SIFCO INDUSTRIES, INC. AMENDED AND RESTATED CHANGE IN CONTROL AND SEVERANCE AGREEMENT
Exhibit 10.15
SIFCO INDUSTRIES, INC.
AMENDED AND RESTATED
THIS AMENDED AND RESTATED AGREEMENT (the “Agreement”) is made between SIFCO Industries, Inc.
(the “Company”), and Xxxxx X. Xxxxxx (the “Executive”), dated as of the 27 day of April, 2010.
The Company and the Executive are parties to that certain Change in Control Severance
Agreement dated as of January 31, 2007, as amended by the 409A Amendment to Change in Control
Severance Agreement effective as of December 31, 2008 (as amended, supplemented or otherwise
modified, the “Original CIC Agreement”);
The Company and the Executive have agreed to modify and to amend and restate the Original CIC
Agreement on the terms and conditions contained herein; and
The Supplemental Change in Control Agreement between the Company and the executive dated as of
November 5, 2009 shall remain in full force and effect and not be modified or amended as a result
of this Agreement.
| 1. | PURPOSE OF THIS AGREEMENT/TERM OF AGREEMENT. |
(a) 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(c) below) 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 in the event of his termination of
employment following 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. The Board has further determined that it is appropriate to
provide the Executive with severance pay and certain welfare benefits in the event the
Executive’s employment with the Company is terminated by the Company for reasons other than
Cause (as defined in Section 2(b) below) or by the executive with Good Reason (as defined in
Section 2(f) below) and such termination is not in connection with or as a result of a
Change in Control.
(b) This Agreement and the obligations hereunder shall extend from the date set forth
above and expire on the second anniversary of the closing date of the Change in Control
transaction (the “Expiration Date.”) After the Expiration Date, the parties shall have no
further obligations pursuant to this Agreement.
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| 2. | DEFINITIONS. Whenever used herein, the following terms shall have the meaning 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 designation of Beneficiary by filing a
revised Exhibit B with the Company prior to his 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 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 Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the mean 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) below; 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
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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.
(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:
(i) there is a change in the Executive’s status or position with the Company
that represents an materially adverse change from his or her status or position
immediately before the change in status or position, 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 principal place of employment;
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(ii) the Executive is assigned any duties or responsibilities that are
materially inconsistent with the Executive’s status or position;
(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 reduction (i.e., the Executive’s base salary plus the
most recent award pursuant to the 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, other than as a result of the normal expiration of the Plan; 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.
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For purposes of this Agreement, Good Reason shall not be deemed to be a resignation
for Good Reason unless: (x) Executive has given the Company or its affiliate (as applicable)
at least thirty (30) days’ prior written notice of the date of his resignation for Good
Reason, stating in reasonable detail the facts and circumstances claimed to constitute Good
Reason, and such notice has been given within thirty (30) days of the occurrence of the Good
Reason event, and (y) the Company or its affiliate (as applicable) has not remedied the
events claimed to constitute Good Reason within such thirty-day period after receiving
notice.
(g) A “Qualifying Termination” is deemed to have occurred for purposes of this
Agreement if (i) there is a Change in Control and, on or prior to the second anniversary of
the closing date of the Change in Control transaction, 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, or (ii) the Executive’s termination
of employment by the Company for reasons other than Cause or by the Executive with Good
Reason.
(h) “Voting Trust” means that certain voting trust entered into by agreement dated as
of February 1, 2007, into which Common Shares of the Company have been deposited and with
respect to which, as of January 31, 2010, Xxxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxx, 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
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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 THAT IS A QUALIFYING TERMINATION.
(a) In the event of a Qualifying Termination, the Executive shall receive the benefits
described in Exhibit A attached hereto, provided however that no payments, reimbursements,
or in-kind benefits shall be made unless the Qualifying Termination is a “separation from
service” within the meaning of Section 409(A) of the Code, and the final regulations issued
thereunder (“Section 409(A)”).
(b) If at the time of the Executive’s “separation from service” (as defined in Section
409A) the Executive is a “specified employee” (within the meaning of Section 409A and the
Company’s specified employee identification policy, if any) and if the deferral of
commencement of any payments, reimbursements and/or in-kind benefits otherwise payable
hereunder as a result of such separation from service is necessary in order to prevent any
accelerated or additional tax under Section 409A, then, to the extent one or more exceptions
to Section 409A are inapplicable (including, without limitation, the exception under
Treasury Regulation Section 1.409A-1(b)(9)(iii) relating to separation pay due to an
involuntary separation from service and its requirement that installments must be paid no
later than the last day of the second taxable year following the taxable year in which the
specified employee incurs the involuntary separation from service), then the Company shall
defer the commencement of any such payments, reimbursements, and in-kind benefits (without
any reduction in such payments, reimbursements, or in-kind benefits ultimately paid or
provided to the Executive) until the earlier of: (X) the date of the Executive’s death, (Y)
the earliest date as is permitted under Section 409A; or (Z) the first business day of the
seventh month following the month of the Executive’s separation from service, at which time
all delayed payments, reimbursements, and in-kind benefits otherwise due during the first
six months following the Executive’s separation from service, shall be made, reimbursed, or
provided in a lump sum on the first business day of such seventh month, and any other
payments, reimbursements, or provisions shall be made in the normal course.
(c) All in-kind benefits provided hereunder shall be made or provided in accordance
with the requirements of Section 409A, including, where applicable, the requirement that (i)
the provision of benefits in-kind during a calendar year shall not affect the provision of
in-kind benefits in any other calendar year; (ii) the right to in-kind benefits is not
subject to liquidation or exchange for another benefit; and (iii) each provision of in-kind
benefit shall be one of a series of separation payments (and each shall be construed as a
separate identified payment) for purposes of Section 409A.
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.
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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 hereunder.
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
hereunder.
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 hereunder.
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. The payments to be made to Executive hereunder shall not be
subject to any “gross-up” or other increase should those payments be subject to the tax imposed by
Section 4999 of the Code or any successor provision thereto. The Company may elect, in its sole
discretion, 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. Notwithstanding the foregoing, any such compensation reduction shall be in accordance
with the following order of priority: (i) first, “full Credit Payments” (as defined below) will be
reduced in reverse chronological order such that the payment owed on the latest date following the
occurrence of the event triggering the reduction will be the first payment to be reduced until such
payment is reduced to zero, and then the payment owed on the next latest date following occurrence
of the event triggering the reduction will be the second payment to be reduced until such payment
is equal to zero, and so forth, until all such Full Credit Payments have been reduced to zero, and
(ii) second, “Partial Credit Payments” (as defined below) will be reduced in reverse chronological
order in the same manner as “Full Credit Payments” are reduced. “Full
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Credit Payment” means a payment, distribution or benefit, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or otherwise, that if reduced
in value by one dollar ($1.00) reduces the amount of a “parachute payment” (as defined in Section
280G(b)(2) of the Code, without regard to Section 280G(b)(2)(A)(ii) of the Code) by one dollar
($1.00). “Partial Credit Payment” means a payment, distribution or benefit, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, that
if reduced in value by one dollar ($1.00) reduces the amount of a parachute payment by an amount
that is less than one dollar ($1.00). For clarification purposes only, a “Partial Credit Payment”
would include a stock option as to which vesting is accelerated upon an event that triggers the
reduction, where the in the money value of the option exceeds the value of the option acceleration
that is added to the parachute payment.”
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.
(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:
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| IF TO THE EXECUTIVE: | Xxxxx X. Xxxxxx | |||
| 00000 Xxxxxxxx Xxxxxx | ||||
| Xxxx Xxxx, Xxxx 00000 | ||||
| IF TO THE COMPANY: | SIFCO INDUSTRIES, INC. | |||
| 000 Xxxx 00xx Xxxxxx | ||||
| Xxxxxxxxx, Xxxx 00000 | ||||
| Attention: Xxxxxxx Xxxxxxxx |
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.
(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/ Xxxxxxx X. Xxxxxxxx | /s/ Xxxxx X. Xxxxxx | ||||||
| Title: Chief Executive Officer | Signature | |||||||
| Xxxxx X. Xxxxxx | ||||||||
| Printed Name | ||||||||
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EXHIBIT A
BENEFITS
x. XXXXXXXXX. In the event the Executive becomes eligible for benefits under Section
5 of the Agreement, the Company shall pay to the Executive or, if applicable, to the Executive’s
legal representative, or the Executive’s Beneficiary in a lump sum in cash within thirty (30) days
after the Executive’s Date of Termination (subject to the provision of Section 5 of the Agreement)
an amount equal to the product of (i) One and one-half (1.5) multiplied by (ii) the sum of (x)
Executive’s annual salary plus (y) the average annual incentive compensation earned by the
Executive for the three (3) fiscal years immediately preceding the Executive’s 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.
c. ENHANCED RIGHTS REGARDING STOCK AWARDS. In the event the Executive becomes
eligible for benefits under Section 5 of the Agreement as a result of a Qualifying Termination,
unless previously forfeited, or unless limited pursuant to Section 11 of the Agreement or any
similar provision in any agreement evidencing a long-term stock incentive award (each, a “LTIA
Agreement”), and notwithstanding anything to the contrary in a LTIA Agreement, all long-term stock
incentive awards held by the Executive (whether in the form of options, phantom units, performance
shares, restricted shares or other similar long-term stock incentive awards) shall vest on a pro
rata basis upon the occurrence of the Qualifying Termination. The pro rata vesting will be
determined by applying a fraction, the numerator of which is the number of full months between and
including the first month of the applicable performance period and the month of the Qualifying
Termination, and the denominator of which is the total number of months in the applicable
performance period to the award. In addition, if the Qualifying Termination occurs within two
years after a Change in Control and any portion of any award of Performance Shares to the Executive
under the 2007 Long-Term Incentive Plan of the Company did not vest as of the date of such Change
in Control (the “non-vested Performance Shares”) pursuant to the applicable LTIA Agreement, then,
unless limited pursuant to Section 11
of the Agreement, and subject to the provisions of Section 5(b) of the Agreement, the Company
shall make a lump sum cash payment to the Executive within thirty (30) days after the Qualifying
Termination equal to the product of (i) the cash equivalent of one share of stock as of the date of
the Change in Control and (ii) the number of non-vested Performance Shares.
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EXHIBIT B
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:
| Xxxxx Xxxxxx | ||||
| Name of Beneficiary | ||||
| Spouse | ||||
| Relationship to Executive | ||||
| /s/ Xxxxx X. Xxxxxx | ||||
| Signature of Executive | ||||
| April 27, 2010 |
||||
| Date | ||||
