ex_10a.htm


    CTS
      Corporation

    Form
      10-Q

    
      Third
        Quarter 2007

    

    
      

      

    

    


    EXHIBIT
      (10)(a)

    


     CTS
      CORPORATION

    PERFORMANCE
      SHARE AGREEMENT

    


    


    THIS
      AGREEMENT (this “Agreement”), made by and between CTS CORPORATION, an Indiana
      corporation (together with any successors to all or substantially all of the
      business of such corporation, the "Company"), and Vinod M. Khilnani (the
      "Grantee").  Except as expressly provided herein, capitalized terms
      used herein shall have the meaning ascribed to such terms under the Company's
      2004 Omnibus Long-Term Incentive Plan (the "Plan").

    


    The
      execution of a Performance Share Agreement substantially in the form hereof
      has
      been authorized by the Compensation Committee (the “Committee”) of the Company’s
      Board of Directors. The Company hereby confirms to the Grantee, effective as
      of
      the Date of Grant, pursuant to the Plan, the grant of Performance Shares
      described below in Section 1 of this Agreement subject to the terms and
      conditions of the Plan and the terms and conditions described
      below.

    


    1.  Grant.
      Subject to the terms set forth in this Agreement and in the Plan, the Company
      hereby grants to the Grantee three awards of 8,333, 8,333 and 8,334 Performance
      Shares respectively, together with the opportunity to earn up to an additional
      approximately 50% of such Performance Shares (the “Award”), which the Grantee
      may earn during each of three separate performance periods (the “Tranches”),
      subject to a maximum of 25,000 Shares that may be earned in the
      aggregate.

     

    2.  Performance
      Periods.  The performance periods will commence on July 2, 2007,
      July 2, 2008 and July 2, 2009 respectfully, the performance periods will end
      on
      July 1, 2010 (the “First Performance Period”), July 1, 2011 (the “Second
      Performance Period”), and July 1, 2012 (the “Third Performance Period”),
      respectively.  The term “Performance Period” refers to any of the
      First Performance Period, the Second Performance Period or the Third Performance
      Period, as applicable, and the term “Vesting Date” refers to any of July 1,
      2010, July 1, 2011 or July 1, 2012, as applicable.

     

    3.           Performance
      Measure.  For purposes of this Agreement, “Performance Measure”
means the Relative Total Stockholder Return goals established by the Committee
      for the Performance Period based on the Total Stockholder Return of the Company
      during each Performance Period relative to the Total Stockholder Return of
      a
      benchmark peer group comprised of the 32 entities set forth on Exhibit A
      (each, a “Peer”).  For purposes of this Agreement, “Total Stockholder
      Return” means the appreciation in the price of a share of common stock plus
      reinvested dividends (including dividends paid in cash or other property) over
      a
      specified period of time.  Such peer group of entities (the “Peer
      Group”) will be adjusted during the Performance Period, if necessary, as
      determined by the Committee, according to the protocol set forth on Exhibit
      A.

    


    The
      Performance Measure for the Performance Period covered by this Agreement is
      set
      forth on Exhibit B.  The following applies with respect to the
      Performance Measure:

     

    
      	
              (a)  

            	
              The
                Total Stockholder Return of the Company and each Peer will be determined
                and the Performance Measure evaluated separately for each Performance
                Period, and the Award will be determined based on the matrix set
                forth on
                Exhibit B (the “RTSR Matrix”);
                and

            


    

     

    
      	
              (b)  

            	
              In
                no event shall the Grantee be entitled to receive more than 25,000
                Shares
                under this Agreement in the
                aggregate.

            


    

    


    4.           Earning
      Performance Shares; Settlement of Award.  Performance Shares will
      be earned and become non-forfeitable on the respective Vesting Date for each
      Performance Period in accordance with the RTSR Matrix; provided,
however, that, except as otherwise provided in this Section 4, the
      Grantee remains in the continuous employ of the Company during the applicable
      Performance Period and is an employee of the Company on the applicable Vesting
      Date.  Each Tranche of Performance Shares will be forfeited to the
      extent that they are not earned at the end of the applicable Performance Period
      or, except as otherwise provided in this Agreement, if the Grantee ceases to
      be
      employed by the Company at any time prior to the end of the Performance
      Period.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Performance
      Shares will be settled on the basis of one Share for each Performance Share
      that
      vests and is earned during the applicable Performance Period.  Shares
      will be issued or transferred to the Grantee in settlement of Performance Shares
      that vest and are earned during an applicable Performance Period, less
      applicable taxes, as soon as practicable after the determination by the
      Committee of the level of attainment of Relative Total Stockholder Return for
      each Performance Period (but in no case later than 60 days after the applicable
      Vesting Date) (“Settlement Date”).  The Company’s obligations to the
      Grantee with respect to earned and vested Performance Shares will be satisfied
      in full upon the distribution of one Share for each Performance Share earned
      and
      vesting during the applicable Performance Period.  On each Settlement
      Date, the Company may, at its election, either:

     

    
      	
              (a)  

            	
              credit
                the number of Shares to be issued or transferred to the Grantee as
                of that
                Settlement Date to a book-entry account in the name of the Grantee
                held by
                the Company’s transfer agent; or

            


    

     

    
      	
              (b)  

            	
              deliver
                to the Grantee a certificate representing the number of Shares transferred
                or issued to the Grantee as of that Settlement
                Date.

            


    

    


    Subject
      to Section 3(b) of this
      Agreement, upon the first to occur of the following events while the Grantee
      is
      employed by the Company, all 25,000 Performance Shares granted hereunder and
      that have not been previously earned or forfeited shall vest and be deemed
      earned under this Agreement:

    


    
      	
              (a)  

            	
              the
                Grantee becomes disabled;

            


    

    


    
      	
              (b)  

            	
              the
                Grantee dies; or

            


    

    


    
      	
              (c)  

            	
              a
                change in ownership or effective control of the Company, or a change
                in
                the ownership of a substantial portion of the assets of the
                Company.

            


    

     

    5.  Tax
      Withholding.  The Company shall have the right to deduct from any
      compensation due the Grantee from the Company any federal, state, local or
      foreign taxes required by law to be withheld in connection with the issuance
      of
      Shares or vesting of any Performance Shares pursuant to this
      Agreement.  To the extent that the amounts payable to the Grantee are
      insufficient for such withholding, it shall be a condition to the issuance
      of
      Shares or vesting of the Performance Shares, as the case may be, that the
      Grantee shall pay such taxes or make provisions that are satisfactory to the
      Company for the payment thereof within the 60-day payment period.

    


    Unless
      otherwise determined by the Committee, the Company shall retain Shares otherwise
      deliverable on any Settlement Date in an amount sufficient to satisfy the amount
      of tax required to be withheld; provided, that such amounts shall not
      exceed the statutorily required minimum withholding. The determination of the
      number of Shares retained for this purpose shall be based on the Fair Market
      Value of the Shares on the Settlement Date.

    


    6.           Rights
      Not Conferred.  The Grantee shall have none of the rights of a
      stockholder with respect to the Performance Shares, including the right to
      receive dividends or vote stock, until such time, if any, that Shares are
      distributed to the Grantee in settlement thereof.  The Grantee is
      further advised that until distribution, the Company’s obligation will be merely
      that of an unfunded and unsecured promise of the Company to deliver Shares
      in
      the future, and the rights of the Grantee will be no greater than that of an
      unsecured general creditor.  No assets of the Company will be held as
      collateral security for the obligations of the Company hereunder, and all assets
      of the Company will be subject to the claims of the Company’s
      creditors.

    


    7.           Agreement
      Not Assignable.  This Agreement and the Performance Shares awarded
      hereunder are not transferable or assignable by the Grantee; provided,
      that no provision herein shall prevent the distribution of Shares to the
      Grantee’s estate or designated beneficiary, in the event of the Grantee’s
      death.

    


    8.           Adjustments.  In
      the event of any merger, reorganization, consolidation, recapitalization, stock
      dividend, stock split, reverse stock split, spin-off, combination, repurchase
      or
      exchange of Shares or other securities of the Company, or corporate transaction
      or event having an effect similar to the foregoing, the Committee shall adjust
      the Award, as provided by the Plan.

     

    9.           Governing
      Law.  This Agreement shall be construed in accordance with and
      governed by the internal substantive laws of the State of Indiana.

    


    10.           Amendments.  Any
      amendment to the Plan shall be deemed to be an amendment to this Agreement
      to
      the extent that the amendment is applicable hereto; provided,
however, that no amendment to the Plan or the Agreement shall adversely
      affect the value or number of the Grantee’s Performance Shares without the
      Grantee’s written consent, except to the extent necessary to comply with the
      provisions of Section 409A of the Code.

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    11.           Administration.  The
      Committee shall have the power to interpret the Plan and this Agreement and
      to
      adopt such rules for the administration, interpretation, and application of
      the
      Plan as are consistent therewith and to interpret or revoke any such
      rules.  All actions taken and all interpretations and determinations
      made by the Committee shall be final and binding upon the Grantee, the Company
      and all other interested persons.  No member of the Committee shall be
      personally liable for any action, determination or interpretation made in good
      faith with respect to the Plan or this Agreement.

    


    It
      is intended that this Agreement and
      its administration comply with the provisions of Section 409A of the
      Code.  Accordingly, notwithstanding any provision in this Agreement or
      in the Plan to the contrary, this Agreement and the Plan will be interpreted
      and
      applied in a manner consistent with such intention.  As used herein,
“Code” means the Internal Revenue Code of 1986 as amended from time to time, and
      any interpretations thereof issued by the U.S. Treasury Department on which
      the
      Company is permitted to rely.

     

    12.           Effect
      on Other Employee Benefit Plans.  The value of the Performance
      Shares granted pursuant to this Agreement shall not be included as compensation,
      earnings, salary or other similar terms used when calculating the Grantee’s
      benefits under any employee benefit plan sponsored by the Company or any
      subsidiary, except as such plan otherwise expressly provides.  The
      Company expressly reserves its rights to amend, modify, or terminate any of
      the
      Company’s employee benefit plans.

    


    13.   Severability.  If
      any provision of the Plan or this Agreement is, becomes, or is deemed to be
      invalid, illegal or unenforceable in any jurisdiction or would disqualify the
      Plan or award hereunder under any law deemed applicable by the Committee, such
      provision shall be construed or deemed amended to conform to applicable laws,
      or
      if it cannot be so construed or deemed amended without, in the determination
      of
      the Committee, materially altering the purpose or intent of the Plan or award,
      such provision shall be stricken as to such jurisdiction or award, and the
      remainder of the Plan or Agreement shall be in full force and
      effect.

    


    14.           Construction.  The
      Performance Shares granted hereunder are being issued pursuant to Sections
      3(s),
      7 and 11 of the Plan (“Performance Awards”) and are subject to the terms of the
      Plan.  A copy of the Plan has been given to the Grantee, and
      additional copies of the Plan are available upon request during normal business
      hours at the principal executive offices of the Company.  To the
      extent that any provision of this Agreement violates or is inconsistent with
      an
      express provision of the Plan, the Plan provision shall govern and any
      inconsistent provision in this Agreement shall be of no force or
      effect.

    


    15.           Data
      Protection.  By signing below, the Grantee expressly consents to
      the transfer and use of personal data by the Company and its agents in
      connection with the administration of this Award.

    


    16.           Binding
      Effect.  This Agreement shall be binding upon the heirs,
      executors, administrators and successors of the parties hereto.

    


    


    The
      undersigned hereby acknowledges
      receipt of an executed original of this Performance Share Agreement and accepts
      the Performance Shares granted thereunder on the terms and conditions set forth
      herein and in the Plan.

    


    


    


    Date:  August
      1, 2007                                                                                   /s/
      Vinod M. Khilnani

                                                 ________________________________

            Vinod
      M.
      Khilnani

    


    


    Executed
      in the name and on behalf of
      the Company at Elkhart, Indiana as of the 1 day of August,
      2007.

    


    


    CTS
      CORPORATION

    
 

    By:    
      /s/ James L. Cummins

        ___________________________________

        James
      L.
      Cummins

               
Senior
      Vice President Administration


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    CTS
      CORPORATION

    


    Relative
      Total Stockholder Return — Peer Group (32 Peers)

     

    

      
        	
                NAME

              	
                SYMBOL

              	
                STOCK
                  EXCHANGE

              
	
                Aeroflex
                  Incorporated

              	
                ARXX

              	
                Nasdaq
                  Global Select Market

              
	
                ArvinMeritor,
                  Inc.

              	
                ARM

              	
                New
                  York Stock Exchange

              
	
                AVX
                  Corporation

              	
                AVX

              	
                New
                  York Stock Exchange

              
	
                Benchmark
                  Electronics, Inc.

              	
                BHE

              	
                New
                  York Stock Exchange

              
	
                BorgWarner
                  Inc.

              	
                BWA

              	
                New
                  York Stock Exchange

              
	
                Celestica
                  Inc.

              	
                CLS

              	
                New
                  York Stock Exchange

              
	
                EPCOS
                  AG

              	
                EPC

              	
                New
                  York Stock Exchange

              
	
                Flextronics
                  International Ltd.

              	
                FLEX

              	
                Nasdaq
                  Global Select Market

              
	
                Frequency
                  Electronics, Inc.

              	
                FEIM

              	
                Nasdaq
                  Global Market

              
	
                Gentex
                  Corporation

              	
                GNTX

              	
                Nasdaq
                  Global Select Market

              
	
                Jabil
                  Circuit, Inc.

              	
                JBL

              	
                New
                  York Stock Exchange

              
	
                KEMET
                  Corporation

              	
                KEM

              	
                New
                  York Stock Exchange

              
	
                Key
                  Tronic Corporation

              	
                KTCC

              	
                Nasdaq
                  Global Market

              
	
                Kimball
                  International, Inc.

              	
                KBALB

              	
                Nasdaq
                  Global Select Market

              
	
                LaBarge,
                  Inc.

              	
                LB

              	
                American
                  Stock Exchange

              
	
                Lear
                  Corporation

              	
                LEA

              	
                New
                  York Stock Exchange

              
	
                LittelFuse,
                  Inc.

              	
                LFUS

              	
                Nasdaq
                  Global Select Market

              
	
                Methode
                  Electronics, Inc.

              	
                METH

              	
                Nasdaq
                  Global Select Market

              
	
                Molex
                  Incorporated

              	
                MOLX

              	
                Nasdaq
                  Global Select Market

              
	
                Plexus
                  Corp.

              	
                PLXS

              	
                Nasdaq
                  Global Select Market

              
	
                RF
                  Micro Devices, Inc.

              	
                RFMD

              	
                Nasdaq
                  Global Select Market

              
	
                Sanmina-Sci
                  Corporation

              	
                SANM

              	
                Nasdaq
                  Global Select Market

              
	
                Sirenza
                  Microdevices, Inc.

              	
                SMDI

              	
                Nasdaq
                  Global Market

              
	
                Solectron
                  Corporation

              	
                SLR

              	
                New
                  York Stock Exchange

              
	
                Sparton
                  Corporation

              	
                SPA

              	
                New
                  York Stock Exchange

              
	
                Spectrum
                  Control, Inc.

              	
                SPEC

              	
                Nasdaq
                  Global Market

              
	
                Stoneridge,
                  Inc.

              	
                SRI

              	
                New
                  York Stock Exchange

              
	
                Sypris
                  Solutions, Inc.

              	
                SYPR

              	
                Nasdaq
                  Global Market

              
	
                Technitrol,
                  Inc.

              	
                TNL

              	
                New
                  York Stock Exchange

              
	
                Triquint
                  Semiconductors, Inc.

              	
                TQNT

              	
                Nasdaq
                  Global Select Market

              
	
                Vishay
                  Intertechnology, Inc.

              	
                VSH

              	
                New
                  York Stock Exchange

              
	
                Williams
                  Controls, Inc.

              	
                WMCO

              	
                Nasdaq
                  Global Market

              


      





    


      
        
                

                                        
                            
      

                                             
    

          
          

        

        
          4

          
            

          

        

        
          
          

        

      



    Peer
      Group Adjustment Protocol

    


    If,
      as of
      the last date of any Performance Period, all of the common equity of any Peer
      has been delisted from the stock exchange on which any of its common equity
      was
      listed as of the date of this Agreement (and all such common equity (or the
      common equity of a successor to all or substantially all of the business of
      such
      Peer) has not been, within 30 days of such delisting, subsequently listed on
      any
      of the New York Stock Exchange, the Nasdaq Stock Market LLC, the London Stock
      Exchange or the American Stock Exchange), then:

     

    
      	
              ·  

            	
              such
                Peer will be removed from the Peer Group for purposes of such Performance
                Period and any subsequent Performance Periods;
                and

            


    

     

    
      	
              ·  

            	
              the
                Relative Total Stockholder Return for such Performance Period and
                any
                subsequent Performance Periods will be calculated as if such Peer
                had
                never been a member of the Peer
                Group.

            


    

     

    For
      purposes of this Agreement, Peer includes any successor to all or substantially
      all of the business of an entity as set forth on Exhibit A, whether or
      not the same legal entity at end of any Performance Period.

    


    If
      a
      company files for bankruptcy or is operating under bankruptcy protection, it
      clearly shows bad performance and will, therefore, stay in the Peer Group as
      a
      bottom performer.


    
      
        
        

      

      
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    EXHIBIT
      B

    


    CTS
      CORPORATION

    


    Determining
      Relative Total Stockholder Return

                                                                 
      (for each Performance
      Period)                                                                

    


    For
      purposes of calculating Relative
      Total Stockholder Return (rounding shall be to the nearest tenth of a percent,
      with all hundredths of a percent equal to or greater than 5 rounded up to the
      nearest tenth of a percent):

    


    
      	
              ·  

            	
              Company
                Return.  For each Performance Period, the Company’s Total
                Stockholder Return will be a percentage amount determined based on
                (1) the
                average closing price of the Shares for the 20 business days immediately
                preceding the respective Vesting Date (including aggregate dividends
                for
                the Performance Period) compared to (2) the average closing price
                of the
                Shares for the 20 business days immediately preceding July 2,
                2007.

            


    

     

    
      	
              ·  

            	
              Peer
                Return.

            


    

     

    
      	
               

            	
              For
                each Performance Period, each Peer’s Total Stock Return will be a
                percentage amount determined based on (1) the closing stock price
                on the
                last trading day of the Performance Period (adjusted for stock splits)
                compared to (2) the closing stock price on the first trading day
                of the
                Performance Period (adjusted for stock
                splits.)

            


    

     

    
      	
              ·  

            	
              Company
                Ranking.  For each Performance Period, the Company’s and
                each Peer’s Total Stockholder Return will be ranked in decreasing
                order.  Relative Total Stockholder Return equals the percentile
                rank (expressed as a percentage) of the Company’s Total Stockholder Return
                when compared to the rankings, from lowest to highest, of the Total
                Stockholder Returns of the Peers comprising the Peer Group for the
                Performance Period.

            


    

     


    
      
              

                                      
                          
      

                                           
    

        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    RTSR
      Matrix

     

    Relative
      Total Stockholder
      Return                                                                               Earned
      and Vested Performance

    (RTSR)
      for a Performance
      Period                                                                   
Shares for the Performance
      Period

     

    Less
      than
      33%                                                                                                                           
0 Performance Shares

     

    Greater
      than or equal to 33% and
      less                                                                                  
50% of Performance Shares (or 4,166 than or equal to 49.9%Shares)

     

    Greater
      than 49.9% and less than
      or                                                                                     
100% of Performance Shares (or 8,333 equal to 66.6%Shares)

     

    Greater
      than
      66.6%                                                                                                                   
150% of Performance Shares (or 12,500 Shares)

     

    *  Provided,
      that in no event shall the Grantee be entitled to receive more than 25,000
      Shares during the Performance Period under this Agreement.

    


    Examples:

     

    1.           Hypothetical
      results for First Performance Period:

     

    Company
      Ranking:                     15th out of
      34

    RTSR:                                           55.9
      percentile of Peer Group

    Payout:                                         100%,
      or 8,333 Shares

    


    2.           Hypothetical
      results for Second Performance Period:

     

    Company
      Ranking:                     21st out of
      34

    RTSR:                                           38.2
      percentile of Peer Group

    Period
      Payout:                            50%,
      or 4,166 Shares

    Cumulative
      Payout:                    12,499
      Shares

    


    3.           Hypothetical
      results for Third Performance Period:

     

    Company
      Ranking:                      10th out of
      34

    RTSR:                                           
      70.6 percentile of Peer Group

    Period
      Payout:                              150%,
      or 12,500 Shares

    Total
      Payout:                                24,999

    


    4.           Alternative
      hypothetical results for Third Performance Period (where 100% of payout received
      for First Performance Period and 150% of payout received for Second Performance
      Period, for a total of 20,833 previously earned Shares):

     

    Company
      Ranking:                     8th out of
      34

    RTSR:                                           76.5
      percentile of Peer Group

    Payout:                                         150%,
      but overall cap applies – only 4,167additional Shares are earned

    Total
      Payout:                               25,000


    
      
        
        

      

      
        7