CTS Corporation
Form 10-Q
Third Quarter

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Exhibit (10)(a)

February 19, 2010

CONFIDENTIAL
CTS Corporation
905 West Boulevard North
Elkhart, Indiana 46514

Attention:      Vinod M. Khilnani
         President and Chief Executive Officer

      Re: Letter Agreement

Dear Mr. Khilnani:
 
Toyota Motor Sales, U.S.A., Inc., Toyota Canada Inc., and Toyota Motor
Engineering & Manufacturing North America, Inc. (collectively, "Toyota") and CTS
Corporation agree that the relationship between Toyota and CTS Corporation is a
valued relationship, and this Agreement is made in good faith and in furtherance
of that valued relationship. Toyota and CTS Corporation understand that this
Agreement is intended to reflect the general intent of the parties, but that
execution of a more detailed agreement may be necessary to effectuate the full
intent of this Agreement. Nevertheless, Toyota and CTS Corporation further
represent that each has relied on and obtained the advice of independent counsel
with respect to this Agreement. Toyota and CTS Corporation enter into this
Agreement with full knowledge of their respective rights, and without any
duress, coercion or pressure of any kind from any person or entity.
 
Subject to the limitations set forth below, Toyota agrees to indemnify, defend,
and hold harmless CTS Corporation (and its affiliates, subsidiaries, officers,
directors and employees) from, and pay on their behalf, any costs, expenses and
liabilities (including reasonable attorneys fees and litigation costs, potential
awards, settlements and judgments, and penalties or fees) associated with,
arising out of or relating to civil litigation or claims, filed or asserted in
the United States or Canada, arising from or relating to alleged incidents of
unintended acceleration of Toyota and Lexus vehicles where CTS is named as a
defendant, including litigation or claims which are currently pending or
subsequently may be commenced against any one or all of the Parties ("Unintended
Acceleration Claims"). By way of further clarification and without limitation,
Unintended Acceleration Claims includes claims by third parties of personal
injury, property damage, diminution of value, breach of warranty and violation
of consumer protection laws or unfair business practices because of alleged
defects in the accelerator in Toyota and Lexus vehicles.
 
CTS Corporation agrees to fully cooperate (and will direct its counsel to fully
cooperate) in any investigation by Toyota related in any way to the design and
manufacture of the CTS accelerator assembly that is the subject of the
Unintended Acceleration Claims, and further agrees to fully cooperate (and will
direct its counsel to fully cooperate) with Toyota in the defense of all
Unintended Acceleration Claims. This cooperation includes, but is not limited
to, providing Toyota’s counsel reasonable access to non-privileged documents or
information, regardless of the source of the information, as needed to defend
these actions, including but not limited to analysis or inspection reports of
returned components related to Unintended Acceleration Claims. The Parties agree
to employ reasonable measures to protect any propriety or confidential
information of third-parties such as other OEMs for whom CTS Corporation
manufactures pedals. CTS Corporation shall provide Toyota with reasonable access
to all current employees and agrees to make reasonable efforts to provide access
to former employees who may have information related to the CTS accelerator
assembly that is the subject of Unintended Acceleration Claims. CTS Corporation
further agrees to notify Toyota immediately of the filing of any Unintended
Acceleration Claims, whether or not any Toyota entity is named as a party
therein.
 
Toyota and CTS Corporation further agree that they have a mutual interest in
proceeding together in a common defense and agree that they will enter into a
Joint Defense Agreement to allow for the sharing of privileged communications
(including communications, documents, memoranda and reports prepared for or in
contemplation of litigation) and attorney work product to aid and to promote
adequate legal representation in defense of Unintended Acceleration Claims.
Toyota acknowledges that CTS Corporation desires to be represented by
independent counsel in individual or collective Unintended Acceleration Claims,
and the Parties agree that Toyota's obligation to pay the defense costs
associated with independent counsel for CTS Corporation will be limited to
coverage of those activities that are reasonable and necessary to effectuate the
unified defense of Toyota and CTS Corporation. Toyota and CTS Corporation agree
that Toyota's obligation in this regard is limited to payment for such
independent counsel as is necessary to fulfill Toyota's duty to timely inform
and consult with CTS Corporation on matters relating to Unintended Acceleration
Claims and to disclose to CTS Corporation all information concerning any action
upon request. Nothing in this section is meant to prevent CTS Corporation from
utilizing its independent counsel in an expanded role consistent with the terms
of this Agreement, but such costs will be the responsibility of CTS Corporation.
 
Subject to the limitations set forth below, Toyota and CTS Corporation agree
that Toyota will have sole authority to settle Unintended Acceleration Claims on
its own behalf and on behalf of CTS Corporation, to the extent such claims are
covered by this Agreement. CTS Corporation agrees that it will not independently
negotiate or settle any Unintended Acceleration Claims covered by this
Agreement.
 
 
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The foregoing provisions notwithstanding, if Toyota concludes after good faith
investigation that CTS Corporation acted negligently (a) with regard to those
manufacturing processes and materials selection under CTS Corporation's sole
control or (b) in failing to meet Toyota product specifications or (c) by making
unapproved changes in component design or materials, and such negligence has
caused or contributed to the Unintended Acceleration Claims, Toyota agrees that
it will continue to defend CTS Corporation for the particular negligent act or
conduct. CTS Corporation agrees, however, that it will be responsible for any
judgment that may subsequently be rendered against CTS Corporation individually
or any portion of a judgment that may be allocated to CTS Corporation, to the
extent CTS Corporation's insurance coverage is available. By way of
clarification, to the extent that Toyota had agreed in a writing to the
manufacturing processes, changes and materials selection as referenced above,
these are not considered to be under CTS Corporation's sole control.

    Toyota and CTS Corporation agree that if either Party takes a position at
any time in the litigation contrary to the interests of the other Party, such
that the Parties are no longer proceeding together in a common defense of the
Unintended Acceleration Claims, that other Party may void this Agreement upon
reasonable notice. If this occurs, each Party will be obligated to assume its
own defense from that point forward, including but not limited to its payment of
all attorneys' fees, expenses, settlement costs, and judgments. The parties
further agree that each will make good faith efforts to ensure that any public
statements they make are consistent with their common defense. To that end, CTS
Corporation agrees, to the extent reasonably practicable and in accordance with
its other legal obligations, to advise Toyota in advance of any statement CTS
Corporation intends to make public relating to this litigation.
 
The Parties agree that any claims which may arise between or among the Parties
to this Agreement for indemnity or contribution, including claims related to the
CTS Corporation's negligence as previously defined (including without
limitation, attorneys' fees, other defense costs, settlement costs or
judgments), arising from any Unintended Acceleration Claim will be addressed
within a reasonable period of time following resolution of such Unintended
Acceleration Claim through good faith negotiations.  If the Parties are unable
to resolve their disputes through good faith negotiations, they agree to submit
the dispute to arbitration before the American Arbitration Association. If any
award is ultimately made to Toyota, Toyota will be limited to recovering only
such damages as are collectible from CTS Corporation's insurers.
 
If this Agreement becomes void, CTS Corporation agrees that Toyota's counsel may
continue to defend Toyota without any suggestion of impropriety or conflict of
interest in regard to such continued representation, and Toyota agrees that CTS
Corporation's counsel may continue to defend CTS Corporation without any
suggestion of impropriety or conflict of interest in regard to such continued
representation. In such event, CTS Corporation and Toyota waive their respective
right to contend that conflicts of interest or attorney-client privilege require
disqualification of counsel.  CTS Corporation and Toyota are expressly agreeing
to waive any potential conflict of interest that might arise as a result of this
Agreement.
 
This Agreement is limited to Unintended Acceleration Claims which seek relief by
third parties for personal injuries, property damage, and/or economic loss and
is not intended to address costs of defense of, or indemnification for costs or
liabilities incurred in connection with, criminal prosecutions, government
investigations (including NHTSA investigations), government hearings, and
government recalls.
 
Toyota and CTS Corporation agree to cooperate in the creation of any future
documents deemed reasonably necessary to effectuate this Agreement.

                                              Sincerely,
 

TOYOTA MOTOR SALES, U.S.A., Inc.        
By:
/s/ G. Webster Burns     Name: G. Webster Burns      Title: Assistant General
Counsel   

 
Accepted and agreed effective as of the
date first above written:
 

CTS CORPORATION        
By:
/s/ Vinod M. Khilnani     Name: Vinod M. Khilnani     Title: Chairman, President
& CEO   

 
TOYOTA MOTOR ENGINEERING &
MANUFACTURING NORTH AMERICA, INC.
       
By:
/s/ Patrick Nepute     Name: Patrick Nepute     Title: VP & General Counsel  

 
 
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