DEF 14A

Gordon Hunter

The Board believes that Mr. Hunter’s experience as a President and Chief Executive Officer of a publicly traded corporation serving global markets, as well as substantial experience in the electronics industry, make him well qualified to serve as a director.

Age:

70

Director since:

2011

Professional Experience:

• Chairman of the Board of Littelfuse, Inc. (2018—Present)

• Executive Chairman of the Board of Littelfuse, Inc. (2017)

• Chairman of the Board, President and Chief Executive Officer of Littelfuse, Inc. (2005—2017)

• Chief Operating Officer of Littelfuse, Inc. (2003—2005)

• Director, Executive Chairman of Littelfuse, Inc. (2002—2003)

Other Public Company Boards:

• Director of Littelfuse, Inc. (2002—Present); Chairman of the Board and Member of the Technology Committee

• Director of Veeco Instruments, Inc. (2010—Present); Chair of the Compensation Committee and Member of the Nominating and Governance Committee

DEF 14A 1 d275471ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐	Preliminary Proxy Statement

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒	Definitive Proxy Statement

☐	Definitive Additional Materials

☐	Soliciting Material Pursuant to §240.14a-12

CTS CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all applicable boxes):

☒	No fee required.

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☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

LOGO

Dear CTS Shareholder:

2021 Results

2021 was a defining period for CTS as we advanced our diversification strategy with non-transportation sales growing 25%. We also secured record new business awards, close to $700 million. Despite the pandemic and supply chain challenges, we persevered, effectively serving our customers while continuing to invest in our future, guided by our Focus 2025 initiative. The resilience of our employees shone through as we finished the year in a position of strength, with exciting opportunities ahead. Thanks to the dedication, hard work and adaptability of our teams, CTS was able to deliver strong financial results. Full year sales were $512.9 million, up 21% year-over-year.

Creating Long-Term Value for our Shareholders

We remain committed to our long-term strategy, which centers on diversifying our end market profile by expanding our range of technologies, products, customers, and geographic reach. We believe this diversification enhances the value creation opportunity for our shareholders, as well as the quality of our earnings. This past year we made good progress on our diversification efforts, increasing non-transportation sales to 45% of total 2021 sales, compared to 35% of total sales in 2017. Looking ahead, we will continue to focus on diversification through faster growth in non-transportation revenues, while continuing to strategically grow our transportation business. We are targeting an overall revenue growth rate of 10%, with a long-term goal of greater than 50% of total revenue coming from non-transportation end markets.

Advancing ESG Initiatives

We understand that we have a responsibility to help shape not only a smarter future, but one that is sustainable for future generations. As a result, we remain committed to ethical and sustainable environmental, social, and governance practices, and we took meaningful steps in 2021 to advance our efforts in those areas. For example, we expanded the role of our Nominating and Governance Committee (now the Nominating, Governance and Sustainability Committee) to include oversight of our sustainability initiatives. In addition, we enhanced our legacy of community outreach and support through the launch of CTS CARES – a global program designed to promote charitable giving and community involvement. We continued supplying sustainable applications for the transportation end market where our products help reduce harmful emissions in commercial vehicles and support the electrification of passenger cars. In medical markets, CTS products enable less invasive health diagnostics through ultrasound and aid the targeted delivery of treatments to sites of disease.

We also understand that our success depends on fostering an inclusive and empowered work environment where all employees are respected and treated equally. With a business spanning the globe, we strive for our facilities and workforce to reflect the diversity of our geographical footprint. We take the importance of continuing to strengthen the diversity of our workforce seriously. We are proud that our Board of Directors is comprised of members who reflect a diverse set of skills, backgrounds, perspectives, and experiences, more than 40% of whom are women and/or racially/ethnically diverse.

Key Trends Driving Long-Term Growth

The need for increased safety, electrification, automation, connectivity, and efficiency will continue to drive demand for CTS solutions. Our non-transportation markets are growing fast, where we leverage core technology and domain expertise to expand our presence by partnering to create new solutions, while also ensuring deeper penetration with our current applications. The pace of recovery in our transportation market remains pressured by ongoing supply challenges and inflation, which are expected to persist in 2022. Overall, we anticipate robust order levels in the first half of the year and remain cautious about the demand environment in the second half of 2022.

CTS 2022 Proxy Statement

Mobility is a fast-growing market, with vehicles requiring increased processing power and communications. Electrification is expected to drive the penetration of electric vehicles from 6% today to a forecast greater than 30% globally by 2030. CTS’ electrification growth is enabled by the expansion of our accelerator sensors, applying inductive technology, and expanding modular solutions as we also continue to advance passive safety sensors. More recently, we have developed advanced E-Brake products to satisfy the requirements of new electric vehicle architectures. As our world becomes smarter and more connected, there is a growing need for more efficient and automated solutions. The medical field increasingly requires more portable and connected ultrasound products. Automation of medical procedures continues to advance with the growth of robotics.

We are expanding our customer base in defense, where we provide underwater sonar solutions. Our teams are also researching new applications for unmanned autonomous products. The demand for our temperature products in industrial applications, both hot and cold, continues to expand globally, aided by our ceramic technology expertise. Additionally, the demand for micro-actuators in printing is growing, driven by the growth of online purchasing and the associated growth in packaging, warehousing, and logistics. We are confident that we will continue to innovate and grow, increasing revenues, expanding margins, and generating stronger cashflows as we leverage secular growth opportunities and seek meaningful M&A opportunities to advance our strategy.

2022 Annual Meeting of Shareholders

With the full dedication and care of our leadership team and every CTS employee globally, we will continue to drive the company forward to deliver superior performance for our customers, shareholders, and employees. I want to thank our valued customers, employees, shareholders, business partners, and the Board of Directors for their support this past year.

As we look to the future, you are cordially invited to attend the 2022 Annual Meeting of Shareholders of CTS Corporation. The meeting will be held on Thursday, May 12, 2022, at 9:30 a.m. central time, at the Hotel Arista, located at 2139 City Gate Lane, Naperville, Illinois 60563.

We are pleased to continue to take advantage of the Securities and Exchange Commission rules allowing us to furnish proxy materials to shareholders on the Internet. We believe that these rules provide you with proxy materials more quickly and reduce the environmental impact of our Annual Meeting. Accordingly, we are mailing to shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review our 2022 Proxy Statement and Annual Report to Shareholders for the year ended December 31, 2021, and to vote online or by telephone. If you would like to receive a paper copy of our proxy materials, please follow the instructions for requesting these materials on page 52 of this 2022 Proxy Statement.

We hope you will attend the meeting in person. Whether you plan to attend the meeting or not, we encourage you to read this Proxy Statement and to vote your shares. The vote of every shareholder is important.

LOGO

Kieran M. O’Sullivan

Chairman, President and Chief Executive Officer

CTS 2022 Proxy Statement

Table of Contents



Notice of the 2022 Annual Meeting of Shareholders			1

Proxy Statement Summary			2

Proposal 1: Election of Directors			6

Committees of the Board of Directors			11

Audit Committee			11

Compensation Committee			12

Nominating, Governance and Sustainability Committee			13

Technology and Transactions Committee			14

Further Information Concerning the Board of Directors			15

Attendance			15

Director Independence			15

Meetings of Non-Management Directors			15

Board Leadership Structure			15

Board of Directors’ Role in Risk Oversight			16

Director Education			16

Stock Ownership Guidelines for Executives and Directors			17

Director Resignation Policy			17

Code of Ethics			17

Communications to Directors			18

ESG Initiatives			19

Stock Ownership Information			22

Five Percent Owners of CTS Common Stock			22

Directors’ and Officers’ Stock Ownership			23

Proposal 2: Approval, on an Advisory Basis, of the Compensation of CTS’ Named Executive Officers			24


Compensation Discussion and Analysis			25

Executive Summary			25

Compensation Objectives			26

Competitive Market Pay Information			27

How 2021 Named Executive Officer Compensation was Determined			28

Elements of 2021 Named Executive Officer Compensation			28

Agreements and Arrangements with Named Executive Officers			34

Stock Ownership Guidelines			34

CTS Securities Hedging/Pledging Policy			34



Compensation Committee Report			35

CTS Corporation 2021 Compensation Committee			35

Executive Compensation			36

2021 Summary Compensation Table			36

2021 Grants of Plan-Based Awards			37

Outstanding Equity Awards at 2021 Fiscal Year-End			38

2021 Option Exercises and Stock Vested			38

Change-in-Control Severance Table			40

Executive Severance Policy			40

CEO Pay Ratio			42

2021 Director Compensation			43

Proposal 3: Ratification of Appointment of Grant Thornton LLP as Independent Auditor for 2022			45

Report of the Audit Committee			46

CTS Corporation 2021 Audit Committee			46

Independent Auditor			46

Proposal 4: Approval of an Amendment to the CTS Articles of Incorporation to Implement a Majority Voting Standard in Uncontested Director Elections			47

2021 ANNUAL REPORT ON FORM 10-K			49

Frequently Asked Questions About The 2022 Annual Meeting of Shareholders and Voting			50

Appendix			A-1

LOGO

Notice of the 2022 Annual Meeting of Shareholders

Annual Meeting

Date

Time

Location

Record Date

May 12, 2022

9:30 a.m. Central Time

Hotel Arista

2139 City Gate Lane

Naperville, Illinois 60563

March 14, 2022

Proposals and Voting Recommendations

Only CTS shareholders of record at the close of business on March 14, 2022, may vote at this meeting or any adjournments that may take place. At the meeting, shareholders will vote on the following items:

Election of seven directors for a one-year term

Approval, on an advisory basis, of the compensation of CTS’ named executive officers

Ratification of the appointment of Grant Thornton LLP as CTS’ independent
auditor for 2022

Approval of an amendment to the CTS Articles of Incorporation to implement a majority voting standard in uncontested director elections

Board Vote Recommendation

✓

FOR

✓

FOR

✓

FOR

✓

FOR

Page 6

Page 24

Page 45

Page 47


		By Order of the Board of Directors,

		Scott D’Angelo Corporate Secretary

April 1, 2022

As part of our contingency planning in response to the COVID-19 pandemic, we are preparing for the possibility that the Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance through a public filing with the Securities and Exchange Commission, and details will be available at http://www.ctscorp.com.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2022.

The Notice, 2022 Proxy Statement, Form of Proxy

and 2021 Annual Report on Form 10-K are available at

http://www.ctscorp.com/investors

This 2022 Proxy Statement (“Proxy Statement”) is furnished in connection with the solicitation by the Board of Directors (“Board”) of CTS Corporation (“CTS”, “we”, “us”, “our” or the “Company”) of proxies to be voted at the 2022 Annual Meeting of Shareholders (“Annual Meeting”). CTS will bear the cost of this solicitation. On or about April 1, 2022, the Company mailed to its shareholders the Notice of Internet Availability of Proxy Materials, and made available this Proxy Statement, the accompanying proxy card, and its Annual Report on Form 10-K.

CTS 2022 Proxy Statement

Proxy Statement Summary

The Board is soliciting proxies for use at the Company’s Annual Meeting to be held on May 12, 2022.

The following summary highlights certain information contained in this Proxy Statement. This summary does not contain all of the information that you should consider when casting your vote. Please review the entire Proxy Statement carefully before voting. For more information on the Company’s 2021 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Annual Meeting

Date

Time

Location

Record Date

May 12, 2022

9:30 a.m. Central Time

Hotel Arista

2139 City Gate Lane

Naperville, Illinois 60563

March 14, 2022

Proposals and Voting Recommendations

Only CTS shareholders of record at the close of business on March 14, 2022, may vote at this meeting or any adjournments that may take place. At the meeting, shareholders are being asked to vote on the following items:

Election of seven directors for a one-year term

Approval, on an advisory basis, of the compensation of CTS’ named executive officers

Ratification of the appointment of Grant Thornton LLP as CTS’ independent
auditor for 2022

Approval of an amendment to the CTS Articles of Incorporation to implement a majority voting standard in uncontested director elections

Board Vote Recommendation

✓

FOR

✓

FOR

✓

FOR

✓

FOR

Page 6

Page 24

Page 45

Page 47

CTS 2022 Proxy Statement

Business Performance Highlights*

●

Sales were $512.9 million, up 21% year-over-year. Sales to non-transportation end markets increased 25% and sales to transportation end markets increased 18% over the same period.

●

Net loss was $41.9 million, or $(1.30) per diluted share, versus net earnings of $34.7 million, or $1.06 per diluted share, in 2020. The 2021 net loss was impacted by non-cash charges of $96.6 million, net of taxes related to the previously disclosed termination of the U.S. pension plan.

●

Adjusted diluted EPS was $1.93, up from $1.12 in 2020.

●

Adjusted EBITDA margin was 21.0%, compared to 18.3% for 2020.

●

Operating cash flow was $86.1 million, up from $76.8 million in 2020.

●

New business wins were $694 million, up from $442 million in 2020.

●

Returned $5.2 million to stockholders through the payment of dividends.

Governance Highlights

●

Annual Election of Directors

●

Resignation Policy for Directors who Fail to Receive a Majority Vote

●

All Directors are Independent except for the Chairman

●

Diverse and Highly Skilled Board that Provides a Range of Viewpoints

●

Independent Audit, Compensation and Nominating, Governance and Sustainability Committees

●

Executive Sessions of Independent Directors after each Board Meeting led by the Lead Independent Director

●

Annual “Say-on-Pay” Advisory Vote

●

Anti-Hedging/Anti-Pledging Policies for Directors, Officers and Certain Employees

^*	A reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is included in the Appendix to this Proxy Statement.

CTS 2022 Proxy Statement

Director Nominees

Nominee

Age

Director

Since

Independent

Other

Public

Boards

Committee Memberships

NG&S

T&T

Donna M. Costello

2021

✓

Chair

✓

Gordon Hunter

2011

✓

Chair

William S. Johnson

2015

✓

Chair

✓

Ye Jane Li

2020

✓

Kieran M. O’Sullivan*

2013

✓

Robert A. Profusek+

1998

✓

Chair

Alfonso G. Zulueta

2018

✓


A		Audit
C		Compensation
NG&S		Nominating, Governance and Sustainability
T&T		Technology and Transactions
+		Lead Director
*		Chairman of the Board

Board Diversity and Experience

LOGO

CTS 2022 Proxy Statement

Forward-Looking Statements/Non-GAAP Financial Measures

This Proxy Statement contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management’s expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause CTS’ actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect CTS future operating results and financial condition include, but are not limited to: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition; changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

The information included in this Proxy Statement includes the non-GAAP financial measures of adjusted EBITDA, adjusted net earnings, and adjusted diluted EPS. A reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is included in the Appendix to this Proxy Statement. From time to time, CTS may use non-GAAP financial measures, such as those included in this Proxy Statement, in discussing its business. CTS’ management believes that the foregoing non-GAAP financial measures are commonly used by financial analysts and others in the industries in which it operates, and thus further provide useful information to investors. In addition, CTS’ management uses these measures when assessing the performance of the business and for business planning purposes. These non-GAAP financial measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP.

CTS 2022 Proxy Statement

Proposal 1: Election of Directors

CTS’ Articles of Incorporation provide that the number of directors will be between three and fifteen, as fixed from time to time by the Board. As part of the succession planning and search process, the Nominating, Governance and Sustainability Committee and the Board regularly assesses the Board’s size. The Board has established the number of authorized directors at seven. There are seven director nominees for election. Detailed information on each director nominee is provided below. All directors are elected annually and serve one-year terms, or until their successors are elected and qualified.

✓

The Board of Directors unanimously recommends a vote FOR each director nominee.

CTS 2022 Proxy Statement

Proposal 1: Election of Directors

Nominees for the Board of Directors. Each director nominee named below is currently a director of CTS. The ages shown are as of April 1, 2022, the date of this Proxy Statement. Each director nominee has agreed to serve as a director if elected. If one or more of the nominees becomes unavailable for election, the remaining members of the Board will, in their sole discretion and pursuant to authority granted by the CTS Bylaws, nominate and vote for a replacement director or reduce the authorized number of directors.


	Donna M. Costello
	The Board believes that Ms. Costello’s experience as a Chief Financial Officer of a large corporation, as well as substantial operations experience, make her well qualified to serve as a director.
Age: 49 Director since: 2021	Professional Experience: • Chief Financial Officer of C&D Technologies, Inc. (2016—2020) • Chief Financial Officer of Sequa Corporation (2008—2015) • Vice President, Controller and Chief Accounting Officer of Sequa Corporation (2002—2008) • Senior Manager of Arthur Andersen LLP (1995—2002)	Other Public Company Boards: • Director of Neenah, Inc. (2019—Present); Chair of the Audit Committee and Member of the Compensation Committee • Director of Horizon Global Corporation (2021—Present); Member of the Audit Committee

CTS 2022 Proxy Statement

Proposal 1: Election of Directors

CTS 2022 Proxy Statement

Proposal 1: Election of Directors

CTS 2022 Proxy Statement

Proposal 1: Election of Directors


	Alfonso G. Zulueta
	The Board believes that Mr. Zulueta’s broad global management experience, his exposure to a range of cultures, and his deep experience in medical markets, make him well qualified to serve as a director.
Age: 59 Director since: 2018	Professional Experience: • President of Lilly International (2017—2021) • Member of Executive Committee of Eli Lilly and Company (2014—2021) • Senior Vice President of Eli Lilly and Company (2011—2021) • President of Emerging Markets and various other roles with Eli Lilly and Company (1988—2014)	Other Public Company Boards: • Director of Syneos Health, Inc. (2022—Present)

Board Skills, Qualifications and Experience

Summary of Director

Qualifications and Experience

Donna M.

Costello

Gordon

Hunter

William S.

Johnson

Ye Jane Li

Kieran M.

O’Sullivan

Robert A.

Profusek

Alfonso G.

Zulueta

Years Served on the Board

Leadership and Strategy

✓

Financial Expertise/Literacy

✓

Risk Management

✓

International Business

✓

Corporate Governance

✓

Industry Experience

✓

Your Board recommends a vote FOR each of these director nominees.

CTS 2022 Proxy Statement

Committees of the Board of Directors

Committee Membership

Director

Audit
Committee

Compensation
Committee

Nominating,
Governance and
Sustainability
Committee*

Technology and
Transactions
Committee

Donna M. Costello

✓

Gordon Hunter

✓

William S. Johnson

✓

Ye Jane Li

✓

Kieran M. O’Sullivan

✓

Robert A. Profusek

✓

Alfonso G. Zulueta

✓

✓	Member C Chairman

In 2021, the Board changed the name of this Committee from the “Nominating and Governance Committee” to the “Nominating, Governance and Sustainability Committee” and updated its charter to reflect the Committee’s role in the oversight of the Company’s environmental, social and governance initiatives.

CTS 2022 Proxy Statement

Committees of the Board of Directors

Board regarding the Chief Executive Officer’s compensation. The Compensation Committee does not delegate authority to perform any of the foregoing functions with respect to the compensation of any named executive officer. The Compensation Committee also administers the CTS Corporation 2018 Equity and Incentive Compensation Plan, including the annual equity awards thereunder and has delegated to management the oversight of those programs for participants who are not named executive officers. In addition, the Compensation Committee reviews director compensation annually and makes recommendations regarding director compensation to the Board for approval.

The Compensation Committee may, from time to time, direct senior functionaries of the Company’s human resources department to research specific issues and make recommendations to the Compensation Committee. In addition, the Compensation Committee directly engaged Compensation Strategies, Inc. (“Compensation Strategies”) as its compensation consultant. The Compensation Committee has assessed the independence of Compensation Strategies, as required under the NYSE Corporate Governance Listing Standards. The Compensation Committee has also considered and assessed all relevant factors, including those required by the Securities and Exchange Commission (“SEC”), that could give rise to a potential conflict of interest with respect to Compensation Strategies. Based on this review, the Compensation Committee did not identify any conflict of interest raised by the work performed by Compensation Strategies. For more information regarding the role of Compensation Strategies and our executive officers in determining or recommending the amount or form of executive compensation, see the Compensation Discussion and Analysis section of this Proxy Statement.

Compensation Committee Interlocks and Insider Participation. Directors Patricia K. Collawn (who was a member of the Board until her departure on May 13, 2021), Costello, Hunter, Johnson, Profusek, and Zulueta each served on the Compensation Committee during 2021. During 2021, no executive officer of CTS served as a director of any other entity for which any CTS director was an executive officer.

CTS 2022 Proxy Statement

Committees of the Board of Directors

CTS does not have a formal policy concerning whether the Nominating, Governance and Sustainability Committee will consider director nominees submitted by shareholders. CTS did not receive any shareholder director nominees for election at the Annual Meeting. At this time, the Board does not believe a formal policy regarding shareholder director nominees is necessary since CTS’ Bylaws provide a process for nomination of directors and no shareholder nominations for director have been received in past years.

The Nominating, Governance and Sustainability Committee reviews with the Board, on an annual basis, the requisite skills and director characteristics of any new members as well as the composition of the Board as a whole. This review includes an assessment of whether each non-management director qualifies as independent and an assessment of the diversity, age, skills, and experience of the directors in the context of the needs of the Board. Although the Nominating, Governance and Sustainability Committee has not established any specific minimum criteria or qualifications that a candidate must possess, the Nominating, Governance and Sustainability Committee seeks a diverse selection of candidates who possess the experience necessary to make a valuable contribution to the Board. The Board does not have a formal diversity policy; it construes the notion of diversity broadly, considering differences in viewpoint, professional experience, education, skills, and other individual qualities, in addition to race, gender, national origin and other similar characteristics. The Board believes that its efforts to foster a diverse board have been effective; while all directors are skilled in business, a variety of points of view, educational backgrounds, and experiences are represented on the Board. The Nominating, Governance and Sustainability Committee may retain and pay search firms for the purpose of identifying and evaluating director candidates.

In 2021, the Board charged the Nominating, Governance and Sustainability Committee with responsibility for reviewing, evaluating and consulting with the Company regarding its environmental, social and governance policies and initiatives, and to advise the Board regarding such initiatives. The Nominating, Governance and Sustainability Committee receives regular reports from management on the Company’s environmental, social and governance policies and initiatives.

CTS 2022 Proxy Statement

Committees of the Board of Directors

CTS 2022 Proxy Statement

Further Information Concerning the Board of Directors

Attendance

During 2021, the Board held five meetings and all of the directors attended at least 75% of the regular meetings of the Board and the standing committees of which they were then members, either in person, by telephone or by video conference. It is the policy of the Board that each director endeavor to attend each Annual Meeting of Shareholders, unless exigent circumstances arise. Each director standing for re-election at the 2021 Annual Meeting of Shareholders attended that meeting.

Director Independence

In addition to the NYSE Corporate Governance Listing Standards, the CTS Corporation Corporate Governance Guidelines govern the determination of whether a director is independent. A copy of the CTS Corporation Corporate Governance Guidelines can be found in the governance section of the Company’s website at https://investors.ctscorp.com.

The Board has determined that each non-management director that served in 2021 and each non-management director nominee is or was an independent director and has or had no material relationship with CTS, apart from his or her service as a director. For purposes of determining whether a director has a material relationship with CTS apart from his or her service as a director, the Board has determined that any transaction that is not required to be disclosed pursuant to Item 404(a) of Regulation S-K shall be deemed categorically immaterial.

The CTS Corporation Corporate Governance Guidelines provide that the Nominating, Governance and Sustainability Committee shall review any transaction that might be construed to disqualify a director as independent (including any transactions that are required to be reported under Item 404(a) of Regulation S-K) and, if appropriate, make a recommendation that the Board approve such transaction. The Board would then review and, if appropriate, approve such transaction. The Nominating, Governance and Sustainability Committee Charter further provides that the Nominating, Governance and Sustainability Committee shall review any potential director conflict of interest and recommend appropriate action to the Board.

Meetings of Non-Management Directors

It is the policy of the Board to hold an independent session excluding management directors at each regular Board meeting. In 2021, an independent session was held at each regular Board meeting. The Lead Independent Director of the Board presides over the independent sessions.

Board Leadership Structure

CTS does not have a policy as to whether the role of Chief Executive Officer and Chairman of the Board should be separate or combined, or whether the Chairman should be a management or non-management director. In the recent past, the Board has been structured with an independent or non-management director as Chairman and alternatively structured with a combined Chairman/Chief Executive or Executive Chairman and Chief Executive Officer. Currently, Mr. O’Sullivan serves as Chairman of the Board, President and Chief Executive Officer and Mr. Profusek serves as Lead Independent Director. Mr. O’Sullivan is the only CTS director who is not independent. He does not receive any additional compensation for his service on the Board.

The Lead Independent Director is the leader of the independent directors, and leads all sessions of independent directors, which normally occur at the end of each regular Board meeting. A full description of his duties is as follows:

•

Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;

•

Approve meeting agendas and schedules for the Board;

CTS 2022 Proxy Statement

Further Information Concerning the Board of Directors

•

Review key strategic initiatives presented to the Board;

•

Serve as a liaison between the Chairman and the independent directors. To that end, ensure personal availability for consultation and communication with independent directors and with the Chief Executive Officer, as appropriate;

•

Call special meetings of the independent directors, as the Lead Independent Director may deem to be appropriate;

•

Be available, at the request of major shareholders, for consultation and direct communication. Respond directly to shareholder and other stakeholder questions and comments that are directed to the Lead Independent Director or to the independent directors as a group, consulting on such with the Chief Executive Officer or other directors as the Lead Independent Director may deem appropriate;

•

Act as a sounding board for the Chief Executive Officer and/or independent directors with respect to strategies, plans, organization, relationships, accountabilities, and other issues;

•

Between regularly scheduled Board meetings discuss with the Chief Executive Officer key corporate risks and current issues and plans for presentations on such to the full Board or its committees;

•

Lead the independent directors in appraising the Chief Executive Officer’s performance at least annually; and

•

Lead the directors in appraising the Board’s performance at least annually.

The General Counsel and Corporate Secretary’s Office provides support to the Lead Independent Director in fulfilling his role. The Lead Independent Director receives an annual retainer of $20,000 in addition to his ordinary director compensation, for the additional services the Lead Independent Director provides. The Board believes this leadership structure is effective, efficient, appropriate to CTS’ size and complexity, and represents a cost-effective allocation of responsibilities.

Contrasting with the cost and efficiency benefits is the desire to ensure that control over both management and corporate governance is not overly invested in one person. The Board is confident that, as currently constituted, it will provide ample counterbalance to a combined Chairman and Chief Executive Officer and that it continues to provide suitable independent oversight of management. The independent directors on the Board are all accomplished professionals possessing substantial business and business-related experience as described in this Proxy Statement. Additionally, most have served on the Board for a number of years. As discussed above, the independent directors meet in separate session excluding management at each regular meeting of the Board. Further, any director has the right to submit items to be heard at any Board meeting. Lastly, the independent directors outnumber the one non-independent director, the combined Chairman and Chief Executive Officer, by a large supermajority.

Board of Directors’ Role in Risk Oversight

As a part of its oversight function, the Board monitors how management operates the Company. Risk is an important part of deliberations at the Board and committee levels throughout the year. Committees consider risks associated with their particular areas of responsibility. The Board conducts periodic reviews of corporate risk management policies and procedures and annually reviews risk assessments prepared by management as a part of CTS’ enterprise risk management process. The enterprise risk management process evaluates CTS’ major risk exposures and the steps management has taken to monitor and mitigate these exposures. Therefore, the Board and its committees consider among other items, the relevant risks to CTS when granting authority to management and approving business strategies. The Board has utilized this risk management structure for a number of years. Although the Board retains the right to make changes in risk oversight responsibilities from time-to-time, the Board anticipates that the risk management responsibilities will continue in a substantially similar manner as described above, whether or not the Board’s leadership structure changes.

Director Education

The CTS Corporation Corporate Governance Guidelines encourage all directors to participate in director continuing education programs. CTS reimburses directors for attendance at such programs. In addition, management monitors and reports to the directors regarding significant corporate governance initiatives. The directors also receive a presentation on new developments in corporate governance at least annually.

CTS 2022 Proxy Statement

Further Information Concerning the Board of Directors

Stock Ownership Guidelines for Executives and Directors

The Board has adopted stock ownership guidelines that apply to directors and executives in order to increase the alignment of their interests with those of shareholders and promote enduring shareholder value. The guidelines are administered by the Compensation Committee, and as part of that process the Compensation Committee periodically reviews the guidelines and directors’ and named executive officers’ progress against the requirements of the guidelines and recommends to the Board any changes that may be appropriate. The stock ownership levels included in the guidelines for our Chief Executive Officer, other named executive officers and directors are as follows:

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Chief Executive Officer: 5.5x annual base salary;

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Chief Financial Officer: 3x annual base salary;

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General Counsel, Corporate Secretary: 3x annual base salary; and

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Directors: 5.5x annual retainer.

In each case, the share ownership guideline level will be recalculated whenever the Chief Executive Officer or other named executive officer receives an increase in base salary or, in the case of directors, whenever the directors’ annual retainer is increased. In calculating compliance with the guidelines, each named executive officer and director is credited with one share unit for (1) each share of the Company’s stock beneficially owned by such executive or director, including shares held in the Company’s 401(k) plan and shares of restricted stock; and (2) for each restricted stock unit, directors’ deferred common stock unit, and share subject to a stock option which such executive or director holds. Both vested and non-vested shares of restricted stock and restricted stock units are included in calculating the total share units. Unvested performance equity awards and shares subject to non-vested stock options are not included in the calculation. Each director and named executive officer has a period of six years from his or her initial election/appointment to attain the applicable share ownership level. The Compensation Committee or the Board, as applicable may, in its discretion, reduce future grants to any director or named executive officer who does not comply with the restrictions on dispositions of shares as set forth in the stock ownership guidelines. A copy of the stock ownership guidelines can be found in the governance section of the Company’s website at https://investors.ctscorp.com.

All directors and named executives officers to whom the stock ownership guidelines apply hold shares in excess of the minimum requirements with the exception of Mr. D’Angelo, who commenced employment with the Company in 2021, and Ms. Costello and Ms. Li, who joined the Board in 2021 and 2020, respectively.

Director Resignation Policy

The CTS Corporate Governance Guidelines designate the circumstances under which a director must offer his or her resignation to the Board in connection with a change of employment or a majority “against” or “withheld” vote by the shareholders. The Guidelines also require that a director tender his or her resignation effective as of the next occurring Annual Meeting of Shareholders after the date on which he or she reaches the age of 75. The Nominating, Governance and Sustainability Committee may recommend to the full Board that an exception be made to this policy. The Board will evaluate the best interest of CTS and its shareholders and may consider any factors it deems relevant in deciding whether to accept a director’s resignation.

Code of Ethics

CTS has adopted a Code of Ethics that applies to all CTS employees, including the principal executive officer, the principal financial officer, the principal accounting officer and/or controller, and all other executive officers and non-management directors. The Code of Ethics includes ethical standards concerning conflicts of interest and potential conflicts of interest. The Code of Ethics also includes the Company’s policies prohibiting workplace harassment and discrimination, compliance with anti-corruption, antitrust and trade laws, policy against insider trading and stock tipping and requirements addressing the accurate and timely reporting of the Company’s financial information.

The Company, through a third-party provider, maintains an Ethics and Compliance Hotline which may be used to report violations of the Code of Ethics and other misconduct. Reports can be made over the phone or through the third-party provider’s website. The Ethics and Compliance Hotline is available 24/7, permits anonymous reporting and supports reports in applicable local languages. The Company holds annual training sessions on the Code of Ethics and other compliance-related topics.

CTS 2022 Proxy Statement

Further Information Concerning the Board of Directors

The Audit Committee is responsible for reviewing compliance with the Code of Ethics and reviews any potential conflict of interest involving an executive officer. A copy of the Code of Ethics can be obtained free of charge from the Corporate Secretary upon request or found in the governance section of the Company’s website at https://investors.ctscorp.com.

Communications to Directors

Shareholders and other interested parties may address written communications to individual directors, including non-management directors, or to the Board, by writing to the Corporate Secretary at CTS’ executive offices located at 4925 Indiana Avenue, Lisle, Illinois 60532. All communications from shareholders must include the name and address of the shareholder as it appears on the record books of CTS and the name and address of the beneficial owner, if any, on whose behalf the communication is submitted. The Corporate Secretary will compile such communications and forward them to the directors on a periodic basis. However, the Corporate Secretary has authority to disregard any communication that is primarily an advertisement or solicitation or is threatening, obscene, or similarly inappropriate in nature. Communications that have been disregarded for these reasons may be reviewed by any non-management director upon request.

CTS 2022 Proxy Statement

Environmental, Social and Governance (ESG)

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ESG Initiatives

At CTS, our mission is to enable an intelligent and seamless world. We continually strive to fulfill our mission by being instrumental in helping our customers and their products shape the future, including by designing highly-engineered components that make our customers’ products smarter with effective and efficient technologies that allow systems to sense, connect, and move. We also understand that we have a responsibility to help shape not only a smarter future—but one that is more sustainable for future generations—and that making sustainable business choices creates long-term value for the Company, our stakeholders, and the communities in which we do business.

While we have taken meaningful steps towards enhancing our sustainable business practices, we recognize we have more to do and we are committed to continuing to make progress on environmental, social and governance (“ESG”) initiatives in the future.

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CTS 2022 Proxy Statement

Environmental, Social and Governance (ESG)

2021 Key Highlights

Key highlights of the Company’s ESG initiatives in 2021 including the following:

Environmental

✓ Developing a sustainability scorecard aligned with our primary industry, as identified by the Sustainable Accounting Standards Board (“SASB”), in particular, the Sustainable Industry Classification System® (SICS®): Resource Transformation Sector—Electrical and Electronic Equipment SASB Standard, to assist us in measuring these key metrics and to support our inaugural sustainability report which we expect to release to our employees, shareholders, and other stakeholders before we file our 2023 proxy statement.

✓ Enhancing our incident reporting and safety observation system.

✓ Developing and supplying sustainable and innovative products

✓ Supplying components used in non-invasive surgical devices (such as medical ultrasound) and vehicle safety systems (such as passive safety sensors).

✓ Securing funding from Eurostars for the development of lead-free piezoceramic material.

✓ Supplying applications used in electric vehicle platforms.

CTS 2022 Proxy Statement

Environmental, Social and Governance (ESG)

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Social

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Cares

✓	Continuing our legacy of community outreach and support through the launch of CTS CARES–our global program designed to support charitable giving and community involvement initiatives.

✓	Supporting the ongoing development of our employees by continuing our Situational Leadership Training, Advanced Leadership Program, and other training programs designed to provide employees with additional resources to advance their leadership skills and career goals.

✓	Recognizing our employees for achievements that demonstrate our core values through our “Values in Action” awards.

✓	Rewarding our employees for key innovations through our annual patent awards.

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Governance

✓ Expanding the role of the Nominating and Governance Committee (now known as the Nominating, Governance and Sustainability Committee), to include assisting the Board in fulfilling its responsibility for oversight of our sustainability initiatives.

✓ Establishing the ESG Steering Committee, a cross- functional group comprised of representatives from legal, human resources, environmental, health and safety, internal audit, product management and operations, which has responsibility for spearheading our sustainability initiatives.

✓ Reinforcing our commitment to doing business ethically by training our employees on the requirements of our Code of Ethics and other compliance-related topics.

✓ Developing a board comprised of directors who reflect a diverse set of skills, backgrounds, perspectives, and experiences, more than 40% of whom are women and/or racially/ethnically diverse.

CTS 2022 Proxy Statement

Stock Ownership Information

Five Percent Owners of CTS Common Stock

The table below lists information about the persons known by CTS to beneficially own at least 5% of the outstanding shares of CTS common stock as of December 31, 2021. There were 32,178,715 shares of CTS common stock issued and outstanding as of December 31, 2021. The shareholding information below is derived solely from the most recent Schedules 13F or 13G, and amendments thereto, filed with the SEC and the percentage ownership is based on the number of shares outstanding as reported herein and may vary from the percentage reported in the applicable Schedules 13F or 13G.


Name and Address	Number of Shares			Percent of Class

BlackRock, Inc. 55 East 52nd Street New York, New York 10022		5,173,881	⁽¹⁾		16.08	%

T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202		3,071,053	⁽²⁾		9.54	%

The Vanguard Group 100 Vanguard Blvd. Malvern, Pennsylvania 19355		2,152,714	⁽³⁾		6.69	%

GAMCO Investors, Inc., et al. One Corporate Center Rye, New York 10581		2,147,933	⁽⁴⁾		6.68	%

Wellington Management Group LLP 280 Congress Street Boston, Massachusetts 02210		1,610,500	⁽⁵⁾		5.00	%

⁽¹⁾	As reported on Schedule 13G filed with the SEC on January 26, 2022.

⁽²⁾	As reported on Schedule 13G/A filed with the SEC on February 14, 2022.

⁽³⁾	As reported on Schedule 13G/A filed with the SEC on February 9, 2022.

⁽⁴⁾	As reported on the Schedule 13Fs filed with the SEC on February 11, 2022.

⁽⁵⁾	As reported on Schedule 13G/A filed with the SEC on February 14, 2022.

CTS 2022 Proxy Statement

Stock Ownership Information

Directors’ and Officers’ Stock Ownership

The following table shows the number of shares of CTS common stock each named executive officer, director, and director nominee beneficially owned as of March 14, 2022 (the “Record Date”), including shares of CTS common stock covered by restricted stock units exercisable within 60 days of March 14, 2022. Please note that, as reported in this table, beneficial ownership includes those shares of CTS common stock a director or officer has the power to vote or transfer, as well as shares of CTS common stock owned by immediate family members that reside in the same household with the director or officer.


Name	Beneficially Owned Shares⁽¹⁾		Options Exercisable Within 60 Days		Shares Held in 401(k)		Directors’ Deferred Common Stock Units ⁽²⁾		Total⁽³⁾			% of Shares Outstanding⁽⁴⁾

Ashish Agrawal		76,835		—		—		—		76,835	*		—

Donna M. Costello		3,300		—		—		—		3,300	*		—

Scott L. D’Angelo		403		—		—		—		403	*		—

Gordon Hunter		50,700		—		—		—		50,700	*		—

William S. Johnson		30,500		—		—		—		30,500	*		—

Ye Jane Li		8,200		—		—		—		8,200	*		—

Kieran M. O’Sullivan		362,436		—		—		—		362,436			1.13%

Robert A. Profusek⁽⁵⁾		85,542		—		—		4,722		90,264	*		—

Alfonso G. Zulueta		19,713		—		—		—		19,713	*		—

All Current Directors and Officers as a Group		637,629		—		—		4,722		642,351			2.0	%

*	Represents less than 1% of the outstanding shares of CTS common stock.

⁽¹⁾	Includes shares of CTS common stock which will vest within 60 days of March 14, 2022.

⁽²⁾	Includes restricted stock units (each an “RSU”) that are distributable upon the director’s separation from service and convert on a one-to-one basis to shares of CTS common stock upon distribution.

⁽³⁾	No director or executive officer has pledged his or her shares of CTS common stock.

⁽⁴⁾	Based on 32,132,367 shares of CTS common stock outstanding as of the Record Date.

⁽⁵⁾	Excludes 1,800 shares held by Mr. Profusek’s spouse. Mr. Profusek disclaims any beneficial interest with respect to these shares.

CTS 2022 Proxy Statement

Proposal 2: Approval, on an Advisory Basis, of the Compensation of CTS’ Named Executive Officers

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934 (“Exchange Act”), our Board of Directors is submitting a proposal asking shareholders to cast an advisory shareholder vote approving the compensation of CTS’ named executive officers (commonly referred to as a “Say-on-Pay” vote). The Compensation Discussion and Analysis section of this Proxy Statement describes CTS’ executive compensation program and the compensation decisions made by the Compensation Committee and the Board in 2021 with respect to our named executive officers. We currently hold a Say-on-Pay vote on an annual basis. Our next Say-on-Pay vote is expected to be held at the 2023 Annual Meeting of Shareholders.

CTS’ executive compensation program is designed to attract, retain, and motivate high quality executive talent, to provide executives with strong incentives to maximize CTS’ performance, and to align executives’ interests with those of our shareholders. For these reasons, the Board is asking shareholders to vote FOR the following resolution:

“RESOLVED, that the compensation of the named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in the CTS 2022 Proxy Statement, is hereby approved.”

While the advisory vote we are asking you to cast is non-binding, the Compensation Committee and the Board value the views of our shareholders and expect to take into account the outcome of the vote when considering future compensation decisions for our named executive officers.

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Your Board recommends a vote FOR the advisory approval of CTS’ named executive officer compensation.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides details about CTS’ compensation practices for its named executive officers. The information provided in this section should be read together with the tables and narratives that accompany the information presented.

The following executive officers are CTS’ named executive officers for 2021, as that term is defined by the SEC:

Executive Summary

Executive Compensation Goals. CTS’ executive compensation program is designed to attract, retain, and motivate high-quality executive talent, to provide executives with strong incentives to maximize CTS’ performance, and to align executives’ interests with those of our shareholders. Our executive compensation structure consists of base salary, annual cash incentives, performance-based equity compensation, service-based equity compensation, health and welfare benefits, retirement benefits and limited perquisites. CTS believes that our executive compensation program provides the best means of attracting, retaining, and motivating executives with the skills and experience necessary to achieve our business goals and maximize shareholder value. CTS has remained committed to its fundamental compensation structure and philosophy over a period of many years, including during the current COVID-19 pandemic and other recent periods of economic volatility.

Recent Governance Activity. We hold “Say-on-Pay” votes every year. At our 2021 Annual Meeting of Shareholders, we received over 97% approval, based on the total votes cast, for our advisory “Say-on-Pay” proposal to approve the compensation of our named executive officers. The Compensation Committee believes the voting results demonstrate significant continuing support for our overall executive pay program. After reviewing the 2021 Say-on-Pay vote results, the Compensation Committee did not make any changes as a direct result of the vote and decided to continue to apply the same general philosophy, compensation objectives, and governing principles that it used in 2020 regarding named executive officer compensation decisions and policies. The Compensation Committee remains dedicated to aligning executive pay with Company performance both in the existing executive pay programs and the governance environment surrounding the overall program.

Mr. Kieran M. O’Sullivan,

Chairman, President and
Chief Executive Officer

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Mr. Ashish Agrawal,

Vice President and Chief
Financial Officer

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Mr. Scott L. D’Angelo,

Vice President, General
Counsel and Secretary

CTS had no other executive officers during 2021.

Inside This CD&A

Executive Summary

Compensation Objectives

Competitive Market Pay Information

How 2021 Named Executive Officer Compensation was Determined

Elements of 2021 Named Executive Officer Compensation

Agreements and Arrangements with Named Executive Officers

Stock Ownership Guidelines

CTS Securities Hedging/Pledging Policy

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

2021 Performance. The Company delivered strong growth across all end markets in 2021 despite a challenging macroeconomic environment, and further advanced its diversification strategy. Sales increased 21% to $512.9 million in 2021. GAAP earnings (loss) per diluted share were ($1.30) in 2021 compared to $1.06 in 2020. The 2021 net loss was impacted by non-cash charges of $96.6 million, net of taxes related to the termination of the Company’s U.S. pension plan. Adjusted earnings per diluted share, which is used as a target for compensation as described below, was $1.93 in 2021, up 72% from $1.12 in 2020. Cash flow from operations, which is also used as a target for compensation as described below, was $86.1 million in 2021 versus $76.8 million in 2020. For more information on the Company’s 2021 performance, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. A reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is included in the Appendix to this Proxy Statement.

Implications of 2021 Results for Compensation. For the 2021 Management Incentive Plan (also sometimes referred to in this Proxy Statement as the “MIP”), which is our annual performance-based cash incentive plan, our named executive officers were each granted award opportunities based on the following weighted quantitative financial performance metrics: 60% on the Company’s adjusted fully diluted net earnings per share (“Adjusted EPS”); 30% on sales; and 10% on controllable working capital as a percentage of sales. As described more fully in the section below titled “How 2021 MIP Awards Were Calculated,” the Company’s performance in 2021 exceeded the target metrics for Adjusted EPS and sales, but did not meet the target metric for controllable working capital as a percentage of sales. As a result of the Company’s performance in 2021 based on these metrics, Messrs. O’Sullivan, Agrawal and D’Angelo received 2021 MIP payments of $1,364,400, $448,695 and $292,256, respectively, in 2022.

The Compensation Committee determined the payout under the 2019-2021 Performance Restricted Stock Unit Plan, which is the three-year performance-based equity award program established under the CTS Corporation 2018 Equity and Incentive Compensation Plan. This program measures the Company’s performance over a three-year performance period based on the following weighted criteria: 35% on relative total stockholder return (“RTSR”); 35% on sales growth; and 30% on operating cash flow. As a result of the Company’s three-year performance based on these metrics, Messrs. O’Sullivan and Agrawal received payouts of 24,528 and 9,754 shares, respectively, in 2022. Mr. D’Angelo commenced employment with CTS on February 8, 2021, and did not receive an award opportunity under the 2019-2021 Performance Restricted Stock Unit Plan. Awards under the 2019-2021 Performance Restricted Stock Unit Plan were settled in 2022 and were reported in the participating named executive officer’s compensation for 2019, the year in which they were granted.

Compensation Objectives

CTS designs its named executive officer compensation program to achieve three main objectives:

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Offer competitive compensation;

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Link compensation to performance; and

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Align compensation with shareholder interests.

Additionally, the elements of total compensation are designed to reward the named executive officers for: (1) their core competencies, skills, experience, and contributions to CTS (in the form of base salary, retirement benefits, health and welfare benefits and limited perquisites); (2) achievement of annual corporate goals (in the form of annual performance-based cash incentives); and (3) achievement of long-term objectives that are beneficial to CTS and its shareholders (in the form of performance-based and service-based equity awards). The first compensation element helps CTS offer competitive compensation, while the second and third compensation elements help CTS link compensation to performance and align compensation with shareholder interests. Decisions on specific elements of compensation do not generally affect the Compensation Committee’s decisions regarding the other elements of compensation except to the extent that these categories of compensation are structured to provide a substantial portion of total compensation that is based on performance and at risk each year.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

Competitive Market Pay Information

CTS initially designed its executive compensation program to be competitive with similarly situated companies with whom we compete for executive talent, and the Compensation Committee references in particular total compensation at the fiftieth percentile of the compensation for similar positions at similarly situated companies based on market survey data provided by Compensation Strategies, the Compensation Committee’s independent compensation consultant (discussed in more detail below). While the Compensation Committee considers this comparative compensation information to gain a general understanding of current median pay practices in our markets, this consideration provides only an initial, general guideline for CTS’ compensation decisions, rather than a fixed rule or final determining factor. By initially referencing median compensation levels for its named executive officers, CTS believes it strikes the right balance between motivating named executive officers with market competitive factors and providing the compensation necessary to recruit and retain top executive talent. Individual compensation opportunities vary based on other factors, such as tenure with CTS, individual performance and level of leadership responsibility with CTS.

What We Pay and Why


Elements of Total Compensation				Purpose

• Base Salary • Retirement Benefits • Health and Welfare Benefits • Limited Perquisites				• Fixed cash and other customary compensation to attract and retain high-quality executive talent.

• Annual Performance-Based Cash Incentives				• At-risk, variable incentive compensation to promote the achievement of specific financial and operational performance objectives.

• Performance-Based Equity Awards				• At-risk, variable incentive compensation to promote the achievement of specific goals. • Align executives’ interests with shareholder interests.

• Service-Based Equity Awards				• Fixed equity awards for long-term retention of executive talent. • Align executives’ interests with shareholder interests.

CTS does not use a specific formula for allocating total compensation between current and long-term compensation or between cash and non-cash compensation. The amount allocated to each element of compensation generally is determined in part by reference to allocation percentages in Compensation Strategies’ market survey data for comparable positions, based on the analysis described below. Additionally, relevant factors such as an executive’s specific level of experience, responsibilities, demonstrated performance, length of service with the Company, achievement of individual and corporate goals, risk, and retention considerations also may affect compensation structure for a particular named executive officer.

Our named executive officers have a substantial percentage of their total compensation opportunities based on at-risk, variable elements of compensation. CTS believes that this practice is appropriate because CTS’ named executive officers have the greatest ability to drive performance and, therefore, should have the most to gain or lose in terms of compensation opportunities based on performance. It is possible for CTS’ named executive officers to earn above-market compensation in any year, but they may earn below-market compensation as well, depending on individual and Company performance for that year.

CTS believes that named executive officers will consider the impact of decisions in both the short term and long term and will exercise careful judgment, so that while attempting to enhance shareholder value they will not take actions that pose unnecessary risk to the overall long-term well-being of the Company. As a result, CTS has determined that, for the named executive officers and for all of its other employees, CTS’ compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on CTS.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

The amount of total compensation realized or potentially realizable from prior compensation awards does not directly influence the level of compensation paid in the current year or future pay opportunities.

How 2021 Named Executive Officer Compensation was Determined

Mr. O’Sullivan recommended a total 2021 compensation package to the Compensation Committee for Mr. Agrawal considering, among other factors, Mr. Agrawal’s individual performance and responsibilities, and data provided by Compensation Strategies, with particular reference to total compensation opportunities at the fiftieth percentile of similarly situated executives based upon the peer group of companies identified in the section below describing the 2019-2021 Performance Restricted Stock Unit Plan. Mr. O’Sullivan recommended a total 2021 compensation package to the Compensation Committee for Mr. D’Angelo considering, among other factors, Mr. D’Angelo’s level of experience and a general review and sense of the competitive market for similar positions.

At its February 2021 meeting, the Compensation Committee reviewed the data provided by Compensation Strategies and considered the recommendations of Mr. O’Sullivan, ultimately deciding on a total compensation package for Messrs. O’Sullivan, Agrawal and D’Angelo. For Messrs. Agrawal and D’Angelo, total compensation packages for the year were finalized when approved by the Compensation Committee. The Compensation Committee also reviewed information provided by Compensation Strategies based on the same peer group of companies as described above to assess and recommend a total compensation package for Mr. O’Sullivan to the Board, which was discussed and approved by the Board in independent session at its February 2021 meeting.

Elements of 2021 Named Executive Officer Compensation

Base Salary. Base salary is included as an element of total compensation to ensure that each named executive officer receives a base level of cash compensation and is rewarded for service to the Company. A sufficient base salary also helps to ensure that named executive officers do not become unduly focused on achievement of shorter-term incentive awards that may be to the detriment of the overall long-term health of CTS.

The base salaries for the named executive officers that were set in February 2021 (effective in April 2021 for Messrs. O’Sullivan and Agrawal, and effective upon hire for Mr. D’Angelo) were as follows: Mr. O’Sullivan, $758,000; Mr. Agrawal, $383,500; and Mr. D’Angelo, $325,000. These base salary levels reflected no change to Mr. O’Sullivan’s base salary and an increase for Mr. Agrawal of 4%. Mr. Agrawal’s salary was increased in recognition of his performance in 2020 and the fact that he did not receive an increase in his base salary in 2020. Mr. D’Angelo commenced employment with CTS on February 8, 2021, thus the amount noted reflects his starting base salary which was determined in part based on a general review and sense of the competitive market. The base salary levels described in this paragraph are not directly comparable to the amounts listed in the “Salary” column for 2021 in the 2021 Summary Compensation Table because the 2021 Summary Compensation Table discloses actual base salary earned during the applicable fiscal year rather than any particular base salary rate.

Annual Management Incentive Plan. The Management Incentive Plan provides for annual cash payments to named executive officers based on achievement of certain quantitative financial performance goals. A named executive officer’s ultimate award is determined under a formula that provides for payment of zero to 200% of a target award based on CTS’ actual performance versus the established quantitative financial performance goals. In addition, the Compensation Committee reserves the right to adjust awards guided by the named executive officer’s actual performance or the effects of unusual conditions, factors or events.

In February 2021, the Compensation Committee established a target award opportunity as a percentage of base salary and quantitative financial performance goals for each named executive officer. In setting target award opportunities, the Compensation Committee took into consideration the median percentile target awards in the Compensation Strategies’ reports described above, and the individual performance and responsibilities of each named executive officer, as well as internal parity. No changes were made to the target award opportunities of Messrs. O’Sullivan and Agrawal for 2021. Mr. D’Angelo’s target award opportunity was initially established when he joined CTS in February 2021, and his base salary rate was prorated to correspond to his start date for purposes of calculating his target MIP award opportunity.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

The quantitative financial performance goals were based on CTS’ established business plan for 2021. Each year, the Board reviews a business plan prepared by members of management that includes projections for revenues, earnings, key balance sheet metrics, and cash flow. The Compensation Committee generally may use any of the metrics set out in the business plan to establish the quantitative financial performance goals for the annual MIP.

In 2021, the Compensation Committee set quantitative financial performance goals for participants who are named executive officers using targets for Adjusted EPS, CTS’ annual sales and controllable working capital as a percentage of sales. Adjusted EPS was selected as a metric because it takes into consideration overall financial performance and provides a quantitative measurement from which CTS is able to assess the performance of its named executive officers. Sales was chosen as a metric because it places an emphasis on CTS’ annual sales growth goals. Controllable working capital as a percentage of sales was chosen as a metric because it is an objective measure of the efficiency with which CTS manages its short-term capital needs. The targets for the Adjusted EPS, sales and controllable working capital metrics are described in the section below titled “How 2021 MIP Awards Were Calculated”. As shown in that section, the Compensation Committee set the performance levels for each metric and established a minimum performance level that had to be reached before MIP awards were paid with respect to that metric. The MIP also includes a minimum threshold for Adjusted EPS that must be met for any portion of the MIP award to pay out. Failure to reach the MIP’s minimum threshold for Adjusted EPS results in no payment for the entire MIP award.

Adjusted EPS is calculated by using the Company’s fully diluted net earnings (or losses) per share as reported in the Company’s consolidated statement of earnings for the applicable fiscal year, which, for purposes of the MIP, may be adjusted for unusual conditions, factors or events as determined by the Compensation Committee. Sales are calculated using the net sales as reported in the Company’s audited financial statements for the applicable fiscal year, which, for purposes of the MIP, may be adjusted for unusual conditions, factors or events as determined by the Compensation Committee. Controllable working capital as a percentage of sales is derived by dividing accounts receivable plus inventory minus accounts payable by annualized quarterly sales, adjusted to exclude temporary inventory, safety stock during plant transition and supplier transition in excess of $1 million. The controllable working capital metric is calculated on a quarterly basis using an annualized sales figure, and the overall annual calculation is determined by computing the simple average of the four quarterly measurements for the applicable fiscal year. Although, as noted above, the Compensation Committee may adjust the Adjusted EPS and sales metrics to account for unusual conditions, factors or events, no such adjustments were made by the Compensation Committee when calculating and approving the awards under the 2021 MIP.

Determination of Actual MIP Awards. Actual MIP award payments are based on a formula and can vary from zero to 200% of the target award opportunity based on achievement of the quantitative financial performance goals. If actual performance fails to meet the minimum or required threshold for a quantitative financial goal, the payout under the MIP for that goal is zero. On the upside, payout increases linearly up to 200% as performance exceeds the threshold performance goals. If actual performance equals the minimum or required threshold for a quantitative financial goal, the payout under the MIP for that goal is 50% of the target award opportunity, and if actual performance equals the target quantitative financial goal, the payout under the MIP for that goal is 100% of the target award opportunity. The maximum payout under the MIP is 200% even if the Company’s performance exceeds that level. The Company uses straight line mathematical interpolation to calculate results between the minimum threshold and target and target and the maximum level. One consequence of this cliff threshold and payout performance formula is that a named executive officer’s risk of receiving no award is greater than the named executive officer’s opportunity to obtain an award that is substantially above target. Another consequence is that payouts above target represent a fraction of the expected return to the Company from “better than plan” performance. Since payments are capped, a named executive officer cannot increase MIP awards beyond a fixed amount, counterbalancing the incentive to pursue outsized short-term rewards at the expense of the long-term health of the Company. While actual awards will vary above and below target from year to year, CTS expects that over a period of several years, payouts under the MIP will average about 100% of target. Over the past five years, payouts under the MIP based on corporate metrics averaged 100.6% of target.

How 2021 MIP Awards Were Calculated. For CTS’ named executive officers, performance measurements were weighted 60% for the Adjusted EPS goal, 30% for the sales goal, and 10% for the controllable working capital goal. The target award opportunities, which were based on base salary and unchanged from the prior year for Messrs. O’Sullivan and Agrawal, were 100% and 65%, respectively. The target award opportunity for Mr. D’Angelo was 55% of base salary, and was established in connection with his commencement of employment in February 2021. For purposes of the 2021 MIP, base salary is generally the named executive officer’s annual base salary level in effect on the last day of the calendar year. These target award opportunities were derived in part from the data obtained from the Compensation Strategies report and in part by the

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

Compensation Committee’s judgment on internal equity of the positions, their relative value to CTS, and the desire to maintain a consistent annual target award incentive for named executive officers of CTS.

For 2021, the minimum threshold for the Adjusted EPS metric was $1.00, the target was $1.35 and the maximum was $1.60. The minimum threshold for Company sales was $400 million, the target was $450 million and the maximum was $490 million. The minimum threshold for controllable working capital as a percentage of sales was 14.3%, the target was 13.0% and the maximum was 11.7%. Actual results are shown in the table below.


	2021 Management Incentive Plan Performance Goals at Target												2021 Management Incentive Plan Performance Results
	2021 End of Year Base Salary Rate ($)		2021 Annual Target Award (% of Base Salary)		Adjusted EPS ($)		Sales (000s) ($)		Controllable Working Capital as a Percentage of Annual Sales (%)		MIP Awards at Target ($)		Adjusted EPS ($)		Sales (000s) ($)		Controllable Working Capital as a Percentage of Annual Sales (%)		2021 Annual Incentive Earned (%)		2021 Annual Incentive Earned ($)

Kieran M. O’Sullivan		758,000		100		1.35		450,000		13.0		758,000		1.93		512,925		15.3		180		1,364,400

Ashish Agrawal		383,500		65		1.35		450,000		13.0		249,275		1.93		512,925		15.3		180		448,695

Scott L. D’Angelo⁽¹⁾		325,000		55		1.35		450,000		13.0		162,364		1.93		512,925		15.3		180		292,256

⁽¹⁾	Mr. D’Angelo’s year-end base salary rate was prorated, for purposes of calculating his MIP target award and payout to be $295,208 based on his period of service during 2021.

Performance-Based Equity Compensation. Named executive officers may earn RSUs based upon, and thus are rewarded for, achievement of financial objectives that CTS believes are beneficial to the Company and its shareholders, or based upon CTS’ overall performance relative to peers over a longer term.

2019-2021 Performance Restricted Stock Unit Plan. In February 2019, the Compensation Committee established the 2019-2021 Performance Restricted Stock Unit Plan. Depending upon CTS’ achievement of sales growth, operating cash flow, and CTS’ RTSR compared to the peer group of companies described below over a three-year performance period (through December 31, 2021), a participating named executive officer was eligible to earn an RSU award of zero to 200% of a target award opportunity established for the applicable position. The Compensation Committee selected a three-year performance measurement period to encourage sustained performance beneficial to shareholders over more than just an annual period.

The Compensation Committee selected RTSR as a performance goal because it is a meaningful measure of CTS’ overall relative performance in comparison to its designated peers. RTSR is a comparison of the total stockholder return of the Company during the three-year measurement period, relative to the total stockholder return of a designated peer group of companies (as described below) over that same period (including aggregated dividends and adjusted for stock splits over the period). Three-year sales growth was selected to reinforce senior management’s focus on increasing sales over the long-term. Sales growth is determined by calculating the change in the Company’s net sales set forth in its consolidated statement of earnings as of the end of the fiscal year immediately preceding the first year of the three-year measurement period as against the net sales set forth in its consolidated statement of earnings as of the end of the last fiscal year of the three-year measurement period. Three-year operating cash flow was selected to focus management’s attention on operational efficiency. Operating cash flow is the sum of the Company’s operating cash flow calculated in accordance with GAAP for each year of the three-year measurement period.

For the 2019-2021 Performance Restricted Stock Unit Plan, awards are weighted 35% for achievement of the RTSR metric, 35% for achievement of the sales growth metric and 30% for achievement of the operating cash flow metric.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

The Compensation Committee also determined the various performance levels that had to be achieved in order to earn an award under the 2019-2021 Performance Restricted Stock Unit Plan which are shown in the graphs below.

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Payouts with respect to each metric are interpolated between the established levels set forth in the graphs above. However, there is no interpolation for performance below the applicable threshold levels. Awards are settled on the basis of one share of CTS common stock for each earned RSU on the settlement date.

The 2019-2021 Performance Restricted Stock Unit Plan utilized a peer group initially consisting of the companies identified below whose total stockholder return performance is compared to CTS’ performance over the three-year performance period for the RTSR measurement. A peer company may be removed from the list if it is delisted from its exchange or ceases to exist as a business entity for certain reasons not involving poor performance. If a peer company is acquired, merged or otherwise assumed by another business entity and the resulting entity is substantially the same in size and nature of business, then it will remain in the peer group; otherwise, the peer company may be removed from the peer group.


AVX Corporation	Haynes International, Inc.	Methode Electronics, Inc.

CMC Materials, Inc.	II-VI, Inc.	MTS Systems Corporation

Dorman Products, Inc.	KEMET Corporation	Rogers Corp.

Electro Scientific Industries, Inc.	Littelfuse, Inc.	Silicon Laboratories, Inc.

Fabrinet	Materion Corp.	Stoneridge, Inc.

Gentex Corporation	Maxwell Technologies, Inc.	Strattec Security Corporation

Gentherm, Inc.	Mercury Systems, Inc.	Vishay Precision Group, Inc.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

Following the grant of the 2019-2021 Performance Restricted Stock Unit Plan awards, AVX Corporation, Electro Scientific Industries, Inc., KEMET Corporation, Maxwell Technologies, Inc., MTS Systems Corporation, CMC Materials, Inc. and Rogers Corporation were removed from the peer group due, in each case, to their acquisition (or proposed acquisition) by other companies.

Participants must remain continuously employed by CTS through the end of the three-year performance period to receive an award payout, subject to limited exceptions. The Compensation Committee can, in its discretion, adjust a participant’s payout of an award after consideration of other factors, including overall CTS performance and the individual participant’s contribution to CTS performance. The Compensation Committee can also adjust a payout of an award in its discretion to prevent the enlargement or dilution of the award because of extraordinary events or circumstances as determined by the Compensation Committee; however, no such adjustments were made by the Compensation Committee when calculating and approving the payouts under the 2019-2021 Performance Restricted Stock Unit Plan.

The Company achieved the following results against the performance metrics of the 2019-2021 Performance Restricted Stock Unit Plan during the three-year performance period:

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The target RSU award opportunities for Messrs. O’Sullivan and Agrawal were 27,782 and 11,048, respectively. As a result of the Company’s three-year performance based on these metrics, Messrs. O’Sullivan and Agrawal received the following awards of shares under the 2019-2021 Performance Restricted Stock Unit Plan:

Award at Target

Actual Results
as % of Target

Payout

(#)

Kieran M. O’Sullivan

27,782

88.3%

24,528

Ashish Agrawal

11,048

88.3%

9,754

Awards under the 2019-2021 Performance Restricted Stock Unit Plan were paid in 2022 and were reported in the participating named executive officer’s compensation when granted in 2019. Mr. D’Angelo commenced employment with CTS on February 8, 2021, and did not receive an award opportunity under the 2019-2021 Performance Restricted Stock Unit Plan.

Succession Planning Performance Restricted Stock Unit Plan. In February 2019, the Compensation Committee recommended, and the Board approved (other than Mr. O’Sullivan, who abstained in discussions and votes related to this plan), the establishment of a supplemental Performance Restricted Stock Unit Plan for Mr. O’Sullivan pursuant to the Company’s 2018 Equity and Incentive Compensation Plan (the “Succession Planning Performance RSU Plan”). Under the Succession Planning Performance RSU Plan, the Company established a target award opportunity for Mr. O’Sullivan of 6,945 RSUs subject to his achievement of the following succession planning goals (by the dates indicated) over a three-year performance period (through December 31, 2021): (1) development of a CEO profile for the future state of the Company and an assessment tool to evaluate internal talent against such profile by May 2019; (2) assessment of progress towards the identification of two internal successors by November 2019; and (3) identification by Mr. O’Sullivan, with approval by the Board, of two internal successors who are within three to four years of being ready to be successor CEO of the Company and the establishment of individual development plans for each such successor. Depending upon Mr. O’Sullivan’s level of achievement of the foregoing succession planning goals, as subjectively determined by the Compensation Committee and the Board, he was eligible to earn an award of zero to 200% of the target award opportunity established under the Succession Planning Performance RSU Plan. After considering Mr. O’Sullivan’s level of achievement, the Compensation Committee recommended, and the Board approved (other than Mr. O’Sullivan, who abstained in discussions and votes related to this plan), an award at the level of 150% of the target award opportunity, equating to 10,418 shares.

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

Other Three-year Performance Restricted Stock Unit Plans. In each of February 2020 and 2021, the Compensation Committee established a new three-year performance-based equity compensation program for the 2020-2022 and 2021-2023 periods respectively. The 2020-2022 Performance Restricted Stock Unit Plan has the same metrics as the 2019-2021 Performance Restricted Stock Unit Plan described above but applies different weightings (25% for RTSR, 40% for sales growth, and 35% for operating cash flow) and goal levels. The 2020-2022 Performance Restricted Stock Unit Plan includes the following initial peer group of companies for purposes of the RTSR calculation:


AVX Corporation	II-VI, Inc.	Rogers Corp.

CMC Materials, Inc.	KEMET Corporation	Silicon Laboratories, Inc.

Dorman Products, Inc.	Littelfuse, Inc.	Stoneridge, Inc.

Fabrinet	Materion Corp.	Strattec Security Corporation

Gentex Corporation	Mercury Systems, Inc.	Vishay Precision Group, Inc.

Gentherm, Inc.	Methode Electronics, Inc.

Haynes International, Inc.	MTS Systems Corporation

The 2021-2023 Performance Restricted Stock Unit Plan has the same metrics and weightings as the 2020-2022 plan but has different goal levels. The 2021-2023 Performance Restricted Stock Unit Plan includes the following initial peer group of companies for purposes of the RTSR calculation:


AVX Corporation	Haynes International, Inc.	MTS Systems Corporation

CMC Materials, Inc.	II-VI, Inc.	Rogers Corp.

Dorman Products, Inc.	Littelfuse, Inc.	Silicon Laboratories, Inc.

Fabrinet	Materion Corp.	Stoneridge, Inc.

Gentex Corporation	Mercury Systems, Inc.	Strattec Security Corporation

Gentherm, Inc.	Methode Electronics, Inc.	Vishay Precision Group, Inc.

Grants made to named executive officers under each year’s plan are reported as compensation in our Summary Compensation Table at grant date fair value for the year the grant is made. Mr. D’Angelo did not receive awards under the 2019-2021 Performance Restricted Stock Unit Plan or the 2020-2022 Performance Restricted Stock Unit Plan because he did not commence employment with CTS until February 2021.

We do not disclose the specific, forward-looking goals that we established for the 2020-2022 and 2021-2023 Performance Restricted Stock Unit Plans in this Proxy Statement because (1) these goals relate to executive compensation to be earned and/or paid in future years and do not affect a fair understanding of the named executive officers’ compensation for 2021 and (2) we believe that disclosure of such goals while the applicable performance period is ongoing would cause us competitive harm. However, we intend to disclose such goals in future proxy statements once the applicable performance periods have ended as part of our discussion and analysis about the amounts earned by the named executive officers under these awards. In setting the applicable target levels, the Compensation Committee considered how achievement of the performance goals could be impacted by events expected to occur in the coming years. We believe that the threshold goals have been established at levels that should be appropriately difficult to attain, and that the target goals will require considerable and increasing collective effort on the part of our employees, including our named executive officers, to achieve. Achievement of the maximum goals under such plans is considered to be a stretch given current market conditions.

The Compensation Committee established a target award opportunity for each participating named executive officer in the form of a specific number of RSUs for each three-year performance plan based on the compensation metrics described above while accounting for changes in grant date share value. The target RSU award opportunities under the 2020-2022 Performance Restricted Stock Unit Plan are: Mr. O’Sullivan, 33,326 and Mr. Agrawal, 10,557; and under the 2021-2023 Performance Restricted Stock Unit Plan are: Mr. O’Sullivan, 32,950; Mr. Agrawal, 10,403; and Mr. D’Angelo 3,600.

Service-Based Equity Compensation. CTS believes that stock ownership and equity-based compensation are valuable tools for motivating employees to improve, and rewarding them for improvements in, CTS’ long-term performance. In February 2021, the

CTS 2022 Proxy Statement

Compensation Discussion and Analysis

Compensation Committee awarded RSUs vesting over a three-year period to Messrs. Agrawal (6,938) and D’Angelo (2,400) based on the recommendation of Mr. O’Sullivan. In making his recommendation, Mr. O’Sullivan analyzed the third-party market information provided by Compensation Strategies and subjectively considered retention and performance factors. Mr. O’Sullivan’s 2021 RSU award was recommended by the Compensation Committee and approved by the entire Board (other than Mr. O’Sullivan, who abstained in discussions and votes related to his own awards). Mr. O’Sullivan’s 2021 grant was for 22,068 RSUs, and was determined based on a review of competitive market, retent

SEC Form DEF 14A filed by CTS Corporation