-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LUjkfKuWu2dgo+vkRZ1QzqHILtvRmy83ToQoihXk6Vt/2s1/Lthhv+OKmI6A5G1Q X8CkY4DibnTHWW/a5JDw4Q== 0000950152-01-001168.txt : 20010224 0000950152-01-001168.hdr.sgml : 20010224 ACCESSION NUMBER: 0000950152-01-001168 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIFCO INDUSTRIES INC CENTRAL INDEX KEY: 0000090168 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT ENGINES & ENGINE PARTS [3724] IRS NUMBER: 340553950 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-05978 FILM NUMBER: 1549774 BUSINESS ADDRESS: STREET 1: 970 E 64TH ST CITY: CLEVELAND STATE: OH ZIP: 44103 BUSINESS PHONE: 2168818600 MAIL ADDRESS: STREET 1: 970 EAST 64TH STREET CITY: CLEVELAND STATE: OH ZIP: 44103 FORMER COMPANY: FORMER CONFORMED NAME: STEEL IMPROVEMENT & FORGE CO DATE OF NAME CHANGE: 19690520 10-Q/A 1 l86627ae10-qa.txt SIFCO INDUSTRIES & SUBSIDIARIES 10-Q/A 1 The following items were the subject of a Form 12b-25 and are included herein: Item 6(a) Exhibits FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2000 ----------------- Commission File Number 1-5978 ------ SIFCO Industries, Inc. and Subsidiaries (Exact name of registrant as specified in its charter) Ohio 34-0553950 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 970 East 64th Street, Cleveland, Ohio 44103 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (216) 881-8600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No --- --- As of January 31, 2000, the issuer had 5,135,063 shares of common stock outstanding. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (Amounts in thousands, except per share data) Three Months Ended December 31 --------------------------- 2000 1999 ---- ---- NET SALES $ 25,185 $ 25,345 OPERATING EXPENSES: Cost of goods sold 20,854 21,447 Selling, general and administrative expenses 2,955 3,098 --------- --------- Total operating expenses 23,809 24,545 --------- --------- Operating income 1,376 800 INTEREST INCOME (150) (31) ------------- INTEREST EXPENSE 369 265 OTHER EXPENSE, NET 569 41 --------- --------- Income before income tax provision 588 525 INCOME TAX PROVISION 286 41 --------- --------- Net income $ 302 $ 484 ========= ========= NET INCOME PER SHARE (BASIC) $ .06 $ .09 NET INCOME PER SHARE (DILUTED) $ .06 $ .09 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES (BASIC) 5,135 5,194 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES (DILUTED) 5,155 5,240
See accompanying notes to unaudited consolidated condensed financial statements. 3
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in thousands, except per share data) December 31 September 30 2000 2000 ----------- ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,846 $ 4,687 Receivables, net 18,685 19,743 Inventories 19,156 19,878 Deferred income taxes 1,486 1,486 Prepaid expenses and other current assets 782 656 -------- -------- Total current assets 47,955 46,450 PROPERTY, PLANT AND EQUIPMENT, NET 29,482 29,009 OTHER ASSETS: Funds held by trustee for capital project 539 530 Goodwill and other intangible assets, net 3,802 3,866 Other assets 761 645 -------- -------- Total other assets 5,102 5,041 -------- -------- Total assets $ 82,539 $ 80,500 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 1,420 $ 1,420 Accounts payable 4,467 6,723 Accrued liabilities 9,547 9,631 -------- -------- Total current liabilities 15,434 17,774 LONG-TERM DEBT - NET OF CURRENT MATURITIES 14,508 11,962 OTHER LONG-TERM LIABILITIES 5,275 5,264 SHAREHOLDERS' EQUITY: Serial preferred shares - no par value -- -- Common shares, par value $1 per share 5,206 5,205 Additional paid-in-capital 6,416 6,413 Accumulated other comprehensive loss (6,793) (8,310) Retained earnings 42,942 42,641 Common shares held in treasury at cost (449) (449) -------- -------- Total shareholders' equity 47,322 45,500 -------- -------- Total liabilities and shareholders' equity $ 82,539 $ 80,500 ======== ========
See accompanying notes to unaudited consolidated condensed financial statements. 4 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
Three Months Ended December 31 ------------------ 2000 1999 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 302 $ 484 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,106 1,164 CHANGES IN OPERATING ASSETS AND LIABILITIES: Receivables 1,431 2,469 Inventories 1,066 910 Prepaid expenses and other current assets (109) (444) Other assets (106) 52 Accounts payable (2,733) (686) Accrued liabilities 162 (457) Other long-term liabilities (118) -- ------- ------- Net cash provided by operating activities 1,001 3,492 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (830) (1,326) Decrease in funds held by trustee for capital project (9) -- Other 60 (59) ------- ------- Net cash used for investing activities (779) (1,385) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit agreement 8,252 300 Repayments of revolving credit agreement (5,406) (300) Repayments of long-term debt (300) (300) Issuance of common stock 4 37 ------- ------- Net cash provided by (used for) financing activities 2,550 (263) ------- ------- Increase in cash and cash equivalents 2,772 1,844 Cash and cash equivalents at the beginning of the period 4,687 2,022 Effect of exchange rate changes on cash and cash equivalents 387 (116) ------- ------- Cash and cash equivalents at the end of the period $ 7,846 $ 3,750 ======= ======= Supplemental disclosure of cash flow information: Cash paid for interest $ 237 $ 227 Cash paid for income taxes, net 1 4
See accompanying notes to unaudited consolidated condensed financial statements. 5 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Amounts in thousands) (Unaudited) 1. BASIS OF PRESENTATION The unaudited interim consolidated condensed financial statements included herein include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented have been included. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the SIFCO industries, Inc. and Subsidiaries ("Company") fiscal 2000 annual report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. Certain prior year amounts have been reclassified in order to conform to current year classifications. 2. ADOPTION OF NEW ACCOUNTING STANDARD The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" on October 1, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income (loss), based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. The Company uses an interest rate swap agreement to convert its variable rate term note to an effective fixed rate of 7.74%. In accordance with the transition provisions of SFAS No. 133, upon adoption of this standard, the Company recorded a net of tax cumulative effect type adjustment of $135 in accumulated other comprehensive (loss) income to recognize the fair value of the interest rate swap designated as a cash flow hedging instrument. The derivative was also recognized on the balance sheet at its fair value of $205. 3. INVENTORIES Inventories consist of: December 31, 2000 ----------------- Raw material and supplies $ 4,096 Work-in-progress and finished goods 15,060 ---------- Total inventories $ 19,156 ========== If the FIFO method had been used for the entire Company, inventories would have been $3,015 higher than reported at December 31, 2000. 4. INCOME TAXES At December 31, 2000, U. S. income taxes were provided on the undistributed earnings for the three months ended December 31, 2000 of non-U.S. subsidiaries in anticipation that distributions from such, to the extent they may occur in the future, would result in an additional income tax liability. The income tax provision on U.S. earnings is based on the anticipated effective rate for the year. 6 5. COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS Total comprehensive income is as follows: Three months ended December 31, 2000 ----------------- Net income $ 302 Foreign currency translation adjustment 1,534 Cumulative effective adjustment of interest rate swap agreement, net of tax 135 Loss on interest rate swap agreement (152) -------- Total comprehensive income $ 1,819 ======== The components of Accumulated Other Comprehensive Loss are as follows: December 31, 2000 ----------------- Foreign currency translation adjustment $ (6,776) Interest rate swap adjustment (17) -------- Total accumulated other comprehensive loss $ (6,793) ======== 7 6. BUSINESS SEGMENTS Reportable segments are identified by the Company based upon distinct products manufactured and services provided. The Turbine Component Services and Repair segment consists primarily of turbine component remanufacturing, precision contract machining, subassemblies, and finished parts, as well as, selective electroplating equipment, solutions and services. The Aerospace Component Manufacturing segment consists primarily of domestically produced forgings and semi-finished components primarily for the aerospace industry. Segment information is as follows:
Three months ended December 31 ------------------------------ 2000 1999 ---- ---- Net sales: Turbine Component Services and Repair $ 16,216 $ 17,743 Aerospace Component Manufacturing 8,969 7,602 ---------- ---------- Consolidated net sales $ 25,185 $ 25,345 ========== ========== Operating income: Turbine Component Services and Repair $ 1,316 $ 1,126 Aerospace Component Manufacturing 458 153 Corporate unallocated expenses (398) (479) ---------- ---------- Consolidated operating income 1,376 800 Interest expense, net 219 234 Other expense, net 569 41 ---------- ---------- Consolidated income before income tax provision $ 588 $ 525 ========== ==========
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations may contain various forward-looking statements and includes assumptions concerning the Company's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important economic, political and technological factors, among others, the absence of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) future business environment, including capital and consumer spending; (2) competitive factors, including the ability to replace business which may be lost due to OEM encroachment into turbine component services and repair markets; (3) successful procurement of new repair process licenses; (4) the impact of fluctuations of foreign currency (euros) exchange rates on the results of operations; (5) successful development and market introductions of new products; (6) stability of government laws and regulations, including taxes; and (7) stable governments and business conditions in economies where business is conducted. SIFCO Industries, Inc. and its subsidiaries engage in the production and sale of a variety of metalworking processes, services and products produced primarily to the specific design requirements of its customers. The processes include forging, heat treating, coating, welding, machining and electroplating; and the products include forgings, machined forged parts and other machined metal parts, remanufactured component parts for turbine engines, and electroplating solutions and equipment. A. RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1999 In the quarter ended December 31, 2000, net sales decreased 0.6% to $25.2 million from $25.3 million in the corresponding quarter in fiscal 2000. Net income decreased 37.6% to $0.3 million, or $0.06 per share (diluted), in the quarter ended December 31, 2000 from $0.5 million or $0.09 per share (diluted) in the same quarter in fiscal 2000. TURBINE COMPONENT SERVICES AND REPAIR GROUP ("REPAIR GROUP") SIFCO's Repair Group had net sales of $16.2 million in the first quarter of 2001, which was down 8.6% from $17.7 million in the corresponding quarter in fiscal 2000. Operating income for the first quarter 2001 increased to $1.3 million from $1.1 million in the same 2000 period. Repair volumes for the older engine types continued the decline that we experienced during 2000. As we mentioned during 2000, there has been a decline in the demand for repairs to older model JT8D engines which we expected to continue into 2001 due to the continued retirement and reduced utilization of older model aircraft such as the 737-100/200, the 727, and the DC-9. In addition, there was a reduction in repair volume related to the CFM-56 engines due principally to the encroachment of the engine OEM's into the marketplace. During the first quarter of 2001, reduced sales volumes for repair services adversely impacted the Repair Group's operating income. This negative impact was offset by the positive impact, to the Repair Group's non-U.S. operation's net sales and margins, of a weaker euro during the first quarter of 2001 when compared to the same 2000 period. Considerable cost saving efforts were put into place in the first quarter of 2001 when compared to the same period in 2000. For example, overall employment at repair facilities has been reduced by 15% in the period December 31, 1999 to December 31, 2000. AEROSPACE COMPONENT MANUFACTURING GROUP ("ACM GROUP") Net sales in the first quarter of 2001 increased 18.0% to $9.0 million, compared with $7.6 million in the same 2000 period. The sales increase is net of a reduction in selling price of $0.6 million caused by a decline in the market price of a key raw material that was passed on to customers. The increase in sales is attributable to an increase in the number of AE series new generation jet engines built by Rolls-Royce for business and regional jets, as well as transport and surveillance aircraft. First quarter fiscal 2001 sales also benefited from an increase in components sold to large aircraft manufacturers. 9 Selling, general and administrative expenses were $0.5 million in both the first quarters of fiscal 2001 and 2000. The ACM Group's operating income in the first quarter of 2001 was $0.5 million, or 5.1% of net sales in 2001, compared with $0.2 million, or 2.0% of net sales in the same 2000 period. The operating income percentage of net sales benefited in the first quarter of 2001 from the decline in the market price of a key raw material. Operating income in the first quarter of fiscal 2001 benefited from a favorable product mix and the overall increase in sales. OTHER/GENERAL Other expense, net increased by $0.5 million for the first quarter of 2001 when compared to the same 2000 period. The sudden strengthening of the euro at the end of the first quarter of 2001, resulted in a net transaction loss of $0.6 million for the quarter as compared to $0.1 million in the same 2000 period. The Company's backlog as of December 31, 2000 and September 30, 2000 was $44.6 million and $42.6 million, respectively. At December 31, 2000, approximately 2.8% of the backlog is on hold and 8.2% is scheduled for delivery beyond the next twelve months. B. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased to $7.8 million from $ 4.7 million at September 30, 2000. A significant portion of the Company's cash consists of undistributed earnings of non-U.S. subsidiaries. Historically, income taxes have not been provided on undistributed earnings of non-U.S. subsidiaries. The Company recorded a U.S. income tax provision applicable to all non-U.S. income that was earned during the quarter ended December 31, 2000. Cash flow activity for the first quarter of fiscal 2001 is presented in the Consolidated Condensed Statements of Cash Flows. During the three months ended December 31, 2000, the Company generated $1.0 million from its operating activities. Net income plus non-cash charges generated $1.4 million, while changes in working capital required $0.4 million. A decrease in both accounts receivable and inventories generated $2.5 million, while a decrease in accounts payable required $ 2.7 million. The reduction in accounts receivable and inventories is primarily attributable to the Company's Turbine Component Services and Repair Group's reduced sales levels. The decrease in accounts payable is attributable to lower raw material purchases at the end of the quarter in anticipation of the Company's Aerospace Component Manufacturing Group's holiday shutdown, as well as the Repair Group's overall lower sales levels. Working capital was $32.5 million at December 31, 2000, compared to $28.7 million at September 31, 2000. The current ratio for the same periods was 3.1 and 2.6, respectively. Capital expenditures were $0.8 million in the first quarter of fiscal 2001, compared to $1.3 million in the first quarter of fiscal 2000. The Company anticipates making $4.0 million of capital expenditures during fiscal 2001. These capital expenditures relate primarily to new equipment and the upgrade of existing equipment. The Company's long-term debt as a percentage of equity at December 31, 2000 was 30.7%, compared to 26.3% at September 30, 2000. As of December 31, 2000, the Company had $3.2 million outstanding against its $6.0 million revolving credit agreement, which expires March 31, 2002. The Company believes that the funds available under its credit agreements and anticipated funds generated from its operations will be adequate to meet its liquidity through the foreseeable future. C. RECENTLY ISSUED ACCOUNTING STANDARDS Effective October 1, 2000, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. The standard requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income, based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. The adoption of SFAS No. 133 did not have a material effect on the Company's consolidated results of operations, financial position or cash flows. 10 D. EFFECTS OF FOREIGN CURRENCY AND INFLATION The Company generates a substantial portion of its revenues in international markets, which subjects its operations to the exposure of currency exchange fluctuations. The effects of foreign currency on the operating results of the Company were discussed previously. The Company believes that inflation has not materially affected its results of operations in the first quarter of fiscal 2001 and 2000 and does not expect inflation to be a significant factor for the balance of fiscal 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates and in foreign currency exchange rates as part of its normal operations. During the first quarter of fiscal 2001, the Company suspended its use of foreign currency exchange contracts while it evaluates its foreign currency risk and the effectiveness of using similar hedging activities in the future to mitigate such risk. There have been no material changes in the Company's market risk during the three months ended December 31, 2000. For additional information refer to Item 7A of Form 10-K for the year ended September 30, 2000. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- (10) Material Contracts (g) Change in Control Severance Agreement between the Company and Frank Cappello dated September 28, 2000 (h) Change in Control Severance Agreement between the Company and Hudson Smith dated September 28, 2000 (i) Change in Control Severance Agreement between the Company and Remigijus Belzinskas dated September 28, 2000 (j) Change in Control Agreement between the Company and Frank Cappello dated November 9, 2000 The Company has not entered into a Change in Control Severance Agreement with Jeffrey P. Gotschall. (b) Reports on Form 8-K ------------------- The Company did not file a Current Report on Form 8-K in the first quarter of fiscal 2001. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. SIFCO Industries, Inc. and Subsidiaries (Registrant) Date February 19, 2001 /s/ Jeffrey P. Gotschall ----------------- --------------------------- Jeffrey P. Gotschall President and Chief Executive Officer Date February 19, 2001 /s/ Frank A. Cappello ----------------- --------------------------- Frank A. Cappello Vice President - Finance (Principal Accounting Officer) EX-10.G 2 l86627aex10-g.txt EXHIBIT 10.G 1 EXHIBIT 10(g) SIFCO INDUSTRIES, INC. CHANGE IN CONTROL SEVERANCE AGREEMENT THIS AGREEMENT is made between SIFCO Industries, Inc. (the "Company"), and Frank Cappello (the "Executive"), dated as of the 28 day of September, 2000. 1. PURPOSE OF THIS AGREEMENT. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined in Section 2(b)) of the Company, and the uncertainties and risks that a Change in Control would pose for the Executive. To this end, the Board desires to encourage the Executive's full attention and dedication to the Company, currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other similar corporations. 2. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Beneficiary" means the person or entity designated by the Executive (on Exhibit B hereto) to receive payment of any benefits hereunder that are or may be payable after the Executive's death. The Executive may change his or her designation of Beneficiary by filing a revised Exhibit B with the Company prior to his or her death. (b) "Cause" means any of the following: (i) the Executive's engagement in unlawful acts intended to result in substantial personal enrichment to the Executive at the Company's expense; (ii) the Executive's engagement in a material breach of his or her responsibilities to the Company that results in a material injury to the Company other than any such breach resulting from the Executive's incapacity due to illness or injury or in connection with an actual or anticipated termination of employment with the Company by the Executive for Good Reason; or (iii) an act or acts by the Executive which have been found in an applicable court to constitute a felony. (c) "Change in Control" means any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange 2 Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding common shares of the Company other than those held by the Voting Trust (the "Outstanding Company Common Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors other than that represented by shares held by the Voting Trust (the "Outstanding Company Voting Securities"); but for purposes of this subsection, (i) the following acquisitions of voting securities shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2; or (ii) Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; but any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding from the Incumbent Board, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50%, respectively, of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as 3 a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Disability" means an illness or injury which, in the opinion of the Board, renders the Executive unable or incompetent to perform the job responsibilities which the Executive held or the job duties to which the Executive was assigned at the time such illness or injury was incurred, on a full-time basis for at least six (6) consecutive months. (f) "Good Reason" means the occurrence of only one or more of the following events provided that the Executive specifically agrees in writing that such event shall constitute Good Reason: (i) there is a change in the Executive's status or position with the Company that, in the Executive's reasonable judgment, represents an adverse change from his or her status or position immediately before the Change in Control, including a change in the principal place of the Executive's employment that does not conform with the Company's present policies for executive relocation, but excluding required travel to an extent substantially consistent with the Executive's business travel obligations immediately before the Change in Control; (ii) the Executive is assigned any duties or responsibilities that, in the Executive's reasonable judgment, are inconsistent with the Executive's status or position immediately before the Change in Control; 4 (iii) the Executive is subject to a layoff by the Company or the Executive's employment with the Company is involuntarily terminated other than for Cause by the Company or due to the Executive's Disability, death or retirement; (iv) there is a reduction by the Company in the Executive's total compensation as in effect at the time of the Change in Control (i.e., the Executive's base salary plus the most recent award that the Executive earned under the Company's Incentive Compensation Plan) or as the same may be increased from time to time; (v) the Company fails to continue in effect any compensation plan, employee benefit plan, or other plan, program or policy of the Company that is intended to materially benefit the Company's employees (each a "Plan"), in which the Executive was participating at the time of the Change in Control, other than as a result of the normal expiration of such Plan in accordance with its terms in effect at the time of the Change in Control; or (vi) the Company takes any action or fails to take any action that would: (A) adversely affect the Executive's continued participation in any Plan on at least as favorable a basis as was the case at the time of the Change in Control; (B) materially reduce the Executive's benefits in the future under any Plan; or (C) deprive the Executive of any material benefits that the Executive enjoyed at the time of the Change in Control; except to the extent that such action or inaction by the Company is required by the terms of the Plan as in effect immediately before the Change in Control or is necessary to comply with the applicable law, and except to the extent that the Company provides the Executive with substantially equivalent benefits; (vii) there is a material violation by the Company of any agreement with the Executive; or (viii) without the Executive's consent, the Company fails to pay the Executive any portion of his or her current or deferred compensation within thirty (30) days after the Executive provides written notification to the Company that payment is past due. (g) A "Qualifying Termination" is deemed to have occurred for purposes of this Agreement if there is a Change in Control and, within [two (2)] years after the Change in 5 Control, the Executive's employment with the Company is either involuntarily terminated by the Company without Cause or the Executive terminates employment with the Company for Good Reason (h) "Voting Trust" means that certain voting trust entered into by agreement dated as of February 1, 1997, into which Common Shares of the Company have been deposited and with respect to which, as of November 30, 1999, Janice Carlson and Charles H. Smith, III are trustees. 3. NOTICE OF CHANGE IN CONTROL. The Company shall provide the Executive with written notice of the occurrence of a Change in Control in accordance with Section 13(b) of this Agreement within two (2) weeks after such Change in Control. 4. NOTICE OF TERMINATION. (a) Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (b) For purposes of this Agreement, "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date (within thirty (30) days after that date) specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company, other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the disability effective date, as the case may be. 5. BENEFITS UPON TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. In the event of a Qualifying Termination, the Executive shall receive the benefits described in Exhibit A attached hereto. 6. DEATH. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement. 6 7. DISABILITY. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive. 8. RETIREMENT. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's retirement from the Company at or after age 65, this Agreement shall terminate without further obligations to the Executive. 9. CAUSE; OTHER THAN FOR GOOD REASON. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment shall be terminated by the Company for Cause or if the Executive's employment with the Company is terminated by the Executive for other than Good Reason, this Agreement shall terminate without further obligations to the Executive. 10. OTHER EMPLOYMENT; LEGAL REPRESENTATION. Any severance benefits described in Exhibit A hereto to which the Executive is entitled will not be reduced by any remuneration the Executive may receive from employment with another employer following a Qualifying Termination. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement. 11. NO TAX GROSS-UP PAYMENT. Notwithstanding anything to the contrary in this Agreement, if any portion of the compensation under the Agreement, or under any other agreement with or plan of the Company (in the aggregate "Total Payments"), would constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code (the "Code"), then the payments to be made to the Executive under the Agreement shall be subject to the tax imposed by Section 4999 of the Code or any successor provision thereto unless the Company elects to reduce the payments to be made to the Executive under the Agreement because such reduction will provide a more favorable after-tax result for the Executive with respect to the excise taxes described in this Section. The calculation of such potential excise tax liability, as well as the method in which any compensation reduction is applied, shall be conducted and determined by the Company's independent accountants, whose determinations shall be binding on all parties. 12. SUCCESSORS. (a) This Agreement is personal to the Executive and shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 7 (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: Frank Cappello 34230 Rosewood Trail Willoughby Hills, OH 44094 IF TO THE COMPANY: SIFCO INDUSTRIES, INC. 970 East 64th Street Cleveland, Ohio 44103 Attention: Jeff Gotschall or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communication shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state, local and/or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 8 (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 2(f) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above. SIFCO INDUSTRIES, INC. EXECUTIVE By: /s/Jeffrey P. Gotschall /s/Frank Cappello ----------------------------- ---------------------------------- Title: President and CEO Signature Frank Cappello ----------------------------------- Printed Name 9 EXHIBIT A TO CHANGE IN CONTROL SEVERANCE AGREEMENT BENEFITS a. SEVERANCE. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, the Company shall pay to the Executive or the Executive's Beneficiary in a lump sum in cash within thirty (30) days after the Executive's Date of Termination an amount equal to: (i) $140,000 Dollars; (ii) the excess of (A) the actuarial equivalent of the benefit under any qualified defined benefit pension plan the Company may have (the "Retirement Plan"), and any supplemental retirement plan in which the Executive participates (the "SERP") which the Executive would receive if the Executive's employment continued for two (2) years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, over (B) the actuarial equivalent of the Executive's actual benefit paid or payable, if any, under the Retirement Plan and the SERP as of the Date of Termination. b. WELFARE BENEFITS. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, for twenty-four ( 24 ) months after the Executive's Date of Termination, or such longer period as may be provided by the terms of the applicable welfare benefit plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the Company's welfare benefit plans, programs, practices and policies if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive welfare benefits under another employer provided plan, the Company shall discontinue such benefits as of such eligibility date. In lieu of providing such benefits, the Company may elect, in its sole discretion, without the consent of the Executive, to pay in a single sum to the Executive an amount equal to the cash equivalent present value of the premiums to purchase such continued insurance coverage within thirty (30) days after the Executive's Date of Termination. (c) ENHANCED RIGHTS REGARDING STOCK AWARDS. All long-term stock incentive awards held by the Executive (whether in the form of options, phantom 10 units, performance shares, restricted shares or other awards of whatever nature), shall fully vest and all restrictions and conditions shall be removed on the Date of Termination. (d) RETIREMENT BENEFITS. All Retirement Plan, Thrift Plan and SERP benefits of the Executive shall fully vest if they are not otherwise fully vested on the Date of Termination. 11 EXHIBIT B TO CHANGE IN CONTROL SEVERANCE AGREEMENT DESIGNATION OF BENEFICIARY Executive hereby designates the following individual to receive payment of any benefits under this Agreement that may be due or payable after the Executive's death: Domenica Cappello - -------------------------------- Name of Beneficiary Spouse - -------------------------------- Relationship to Executive /s/Frank Cappello - -------------------------------- Signature of Executive 10/25/00 - -------------------------------- Date EX-10.H 3 l86627aex10-h.txt EXHIBIT 10.H 1 EXHIBIT 10(h) SIFCO INDUSTRIES, INC. CHANGE IN CONTROL SEVERANCE AGREEMENT THIS AGREEMENT is made between SIFCO Industries, Inc. (the "Company"), and Hudson Smith (the "Executive"), dated as of the 28 day of September, 2000. 1. PURPOSE OF THIS AGREEMENT. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined in Section 2(b)) of the Company, and the uncertainties and risks that a Change in Control would pose for the Executive. To this end, the Board desires to encourage the Executive's full attention and dedication to the Company, currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other similar corporations. 2. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Beneficiary" means the person or entity designated by the Executive (on Exhibit B hereto) to receive payment of any benefits hereunder that are or may be payable after the Executive's death. The Executive may change his or her designation of Beneficiary by filing a revised Exhibit B with the Company prior to his or her death. (b) "Cause" means any of the following: (i) the Executive's engagement in unlawful acts intended to result in substantial personal enrichment to the Executive at the Company's expense; (ii) the Executive's engagement in a material breach of his or her responsibilities to the Company that results in a material injury to the Company other than any such breach resulting from the Executive's incapacity due to illness or injury or in connection with an actual or anticipated termination of employment with the Company by the Executive for Good Reason; or (iii) an act or acts by the Executive which have been found in an applicable court to constitute a felony. 2 (c) "Change in Control" means any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding common shares of the Company other than those held by the Voting Trust (the "Outstanding Company Common Shares") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors other than that represented by shares held by the Voting Trust (the "Outstanding Company Voting Securities"); but for purposes of this subsection (i), the following acquisitions of voting securities shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2; or (ii) Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; but any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding from the Incumbent Board, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50%, respectively, of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as 2 3 a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Disability" means an illness or injury which, in the opinion of the Board, renders the Executive unable or incompetent to perform the job responsibilities which the Executive held or the job duties to which the Executive was assigned at the time such illness or injury was incurred, on a full-time basis for at least six (6) consecutive months. (f) "Good Reason" means the occurrence of only one or more of the following events provided that the Executive specifically agrees in writing that such event shall constitute Good Reason: (i) there is a change in the Executive's status or position with the Company that, in the Executive's reasonable judgment, represents an adverse change from his or her status or position immediately before the Change in Control, including a change in the principal place of the Executive's employment that does not conform with the Company's present policies for executive relocation, but excluding required travel to an extent substantially consistent with the Executive's business travel obligations immediately before the Change in Control; (ii) the Executive is assigned any duties or responsibilities that, in the Executive's reasonable judgment, are inconsistent with the Executive's status or position immediately before the Change in Control; 3 4 (iii) the Executive is subject to a layoff by the Company or the Executive's employment with the Company is involuntarily terminated other than for Cause by the Company or due to the Executive's Disability, death or retirement; (iv) there is a reduction by the Company in the Executive's total compensation as in effect at the time of the Change in Control (i.e., the Executive's base salary plus the most recent award that the Executive earned under the Company's Incentive Compensation Plan) or as the same may be increased from time to time; (v) the Company fails to continue in effect any compensation plan, employee benefit plan, or other plan, program or policy of the Company that is intended to materially benefit the Company's employees (each a "Plan"), in which the Executive was participating at the time of the Change in Control, other than as a result of the normal expiration of such Plan in accordance with its terms in effect at the time of the Change in Control; or (vi) the Company takes any action or fails to take any action that would: (A) adversely affect the Executive's continued participation in any Plan on at least as favorable a basis as was the case at the time of the Change in Control; (B) materially reduce the Executive's benefits in the future under any Plan; or (C) deprive the Executive of any material benefits that the Executive enjoyed at the time of the Change in Control; except to the extent that such action or inaction by the Company is required by the terms of the Plan as in effect immediately before the Change in Control or is necessary to comply with the applicable law, and except to the extent that the Company provides the Executive with substantially equivalent benefits; (vii) there is a material violation by the Company of any agreement with the Executive; or (viii) without the Executive's consent, the Company fails to pay the Executive any portion of his or her current or deferred compensation within thirty (30) days after the Executive provides written notification to the Company that payment is past due. (g) A "Qualifying Termination" is deemed to have occurred for purposes of this Agreement if there is a Change in Control and, within [two (2)] years after the Change in 4 5 Control, the Executive's employment with the Company is either involuntarily terminated by the Company without Cause or the Executive terminates employment with the Company for Good Reason (h) "Voting Trust" means that certain voting trust entered into by agreement dated as of February 1, 1997, into which Common Shares of the Company have been deposited and with respect to which, as of November 30, 1999, Janice Carlson and Charles H. Smith, III are trustees. 3. NOTICE OF CHANGE IN CONTROL. The Company shall provide the Executive with written notice of the occurrence of a Change in Control in accordance with Section 13(b) of this Agreement within two (2) weeks after such Change in Control. 4. NOTICE OF TERMINATION. (a) Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (b) For purposes of this Agreement, "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date (within thirty (30) days after that date) specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company, other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the disability effective date, as the case may be. 5. BENEFITS UPON TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. In the event of a Qualifying Termination, the Executive shall receive the benefits described in Exhibit A attached hereto. 6. DEATH. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement. 5 6 7. DISABILITY. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive. 8. RETIREMENT. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's retirement from the Company at or after age 65, this Agreement shall terminate without further obligations to the Executive. 9. CAUSE; OTHER THAN FOR GOOD REASON. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment shall be terminated by the Company for Cause or if the Executive's employment with the Company is terminated by the Executive for other than Good Reason, this Agreement shall terminate without further obligations to the Executive. 10. OTHER EMPLOYMENT; LEGAL REPRESENTATION. Any severance benefits described in Exhibit A hereto to which the Executive is entitled will not be reduced by any remuneration the Executive may receive from employment with another employer following a Qualifying Termination. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement. 11. NO TAX GROSS-UP PAYMENT. Notwithstanding anything to the contrary in this Agreement, if any portion of the compensation under the Agreement, or under any other agreement with or plan of the Company (in the aggregate "Total Payments"), would constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code (the "Code"), then the payments to be made to the Executive under the Agreement shall be subject to the tax imposed by Section 4999 of the Code or any successor provision thereto unless the Company elects to reduce the payments to be made to the Executive under the Agreement because such reduction will provide a more favorable after-tax result for the Executive with respect to the excise taxes described in this Section. The calculation of such potential excise tax liability, as well as the method in which any compensation reduction is applied, shall be conducted and determined by the Company's independent accountants, whose determinations shall be binding on all parties. 12. SUCCESSORS. (a) This Agreement is personal to the Executive and shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 6 7 (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: Hudson Smith 22500 McCauley Rd. Shaker Heights, OH 44122 IF TO THE COMPANY: SIFCO INDUSTRIES, INC. 970 East 64th Street Cleveland, Ohio 44103 Attention: Jeff Gotschall or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communication shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state, local and/or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 7 8 (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 2(f) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above. SIFCO INDUSTRIES, INC. EXECUTIVE By: /s/Jeffrey P. Gotschall /s/Hudson Smith -------------------------------- -------------------------------- Signature Title: President and CEO Hudson Smith -------------------------------- Printed Name 8 9 EXHIBIT A TO CHANGE IN CONTROL SEVERANCE AGREEMENT BENEFITS a. SEVERANCE. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, the Company shall pay to the Executive or the Executive's Beneficiary in a lump sum in cash within thirty (30) days after the Executive's Date of Termination an amount equal to: (i) $140,000 Dollars; (ii) the excess of (A) the actuarial equivalent of the benefit under any qualified defined benefit pension plan the Company may have (the "Retirement Plan"), and any supplemental retirement plan in which the Executive participates (the "SERP") which the Executive would receive if the Executive's employment continued for two (2) years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, over (B) the actuarial equivalent of the Executive's actual benefit paid or payable, if any, under the Retirement Plan and the SERP as of the Date of Termination. b. WELFARE BENEFITS. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, for twenty-four ( 24 ) months after the Executive's Date of Termination, or such longer period as may be provided by the terms of the applicable welfare benefit plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the Company's welfare benefit plans, programs, practices and policies if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive welfare benefits under another employer-provided plan, the Company shall discontinue such benefits as of such eligibility date. In lieu of providing such benefits, the Company may elect, in its sole discretion, without the consent of the Executive, to pay in a single sum to the Executive an amount equal to the cash equivalent present value of the premiums to purchase such continued insurance coverage within thirty (30) days after the Executive's Date of Termination. (c) ENHANCED RIGHTS REGARDING STOCK AWARDS. All long-term stock incentive awards held by the Executive (whether in the form of options, phantom 9 10 units, performance shares, restricted shares or other awards of whatever nature), shall fully vest and all restrictions and conditions shall be removed on the Date of Termination. (d) RETIREMENT BENEFITS. All Retirement Plan, Thrift Plan and SERP benefits of the Executive shall fully vest if they are not otherwise fully vested on the Date of Termination. 10 11 EXHIBIT B TO CHANGE IN CONTROL SEVERANCE AGREEMENT DESIGNATION OF BENEFICIARY Executive hereby designates the following individual to receive payment of any benefits under this Agreement that may be due or payable after the Executive's death: Deborah Smith ---------------------------------- Name of Beneficiary Spouse ---------------------------------- Relationship to Executive /s/ Hudson Smith ---------------------------------- Signature of Executive ---------------------------------- Date 11 EX-10.I 4 l86627aex10-i.txt EXHIBIT 10.I 1 EXHIBIT 10(i) SIFCO INDUSTRIES, INC. CHANGE IN CONTROL SEVERANCE AGREEMENT THIS AGREEMENT is made between SIFCO Industries, Inc. (the "Company"), and Remigijus Belzinskas (the "Executive"), dated as of the 28 day of September, 2000. 1. PURPOSE OF THIS AGREEMENT. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined in Section 2(b)) of the Company, and the uncertainties and risks that a Change in Control would pose for the Executive. To this end, the Board desires to encourage the Executive's full attention and dedication to the Company, currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other similar corporations. 2. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Beneficiary" means the person or entity designated by the Executive (on Exhibit B hereto) to receive payment of any benefits hereunder that are or may be payable after the Executive's death. The Executive may change his or her designation of Beneficiary by filing a revised Exhibit B with the Company prior to his or her death. (b) "Cause" means any of the following: (i) the Executive's engagement in unlawful acts intended to result in substantial personal enrichment to the Executive at the Company's expense; (ii) the Executive's engagement in a material breach of his or her responsibilities to the Company that results in a material injury to the Company other than any such breach resulting from the Executive's incapacity due to illness or injury or in connection with an actual or anticipated termination of employment with the Company by the Executive for Good Reason; or (iii) an act or acts by the Executive which have been found in an applicable court to constitute a felony. (c) "Change in Control" means any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange 2 Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding common shares of the Company other than those held by the Voting Trust (the "Outstanding Company Common Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors other than that represented by shares held by the Voting Trust (the "Outstanding Company Voting Securities"); but for purposes of this subsection (i), the following acquisitions of voting securities shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2; or (ii) Individuals who, as of the date of this Agreement, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; but any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding from the Incumbent Board, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company: Voting Securities immediately prior to such Business Combination beneficially own; directly or indirectly; more than 50%, respectively, of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in-the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common shares of 3 the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Disability" means an illness or injury which, in the opinion of the Board, renders the Executive unable or incompetent to perform the job responsibilities which the Executive held or the job duties to which the Executive was assigned at the time such illness or injury was incurred, on a full-time basis for at least six (6) consecutive months. (f) "Good Reason" means the occurrence of only one or more of the following events provided that the Executive specifically agrees in writing that such event shall constitute Good Reason: (i) there is a change in the Executive's status or position with the Company that, in the Executive's reasonable judgment, represents an adverse change from his or her status or position immediately before the Change in Control, including a change in the principal place of the Executive's employment that does not conform with the Company's present policies for executive relocation, but excluding required travel to an extent substantially consistent with the Executive's business travel obligations immediately before the Change in Control; (ii) the Executive is assigned, any duties or responsibilities that, in the Executive's reasonable judgment, are inconsistent with the Executive's status or position immediately before the Change in Control; 4 (iii) the Executive is subject to a layoff by the Company or the Executive' s employment with the Company is involuntarily terminated other than for Cause by the Company or due to the Executive's Disability, death or retirement; (iv) there is a reduction by the Company in the Executive's total compensation as in effect at the time of the Change in Control (i.e., the Executive's base salary plus the most recent award that the Executive earned under the Company's Incentive Compensation Plan) or as the same may be increased from time to time; (v) the Company fails to continue in effect any compensation plan, employee benefit plan, or other plan, program or policy of the Company that is intended to materially benefit the Company's employees (each a "Plan"), in which the Executive was participating at the time of the Change in Control, other than as a result of the normal expiration of such Plan in accordance with its terms in effect at the time of the Change in Control; or (vi) the Company takes any action or fails to take any action that would: (A) adversely affect the Executive's continued participation in any Plan on at least as favorable a basis as was the case at the time of the Change in Control; (B) materially reduce the Executive's benefits in the future under any Plan; or (C) deprive the Executive of any material benefits that the Executive enjoyed at the time of the Change in Control; except to the extent that such action or inaction by the Company is required by the terms of the Plan as in effect immediately before the Change in Control or is necessary to comply with the applicable law, and except to the extent that the Company provides the Executive with substantially equivalent benefits; (vii) there is a material violation by the Company of any agreement with the Executive; or: (viii) without the Executive's consent; the Company fails to pay the Executive any portion of his or her current or deferred compensation within thirty (30) days after the Executive provides written notification to the Company that payment is past due. (g) A "Qualifying Termination" is deemed to have occurred for purposes of this Agreement if there is a Change in Control and, within [two (2)] years after the Change in 5 Control, the Executive's employment with the Company is either involuntarily terminated by the Company without Cause or the Executive terminates employment with the Company for Good Reason (h) "Voting Trust" means that certain voting trust entered into by agreement dated as of February 1, 1997, into which Common Shares of the Company have been deposited and with respect to which, as of November 30, 1999, Janice Carlson and Charles H. Smith, III are trustees. 3. NOTICE OF CHANGE IN CONTROL. The Company shall provide the Executive with written notice of the occurrence of a Change in Control in accordance with Section 13(b) of this Agreement within two (2) weeks after such Change in Control. 4. NOTICE OF TERMINATION. (a) Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (b) For purposes of this Agreement, "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date (within thirty (30) days after that date) specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company, other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the disability effective date, as the case may be. 5. BENEFITS UPON TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. In the event of a Qualifying Termination, the Executive shall receive the benefits described in Exhibit A attached hereto. 6. DEATH. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement. 6 7. DISABILITY. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive. 8. RETIREMENT. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's retirement from the Company at or after age 65, this Agreement shall terminate without further obligations to the Executive. 9. CAUSE; OTHER THAN FOR GOOD REASON. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment shall be terminated by the Company for Cause or if the Executive's employment with the Company is terminated by the Executive for other than Good Reason, this Agreement shall terminate without further obligations to the Executive. 10. OTHER EMPLOYMENT; LEGAL REPRESENTATION. Any severance benefits described in Exhibit A hereto to which the Executive is entitled will not be reduced by any remuneration the Executive may receive from employment with another employer following a Qualifying Termination. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement. 11. NO TAX GROSS-UP PAYMENT. Notwithstanding anything to the contrary in this Agreement, if any portion of the compensation under the Agreement, or under any other agreement with or plan of the Company (in the aggregate "Total Payments"), would constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code (the "Code"), then the payments to be made to the Executive under the Agreement shall be subject to the tax imposed by Section 4999 of the Code or any successor provision thereto unless the Company elects to reduce the payments to be made to the Executive under the Agreement because such reduction will provide a more favorable after-tax result for the Executive with respect to the excise taxes described in this Section. The calculation of such potential excise tax liability, as well as the method in which any compensation reduction is applied, shall be conducted and determined by the Company's independent accountants, whose determinations shall be binding on all parties. 12. SUCCESSORS. (a) This Agreement is personal to the Executive arid shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon. the Company and its successors and assigns. 7 (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: Remigijus Belzinskas 312 Claymore Boulevard Richmond Hts., OH 44143 IF TO THE COMPANY: SIFCO INDUSTRIES, INC. 970 East 64th Street Cleveland, Ohio 44103 Attention: Jeff Gotschall or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communication shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state, local and/or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 8 (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 2(f) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above. SIFCO INDUSTRIES, INC. EXECUTIVE By: /s/ Jeffrey P. Gotschall /s/Remigijus H. Belzinskas ------------------------ -------------------------- Title: President and CEO Remigijus H. Belzinskas -------------------------- Printed Name 9 EXHIBIT A TO CHANGE IN CONTROL SEVERANCE AGREEMENT BENEFITS a. SEVERANCE. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, the Company shall pay to the Executive or the Executive's Beneficiary in a lump sum in cash within thirty (30) days after the Executive's Date of Termination an amount equal to: (i) $140,000 Dollars; (ii) the excess of (A) the actuarial equivalent of the benefit under any qualified defined benefit pension plan the Company may have (the "Retirement Plan"), and any supplemental retirement plan in which the Executive participates (the "SERP") which the Executive would receive if the Executive's employment continued for one (1) years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, over (B) the actuarial equivalent of the Executive's actual benefit paid or payable, if any, under the Retirement Plan and the SERP as of the Date of Termination. b. WELFARE BENEFITS. In the event the Executive becomes eligible for benefits under Section 5 of the Agreement, for twelve ( 12 ) months after the Executive's Date of Termination, or such longer period as may be provided by the terms of the applicable welfare benefit plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the Company's welfare benefit plans, programs, practices and policies if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive welfare benefits under another employer provided plan, the Company shall discontinue such benefits as of such eligibility date. In lieu of providing such benefits, the Company may elect, in its sole discretion, without the consent of the Executive, to pay in a single sum to the Executive an amount equal to the cash equivalent present value of the premiums to purchase such continued insurance coverage within thirty (30) days after the Executive's Date of Termination. (c) ENHANCED RIGHTS REGARDING STOCK AWARDS. All long-term stock incentive awards held by the Executive (whether in the -form of options, phantom units, performance shares, restricted shares or other awards of whatever nature), shall fully vest and all restrictions and conditions shall be removed on the Date of Termination. (d) RETIREMENT BENEFITS. All Retirement Plan, Thrift Plan and SERP benefits of the Executive shall fully vest if they are not otherwise fully vested on the Date of Termination. 10 EXHIBIT B TO CHANGE IN CONTROL SEVERANCE AGREEMENT DESIGNATION OF BENEFICIARY Executive hereby designates the following individual to receive payment of any benefits under this Agreement that may be due or payable after the Executive's death: Danute Belzinskas - ----------------- Name of Beneficiary Spouse - ------ Relationship to Executive /s/ Remigijus Belzinskas - ------------------------ Signature of Executive November 15, 2000 - ----------------- Date EX-10.J 5 l86627aex10-j.txt EXHIBIT 10.J 1 EXHIBIT 10(j) SIFCO INDUSTRIES, INC. CHANGE IN CONTROL AGREEMENT THIS AGREEMENT is made between SIFCO Industries, Inc. (the "Company"), and Frank Cappello (the "Executive"), dated as of the 9th day of November, 2000. 1. PURPOSE OF THIS AGREEMENT. The Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change in Control (as defined in Section 2(b)) of the Company, and the uncertainties and risks that a Change in Control would pose for the Executive. To this end, the Board desires to encourage the Executive's full attention and dedication to the Company, currently and in the event of any threatened or pending Change in Control, and to provide the Executive with compensation and benefits arrangements upon a Change in Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other similar corporations. 2. DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below: (a) "Beneficiary" means the person or entity designated by the Executive (on Exhibit B hereto) to receive payment of any benefits hereunder that are or may be payable after the Executive's death. The Executive may change his or her designation of Beneficiary by filing a revised Exhibit B with the Company prior to his or her death. (b) "Change in Control" means any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding common shares of the Company other than those held by the Voting Trust (the "Outstanding Company Common Shares") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote. generally in the election of directors other than that represented by shares held by the Voting Trust (the "Outstanding Company Voting Securities"); but for purposes of this subsection (i), the following acquisitions of voting securities shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or 2 (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2; or (ii) Individuals who, as of the date of this Agreement, constitute the Board") cease for any reason to constitute at least a majority of the Board; but any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding from the Incumbent Board, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50%, respectively, of the then-outstanding common shares and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding common shares of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (c) "Disability" means an illness or injury which, in the opinion of the Board, renders the Executive unable or incompetent to perform the job responsibilities which the Executive held or 3 the job duties to which the Executive was assigned at the time such illness or injury was incurred, on a full-time basis for at least six (6) consecutive months. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Voting Trust" means that certain voting trust entered into by agreement dated as of February 1, 1997, into which Common Shares of the Company have been deposited and with respect to which, as of November 30, 1999, Janice Carlson and Charles H. Smith, III are trustees. 3. NOTICE OF CHANGE IN CONTROL. The Company shall provide the Executive with written notice of the occurrence of a Change in Control in accordance with Section 13(b) of this Agreement within two (2) weeks after such Change in Control. 4. BENEFITS UPON CHANGE IN CONTROL. In the event of a Change in Control, provided the Executive has not voluntarily terminated his employment or had his employment terminated involuntarily for cause, prior to a Change, in Control, the Executive shall receive the benefits described in Exhibit A attached hereto. 5. DEATH. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement. 6. DISABILITY. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's Disability, this Agreement shall terminate without further obligations to the Executive. 7. RETIREMENT. Notwithstanding any provision of this Agreement to the contrary, if the Executive's employment is terminated by reason of the Executive's retirement from the Company at or after age 65, this Agreement shall terminate without further obligations to the Executive. 8. NO TAX GROSS-UP PAYMENT. Notwithstanding anything to the contrary in this Agreement, if any portion of the compensation under the Agreement, or under any other agreement with or plan of the Company (in the aggregate "Total Payments"), would constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code (the "Code"), then the payments to be made to the Executive under the Agreement shall be subject to the tax imposed by Section 4999 of the Code or any successor provision thereto unless the Company elects to reduce the payments to be made to the Executive under the Agreement 4 because such reduction will provide a more favorable after-tax result for the Executive with respect to the excise taxes described in this Section. The calculation of such potential excise tax liability, as well as the method in which any compensation reduction is applied, shall be conducted and determined by the Company's independent accountants, whose determinations shall be binding on all parties. 9. SUCCESSORS. (a) This Agreement is personal to the Executive and shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 10. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO THE EXECUTIVE: Frank Cappello 34230 Rosewood Trail Willoughby Hills, OH 44094 IF TO THE COMPANY: SIFCO INDUSTRIES, INC. 970 East 64th Street Cleveland, Ohio 44103 Attention: Jeff Gotschall or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communication shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 5 (d) The Company may withhold from any amounts payable under this Agreement such federal, state, local and/or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 2(f) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above. SIFCO INDUSTRIES, INC. EXECUTIVE By: /s/Jeffrey P. Gotschall /s/Frank Cappello -------------------------- --------------------------- Title: President and CEO Signature Frank Cappello --------------------------- Printed Name 6 EXHIBIT A TO CHANGE IN CONTROL AGREEMENT BENEFITS In the event the Executive becomes eligible for benefits under Section 4 of the Agreement, the Company shall pay to the Executive or the Executive's Beneficiary in a lump sum in cash within thirty (30) days after the date of the Change in Control, an amount equal to $100,000 Dollars less applicable withholdings and taxes. 7 EXHIBIT B TO CHANGE IN CONTROL SEVERANCE AGREEMENT DESIGNATION OF BENEFICIARY Executive hereby designates the following individual to receive payment of any benefits under this Agreement that may be due or payable after the Executive's death: Domenica Cappello - ------------------------- Name of Beneficiary Spouse - ------------------------- Relationship to Executive /s/Frank Cappello - ------------------------- Signature of Exec November 22, 2000 - ------------------------- Date -----END PRIVACY-ENHANCED MESSAGE-----