Exhibit 10.14
SIFCO INDUSTRIES, INC.
SEPARATION PAY AGREEMENT
     THIS AGREEMENT is made between SIFCO Industries, Inc. (the “Company”), and
Frank A. Cappello (the “Executive”), as of this 16th day of December, 2005 (the
“Effective Date”).
     WHEREAS, the Company and the Executive have entered into two Change in
Control Agreements, one of which is dated September 28, 2000, and the other
which is dated November 9, 2000; and
     WHEREAS, both the Board of Directors of the Company (the “Board”) and the
Executive desire to replace the Change in Control Agreement dated November 9,
2000, with a Separation Pay Agreement; and
     WHEREAS, the Board has determined that it is appropriate to provide the
Executive with separation pay and certain welfare benefits in the event that the
Executive’s employment with the Company is terminated for reasons other than for
Cause;
     NOW, THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the Company and the Executive hereby agree, as follows:
     1. Cancellation of the November 9, 2000 Agreement. As of the Effective
Date, the Executive and the Company agree that the Change in Control Agreement
dated November 9, 2000, shall no longer be in effect and that the Executive
shall not be entitled to any benefits thereunder in the future. Both parties
agree, however, that the Change in Control Agreement dated September 28, 2000,
shall remain in effect.
     2. Definitions. Whenever used herein, the following terms shall have the
meanings set forth below:
          (a) The term “Beneficiary” shall mean the person or entity designated
by the Executive (on Exhibit B attached hereto) to receive any benefits to which
he becomes eligible pursuant to Paragraph 3 hereunder prior to his death. The
Executive may change his designation of Beneficiary by filing a revised
Exhibit B with the Company prior to his death, and any such subsequent
designation shall be controlling in all events.
          (b) The term “Cause” shall mean 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 Disability; or    
iii.   an act or acts by the Executive that have been found in an applicable
court to constitute a felony.

          (c) The term “Code” shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
          (d) The term “Disability” shall mean a disability within the meaning
of Section 409A of the Code.
          (e) The term “Retirement” shall mean the retirement of the Executive
under a tax-qualified retirement plan of the Company.
          (f) The terms “termination of employment,” “termination of the
Executive’s employment,” and any such similar phrase shall mean only a
termination of employment that qualifies as a separation from service, as
defined in Section 409A of the Code.
     3. Separation Pay and Welfare Benefits. In the event of the Executive’s
involuntary termination of employment with the Company for reasons other than
Cause, the Company shall pay the Executive the separation pay and provide the
welfare benefits described in Exhibit A attached hereto and in the form and
manner set forth in said Exhibit A.
     4. 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, the Executive’s legal
representative, or Beneficiary.
     5. 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, the Executive’s legal representative, or
Beneficiary.
     6. 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, this Agreement shall terminate without
further obligations to the Executive or the Executive’s legal representative.
     7. No Tax Payments, Reimbursements, or Gross Ups. Notwithstanding anything
to the contrary in this Agreement, the Company shall not reimburse, pay, or
otherwise gross up the Executive for any taxes, penalties, or interest imposed
by Sections 409A and/or 4999 of the Code. If any portion of the compensation
under this Agreement or under any other agreement or arrangement with, or plan
of, the Company (in the aggregate “Total Payments”) would constitute an “excess
parachute payment” under Section 280G of the Code, then the Total Payments,
including payments under this Agreement, shall be reduced to the maximum amount
payable to the Executive that shall not result in the imposition of a tax under
Section 4999 of the Code; provided that such reduction(s) will provide a more
favorable after-tax result for the Executive with respect to the tax imposed by
Section 4999 of the Code. The calculation of such potential 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.
     8. 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. Subject to Sections 4, 5, and 6 hereof, this Agreement shall
inure to the benefit of and be enforceable by the Executive’s legal
representative or Beneficiary, as applicable.
          (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.
     9. 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 A. Cappello
 
      34230 Rosewood Trail
 
      Willoughby Hills, OH 44094
 
       
 
  If to the Company:   SIFCO Industries, Inc.
 
      970 East 64th Street
 
      Cleveland, Ohio 44103
 
      Attention: Jeffrey P. 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.

2

--------------------------------------------------------------------------------

 

          (d) This Agreement is merely a separation pay agreement and is not
intended to be covered by Section 409a of the Code. Therefore, this Agreement
shall be construed in accordance with such intent, to the extent permitted by
law.
          (e) 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.
          (f) 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 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 A. Cappello    
 
               
 
    Jeffrey P. Gotschall       Frank A. Cappello    
 
    President and CEO            

3

--------------------------------------------------------------------------------

 

EXHIBIT A
TO
SEPARATION PAY AGREEMENT
     1. Amount of Separation Pay. In the event the Executive becomes eligible
for separation pay under Section 3 of the Agreement, the Company shall pay to
the Executive, or, if applicable, to the Executive’s legal representative or
Beneficiary, an amount equal to one and one-half (1.5) times the Executive’s
annual base salary and the average of his cash bonus for each of the most recent
three fiscal years prior to his termination, less applicable withholdings and
taxes, provided that calculation of such amount shall be subject to the
provisions of Section 7 of the Agreement. Except as provided below, the payment
of such separation pay under the Agreement shall be made in cash to the
Executive in a lump sum no later than 60 days following his date of termination.
     Notwithstanding any other provision of the Agreement to the contrary, in
the event that the separation pay payable to the Executive under Section 3 of
the Agreement exceeds two times the lesser of: (i) the Executive’s annual
compensation (as defined for purposes of Section 409A of the Code) for the
calendar year preceding the calendar year in which the Executive’s termination
of employment occurs, or (ii) the maximum amount of compensation that may be
taken into account under a qualified plan pursuant to Section 401(a)(17) of the
Code for the year in which the Executive’s termination of employment occurs,
payment of the Executive’s separation pay under the Agreement shall be made in a
lump sum six months after the date on which the Executive’s termination of
employment occurs.
     2. Welfare Benefits. In the event the Executive becomes eligible for
welfare benefits under Section 3 of the Agreement, the Company shall provide the
Executive and/or the Executive’s family with welfare benefits for the 18-month
period following the Executive’s date of termination that are, at least equal,
in the aggregate, to those welfare benefits 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 otherwise provided
benefits as of such eligibility date. Furthermore, the Company shall pay for out
placement services for Executive.

4