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CTS Corporation

Form 10-Q

Third Quarter 2005

 





EXHIBIT (10)(b)




EMPLOYMENT AGREEMENT



This Employment Agreement (this “Agreement”) made and entered into this 4th day of October, 2005,
(the “Effective Date”) by and between CTS Corporation, an Indiana corporation (“CTS”) and Vinod M.
Khilnani, residing at 51500 Norwich Drive, Granger, IN 46530, (“Executive”).



WHEREAS, the parties desire to enter into this Agreement, setting forth the terms and conditions
for the employment relationship of Executive with CTS.



NOW, THEREFORE, in consideration of the mutual premises and the respective covenants and agreements
of the parties herein contained, the parties hereto agree as follows:





	 	1.	 	Term; Duties. CTS agrees to employ Executive, and Executive agrees to be
employed by CTS, on a full-time basis, in Executive’s present capacity as Senior Vice
President and Chief Financial Officer, at CTS’ principal offices or such other business
location as Executive is presently assigned, with duties and responsibilities substantially
the same as those now performed by Executive and such authority as that now exercised by
Executive, or in such other executive capacity as may be agreed upon by Executive and CTS.
The term of this Agreement shall commence on the Effective Date and continue for a period
of four (4) years.
	 
	 	2.	 	Compensation and Benefits. In consideration of the employment of Executive with
CTS, CTS shall pay to Executive such salary, bonuses and other compensation as shall be
established from time to time by the Compensation Committee of the Board of Directors of
CTS; provided, however, that Executive’s base salary shall not be less than the base salary
in effect on the date of this Agreement, unless there is a general salary reduction
affecting all CTS employees. Executive’s base salary shall be payable in accordance with
CTS’ general payroll practices as in effect from time to time, subject to applicable
withholdings. Executive shall be eligible to participate in CTS’ incentive compensation
plans on a basis no less favorable than that of other senior executive officers of CTS and
to participate in CTS’ pension, retirement savings, health and welfare and other employee
benefit plans on a basis consistent with that offered to other salaried employees of CTS,
to the extent permitted by law. This Agreement is not intended to and shall not be deemed
to be in lieu of any rights, benefits and privileges to which Executive may be entitled as
an Executive and as an employee of CTS, it being understood that Executive shall have the
same rights and privileges as other senior executive officers and other salaried employees
of CTS, to the extent permitted by law.
	 
	 	3.	 	Termination of this Agreement.






	 	a)	 	Death. In the event of Executive’s death, this Agreement shall
terminate at the end of the calendar month during which death occurs. The terms of CTS’
employee benefit plans and of any other plans in which Executive then is a participant
shall govern any right or entitlement that Executive’s heirs or beneficiaries have or
may have thereunder.
	 
	 	b)	 	Disability. In the event of Executive’s permanent and total disability
during the term of this Agreement, this Agreement shall terminate at the end of the
calendar month during which a determination is made of Executive’s permanent and total
disability. A conclusive determination of Executive’s permanent and total disability
shall occur when Executive is placed on Permanent Inactive Disability Status under the
CTS Corporation Pension Plan or a similar plan in which Executive is then a
participant.




 









 






	 	c)	 	Voluntary Termination by Executive. This Agreement shall terminate at
the end of the calendar month during which Executive voluntarily terminates employment
with CTS.
	 
	 	d)	 	Termination by CTS for Cause. This Agreement shall terminate
immediately if Executive’s employment with CTS is terminated for cause by CTS. CTS may
terminate Executive’s employment for cause at any time, without prior notice to
Executive. Termination for cause shall mean termination of Executive’s employment by
CTS because of willful neglect or material breach by Executive of the duties of
Executive, gross dishonesty, material violation of CTS policies, to the substantial
detriment of CTS, or any other conduct by Executive which materially prejudices the
interests of CTS. Termination pursuant to this paragraph shall result in Executive’s
immediate forfeiture of all rights and privileges under this Agreement, excluding
accrued salary, if any, which shall be immediately due and payable.
	 
	 	e)	 	Termination by CTS for other than Cause during the Eligibility Period.
The period commencing on the date the CTS Board of Directors appoints a person other
than Donald K. Schwanz as Chief Executive Officer and ending two (2) years thereafter
shall be referred to herein as the Eligibility Period. If during the Eligibility
Period CTS terminates this Agreement for any reason other than cause, as set forth in
Section 3(d) above, then CTS agrees to pay to Executive, for a period of two (2) years
beginning on the date which is six (6) months following the Executive’s date of
termination (herein the “Severance Period”) (i) the Executive’s base salary in effect
at the time of termination and (ii) annual incentive compensation in an amount equal to
the Executive’s target annual incentive compensation for the calendar year ending prior
to the date of termination under this subparagraph. All base salary payments hereunder
shall be made at CTS’ regular pay intervals applicable to executive officers during the
Severance Period. Incentive compensation will be paid on the first regular pay date
next following March 1 of each year during the Severance Period. Notwithstanding
anything herein to the contrary, in the event that the Executive, upon termination
under this subparagraph, is entitled to receive greater benefits under any other
agreement between CTS and the Executive, or under any severance policy of CTS, then
Executive shall be entitled to receive the greater benefits available under that
agreement or policy, in accordance with the provisions of said agreement or policy, in
lieu of receiving any compensation or benefits under this Agreement.
	 
	 	f)	 	Termination by CTS for other than Cause outside the Eligibility Period.
If CTS terminates this Agreement for any reason other than cause, as set forth in
Section 3(d) above, at any time prior to or following the Eligibility Period as set
forth in Section 3(e) above, this Agreement shall terminate at the end of the calendar
month during which Executive’s employment terminates and Executive’s right to severance
benefits, if any, shall be determined under any other contract between CTS and
Executive or any applicable severance policy.






	 	4.	 	Notice. Executive agrees that in the event that Executive elects to voluntarily
terminate employment with CTS, he shall provide at least three (3) months notice prior to
his termination date. Executive further agrees that in the event that Executive elects to
retire from employment with CTS, he shall provide at least six (6) months notice prior to
his retirement date.
	 
	 	5.	 	Non-Solicitation. Executive agrees that he shall refrain from soliciting or
hiring any present or future employee of CTS for employment with another company, and
further agrees that this obligation shall survive termination for a period of five (5)
years.
	 
	 	6.	 	Other Agreements. This Agreement shall not affect any other agreements between
the Executive and CTS pertaining to confidentiality of information, assignment of patents,
stock options, indemnification, or any other subject, provided that any benefits received
hereunder shall not be duplicative of and shall be reduced by any corresponding benefits
paid to the Executive under the Severance Agreement entered into by CTS and the Executive
on September 19, 2002 or any successor agreement thereto.
	 
	 	7.	 	Successors and Assigns. This Agreement may be assigned by CTS to its successors
and shall be binding upon its successors. This Agreement may not be assigned by Executive,
but applicable benefits hereunder may inure to Executive’s heirs or beneficiaries.




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	 	8.	 	Waiver. Failure to insist upon strict compliance with any of the terms,
covenants, or conditions hereof shall not be deemed a waiver of such term, covenant or
condition, nor shall any waiver or relinquishment of any right or power hereunder at any
one or more times be deemed a waiver or relinquishment of such right or power at any other
time or times.
	 
	 	9.	 	Modifications. This Agreement cannot be modified orally. All modifications to
this Agreement must be in a written agreement, signed by the party against whom enforcement
of any waiver, change, extension or discharge is sought.
	 
	 	10.	 	Governing Law; Venue; Attorney’s Fees. This Agreement and all questions arising
in connection herewith shall be governed by the laws of the State of Indiana, with venue in
any court of competent jurisdiction located in the State of Indiana. This Agreement shall
be enforceable against CTS and its successors, agents and assignees by Executive or the
personal representative of Executive’s estate, if the Executive is deceased (“the Personal
Representative”). If Executive or the Personal Representative is the prevailing party in
any legal proceeding brought by Executive or the Personal Representative to enforce this
Agreement, Executive or Executive’s estate shall be entitled to receive reasonable
attorney’s fees and expenses from CTS. Similarly, if CTS prevails in any legal proceeding
brought by either party to enforce this Agreement, CTS shall be entitled to receive its
reasonable attorney’s fees and expenses.





	 	 	 
	 

	 	CTS CORPORATION
	 
	 	 
	 

	 	By:
	 

	 	Donald K. Schwanz
	 

	 	Chairman of the Board and CEO
	 
	 	 
	 

	 	EXECUTIVE
	 
	 	 
	 

	 	Vinod M. Khilnani







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