Business Context and Reporting Period
This Form 8-K filing by CTS Corporation was submitted on December 21, 2011, reporting events that occurred on December 15, 2011. The filing addresses Item 5.02 regarding the appointment of certain officers and compensatory arrangements.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on executive compensation agreements.
Material Changes
On December 15, 2011, CTS Corporation entered into Severance Agreements with three executive officers: Vinod M. Khilnani, Thomas A. Kroll, and Dennis P. Thornton. These agreements are operative only upon a change-in-control of the Company.
Guidance, Outlook, and Management Commentary
The filing details the specific terms of the severance packages triggered by a change-in-control:
- Trigger Events: Defined as acquisition of 25%+ voting stock, board composition changes, mergers/sales of assets, or liquidation.
- Severance Compensation:
- Lump sum equal to 2x the sum of (Base Salary + Incentive Pay).
- Medical/Dental Benefits: Continued for 24 months with company reimbursement for premiums exceeding the employee share.
- Outplacement: Reimbursement up to $30,000.
- Non-Compete Payment: Mr. Khilnani receives an additional lump sum equal to 1x the sum of (Base Salary + Incentive Pay) in consideration for a non-compete provision.
- Tax Provisions: Payments are subject to "golden parachute" reduction rules (Sections 280G and 4999) to avoid excise taxes.
- Restrictions: Executives are subject to a one-year non-compete and non-solicitation period following termination.
- Term: The agreements are effective from December 15, 2011, through December 31, 2015.
Investor Verification Checklist
- Verify the current status of the three named executives (Khilnani, Kroll, Thornton) to confirm they remain employed.
- Monitor for any potential change-in-control transactions that would activate these severance liabilities.
- Review the Company's total potential liability exposure should a change-in-control occur, noting the specific multiplier (2x) and the additional payment for Mr. Khilnani.
- Confirm that the agreements comply with Section 409A of the Internal Revenue Code regarding payment timing.