
(b) by actual or constructive transfer to the Corporation of
nonforfeitable, nonrestricted Common Shares owned by the Optionee for a
minimum of six months prior to the date of such exercise, or (c) by any
combination of the foregoing methods of payment. Constructive, rather
than actual, surrender of Common Shares owned by the Optionee is
permitted, provided that the Internal Revenue Service deems such
constructive surrender as an actual exchange for tax purposes, and
further provided that Optionee provides evidence satisfactory to the
Corporation of his ownership of such constructively surrendered Common
Shares. Nonforfeitable, nonrestricted Common Shares that are transferred
by the Optionee in payment of all or any part of the Exercise Price will
be valued at 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 closing
price is reported. The requirement of payment in cash will be deemed
satisfied if the Optionee makes arrangements that are satisfactory to the
Corporation with a broker that is a member of the National Association of
Securities Dealers, Inc. to sell a sufficient number of the Option Shares
which are being purchased pursuant to the exercise so that the net
proceeds of the sale transaction will at least equal the amount of the
aggregate Exercise Price, plus interest at the "applicable Federal rate"
within the meaning of that term under Section 1274 of the Code, or any
successor provision thereto, for the period from the date of exercise to
the date of payment, and pursuant to which the broker undertakes to
deliver to the Corporation the amount of the aggregate Exercise Price,
plus such interest, not later than the date on which the sale transaction
will settle in the ordinary course of business.
As a further condition precedent to the exercise of this Option,
the Optionee shall comply with all regulations and requirements of any
regulatory authority having control of, or supervision over, the issuance
of Common Shares and in connection therewith shall execute any documents
which the Compensation Committee shall in its sole discretion deem
necessary or advisable.
4. Compliance with Law. The Corporation will make reasonable
efforts to comply with all applicable securities laws; provided, however,
that notwithstanding any other provision of this agreement, the Option
will not be exercisable if the exercise thereof would result in a
violation of any such law.
5. Consideration for Option. In consideration for the grant of
this Option, Optionee agrees that for a period of one year following the
termination of his or her employment with the Corporation, he or she will
not render services of any kind to any business engaged in, or about to
become engaged in, research or development, marketing, leasing or selling
of any product, which is the same as, or similar to, a product of the
Corporation to which Optionee was exposed during the last two years of
his or her employment with the Corporation.
Optionee further agrees not to communicate or disclose to any
person, firm or corporation either directly or indirectly any knowledge
or information acquired during his or her employment with the
Corporation, or any subsidiary or division thereof, concerning business
plans and strategies, inventions, trade secrets, customer or price lists
or any other confidential information with respect to the property or
business of the Corporation or any subsidiary or division thereof.
6. Right to Terminate Employment or Service and Adjust
Compensation. No provision of this Agreement will limit in any way
whatsoever any right that the Corporation may otherwise have to terminate
the employment or adjust the compensation of the Optionee at any time.
7. Relation to Other Benefits. Any economic or other benefit to
the Optionee under this Agreement will not be taken into account in
determining any other benefits to which the Optionee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Corporation or under any employment agreement or
severance agreement between the Optionee and the Corporation, and will
not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the
Corporation.
8. Transferability. The Option may be transferred during the
lifetime of the Optionee, only to (i) a member of Optionee's immediate
family; (ii) a trust for the benefit of members of Optionee's immediate
family; or (iii) a partnership or other entity of which family members of
the Optionee are the sole owners; provided that such transfer is effected
by Optionee in strict compliance with all applicable laws and
regulations.
Notwithstanding the foregoing, this Section shall not be
construed to entitle the Optionee to compel the Corporation to file any
registration statement or take any other action which may be necessary to
enable the Optionee to exercise his right of transfer under this Section.
9. Withholding Taxes. To the extent that the Corporation is
required to withhold any federal, state, local or foreign taxes in
connection with any benefit realized by the Optionee under this
Agreement, and the amounts otherwise available to the Corporation for
such withholding are insufficient, it shall be a condition to the
realization of any such benefit that the Optionee make arrangements
satisfactory to the Corporation for payment of the balance of any taxes
required to be withheld. Subject to applicable law, any such
arrangements may without limitation include voluntary or mandatory
relinquishment of a portion of any such benefit or the surrender of
outstanding Common Shares. The Corporation and the Optionee may also
make similar arrangements with respect to the payment of any taxes on
which withholding is not required.
10. Adjustments. The number, type and price of Option Shares
covered by this Option shall be proportionately and appropriately
adjusted by the Compensation Committee of the Corporation in good faith
to reflect changes in the capital structure of the corporation by reason
of any stock split or dividend, recapitalization, merger, consolidation,
combination or exchange of shares for other securities or other similar
corporate change. In addition, in the event of any merger, consolidation
or other transaction or event having a similar effect, the Optionee may
elect to receive awards economically equivalent to the Option provided
hereunder in respect of securities of the surviving entity of such
transaction.
11. Severability. In the event that one or more of the
provisions of this Agreement may be invalidated for any reason by a
court, any provision so invalidated will be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof will
continue to be valid and fully enforceable.
12. Governing Law. This Agreement is made under, and will be
construed in accordance with, the laws of the State of Indiana, without
giving effect to the principle of conflict of laws of such State.
This Agreement is executed by the Corporation on this 31st day
of October, 1997, effective as of the Date of Grant.
CTS CORPORATION
By:\S\Jeannine M. Davis
The undersigned Optionee hereby acknowledges receipt of an
executed original of this Agreement and accepts the Option granted
hereunder, subject to the terms and conditions hereinabove set forth.
\S\Andrew Lozyniak
Optionee
Date: October 31, 1997
EXHIBIT 21
CTS CORPORATION AND SUBSIDIARIES
CTS Corporation (Registrant), an Indiana corporation
Subsidiaries
CTS Corporation (Delaware), a Delaware corporation
CTS of Panama, Inc., a Republic of Panama corporation
CTS Components Taiwan, Ltd.,(1) a Taiwan, Republic of
China corporation
CTS Singapore Pte., Ltd., a Republic of Singapore
corporation
CTS Electro de Matamoros, S.A.,(1) a Republic of Mexico
corporation
CTS Export Corporation, a Virgin Islands corporation
CTS Japan, Inc., a Japan corporation
CTS of Canada, Ltd., a Province of Ontario (Canada) corporation
CTS Manufacturing (Thailand) Ltd.,(1) a Thailand corporation
CTS Electronics Hong Kong Ltd.,(1) a Hong Kong corporation
CTS Corporation U.K. Ltd., a United Kingdom corporation
CTS Printex, Inc., a California corporation
CTS Micro Peripherals, Inc., a California corporation
Dynamics Corporation of America, a New York corporation
International Electronic Research Corporation, a California
corporation
LTB Investment Corporation, a Delaware corporation
Corporations whose names are indented are subsidiaries of the preceding
non-indented corporations. Except as indicated, each of the above
subsidiaries is wholly-owned by its parent company. Operations of all
subsidiaries and divisions are consolidated in the financial statements
filed.
(1) Less than 1% of the outstanding shares of stock is owned of
record by nominee shareholders pursuant to national laws
regarding resident or nominee ownership.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-27749 and No. 333-5730) of CTS Corporation
of our report dated January 30, 1998, appearing on page 27 of the CTS
Corporation 1997 Annual Report which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule, which appears on page
S-2 of this Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 27, 1998