-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KRiuiYEKu/Se96kAc2t8UWzYKbmMA7sihlBGrYRjBKQWx4PO5cJ87k71tHJHEnAX 8XrmFLYQFP5IPmPV3PWE7Q== 0000950137-00-001090.txt : 20000321 0000950137-00-001090.hdr.sgml : 20000321 ACCESSION NUMBER: 0000950137-00-001090 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000428 FILED AS OF DATE: 20000320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CTS CORP CENTRAL INDEX KEY: 0000026058 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 350225010 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-04639 FILM NUMBER: 573948 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 MAIL ADDRESS: STREET 1: 905 W BLVD NORTH CITY: ELKHART STATE: IN ZIP: 46514 DEF 14A 1 DEFINITIVE PROXY STATEMENT 1 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the registrant [X] Filed by a party other than the registrant [ ] Check the appropriate box: [ ] Preliminary proxy statement. [ ] Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2). [X] Definitive proxy statement. [ ] Definitive additional materials. [ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12. CTS CORPORATION - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) CTS CORPORATION - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if Other Than the Registrant) Payment of filing fee (check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. - -------------------------------------------------------------------------------- [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. (1) Amount Previously Paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: - -------------------------------------------------------------------------------- 2 [CTS CORPORATION LOGO] [CTS CORPORATION LETTERHEAD] March 20, 2000 Dear CTS Shareholder: You are cordially invited to attend the 2000 Annual Meeting of Shareholders of CTS Corporation. The meeting will be held on Friday, April 28, 2000, at 9:00 a.m. Eastern Standard Time at CTS' Corporate Office, 905 West Boulevard North, Elkhart, Indiana 46514. The official notice of meeting, proxy statement and form of proxy are enclosed. We hope you will attend the meeting in person. Whether you plan to attend the meeting or not, we encourage you to read this proxy statement and vote your shares. The vote of every shareholder is important. We look forward to seeing you at the meeting. /s/ JOSEPH P. WALKER Joseph P. Walker Chairman of the Board President and Chief Executive Officer 3 [CTS CORPORATION LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS APRIL 28, 2000 To CTS Shareholders: The Annual Meeting of Shareholders of CTS Corporation will be held at 9:00 a.m. Eastern Standard Time, Friday, April 28, 2000, at the CTS Corporate Office, 905 West Boulevard North, Elkhart, Indiana 46514. Only shareholders of record at the close of business on March 10, 2000 may vote at this meeting or any adjournments that may take place. At the meeting, we will: 1. Elect a Board of Directors; 2. Attend to other business properly presented at the meeting. Your Board of Directors recommends that you vote in favor of the election of directors, as described in this proxy statement. By Order of the Board of Directors, /s/ JEANNINE M. DAVIS LOGO Jeannine M. Davis Secretary March 20, 2000 YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. 4 [CTS CORPORATION LOGO] PROXY STATEMENT --------------------------- ANNUAL MEETING OF SHAREHOLDERS APRIL 28, 2000 This proxy statement is furnished in connection with the solicitation by the Board of Directors of CTS Corporation of proxies to be voted at the Annual Meeting of Shareholders to be held on Friday, April 28, 2000. Following is important information in a question-and-answer format regarding the Annual Meeting and this proxy statement. Q: WHAT MAY I VOTE ON? A: The election of nominees to serve on our Board of Directors. Q: HOW DOES THE BOARD RECOMMEND I VOTE? A: The Board recommends a vote FOR each of the nominees. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED? A: Although we do not know of any business to be considered at the 2000 Annual Meeting other than as described in this proxy statement, if any other business is presented at the Annual Meeting, your signed proxy card gives authority to Joseph P. Walker, CTS' Chairman, President and Chief Executive Officer, and Jeannine M. Davis, CTS' Executive Vice President Administration and Secretary, to vote on those matters at their discretion. Q: HOW MANY VOTES ARE NEEDED TO ELECT DIRECTORS? A: Assuming that at least a majority of shares are present at the Annual Meeting, the eight director-nominees receiving the most votes will be elected. Only votes cast for a nominee will be counted, except that the accompanying proxy will be voted for the eight nominees unless the proxy contains contrary instructions. Abstentions, broker non-votes and instructions on the accompanying proxy to withhold authority to vote for one or more of the nominees will result in those nominees receiving fewer votes. Q: WHO IS ENTITLED TO VOTE? A: Shareholders as of the close of business on March 10, 2000 (the Record Date) are entitled to vote at the Annual Meeting. As of the Record Date, 27,836,506 shares of CTS common stock were issued and outstanding. Every shareholder of common stock is entitled to one vote for each share of common stock held on the Record Date. Q: HOW DO I VOTE? A: Sign and date each proxy you receive and return it in the prepaid envelope. If you return your signed proxy but do not mark the boxes showing how you wish to vote, your shares will be voted FOR the election of the director-nominees. You have the right to revoke your proxy any time before the meeting by: (1) notifying CTS' Secretary; (2) returning a later-dated proxy card; or (3) voting in person at the meeting. 3 5 Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD? A: It means you hold shares registered in more than one account. Sign and return all proxies you receive to ensure that all your shares are voted. Q: HOW MUCH DID THIS PROXY SOLICITATION COST? A: Georgeson & Co., Inc. was hired to assist in distribution of proxy materials and solicitation of votes for $5,000, plus their reasonable expenses. We also reimburse banks, brokers and other custodians, fiduciaries and nominees for their costs of sending proxy and solicitation materials to our shareholders. Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING DUE? A: All shareholder proposals to be considered for inclusion in next year's proxy statement must be submitted in writing to the Secretary of CTS at the CTS Corporate Office by November 20, 2000. In addition, CTS' advance notice bylaw provisions require that to be presented from the floor of the 2001 Annual Meeting, any shareholder proposal, including the nomination of a candidate for director, must be submitted in writing to the CTS Corporate Office no earlier than December 15, 2000 and no later than February 1, 2001. Certain information is required to be included with shareholder proposals. This information is described in CTS' bylaws. Copies of the bylaws may be obtained free of charge from the CTS Secretary. PROPOSAL YOU MAY VOTE ON ELECTION OF DIRECTORS There are eight nominees for election. Detailed information on each is provided on pages 5 and 6. All directors are elected annually and serve a one-year term. YOUR BOARD RECOMMENDS A VOTE FOR EACH OF THESE DIRECTOR-NOMINEES 4 6 ELECTION OF DIRECTORS NOMINEES FOR THE BOARD OF DIRECTORS WALTER S. CATLOW Director since 1999 Age 55 Mr. Catlow is President, Ameritech Cellular Services and an officer of Ameritech, a wireless communications service provider. During the past five years, Mr. Catlow has served in his present capacities and as President, Ameritech International, and Senior Vice President, Ameritech. Mr. Catlow is a member of the Compensation and Nominating Committees of the Board. LAWRENCE J. CIANCIA Director since 1990 Age 57 Mr. Ciancia is a partner in Corporate Development International, a corporate search firm specializing in mergers, acquisitions and divestitures. During the past five years he served as Vice President, Growth & Development, of Uponor U.S., a supplier of PVC pipe products, speciality chemicals and PVC compounds, and President and Chief Operating Officer of Uponor ETI Company, formerly Concorde Industries, Inc. Mr. Ciancia is a member of the Audit and Finance Committees and Chairman of the Compensation Committee of the Board. THOMAS G. CODY Director since 1998 Age 58 Mr. Cody is Executive Vice President, Legal and Human Resources, of Federated Department Stores, Inc. Mr. Cody is a member of the Compensation Committee and Chairman of the Nominating Committee of the Board. GERALD H. FRIELING, JR. Director since 1982 Age 69 Mr. Frieling is Vice Chairman of the Board of Tokheim Corporation, a manufacturer of petroleum dispensing equipment, systems and control devices, and President of Frieling and Associates, a consulting firm. Previously he served as Chairman of the Board and Chief Executive Officer of Tokheim Corporation. Mr. Frieling is a member of the Compensation, Finance and Nominating Committees and Chairman of the Audit Committee of the Board. ROGER R. HEMMINGHAUS Director since 2000 Age 63 Mr. Hemminghaus is Chairman Emeritus of Ultramar Diamond Shamrock Corporation and Chairman of the Federal Reserve Bank of Dallas. Previously, Mr. Hemminghaus served as Chairman and Chief Executive Officer of Ultramar Diamond Shamrock Corporation and as President and Chief Executive Officer of Diamond Shamrock Corporation. Mr. Hemminghaus is a member of the Audit and Finance Committees of the Board. Mr. Hemminghaus is also a director of billserv.com, Luby's, Inc. and New Century Energies. ROBERT A. PROFUSEK Director since 1998 Age 50 Mr. Profusek is a Partner and Head of the Transactions Practice Group of Jones, Day, Reavis & Pogue, a global law firm. He is a member of the Audit and Nominating Committees of the Board. Mr. Profusek is also a director of Law.com. 5 7 JOSEPH P. WALKER Director since 1987 Age 61 Mr. Walker is Chairman of the Board, President and Chief Executive Officer of CTS. He is also a member of the Nominating Committee of the Board. RANDALL J. WEISENBURGER Director since 1999 Age 41 Mr. Weisenburger is Chief Financial Officer of Omnicom Group, Inc., an international advertising company. Previously, Mr. Weisenburger was President and Chief Executive Officer of Wasserstein Perella Management Partners, Inc. Mr. Weisenburger is a member of the Audit Committee and Chairman of the Finance Committee of the Board. YOUR BOARD RECOMMENDS A VOTE FOR EACH OF THESE DIRECTORS 6 8 FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS During 1999 the Board of Directors held six meetings. Each director attended 100% of the meetings of the Board of Directors and the committees of which he was a member in 1999. COMMITTEES OF THE BOARD AUDIT COMMITTEE Members: Directors Ciancia, Frieling, Hemminghaus, Profusek and Weisenburger Number of Meetings in 1999: Five Functions: -- Recommends appointment of independent auditors and oversees their activities -- Reviews audit reports and related financial matters COMPENSATION COMMITTEE Members: Directors Catlow, Ciancia, Cody and Frieling Number of Meetings in 1999: Four Functions: -- Establishes executive compensation -- Administers the CTS Corporation Management Incentive Bonus Plan, the CTS Corporation 1988 Restricted Stock and Cash Bonus Plan and the CTS Stock Option Plans FINANCE COMMITTEE Members: Directors Ciancia, Frieling, Hemminghaus and Weisenburger Number of Meetings in 1999: Two Functions: -- Reviews and approves all capital project appropriation requests between $1 million and $5 million -- Reviews and recommends Board action on all capital project appropriation requests exceeding $5 million -- Reviews and recommends Board action concerning financing arrangements, tax strategies, dividend policies and similar matters NOMINATING COMMITTEE Members: Directors Catlow, Cody, Frieling, Profusek and Walker Number of Meetings in 1999: One Functions: -- Recommends candidates for membership on the Board 7 9 DIRECTOR COMPENSATION Employee directors receive no additional compensation for serving on the Board of Directors or Board Committees. Non-employee directors receive the following fees for their service on the Board: -- Annual Board Retainer.................................. $17,500 -- Annual Retainer for each Committee..................... $ 2,500 -- Meeting Fee for each Board or Committee Meeting attended in person..................................... $ 1,500 -- Meeting Fee for each Board or Committee Meeting attended by telephone.................................. $ 750 -- Meeting Fee for subsequent meetings attended on the same day............................................... $ 750
In 1990 CTS adopted the CTS Corporation Stock Retirement Plan for Non-employee Directors. Under that plan, a deferred stock account is established for each non-employee director. On January 1st of each year, 800 common stock units are credited to each non-employee director's account in the plan. Each account is also credited with common stock units when credits equivalent to cash dividends on the shares in an account aggregate an amount equal to the value of a share of common stock on a dividend payment date. Deferred common stock units are distributable as of January 1st of the year after the director leaves the Board of Directors. CTS expended $361,800 in 1999 for the common stock units credited to the deferred stock accounts of non-employee directors. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Mr. Profusek is a Partner and Head of the Transactions Practice Group of Jones, Day, Reavis & Pogue, a law firm which CTS has retained for specific legal services and litigation, on a case by case basis, for over five years. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires CTS' directors, executive officers and certain persons who own more than 10% of CTS' common stock to file with the Securities and Exchange Commission and the New York Stock Exchange initial reports of ownership and reports of changes in ownership of CTS common stock. Executive officers, directors and greater than 10% shareholders are required to furnish CTS with copies of all Section 16(a) reports they file. CTS believes that all required Section 16(a) filings were made in 1999. DIRECTORS' AND OFFICERS' INDEMNIFICATION AGREEMENTS CTS has entered into Indemnification Agreements with each of its executive officers and directors, which provide that CTS will indemnify each of them to the fullest extent allowed by CTS' bylaws of the Corporation and the Indiana Business Corporation Law, in the event that he or she was or is made a party or threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is an executive officer or director of CTS. The indemnification agreements provide indemnification for acts occurring prior to the execution of the agreements. 8 10 STOCK PERFORMANCE GRAPH COMPARISON OF FIVE-YEAR CUMULATIVE RETURN The following graph compares the cumulative total shareholder return on CTS common stock with Standard & Poor's 500 Stock Index and the Technology 500 Stock Index for the years 1995 through 1999. The graph assumes that $100 was invested on December 31, 1994 in each of CTS common stock, the S&P 500 Stock Index and the Technology 500 Stock Index. VALUE OF $100 INVESTED DECEMBER 1994 COMPARATIVE OF FIVE-YEAR TOTAL CUMULATIVE RETURN [STOCK PERFORMANCE GRAPH]
CTS CORP. S&P 500 TECHNOLOGY-500 --------- ------- -------------- 1994 100 100 100 1995 139 138 144 1996 159 169 204 1997 361 226 258 1998 495 290 446 1999 1721 351 781
- ------------------------------------------------------------------------------------------------------ Growth in Value 1994 1995 1996 1997 1998 1999 - ------------------------------------------------------------------------------------------------------ CTS Corporation $100 $139 $159 $361 $495 $1,721 S&P 500 $100 $138 $169 $226 $290 $ 351 Technology-500 $100 $144 $204 $258 $446 $ 781 - ------------------------------------------------------------------------------------------------------
STOCK OWNERSHIP INFORMATION As of March 3, 2000, no person was known by CTS to beneficially own 5% or more of CTS' Common Stock. 9 11 DIRECTORS' & OFFICERS' STOCK OWNERSHIP The following table shows how much CTS common stock each Named Executive Officer and director-nominee owned as of March 3, 2000. Please note that, as reported in this table, beneficial ownership includes those shares a director or officer has the power to vote or transfer, as well as shares owned by immediate family members that reside in the same household with the director or officer. Additionally, the shares shown as beneficially owned by directors Ciancia, Cody and Frieling, who are members of the Compensation Committee, do not include 1,194,900 shares held by the Northern Trust Company as Trustee of the CTS Corporation Employee Benefit Plans Master Trust. The Compensation Committee has voting and investment authority over those shares.
- ------------------------------------------------------------------------------------------------------------------------- SHARES HELD IN OPTIONS 401(K) DIRECTORS' SHARES EXERCISABLE PLAN AS OF DEFERRED % OF BENEFICIALLY WITHIN DECEMBER 31, COMMON SHARES NAME OWNED 60 DAYS 1999 STOCK UNITS TOTAL OUTSTANDING - ------------------------------------------------------------------------------------------------------------------------- Walter S. Catlow 1,000 0 0 800 1,800 * - ------------------------------------------------------------------------------------------------------------------------- Lawrence J. Ciancia 3,000 0 0 12,631 15,631 * - ------------------------------------------------------------------------------------------------------------------------- Thomas G. Cody 1,000 0 0 1,401 2,401 * - ------------------------------------------------------------------------------------------------------------------------- Jeannine M. Davis 100,443 251,564 2,049 0 354,166 1.3 - ------------------------------------------------------------------------------------------------------------------------- Gerald H. Frieling, Jr. 6,000 0 0 15,178 21,178 * - ------------------------------------------------------------------------------------------------------------------------- George A. Harding 45,140 18,060 0 0 63,200 * - ------------------------------------------------------------------------------------------------------------------------- Roger R. Hemminghaus 400 0 0 0 400 * - ------------------------------------------------------------------------------------------------------------------------- William J. Kaska 116,571 3,128 0 0 119,699 * - ------------------------------------------------------------------------------------------------------------------------- Robert A. Profusek 3,400 0 0 1,401 4,801 * - ------------------------------------------------------------------------------------------------------------------------- Philip G. Semprevio 18,200 6,000 0 0 24,200 * - ------------------------------------------------------------------------------------------------------------------------- Joseph P. Walker 150,518 1,005,883 24,600 0 1,181,001 4.2 - ------------------------------------------------------------------------------------------------------------------------- Randall J. Weisenburger 0 0 0 800 800 * - ------------------------------------------------------------------------------------------------------------------------- All Directors and Officers as a Group 668,754 1,372,135 67,287 32,211 2,140,387 7.7 - -------------------------------------------------------------------------------------------------------------------------
*Less than 1%. 10 12 EXECUTIVE COMPENSATION: REPORT OF THE COMPENSATION COMMITTEE THE COMMITTEE'S RESPONSIBILITIES: The Compensation Committee of the Board has responsibility for setting and administering CTS' executive compensation policies. The Committee is composed entirely of non-employee, outside directors. Reports of the Committee's actions and decisions are presented to the full Board. The purpose of this report is to summarize the principles, specific program objectives and other factors considered by the Committee in reaching its determinations regarding executive compensation. COMPENSATION PHILOSOPHY: The Committee has implemented executive compensation programs which: - Encourage strong financial and operational performance of CTS; - Link compensation to the interests of shareholders; - Emphasize performance-based compensation; - Provide a competitive level of total compensation necessary to attract and retain talented and experienced executives. COMPENSATION METHODOLOGY: The Committee believes that CTS' executive compensation programs reflect this philosophy and provide executives strong incentives to maximize CTS' performance and enhance shareholder value. The executive compensation programs consist of both annual and long-term components and include performance-based and equity-based components. Each year the Committee reviews market data and assesses CTS' competitive position in the area of executive compensation. CTS also retains independent compensation and benefits consultants to assist in evaluating executive compensation programs. The use of independent consultants provides additional assurance that CTS' programs are reasonable and appropriate. COMPONENTS OF COMPENSATION: - Base Salary: Annual base salary is designed to compensate CTS executives for their qualifications, responsibilities and performance. CTS' objective is to compensate executives within the mid-level of the range of base salaries paid for similar positions at similar companies. - Annual Incentives: CTS has maintained an annual management incentive bonus plan for a number of years which provides cash compensation incentives based on the financial performance of CTS. Specifically, awards have historically been made based on the achievement of pre- established return on assets (ROA) targets. In 1999, the shareholders approved the CTS Corporation Management Incentive Bonus Plan. For 1999, CTS achieved 238% of the ROA target established by the Compensation Committee under that Plan. As a result, the Named Executive Officers received formula bonuses equal to between 64% and 100% of their base salaries. - Long Term Stock-Based Compensation: CTS uses two forms of stock-based long-term incentives, restricted stock grants and stock options, under plans previously approved by the shareholders. The Committee believes that stock ownership and stock-based compensation are valuable tools for motivating employees to improve the long-term performance of CTS. We also believe that they are the best way to tie a significant amount of an executive's potential income to enhanced shareholder value. CTS' stock-compensation plans have change of control provisions under which, upon a change of control of CTS, benefits thereunder accelerate and vest immediately. 11 13 Stock options are generally awarded on an annual basis by the Compensation Committee at fair market value and vest over a four year period. No stock options were granted to any CTS executive officers in 1999. The number of shares previously awarded to the Named Executive Officers, their market value, vesting schedules and related bonuses, are set forth in the Summary Compensation Table on page 13 of this proxy statement. Restricted stock grants are used selectively to provide incentives to key employees who contribute or are expected to contribute materially to the success of CTS. In 1999, in conjunction with the completion of the acquisition of the Motorola Components Product Division, restricted stock grants were made to certain of the Named Executive Officers, as described in the following Summary Compensation Table. DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION: Federal income tax law caps at $1,000,000 the deductible compensation per year for the Named Executive Officers in the proxy statement, subject to certain exceptions. In developing and implementing executive compensation policies and programs, the Compensation Committee considers whether particular payments and awards are deductible for federal income tax purposes, along with other relevant factors. Consistent with this policy, the Committee has taken what it believes to be appropriate steps to maximize the deductibility of executive compensation. While it is the general intention of the Committee to meet the requirements for deductibility, the Committee may approve payment of non-deductible compensation from time to time if circumstances warrant. The Committee will continue to review and monitor its policy with respect to the deductibility of compensation. CTS CORPORATION COMPENSATION COMMITTEE Walter S. Catlow, Lawrence J. Ciancia, Thomas G. Cody and Gerald H. Frieling, Jr. 12 14 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------- ANNUAL LONG-TERM COMPENSATION COMPENSATION ---------------------------------------------- RESTRICTED SECURITIES STOCK UNDERLYING ALL OTHER SALARY BONUS AWARD(S)(1) OPTIONS COMPENSATION(2) NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) - --------------------------------------------------------------------------------------------------------- Joseph P. Walker(3)(6) 1999 $500,000 $500,000 $ 0 0 $8,696 Chairman of the Board, 1998 $519,231 $431,000 $ 0 0 $7,228 President and Chief 1997 $441,977 $386,700 $ 0 1,200,000 $7,006 Executive Officer - --------------------------------------------------------------------------------------------------------- William J. Kaska(6) 1999 $230,637 $160,900 $371,031 0 $7,623 Executive Vice President 1998 $202,742 $125,400 $ 0 10,000 $8,064 1997 $ 63,219 $116,600 $ 0 0 $4,689 - --------------------------------------------------------------------------------------------------------- Philip G. Semprevio(4) 1999 $226,346 $152,800 $215,438 0 $7,305 Executive Vice President 1998 $ 26,923 $ 20,100 $ 0 24,000 $ 606 - --------------------------------------------------------------------------------------------------------- Jeannine M. Davis(6) 1999 $219,879 $197,900 $323,156 0 $7,849 Executive Vice President 1998 $157,682 $104,700 $ 0 10,000 $6,561 Administration and 1997 $131,279 $ 91,900 $ 0 300,000 $4,707 Secretary - --------------------------------------------------------------------------------------------------------- George A. Harding(5) 1999 $196,906 $126,000 $323,156 0 $6,542 Group Vice President - ---------------------------------------------------------------------------------------------------------
(1) At December 31, 1999, the Named Executive Officers held the following restricted shares on which transfer restrictions had not lapsed:
- ----------------------------------------------------------------------------------------- NUMBER OF NET VALUE AT SHARES DECEMBER 31, 1999 - ----------------------------------------------------------------------------------------- Joseph P. Walker 0 $ 0 - ----------------------------------------------------------------------------------------- William J. Kaska 36,400 $2,356,150 - ----------------------------------------------------------------------------------------- Philip G. Semprevio 18,000 $1,131,750 - ----------------------------------------------------------------------------------------- Jeannine M. Davis 28,200 $1,788,075 - ----------------------------------------------------------------------------------------- George A. Harding 28,200 $1,788,075 - -----------------------------------------------------------------------------------------
The table below reflects cash payments made to the Named Executive Officers in connection with the lapse of transfer restrictions on restricted shares for the years 1997-1999.
- --------------------------------------------------------------------------------------------------- JOSEPH P. WILLIAM J. PHILIP G. JEANNINE M. GEORGE A. WALKER KASKA SEMPREVIO DAVIS HARDING - --------------------------------------------------------------------------------------------------- 1999 $92,500 $62,375 $ 0 $14,950 $14,950 - --------------------------------------------------------------------------------------------------- 1998 $92,500 $70,025 $ -- $14,950 $ -- - --------------------------------------------------------------------------------------------------- 1997 $92,500 $37,375 $ -- $32,150 $ -- - ---------------------------------------------------------------------------------------------------
13 15 (2) The table below shows the components of the All Other Compensation column for 1999:
- ------------------------------------------------------------------------------------------ CTS MATCH IMPUTED INCOME UNDER 401(K) ON TERM PLAN LIFE INSURANCE TOTAL - ------------------------------------------------------------------------------------------ Joseph P. Walker $4,800 $3,896 $8,696 - ------------------------------------------------------------------------------------------ William J. Kaska $4,800 $2,823 $7,623 - ------------------------------------------------------------------------------------------ Philip G. Semprevio $4,800 $2,505 $7,305 - ------------------------------------------------------------------------------------------ Jeannine M. Davis $4,800 $3,049 $7,849 - ------------------------------------------------------------------------------------------ George A. Harding $4,740 $1,802 $6,542 - ------------------------------------------------------------------------------------------
(3) Mr. Walker has an employment agreement with CTS which provides that for five years, beginning on May 9, 1997, Mr. Walker will be employed by CTS as Chairman of the Board, President and Chief Executive Officer, at an initial annual salary of $500,000. During the term of the agreement, if Mr. Walker's employment is terminated as a result of his death or disability, for good reason (as defined) or by CTS without cause (as defined), Mr. Walker will receive severance benefits equal to his then current annual salary for the remainder of the term, plus an annual bonus for each year remaining in the term equal to the largest cash and stock bonus that he received during the five fiscal years preceding the date of termination. In addition, if Mr. Walker's employment is terminated by Mr. Walker for good reason or by the Corporation without cause, Mr. Walker may instead receive a lump sum equal to 3 1/3 times the sum of his then current annual salary and the largest cash and stock bonus that he received during the five fiscal years preceding the date of the employment agreement. Any payments to Mr. Walker upon a change in control are increased to compensate Mr. Walker for any excise tax payable by him pursuant to Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"). The payments and benefits to Mr. Walker under his employment agreement are reduced automatically by any corresponding payments or benefits under his severance agreement described below. (4) Mr. Semprevio was elected an officer of CTS on November 16, 1998. (5) Mr. Harding was elected an officer of CTS on December 18, 1998. (6) The Named Executive Officers have executed severance agreements with CTS, which have a rolling three-year term which is automatically extended each January 1 thereafter unless notice is given otherwise. The severance agreements become operative only upon a change in control of CTS. Severance benefits are provided if, upon a change in control, CTS terminates a covered executive's employment without cause or the executive terminates his or her employment for good reason (each as defined). Severance compensation under the agreements includes a multiple (two or three, depending upon level of job responsibility) of base salary, a multiple (two or three, depending upon level of job responsibility) of the average annual incentive compensation awarded to the executive during the three fiscal years preceding the fiscal year in which the change in control occurred, the continued participation for a number of months following termination in welfare benefit plans and other similar benefit programs, a lump sum payment equal to the increase in actuarial value of the benefits under CTS' qualified and supplemental retirement plans that the executive would have received had he or she remained employed, outplacement services, and, in lieu of perquisites provided immediately prior to the change in control, the payment of the lesser of $50,000 or 10% of the total base salary and incentive compensation. In addition, if any payments made to the executive are subject to the excise tax under Section 280G of the Code, CTS will make an additional payment in an amount to put the executive in the same after-tax position as if no excise tax had been imposed. 14 16 STOCK OPTIONS OPTION GRANTS IN LAST FISCAL YEAR No stock options were awarded to the Named Executive Officers in 1999. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------- VALUE OF NUMBER OF NUMBER OF UNEXERCISED SHARES SECURITIES UNDERLYING IN-THE-MONEY ACQUIRED VALUE UNEXERCISED OPTIONS OPTIONS AT ON EXERCISE REALIZED AT FISCAL YEAR END (#) FISCAL YEAR END ($) NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---------------------------------------------------------------------------------------------------------- Joseph P. Walker 0 $ 0 1,215,000 0 $78,987,135 $ 0 - ---------------------------------------------------------------------------------------------------------- William J. Kaska 7,500 $359,063 50,600 7,400 $ 3,478,535 $ 454,175 - ---------------------------------------------------------------------------------------------------------- Philip G. Semprevio 0 $ 0 6,000 18,000 $ 362,250 $1,086,750 - ---------------------------------------------------------------------------------------------------------- Jeannine M. Davis 1,300 $ 59,150 309,000 7,400 $20,109,795 $ 454,175 - ---------------------------------------------------------------------------------------------------------- George A. Harding 5,270 $201,186 18,060 4,400 $ 1,236,327 $ 270,050 - ----------------------------------------------------------------------------------------------------------
PENSION PLAN The table below shows the estimated annual retirement benefits payable to a covered participant in the CTS Corporation Salaried Employees' Pension Plan. The benefit formula is calculated as 1.25% of highest average monthly pay during any three calendar years of a participant's last ten calendar years of service, multiplied by a participant's credited service.
YEARS OF PARTICIPATION COMPENSATION 15 20 25 30 35 $ 200,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000 $ 87,500 - -------------------------------------------------------------------------- $ 300,000 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250 - -------------------------------------------------------------------------- $ 400,000 $ 75,000 $100,000 $125,000 $150,000 $175,000 - -------------------------------------------------------------------------- $ 600,000 $112,500 $150,000 $187,500 $225,000 $262,500 - -------------------------------------------------------------------------- $ 800,000 $150,000 $200,000 $250,000 $300,000 $350,000 - -------------------------------------------------------------------------- $1,000,000 $187,500 $250,000 $312,500 $375,000 $437,500 - -------------------------------------------------------------------------- $1,200,000 $225,000 $300,000 $375,000 $450,000 $525,000 - --------------------------------------------------------------------------
The years of service credited to the Named Executive Officers as of December 31, 1999 are: Joseph P. Walker - 11.78 years; William J. Kaska - 7.78 years; Philip G. Semprevio - 5.56 years; Jeannine M. Davis - 19.78 years; and George A. Harding - 6.56 years. Section 415 of the Internal Revenue Code generally places a limit of $130,000 on the amount of annual pension benefits that may be paid at age 65 from a plan like CTS'. The Code also places a $10,000 limit, subject to adjustment by the Internal Revenue Service, on annual contributions by an employee to the CTS Corporation Retirement Savings Plan, and in addition, imposes a combined limitation when an employee is covered by both types of plans. Under a supplemental benefit in this plan and an unfunded plan adopted in 1996, however, CTS will make payments as permitted by the Code to certain participants in CTS' pension plan in an amount equal to the difference, if any, between the benefits that would have been payable under this plan without regard to the limitations imposed by the Code and the actual benefits payable under the plan. 15 17 CORPORATION'S INDEPENDENT ACCOUNTANTS The Corporation's independent accountants are PricewaterhouseCoopers. Representatives of the independent accountants will attend the Annual Meeting, to be available to respond to appropriate questions by shareholders and to have the opportunity to make statements, if they desire. 1999 ANNUAL REPORT ON S.E.C. FORM 10-K Upon the written request of a CTS shareholder owning shares of common stock on the Record Date, to Jeannine M. Davis, Secretary of CTS Corporation, 905 West Boulevard North, Elkhart, Indiana 46514, CTS will provide to such shareholder, without charge, a copy of its 1999 Annual Report on S.E.C. Form 10-K, including the financial statements and financial statement schedules. By Order of the Board of Directors, /s/ JEANNINE M. DAVIS Jeannine M. Davis Secretary Elkhart, Indiana March 20, 2000 16 18 CTS CORPORATION 905 WEST BOULEVARD NORTH, ELKHART, INDIANA 46514 2000 ANNUAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having received the Notice of Annual Meeting of Shareholders and the Proxy Statement hereby appoints Joseph P. Walker and Jeanine M. Davis as proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all of the shares of Common Stock of CTS Corporation held of record by the undersigned on March 10, 2000, at the Annual Meeting of Shareholders originally convened on April 28, 2000 and at any adjournment thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. - -------------------------------------------------------------------------------- PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. - -------------------------------------------------------------------------------- Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. - -------------------------------------------------------------------------------- HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? - ------------------------------------ -------------------------------------- - ------------------------------------ -------------------------------------- - ------------------------------------ -------------------------------------- 19 - -------------------------------------------------------------- 1. Election of Directors. CTS CORPORATION For All With- For All - -------------------------------------------------------------- (01) W.S. CATLOW Nominees hold Except (02) L.J. CLANCIA (03) T.G. CODY [ ] [ ] [ ] (04) G.H. FRIELING, JR. (05) R.R. HEMMINGHAUS (06) R.A. PROFUSEK CONTROL NUMBER: (07) J.P. WALKER RECORD DATE SHARES: (08) R.J. WEISENBURGER NOTE: If you do not wish your shares voted "For" a particular nominee, mark the "For All Except" box and strike a line through the name(s) of the nominee(s). Your shares will be voted for the remaining nominee(s). 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting, or any adjournment thereof. |----------------- Please be sure to sign and date this Proxy | Date Mark Box at right if an address change or comment has - ------------------------------------------------|----------------- been noted on the reverse side of this card. [ ] - -----Shareholder sign here-----------------Co-owner sign here----- DETACH CARD DETACH CARD
Dear CTS Shareholder: Please take note of the important information enclosed with this proxy card. Your vote counts, and you are strongly encouraged to exercise your right to vote your shares. Please mark the boxes on this proxy card to indicate how your shares will be voted, then sign the card, detach it and return your proxy vote in the enclosed postage paid envelope. Your vote must be received prior to the Annual Meeting of Shareholders to be held on April 28, 2000 at the CTS Corporate Offices, 905 West Boulevard North, Elkhart, Indiana 46514. Thank you in advance for your prompt consideration. Sincerely, CTS Corporation -----END PRIVACY-ENHANCED MESSAGE-----