8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report:  March 30, 2012

CTS CORPORATION

(Exact Name of Company as Specified in Its Charter)

Indiana	1-4639	35-0225010
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
905 West Boulevard North
Elkhart, Indiana		46514
(Address of Principal Executive Offices)		(Zip Code)

Company’s Telephone Number, Including Area Code:       (574) 523-3800

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:

q   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

q   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

q   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

q   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 27, 2012, CTS Corporation, an Indiana corporation (the “Company”), entered into an Agreement (the “Agreement”) with Vinod M. Khilnani, the Company’s President and Chief Executive Officer (“Mr. Khilnani”) after Mr. Khilnani decided to retire from the position of Chief Executive Officer of the Company on or after December 31, 2013.  The Company and Mr. Khilnani entered into the Agreement to provide for an orderly transition of duties, responsibilities and authority from Mr. Khilnani to the next principal executive officer of the Company, and to set forth the compensation arrangement between the Company and Mr. Khilnani during and as a result of this transition period.

Under the Agreement, Mr. Khilnani will serve as the Company’s President and Chief Executive Officer through December 31, 2013 or a later date if mutually agreed upon by the Company and him (the “Transition End Date”).  During the transition period, Mr. Khilnani will assist the Company with the identification of and transition of duties, responsibilities and authority to the next principal executive officer of the Company.  Mr. Khilnani will resign as a director of the Company on the Transition End Date or, if earlier, when he ceases to serve as the Company’s Chief Executive Officer.

During the transition period, Mr. Khilnani will: (1) continue to receive base salary at his current annual rate of $ 680,000; (2) continue to participate in the Company’s annual cash incentive program at his current minimum, target and maximum incentive opportunity levels of 0%, 100% and 200%, respectively, of his base salary; (3) be eligible to receive annual equity awards (with such annual equity awards provided, if at all, in amounts substantially equal in value to Mr. Khilnani’s 2011 equity awards); (4) continue to be eligible for annual executive perquisites substantially equivalent to those he received for 2011; and (5) continue to participate in the Company’s pension, retirement savings, health and welfare and other employee benefit plans on a basis consistent with that offered to other salaried employees of the Company, if permitted by law.

If Mr. Khilnani dies, becomes disabled, voluntarily resigns or is terminated by the Company for cause during the transition period, he will cease receiving compensation from the Company under the Agreement (except for accrued but unpaid amounts).  If Mr. Khilnani is terminated by the Company without cause during the transition period: (1) he will receive a lump sum payment in cash equal to the value of the remaining base salary, annual cash incentives, equity awards and perquisites that he would have received through the end of the transition period; (2) he will receive medical and dental benefits from the Company for 24 months following his termination; and (3) his outstanding time-based equity awards will vest and his outstanding performance-based equity awards will become nonforfeitable (with performance-based earnings dependent on actual performance and settled on a pro rata basis), to the extent permitted under applicable equity plans.  Mr. Khilnani will also receive these medical and dental benefits and this equity award treatment if he serves the Company under the Agreement through the end of the transition period.  For purposes of this paragraph, cause and disability will be evaluated based on definitions for those terms in the Company’s Executive Severance Policy.  Mr. Khilnani will remain entitled to indemnification under the terms of his existing indemnification agreement with the Company.

The Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement, which is incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

Exhibit Number         Description

10.1 Agreement, dated as of March 27, 2012, by and between CTS Corporation and Vinod M. Khilnani

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CTS CORPORATION
By:	/s/ Richard G. Cutter
Name:	Richard G. Cutter
Title:	Vice President Law and Business Affairs,
	Corporate Secretary

Date:  March 30, 2012

EX-10.1

AGREEMENT

This Agreement (this “Agreement”) is entered into as of March 27, 2012 (the “Effective Date”) by and between CTS Corporation, an Indiana corporation (the “Company”), and Vinod M. Khilnani (the “Executive”).

WHEREAS, Executive has indicated his intention to retire from the position of Chief Executive Officer of the Company, and both the Company and Executive desire to provide for an orderly transition of duties, responsibilities and authority from Executive to the next principal executive officer of the Company (the “New CEO”).

NOW, THEREFORE, in consideration of the mutual promises and the respective covenants and agreements of the parties contained in this Agreement, and upon the terms and subject to the conditions set forth in this Agreement, the parties hereto hereby agree as follows:

Section 1.  Term of Transition and Duties. Subject to Section 3 below, Executive shall serve as President and Chief Executive Officer (“CEO”) of the Company through December 31, 2013 (or such later date as mutually agreed upon in writing by the parties hereto) (the “Transition End Date”). Until the Transition End Date, except as otherwise reasonably requested in writing by the Board of Directors of the Company (the “Board”), Executive shall have such duties, responsibilities and authority as are customarily incident to the principal executive office of a publicly traded corporation, and shall assist the Company with the identification of, hiring of and/or transition of duties, responsibilities and authority to the New CEO to the extent reasonably requested by the Board. Executive hereby agrees to resign from all directorships and committee positions with the Company and its subsidiaries and affiliates effective on the earlier of the Transition End Date or such date on which Executive no longer serves as CEO.

Section 2.  Compensation.  Subject to Section 3 below, from the Effective Date through the Transition End Date, the Company shall pay or provide to Executive: (a) annual base salary at the annual rate in effect for Executive on the Effective Date (“Base Salary”) in accordance with the Company’s general payroll practices in effect from time to time; (b) annual performance-based cash incentives determined by the Board’s compensation committee (the “Committee”) or the Board on a basis no less favorable than that applicable to other senior executives of the Company, with minimum, target and maximum annual incentive opportunities equal to 0%, 100% and 200%, respectively, of Executive’s Base Salary (“Annual Bonus”); (c) to the extent equity awards are provided to senior executives of the Company, annual performance-based and time-based equity awards on a basis no less favorable than that applicable to other senior executives of the Company, with threshold, target and maximum performance-based equity awards, and time-based equity awards, provided in amounts substantially equal in value to those amounts disclosed for Executive in the “2011 Grants of Plan-Based Awards” table (the “Proxy Table”) in the Company’s definitive proxy statement for its 2012 Annual Meeting of Stockholders (“Equity Awards”); and (d) annual executive perquisites in a form and amount substantially equivalent to those provided to Executive for 2011 (“Perquisites”) (with all payments and benefits under this Section 2(a) subject to applicable withholding). Subject to Section 3 below, from the Effective Date through the Transition End Date, Executive shall be entitled to continued participation in the Company’s 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.

Section 3.  Intervening Termination Events.  In the event of Executive’s death or Disability, or the termination of Executive’s employment by Executive, or the termination of Executive’s employment by the Company for Cause, prior to the Transition End Date, (a) this Agreement shall terminate, (b) Executive shall not be entitled to receive any further payments or benefits under this Agreement after the date of such death, disability or termination (excluding any amounts that are accrued but unpaid), and (c) the terms of the Company’s employee benefit and other plans will govern any right or entitlement that Executive or Executive’s heirs or beneficiaries may have thereunder. If the Company terminates Executive’s employment for any reason other than for Cause prior to the Transition End Date, the Company will pay Executive on the 60th day after the date of such termination a lump sum amount in cash equal to Base Salary, plus Annual Bonus (at target levels), plus the value of Equity Awards (at target levels based on disclosed values in the Proxy Table), plus the value of Perquisites, Executive would have received or been granted if he had remained employed under this Agreement from the date of such termination until the Transition End Date. For purposes of Section 3, “Disability” and “Cause” are used as defined in the CTS Corporation Executive Severance Policy (the “Severance Policy”) in effect on the Effective Date.

Section 4.  Effect on Other Agreements and Arrangements. If Executive’s employment with the Company terminates under Section 1 on the Transition End Date, or if the Company terminates Executive’s employment for any reason other than for Cause prior to the Transition End Date, Executive shall be entitled to the payments and benefits provided for under paragraphs (2), (3) and (4) of Section D of the Severance Policy; otherwise, the parties hereto hereby agree that after the Effective Date, Executive will not be entitled to any other payments or benefits provided for under the Severance Policy. This Agreement shall have no effect as to, and Executive shall continue to be entitled to indemnification to the extent provided under, the Director and Officer Indemnification Agreement, dated as of November 6, 2008, between the parties hereto.

Section 5.  Miscellaneous. This Agreement may be modified or terminated only in a writing signed by both the parties hereto. It is the intent of the parties hereto that the payments and benefits to be paid or provided to Executive under this Agreement will not duplicate substantially similar payments or benefits under any other agreement, policy, plan or arrangement of or with the Company, except to the extent provided for herein. To the extent applicable, it is intended that the compensation arrangements under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and this Agreement will be interpreted consistent with this intent. As used in this Agreement, the term “termination of employment” and terms of similar import will mean a “Separation from Service” within the meaning of Section 409A. Notwithstanding any provision herein to the contrary, if Executive is a “specified employee” (within the meaning of Section 409A and determined pursuant to the identification methodology selected by the Company from time to time) on Executive’s termination of employment and if any portion of the payments or benefits to be received by Executive upon his termination of employment is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then such payments or benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Executive’s termination of employment will instead be accumulated and paid or made available on the earlier of (a) the first day of the seventh month following Executive’s termination of employment and (b) Executive’s death. Each payment and benefit to be made or provided to Executive pursuant to this Agreement will be considered a separate payment and not one of a series of payments for purposes of Section 409A. Coverage provided during one taxable year will not affect the degree to which coverage will be provided in any other taxable year. 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.

IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as of the date first written above.

CTS CORPORATION

By:        /s/ Richard G. Cutter

Name:     Richard G. Cutter

Title:       Vice President Law & Business

Affairs, Corporate Secretary

EXECUTIVE

By:         /s/ Vinod M. Khilnani

Name:      Vinod M. Khilnani