<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SIFCO
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[SIFCO INDUSTRIES, INC. LOGO]
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of SIFCO Industries, Inc. will be held
in the National City Bank auditorium (4th floor) of the National City Center
Annex Building, 1900 East 9th Street, Cleveland, Ohio, on January 26, 1999 at
10:30 a.m., for the following purposes:
1. To elect three directors for a three-year term expiring in 2002.
2. To adopt the 1998 Long-Term Incentive Plan.
3. To ratify the designation of Arthur Andersen LLP as the independent
auditors of the Company.
4. To consider and take action upon such other matters as may properly come
before the meeting or any adjournment thereof.
The holders of record of Common Shares at the close of business on December
4, 1998, will be entitled to receive notice of and vote at the meeting.
The Company's Annual Report for the fiscal year ended September 30, 1998
has been previously mailed to Shareholders.
By order of the Board of Directors.
SIFCO Industries, Inc.
Mara L. Babin, Secretary
December 21, 1998
KINDLY FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN
THE ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ARE PRESENT AND VOTE IN PERSON AT THE MEETING, YOUR PROXY
WILL NOT BE USED.
<PAGE> 3
[SIFCO INDUSTRIES, INC. LOGO]
970 EAST 64TH STREET, CLEVELAND, OHIO 44103
December 21, 1998
PROXY STATEMENT
GENERAL INFORMATION
The proxy that accompanies this statement is solicited by the Board of
Directors of SIFCO Industries, Inc. (the "Company") for use at the 1999 Annual
Meeting of the Shareholders of the Company to be held January 26, 1999, or at
any adjournment thereof. This proxy statement was first mailed on December 21,
1998 to shareholders of record on December 4, 1998.
Any shareholder giving a proxy for the meeting may revoke it before it is
exercised by giving a later dated proxy or by giving notice of revocation to the
Company in writing or in the open meeting. However, the mere presence at the
meeting of the shareholder granting a proxy does not revoke the proxy. Unless
revoked by notice as above stated, the shares represented by valid proxies will
be voted on all matters to be acted upon at the meeting. On any matter or
matters with respect to which the proxy contains instructions for voting, such
shares will be voted in accordance with such instructions. Abstentions will be
deemed to be present for the purpose of determining a quorum for the meeting,
but will be deemed not voting on the issues or matters as to which abstention is
applicable. Brokers who have not received voting instructions from beneficial
owners generally may vote in their discretion with respect to the election of
directors and the ratification of the auditors. Broker non-votes will not affect
the outcome of any matter for which the 1999 annual meeting is called.
The cost of solicitation of proxies in the form accompanying this statement
will be borne by the Company. Proxies will be solicited by mail or by telephone
or personal interview with an officer or regular employee of the Company or by
requesting brokers and other custodians, nominees and fiduciaries to forward
proxy soliciting material to the beneficial owners of shares held of record by
such brokers, custodians, nominees or fiduciaries, who will be reimbursed by the
Company for their expenses in so doing.
OUTSTANDING SHARES AND VOTING RIGHTS
The record date for determining shareholders entitled to vote at the 1999
Annual Meeting is December 4, 1998. As of November 30, 1998, the outstanding
voting securities of the Company were 5,171,227 Common Shares. Each Common
Share, exclusive of treasury shares, has one vote. The Company held no Common
Shares in its treasury on the record date. The holders of a majority of the
Common Shares of the Company issued and outstanding, present in person or by
proxy, shall constitute a quorum for the purposes of the Annual Meeting.
Under the General Corporation Law of Ohio, if notice in writing is given by
any shareholder to the President, any Vice President or the Secretary of the
Company (not less than forty-eight hours before the time fixed for holding the
meeting) that the shareholder desires that the voting for election of directors
shall be cumulative, each shareholder will have cumulative voting rights in the
election of directors if notice of the meeting has been given at least ten days
before the meeting; or, if the ten days' notice has not been given and notice in
writing is given by any shareholder to the President, any Vice President or the
Secretary of the Company (not less than twenty-four hours before such meeting
time) that the shareholder desires that
<PAGE> 4
the voting at such election shall be cumulative, each shareholder will have
cumulative voting rights in the election of directors, provided that an
announcement of the giving of such notice is made upon the convening of the
meeting by the Chairman of the Board or Secretary of the Company or by or on
behalf of the shareholder giving such notice. Cumulative voting allows the
shareholder to give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares held by the
shareholder, or distribute such number of votes among as many candidates and in
such manner as the shareholder deems advisable. In case of such notice, it is
intended that the persons named in the accompanying proxy will vote cumulatively
for all or such of the nominees hereinafter mentioned as they deem best.
As of November 30, 1998, Janice Carlson and Charles H. Smith, III, 970 East
64th Street, Cleveland, Ohio 44103, owned, as Trustees, 2,002,947 Common Shares
representing 38.73% of the outstanding Common Shares of the Company, such Common
Shares having been deposited with them or their predecessors, as Trustees, under
a Voting Trust Agreement entered into as of February 1, 1997 and extended to
January 31, 2002. Voting Trust Certificates for the number of Common Shares so
deposited have been delivered by the Trustees (or their predecessors) to the
beneficial owners thereof, except for any numbers of shares less than one
hundred (100) as may exist from time to time, for which no Voting Trust
Certificates are delivered. The Trustees under the Voting Trust Agreement share
voting control with respect to all such Shares.
The table below names the persons who are known by the Company to be the
beneficial owners of more than 5% of its outstanding Common Shares as of
November 30, 1998, the number of such Common Shares beneficially owned by, or
held in trust for, each such person (including their spouses and children who
live with them, if any) and the percentage of the outstanding Common Shares
which that number of shares constitutes.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------- -------------------- --------
<S> <C> <C>
Mrs. George D. Gotschall 716,972(1) 13.86%
2400 Gulf Shore Blvd. N., Apt. 201
Naples, Florida 33940
Charles H. Smith, Jr. 586,936(1) 11.35%
4565 South Lake Drive
Boynton Beach, FL 33436
Dimensional Fund Advisors, Inc. 273,975(2) 5.30%
</TABLE>
- ---------------
(1) All shares owned by Mrs. G. D. Gotschall and C. H. Smith, Jr. are subject to
the Voting Trust Agreement described above.
(2) The following information was furnished to the Company by Dimensional Fund
Advisors, Inc. ("Dimensional"). As of September 30, 1998, Dimensional, a
registered investment advisor, was deemed to have beneficial ownership of
273,975 Common Shares held by DFA Investment Dimensions Group, Inc. (the
"Fund"), a registered open-end investment company, or by The DFA Investment
Trust Company (the "Trust"), a Delaware business trust, or the DFA Group
Trust and the DFA Participating Group Trust, investment vehicles for
qualified employee benefit plans, for all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Sole Voting Power = 178,700 Common Shares*
Shared Voting Power = 0
Sole Dispositive Power = 273,975
Shared Dispositive Power = 0
</TABLE>
*Persons who are officers of Dimensional also serve as officers of the Fund and
the Trust. In their capacity as officers of the Fund and the Trust, these
persons vote 46,675 additional shares which are owned by the Fund and 48,600
Common Shares which are owned by the Trust (both included in Sole Dispositive
Power above).
ELECTION OF DIRECTORS
The size of the Board of Directors is currently fixed at nine and
classified into three classes. The term of office of one class of directors
expires in each year. The terms of office of William R. Higgins, Hudson D. Smith
and J. Douglas Whelan will expire on the day of the 1999 Annual Meeting.
Proxies solicited hereunder granting authority to vote on the election of
directors will be voted for the election of Messrs. William R. Higgins, Hudson
D. Smith and J. Douglas Whelan to serve for three-year terms ending in 2002, and
until their respective successors are elected. All nominees currently serve as
directors of the Company.
The nominees receiving the greatest number of votes shall be elected.
Although the Company does not contemplate that any of the nominees will be
unavailable for election, if a vacancy in the slate of nominees is occasioned by
death or other unexpected occurrence, it is currently intended that the
remaining directors will, by the vote of a majority of their number, designate a
different nominee for election to the Board at the Annual Meeting.
The following information was furnished to the Company by each
director/nominee and sets forth the name, age, principal occupation or
employment of each such person and the period during which he has served as a
director of the Company. Except as otherwise noted below, each director has held
his principal occupation or employment for at least five years.
DIRECTORS WHOSE TERMS EXPIRE IN 2002
WILLIAM R. HIGGINS, 56, Director of the Company since 1992. Mr. Higgins is
Chief Executive Officer of Applied Fiber Systems (a specialist in carbon fiber
impregnated raw material), Clearwater, Florida. Mr. Higgins served as
President/General Manager of AAR Composites, Inc., Clearwater, Florida (design
and manufacturing of advanced composite material products) from October 1997 to
July 1998, and President of Advanced Technology & Research, Inc., Clearwater,
Florida, from 1980 to September 1997. Mr. Higgins also previously served as a
research consultant in composites technology for Jet Executive International and
Gulfstar, Inc. and as President of Force Engineering, Sarasota, Florida from
1974 to 1978 (design and manufacture of composites technology products for boat
industry).
HUDSON D. SMITH, 47, Director of the Company since 1988. Treasurer of the
Company since 1983; President of SIFCO Forge Group since January 1998; Vice
President and General Manager of SIFCO Forge Group from January 1995 through
January 1997; General Manager of SIFCO Forge Group's Cleveland Operations from
October 1989 through January 1995; and Group General Sales Manager of SIFCO
Forge Group from July 1985 through September 1989.
3
<PAGE> 6
J. DOUGLAS WHELAN, 58, Director of the Company since October 1995. Mr.
Whelan has served as President and Chief Operating Officer of Wyman-Gordon
Company, North Grafton, Massachusetts, since October of 1997. Mr. Whelan
previously served from May of 1994 through September of 1997 as President of
Wyman-Gordon Forgings, Houston, Texas and from 1989 through April 1994, as Vice
President of Operations for the Cameron Forged Products Division of Cooper
Industries, Houston, Texas. From 1965 to 1989, Mr. Whelan served in a variety of
executive, technical and management positions with Cameron Iron Works. Mr.
Whelan has a degree in Metallurgical Engineering from Queen's University in
Kingston, Ontario, Canada and a Masters Degree in Business Administration from
the University of Houston, Houston, Texas.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
GEORGE D. GOTSCHALL, 78, Director of the Company from 1950 to 1958 and
continuously since 1962. Mr. Gotschall is Assistant Secretary of the Company and
previously served the Company until February 1983 as Vice
President-International and Treasurer. Mr. Gotschall is also a director of
National City Trust Company, West Palm Beach, Florida (banking).
RICHARD S. GRAY, 67, Director of the Company since January 1986. Mr. Gray
is President, Enterprise Development Inc., a cooperative venture with the
Weatherhead School of Management of Case Western Reserve University and a
Director of Shiloh Industries, Inc., Mansfield, Ohio, (flatrolled steel
processor). Mr. Gray was Director of The Center for Venture Development from
November 1985 to April 1987, and Senior Vice President of LTV Steel, Cleveland,
Ohio (primary steel manufacturer) from July 1984 to June 1985.
THOMAS J. VILD, 64, Director of the Company since 1994. Management
Consultant since 1990. Mr. Vild was an aerospace industry analyst with the
investment firm of Roulston Research from 1987 through 1990 and former Director
of Market Analysis and Forecasting for the Aircraft Components Group of TRW from
1978 to 1987. Prior to such time, Mr. Vild served in a variety of management
positions at TRW, Martin Marietta Corporation and Gould, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
JEFFREY P. GOTSCHALL, 50, Director of the Company since October 1986. Chief
Executive Officer of the Company since July 1990; President of the Company since
October 1989; and Chief Operating Officer of the Company from October 1986 to
July 1990. Mr. Gotschall previously served the Company from October 1986 through
September 1989 as Executive Vice President and from May 1985 through February
1989 as President of SIFCO Turbine Component Services.
DR. DAVID V. RAGONE, 68, Director of the Company since 1983. Dr. Ragone has
been a partner of Ampersand Ventures, Wellesley, Massachusetts since April 1992.
He was a Senior Lecturer at Massachusetts Institute of Technology (Department of
Materials Science and Engineering) from July 1988 to June 1998 and prior to
that, a Visiting Professor at M.I.T. from July 1987 through June 1988. Dr.
Ragone was President of Case Western Reserve University from July 1980 through
June 1987 and theretofore Dean of the College of Engineering at the University
of Michigan. Dr. Ragone is also a director Cabot Corporation, Boston,
Massachusetts (carbon black and natural gas). He was a general partner of
Ampersand (venture capital fund) from 1988 to April 1992.
CHARLES H. SMITH, JR., 78, Director of the Company since 1941. Chairman of
the Board of the Company. Mr. Smith previously served the Company as its Chief
Executive Officer from January 1943 until February 1983. Mr. Smith is a former
Chairman of the Board of the Chamber of Commerce of the United States. He served
as a member of the governing body of the International Labor Organization from
1975 to 1978 and served as the United States employer delegate to the ILO from
1975 to 1992.
4
<PAGE> 7
STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth as of November 30, 1998, the number of
Common Shares of the Company beneficially owned by each director and officer and
all directors and officers as a group, according to information furnished to the
Company by such persons:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
---- ----------------- --------
<S> <C> <C>
Richard A. Demetter(1)............................. 40,761 *
Timothy V. Crean(1)................................ 34,875 *
George D. Gotschall(2)(3)(4)....................... 716,972 13.86%
Jeffrey P. Gotschall(2)(4)(5)...................... 116,225 2.24%
Richard S. Gray.................................... 9,400 *
William R. Higgins................................. 1,000 *
David V. Ragone (6)................................ 11,125 *
Charles H. Smith, Jr.(2)(3)(4)..................... 586,936 11.35%
Hudson D. Smith(2)(4)(5)........................... 133,402 2.58%
Thomas J. Vild..................................... 1,000 *
J. Douglas Whelan.................................. 8,000 *
All Directors and Officers as a Group.............. 1,659,696 32.09%
</TABLE>
- ---------------
* Common Shares owned are less than one percent of class.
(1) Unless otherwise stated below, the shares owned are owned of record by that
person who has sole voting and investment power as to those shares. A
portion of the total number of shares for the following persons and group
represents shares which could be acquired within 60 days of the date of this
Proxy Statement by exercise of stock options: Mr. R. A. Demetter, 13,750
shares; Mr. T. V. Crean, 59,500 shares; and all directors and officers as a
group, 73,250 shares.
(2) Includes in the cases of Messrs. G. D. Gotschall, J. P. Gotschall, H. D.
Smith and C. H. Smith, Jr. shares owned by their spouses and any children or
in trust for them, their spouses and their lineal descendants.
(3) Mr. C. H. Smith, Jr. and Mr. G. D. Gotschall are brothers-in-law.
(4) Includes Voting Trust Certificates issued by the Voting Trust described
above representing an equivalent number of Common Shares held by such Trust
as follows: Mr. G. D. Gotschall -- 716,972; Mr. J. P. Gotschall -- 99,700;
Mr. C. H. Smith, Jr. -- 586,936; and Mr. H. D. Smith -- 72,344.
(5) Mr. J. P. Gotschall is the son of Mr. G. D. Gotschall and the nephew of Mr.
C. H. Smith, Jr. Mr. H. D. Smith is the son of Mr. C. H. Smith, Jr. and the
nephew of Mr. G. D. Gotschall.
(6) Includes Common Shares owned jointly with his wife.
5
<PAGE> 8
ORGANIZATION AND COMPENSATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors held four regularly scheduled meetings
during the last fiscal year. Among the Board of Directors' standing committees
are the Audit; Compensation, Pension and Stock Option; Nominating; and
Technology Committees.
The functions of the Audit Committee are to determine the scope of the
audit, to discuss any special problems that may arise during the course of the
audit and to review the audit and findings for the purpose of reporting to the
Board of Directors. The Audit Committee, currently composed of Mr. Higgins, Mr.
Gray, Dr. Ragone and Mr. Vild held two meetings during the last fiscal year.
The function of the Compensation, Pension and Stock Option Committee is to
review the compensation of directors and officers of the Company and to
recommend to the Board of Directors the employees of the Company to whom stock
options should be granted and the number of shares which should be subject to
each option so granted. The Compensation, Pension and Stock Option Committee,
currently composed of Messrs. Gray, Higgins and Whelan, held two meetings during
the fiscal year.
The function of the Nominating Committee is to recommend candidates for the
Board of Directors. The Nominating Committee, currently composed of Messrs. G.
D. Gotschall and Gray and Dr. Ragone, held one meeting during the fiscal year.
The Nominating Committee will consider shareholder nominations for directors at
any time. Any shareholder desiring to have a nominee considered by the
Nominating Committee should submit such recommendation in writing to a member of
the Nominating Committee or the Secretary of the Company.
The function of the Technology Committee is to review developments in
technology that may impact the businesses and marketplace the Company serves.
The Technology Committee, comprised of Dr. Ragone and Messrs. Higgins, Vild and
Whelan, held one meeting in 1998.
In fiscal 1998, each director (other than directors who are employed by the
Company) received an annual retainer fee of $12,000 and an attendance fee of
$750 per meeting for meetings on a day other than the day of a Board meeting and
$400 per meeting for meetings held on the day of a Board meeting. Committee
chairmen received an additional $2,000 annual retainer for such service.
Under the Company's deferred compensation program, a director may defer all
or any portion of his compensation as a director. Compensation so deferred is
credited to an account or accounts on the Company's books and is credited, at
the participant's election, with interest at a money market rate, or with units
the value of which is tied to the market value of the Common Shares at the time
the compensation is earned. The amounts so deferred may be distributed, at the
election of the director, upon termination of his position with the Company, or
at a future date, in a lump sum or in installments over a period not to exceed
ten years.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
the Company's Chief Executive Officer and the highest paid executive officers of
the Company whose salary and bonus exceed $100,000, together with the total
compensation paid to each such individual for the Company's three previous
fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION ------------
--------------------- OPTION ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS COMPENSATION($)
------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Jeffrey P. Gotschall(1)....... 1998 250,007 125,000 -0- 2,250
President & CEO 1997 215,000 161,250 -0- 1,290
1996 200,000 74,000 -0- 1,206
Richard A. Demetter(1)........ 1998 115,002 57,500 -0- 1,380
Vice President & CFO 1997 110,000 82,500 -0- 1,320
1996 105,000 39,999 -0- 1,281
Timothy V. Crean.............. 1998 156,193 126,633 -0- -0-
Executive Vice President 1997 135,911 96,565 -0- -0-
1996 141,922 70,155 60,000 -0-
Hudson D. Smith(1)............ 1998 107,705 15,810 -0- 1,260
Treasurer 1997 93,457 16,200 -0- 1,092
1996 88,468 3,440 -0- 1,022
</TABLE>
- ---------------
(1) Represents amounts contributed by the Company as matching contributions with
respect to U.S. employees pursuant to the Company's Employee Thrift Plan, a
defined contribution plan.
The value of non-cash compensation and personal benefits furnished by the
Company to its executive officers in 1998, valued at their incremental cost to
the Company, did not exceed ten percent of the reported cash compensation for
such person.
STOCK OPTIONS
No stock options were granted during the fiscal year ended September 30,
1998.
7
<PAGE> 10
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below, for each individual named in the Summary Compensation
Table, is information relating to such person's exercise of stock options during
the fiscal year ended September 30, 1998 and ownership of unexercised stock
options at September 30, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN
SHARES NUMBER OF UNEXERCISED THE MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey P.
Gotschall........... -0- -0- -0- -0- -0- -0-
R. A. Demetter........ 3,750 $70,939 13,750 -0- $ 83,975 -0-
Timothy V. Crean...... -0- -0- 44,500 30,000 $341,127 $247,500
Hudson D. Smith....... -0- -0- -0- -0- -0- -0-
</TABLE>
PENSION PLAN
The amounts stated in the foregoing Summary Compensation Table do not
include amounts paid by the Company for purposes of funding the Company's
non-contributory pension plan. Messrs. J. P. Gotschall, R. A. Demetter and H. D.
Smith participate on the same basis as other salaried employees in a
non-contributory pension plan known as SIFCO Industries, Inc. Salaried
Retirement Plan (the "Retirement Plan"). Mr. T. V. Crean participates in the
SIFCO Turbine Components Limited Pension Plan (the "STCL Plan"), which is
described later in this section.
The Summary Compensation Table includes both the base salary, which is, in
the case of participating employees, utilized to determine benefits under the
Retirement Plan, and incentive compensation, which is not so utilized.
The estimated annual retirement benefit under the Retirement Plan for each
participant is based upon the assumption that base salary will remain unchanged
until the normal retirement age of 65 is reached, and that likewise the
provisions of the Retirement Plan with respect to those retirement benefits will
remain unchanged. Under the terms of the Retirement Plan, the amount of normal
annual retirement benefit payable to a participating employee is generally based
upon years of service with the Company prior to normal retirement date, "final
average earnings" (average basic salary during the period of 60 consecutive
months within the 120 months preceding retirement during which the total amount
of basic salary was the highest) and average Social Security covered
compensation. For an employee retiring with 25 years of service or less, the
benefit is equal to 2.144% of final average earnings minus .625% of average
Social Security covered compensation multiplied by years of service up to 25
years. If an employee has more than 25 years of service at retirement, the
benefit is increased by 1.25% of final average earnings multiplied by his years
of service in excess of 25 years. The amount so determined is payable in the
form of a single life annuity or a lump sum payment.
8
<PAGE> 11
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 50,000 13,162 17,549 21,936 25,061 28,186
75,000 21,202 28,269 35,336 40,024 44,711
100,000 29,242 38,989 48,736 54,986 61,236
150,000 45,322 60,429 75,536 84,911 94,286
200,000 61,402 81,869 102,336 114,836 127,336
250,000 77,482 103,309 129,136 144,761 160,386
300,000 93,562 124,749 155,936 174,686 193,436
</TABLE>
The payments by the Company to fund the benefits under the Retirement Plan
are actuarially determined. The estimated annual benefits payable upon
retirement and projected years of credited service to retirement are as follows:
Mr. J. P. Gotschall -- $182,596 (39.8 years); Mr. R. A. Demetter -- $63,989
(28.8 years); and Mr. H. D. Smith -- $78,159 (42.5 years). Under the Internal
Revenue Code of 1986, as amended, the maximum benefit payable under the
Retirement Plan to covered employees is limited to $130,000. Therefore,
effective as of March 1, 1984, the Company established a supplemental executive
retirement plan to provide covered employees with an amount equal to what they
would have been entitled to receive under the Retirement Plan if there had been
no reduction in the level of benefits payable as a result of changes in federal
tax laws. Total pension expense for the Retirement Plan for fiscal year 1998 was
$445,542.
Mr. T. V. Crean participates in the STCL Plan. This is a contributory plan
for employees of the Company's Irish subsidiary, SIFCO Turbine Components
Limited ("STCL"). Under the STCL Plan, the employee and STCL each pay 50% of
retirement benefits. Other costs such as life insurance are borne by STCL.
Under the terms of the STCL Plan, the amount of normal annual retirement
benefits payable to a participating employee is generally based upon years of
service with STCL prior to normal retirement date, "final pensionable salary"
(average basic salary during the period of 38 consecutive months within the 120
months preceding retirement during which the total of basic salary was the
highest) and average government pension. The benefit is 1/60th of final
pensionable salary for each year of service, subject to a maximum of 40 years,
minus 1 1/2 times the single person's annual rate of government retirement
pension. Years of service for senior managers who will have completed at least
ten years service may be augmented. The additional cost is paid by STCL.
The payments by STCL and employees to fund the benefits under the STCL Plan
are actuarially determined. The current dollar value of estimated annual
benefits payable (in Irish pounds) upon retirement and projected years of
credited service to retirement for Mr. T. V. Crean is $97,830 (40 years).
EMPLOYEES' THRIFT PLAN
The amounts stated in the Summary Compensation Table include amounts
contributed and expensed by the Company under the SIFCO Industries, Inc.
Employees' Thrift Plan. This Plan is a qualified 401(k) plan for U.S. employees
and was established in 1981 to encourage savings among employees. By the terms
of the Plan, all U.S. employees are permitted to contribute up to 16% of their
pay, including wages,
9
<PAGE> 12
overtime pay and any commissions received, up to a maximum amount of $10,000 in
calendar year 1998, to a trust fund. Under the Plan, the Company matches 60% of
the first 2% of pay contributed.
Employee contributions may be invested in one or more of four funds: an
equity fund, an international equity fund, a balanced fund and a government
money market fund. Company matching contributions are made in Company stock. For
employees with less than three full years of service, one-half of the amounts
contributed by the Company are automatically vested. The remaining 50% becomes
fully vested after three full years of service. Amounts contributed by the
Company for employees with three or more full years of service vest immediately.
All amounts in the fund credited to an employee are payable in cash or stock on
the employee's death, retirement or permanent disability.
PHANTOM STOCK PLANS
The Company has outstanding units pursuant to three compensatory phantom
stock plans for key employees of the Company and its subsidiaries. Under these
plans, an aggregate of up to 600,000 units were authorized to be awarded. The
authority to grant units under the plans expired September 30, 1985 as to the
1981 plan and September 30, 1992 as to the 1987 plan. Awards can be granted
under the 1994 Phantom Plan until September 30, 1999. Units are credited to
participating employees' unit accounts at the average of the high and low
trading prices of the Common Shares on the 10 business days preceding the date
of award. At such times as dividends are paid on the Common Shares of the
Company, the Company credits to participating employees' dividend equivalent
accounts the number of share equivalents which could have been purchased had an
equivalent dividend been paid on the phantom stock units credited to the
employee's unit accounts and applied to purchase the Common Shares.
The earliest date (the "Valuation Date") upon which the Company terminates
the plan or a participating employee (i) retires from the Company in conformity
with its customary retirement policies, (ii) retires early with the consent of
the Company, (iii) becomes disabled such that he is eligible to receive benefits
under the Company's long-term disability plan, (iv) dies, or (v) notifies the
Company of his election to voluntarily discontinue participation in the Plan,
fixes the amounts to which a participating employee is entitled under the Plan.
A participating employee is entitled, with respect to his unit account, to the
excess of the average of the high and low trading prices of the Common Shares
during the 10 days preceding the Valuation Date over the base value of the units
credited to his account and, with respect to his dividend equivalent account,
the value of the dividend equivalents credited thereto. Dividend equivalents are
valued in the same manner as unit accounts.
Twenty-five percent (25%) of the units vest on each anniversary of the date
of the grant, and the employee is fully vested after four (4) years. The
dividend equivalent units vest immediately. The amount of compensation paid from
the Phantom Stock Plan in 1998 was $227,329. As of the date of this Proxy
Statement, there were an aggregate of 124,063 award units outstanding to an
aggregate of 21 employees under the three plans with base values ranging from
$3.56 to $20.31. Included in the foregoing amounts are the number of units and
average base value for each of the following: Mr. J. P. Gotschall -- 8,000 units
($5.88); Mr. Demetter -- 250 units ($10.63); Mr. T. V. Crean -- 13,238 units
($6.17); and Mr. H. D. Smith -- 15,025 units ($5.41).
As of November 5, 1998, the Company's liability under the phantom stock
plans for officers was approximately $279,858, and for all participating
employees, was $631,859.
10
<PAGE> 13
REPORT OF THE PENSION, COMPENSATION
AND STOCK OPTION COMMITTEE
The Company's compensation of its executive personnel has three components:
base salary, cash incentive compensation and non-cash incentives (stock options
and/or phantom stock).
In light of the Company's strong performance in sales and earnings in
fiscal 1997, and in the context of national research on CEO salaries in
manufacturing companies of comparable size, Mr. Gotschall's base salary was set
at $250,000 at the start of fiscal 1998.
The Company has incentive plans for each business unit and for the
corporate headquarters staff. The Forge Group's incentive plan is a gainsharing
plan for all employees of the Group based on profits in excess of quarterly
performance goals.
Members of the other business units share in compensation pools equal to
10% of the unit's operating profits, less interest and parent expense. Each pool
is allocated by the applicable business unit manager among the participants in
the plan in the general proportion that each participant's salary bears to the
aggregate salaries of all participants, with individual awards subject to salary
caps.
Members of the corporate staff earned incentives, limited by salary caps,
from a pool equal to 3% of profits before tax, subject to certain adjustments.
Mr. Gotschall's cash incentive for fiscal 1998 was $125,000.
In fiscal 1998, Mr. Demetter was awarded 1,000 stock units and Mr. H. D.
Smith was awarded 3,000 stock units under the Phantom Stock Plan. An aggregate
of 13,500 stock units were awarded to employees under the Phantom Stock Plan.
Richard S. Gray
William R. Higgins
J. Douglas Whelan
11
<PAGE> 14
PERFORMANCE GRAPH
Set forth below is a graph comparing the price performance of the Company's
Common Shares to the price performance of the S&P Composite - 500 Stock Index
and the S&P Aerospace/Defense Group. The graph assumes that the value of the
investment in the Common Shares, the S&P Composite - 500 Stock Index and the S&P
Aerospace/Defense Group was $100 on September 30, 1993.
COMPARISON OF FIVE-YEAR PRICE PERFORMANCE OF
SIFCO INDUSTRIES, INC., S&P 500 INDEX
AND S&P AEROSPACE/DEFENSE GROUP
<TABLE>
<CAPTION>
S&P
SIFCO STOCK S&P 500 INDEX AEROSPACE/DEFENSE
<S> <C> <C> <C>
SEP-93 100 100 100
DEC-93 110 102 108
MAR-94 118 97 111
JUN-94 84 97 111
SEP-94 102 101 109
DEC-94 124 100 114
MAR-95 106 109 130
JUN-95 137 119 151
SEP-95 139 127 164
DEC-95 169 127 185
MAR-96 218 141 198
JUN-96 271 146 203
SEP-96 314 150 221
DEC-96 325 161 244
MAR-97 373 165 227
JUN-97 447 193 255
SEP-97 651 206 270
DEC-97 600 211 247
MAR-98 718 240 264
JUN-98 663 247 237
SEP-98 392 222 198
</TABLE>
12
<PAGE> 15
THE PROPOSED 1998 LONG-TERM INCENTIVE PLAN
The Board of Directors has approved the submission to shareholders of the
1998 Long-Term Incentive Plan (the "Plan"). The Board believes that the Plan
provides the Company with greater flexibility to offer incentive compensation
tailored to performance objectives for certain business units and specific
factors (such as variances in taxation consideration in various countries)
applicable to particular employees or groups of employees.
DESCRIPTION OF THE PLAN
The following is a summary of the material features of the Plan. The full
text of the Plan is attached as Appendix A, and the following summary is
qualified in its entirety by reference to it.
PURPOSE. The purpose of the Plan is to promote the long-term growth and
performance of the Company and its subsidiaries by providing an opportunity for
employees of the Company and its subsidiaries to participate through share
ownership in the long-term growth and success of the Company, enhancing the
Company's ability to attract and retain persons with desired abilities,
providing additional incentives for such persons and furthering the identity of
interests of employees and shareholders of the Company.
SHARES AVAILABLE FOR AWARDS. The aggregate number of shares which may be
awarded under the Plan in each fiscal year of the Company shall be 1.5 percent
of the total outstanding shares of the Company as of September 30, 1998 up to a
maximum of 5 percent of such total outstanding shares. Shares issuable under the
Plan may consist of authorized and unissued shares of the Company or treasury
shares of the Company. Any shares issued by the Company through the assumption
or substitution of outstanding grants previously made by an acquired corporation
or entity shall not reduce the shares available for awards under the Plan. If
any shares subject to any award granted under the Plan are forfeited or if such
award otherwise terminates without the issuance of such shares or payment of
other consideration in lieu of such shares, the shares subject to such award, to
the extent of any such forfeiture or termination, shall again be available for
grant under the Plan as if such shares had not been subject to an award.
In the event of any change in the number of outstanding shares of the
Company by reason of a reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any change
in the corporate structure or shares of the Company, the number of shares as to
which awards may be granted under the Plan, including limitations relating to
incentive stock option awards and maximum awards to individual participants, the
number of shares issuable pursuant to outstanding awards, and/or, if
appropriate, the prices of shares related to outstanding awards, shall be
appropriately and proportionately adjusted.
ADMINISTRATION. The Plan shall be administered by the Compensation and
Stock Option Committee (the "Committee"), which shall have full power and
authority to interpret the Plan, to grant waivers of Plan restrictions and to
adopt such rules, regulations and policies for carrying out the Plan as it may
deem necessary or proper in order to further the purposes of the Plan. In
particular, the Committee shall have the authority to (i) select participants to
receive awards, (ii) determine the number and type of awards to be granted,
(iii) determine the terms and conditions, not inconsistent with the terms
hereof, of any award granted, (iv) interpret the terms and provisions of the
Plan and any award granted, (v) prescribe the form of any agreement or
instrument executed in connection with any award, and (vi) establish, amend and
rescind
13
<PAGE> 16
such rules, regulations and policies for the administration of the Plan as it
may deem advisable from time to time.
TERM. The Plan shall become effective upon its adoption by the Board of
Directors subject to its approval by the shareholders of the Company. The Plan
shall continue in effect for a period of 5 years from its effective date unless
sooner terminated by the Board of Directors, at which time all outstanding
awards shall remain outstanding in accordance with their applicable terms and
conditions.
ELIGIBILITY. Those persons eligible to participate in the Plan shall
include any employee of the Company or its direct or indirect subsidiaries or
any other person whose selection the Committee determines to be in the best
interests of the Company.
AWARDS. The Committee shall determine the type(s) of award(s) to be made to
each participant and shall set forth in a related award agreement the terms,
conditions and limitations applicable to each award. Awards may include but are
not limited to those listed here. Awards may be made singly, in combination, in
tandem or in exchange for a previously granted award, and also may be made in
combination or in tandem with, in replacement of, or as alternatives to, grants
or rights under any other employee plan of the Company, including the plan of
any acquired entity.
(a) Stock Options. Awards may be made in the form of stock options, which
may be incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code") or non-statutory stock options not intended to
qualify under Section 422 of the Code. Incentive stock options may be granted
only to employees. The aggregate fair market value (determined at the time the
option is granted) of Common Shares as to which incentive stock options are
exercisable for the first time by a participant during any calendar year (under
the Plan and any other plan of the Company) shall not exceed $100,000 or such
other limit as may be required by the Code from time to time). The exercise
price of stock options granted under the Plan shall be not less than 100% of
fair market value on the date of the grant. A stock option granted under the
Plan shall be exercisable in whole or in such installments and at such times and
upon such terms as may be determined by the Committee, provided that no stock
option shall be exercisable more than ten years after the date of grant. A
participant may pay the exercise price of a stock option in cash, Common Shares
or a combination of cash and Common Shares. The Committee shall establish
appropriate procedures for accepting Common Shares in payment of the exercise
price of a stock option and may impose such conditions as it deems appropriate
on such use of Common Shares.
(b) Stock Appreciation Rights. Awards may be granted in the form of stock
appreciation rights ("SARs"). SARs shall entitle the recipient to receive a
payment, in cash or Common Shares, equal to the appreciation in market value of
a stated number of Common Shares from the price stated in an award agreement to
the fair market value on the date of exercise or surrender. SARs may be granted
either separately or in conjunction with other awards granted under the Plan.
Any SAR related to a non-statutory stock option may be granted at the same time
such option is granted or any time thereafter before exercise or expiration of
such option. Any SAR related to an incentive stock option shall be exercisable
only to the extent the related option is exercisable. In the case of any SAR
related to any option, the SAR or applicable portion thereof shall terminate and
no longer be exercisable upon the termination or exercise of the related option.
Similarly, upon exercise of an SAR as to some or all of the Common Shares
covered by a related option, the related option shall be canceled automatically
to the extent of the SARs exercised, and such Common Shares shall not thereafter
be eligible for grant. The Committee may impose such conditions or restrictions
upon the exercise of any SAR as it shall deem appropriate.
14
<PAGE> 17
(c) Restricted Shares. Awards may be granted in the form of restricted
Common Shares in such numbers and at such times as the Committee shall
determine. Awards of restricted Common Shares shall be subject to such terms,
conditions or restrictions as the Committee deems appropriate including, but not
limited to, restrictions on transferability, requirements of continued
employment, individual performance or financial performance of the Company. The
period of vesting and forfeiture restrictions shall be established by the
Committee at the time of grant, except that no restriction period shall be less
than 12 months. During the period in which any restricted Common Shares are
subject to forfeiture restrictions, the Committee may, in its discretion, grant
to the participant to whom such restricted Common Shares have been awarded, all
or any of the rights of a shareholder with respect to such restricted Common
Shares, including the right to vote such Common Shares and receive dividends
with respect to such Common Shares.
(d) Performance Shares. Awards may be made in the form of Common Shares
that are earned only after the attainment of predetermined performance targets
as established by the Committee at the time an award is made ("Performance
Shares"). A performance target shall be based upon one or any combination of the
following: (i) revenues of the Company; (ii) operating income of the Company;
(iii) net income of the Company; (iv) earnings per Common Share; (v) the
Company's return on equity; (vi) cash flow of the Company; (vii) Company
shareholder total return; (viii) return on assets; (ix) return on investment;
(x) asset turnover; (xi) liquidity; (xii) capitalization; (xiii) stock price;
(xiv) expenses; (xv) operating profit and margin; (xvi) retained earnings;
(xvii) market share; (xviii) sales to targeted customers; (xix) customer
satisfaction; (xx) quality measures; (xxi) productivity; (xxii) safety measures;
or (xxiii) educational and technical skills of employees. Performance targets
may also be based on the attainment of levels of performance of the Company
and/or any of its affiliates or divisions under one or more of the measures
described above relative to performance of other businesses. The Committee shall
be permitted to make adjustments when determining the attainment of a
performance target to reflect extraordinary or nonrecurring items or events, or
unusual nonrecurring gains or losses identified in the Company's financial
statements, as long as any such adjustments are made in a manner consistent with
Section 162(m) of the Code to the extent applicable. Awards of Performance
Shares made to participants subject to Section 162(m) of the Code are intended
to qualify under Section 162(m) and provisions of such awards shall be
interpreted in a manner consistent with that intent to the extent appropriate.
The foregoing provisions of this section also shall be applicable to awards of
restricted Common Shares to the extent such awards of restricted Common Shares
are subject to the financial performance of the Company. At the end of the
applicable performance period, Performance Common Shares shall be converted into
Common Shares (or cash or a combination of Common Shares and cash, as set forth
in an award agreement) and distributed to participants based upon the applicable
performance entitlement. Award payments made in cash rather than the issuance of
Common Shares shall not, by reason of such payment in cash, result in additional
Common Shares being available under the Plan.
(e) Stock Awards. Awards may be made in Common Shares or on a basis valued
in whole or in part by reference to, or otherwise based upon, Common Shares.
Common Share awards shall be subject to conditions established by the Committee
and set forth in an award agreement.
PAYMENTS UNDER THE PLAN. Payment of awards may be made in the form of
Common Shares, cash or a combination of Common Shares and cash and may include
such restrictions as the Committee shall determine, including restrictions on
transfer and forfeiture provisions. With Committee approval, payments may be
deferred, either in the form of installments or a future lump sum payment. The
Committee may permit participants to elect to defer payments of some or all
types of awards in accordance with procedures established by the Committee to
assure that such deferrals comply with applicable requirements of the
15
<PAGE> 18
Code including the capability to make further deferrals for payment after
retirement. The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and dividend equivalents for
deferred payments denominated in Common Shares.
CHANGE IN CONTROL. In the event of a change in control of the Company, and
except as the Board may expressly provide otherwise, (i) all stock options or
SARs then outstanding shall become fully exercisable as of the date of the
change in control, whether or not then otherwise exercisable, (ii) all
restrictions and conditions of all awards of restricted Common Shares then
outstanding shall be deemed satisfied as of the date of the change in control,
and (iii) all awards of Performance Shares shall be deemed to have been fully
earned as of the date of the change in control.
VOTE REQUIRED FOR ADOPTION OF THE PLAN
The affirmative vote of a majority of the Common Shares present at the
meeting or by proxy and voting on the proposal is required for the adoption of
the Plan. THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE ADOPTION OF THE
PLAN.
APPROVAL OF DESIGNATION OF AUDITORS
The accounting firm of Arthur Andersen LLP has been the Company's
independent accountants and auditors and has audited the accounts of the Company
and its consolidated subsidiaries for a number of years. The Board of Directors
has chosen that firm to audit the accounts of the Company and its consolidated
subsidiaries for the fiscal year ending September 30, 1999, subject to the
approval of the shareholders for which the affirmative vote of a majority of the
Common Shares present and voting at the Annual Meeting (in person or by proxy)
is required. Arthur Andersen LLP has advised the Company that neither the firm
nor any of its members or associates has any direct or indirect financial
interest in the Company or any of its affiliates other than as auditors. The
Board of Directors recommends ratification of the selection of Arthur Andersen
LLP as independent auditors of the Company for the year ending September 30,
1999.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting of Shareholders with the opportunity to make a statement if they
desire to do so and to be available to respond to appropriate questions.
16
<PAGE> 19
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any shareholder who is the record or beneficial owner of at least 1% or
$1,000 in market value of Common Shares of the Company entitled to be voted at
the 2000 Annual Meeting of Shareholders (the "2000 Annual Meeting") and who has
held such Common Shares for at least one year may present a proposal at the 2000
Annual Meeting. A shareholder who intends to present a proposal at the 2000
Annual Meeting, and who wishes to have the proposal included in the Company's
proxy statement and form of proxy for that meeting, must deliver the proposal to
the Company not later than August 9, 1999.
OTHER MATTERS
The management does not know of any other matters which will come before
the meeting. In case any other matter should properly come before the meeting,
it is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
By order of the Board of Directors
Mara L. Babin, Secretary
December 21, 1998
17
<PAGE> 20
APPENDIX A
SIFCO INDUSTRIES, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSES
The purposes of the SIFCO Industries, Inc. 1998 Long-Term Incentive Plan
(the "Plan") are to promote the long-term growth and performance of SIFCO
Industries, Inc. and its subsidiaries by providing an opportunity for employees
of SIFCO Industries, Inc. and its subsidiaries (collectively, the "Company") to
participate through share ownership in the long-term growth and success of the
Company, enhancing the Company's ability to attract and retain persons with
desired abilities, providing additional incentives for such persons and
furthering the identity of interests of employees and shareholders of the
Company.
2. DEFINITIONS
(a) "Award" means any form of stock option, stock appreciation right,
restricted shares, share or share-based award or performance share granted to a
Participant under the Plan.
(b) "Award Agreement" means a written agreement between the Company and a
Participant setting forth the terms, conditions and limitations applicable to an
Award.
(c) "Board" means the Board of Directors of SIFCO Industries, Inc.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(e) "Committee" means the Compensation and Stock Option Committee of the
Board, or such other committee of the Board that is designated by the Board to
administer the Plan, provided that the Committee shall be constituted so as to
satisfy any applicable legal requirements, including the requirements of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) of the Code or any respective successor
rule.
(f) "Fair Market Value" means the closing price of Shares as reported on
the American Stock Exchange for the date in question, provided that if no sales
of Shares were made on the American Stock Exchange on that date, the closing
price of Shares as reported on the American Stock Exchange for the preceding day
on which sales of Shares were made on the American Stock Exchange shall be used.
(g) "Participant" means any employee of the Company or its direct or
indirect subsidiaries or any other person whose selection the Committee
determines to be in the best interests of the Company, to whom an Award is made
under the Plan.
(h) "Shares" means the common stock, par value $1.00 per share, of the
Company.
3. SHARES AVAILABLE FOR AWARDS
Subject to adjustment as provided in Section 11 below, the aggregate number
of Shares which may be awarded under the Plan in each fiscal year of the Company
shall be one and one half percent (1.5%) of the total outstanding Shares as of
September 30, 1998 up to a maximum of five percent (5%) of such total
1
<PAGE> 21
outstanding Shares. Shares issuable under the Plan may consist of authorized and
unissued Shares or treasury Shares.
Any Shares issued by the Company through the assumption or substitution of
outstanding grants previously made by an acquired corporation or entity shall
not reduce the Shares available for Awards under the Plan. If any Shares subject
to any Award granted under the Plan are forfeited or if such Award otherwise
terminates without the issuance of such Shares or payment of other consideration
in lieu of such Shares, the Shares subject to such Award, to the extent of any
such forfeiture or termination, shall again be available for grant under the
Plan as if such Shares had not been subject to an Award.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
power and authority to interpret the Plan, to grant waivers of Plan restrictions
and to adopt such rules, regulations and policies for carrying out the Plan as
it may deem necessary or proper in order to further the purposes of the Plan. In
particular, the Committee shall have the authority to (i) select Participants to
receive Awards, (ii) determine the number and type of Awards to be granted,
(iii) determine the terms and conditions, not inconsistent with the terms
hereof, of any Award granted, (iv) interpret the terms and provisions of the
Plan and any Award granted, (v) prescribe the form of any agreement or
instrument executed in connection with any Award, and (vi) establish, amend and
rescind such rules, regulations and policies for the administration of the Plan
as it may deem advisable from time to time.
5. AWARDS
The Committee shall determine the type(s) of Award(s) to be made to each
Participant and shall set forth in the related Award Agreement the terms,
conditions and limitations applicable to each Award. Awards may include but are
not limited to those listed in this Section 5. Awards may be made singly, in
combination, in tandem or in exchange for a previously granted Award, and also
may be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under any other employee plan of the Company,
including the plan of any acquired entity.
(a) Stock Options. Awards may be made in the form of stock options, which
may be incentive stock options within the meaning of Section 422 of the Code or
non-statutory stock options not intended to qualify under Section 422 of the
Code. Incentive stock options may be granted only to employees. The aggregate
Fair Market Value (determined at the time the option is granted) of Shares as to
which incentive stock options are exercisable for the first time by a
Participant during any calendar year (under the Plan and any other plan of the
Company) shall not exceed $100,000 (or such other limit as may be required by
the Code from time to time). The exercise price of stock options granted under
the Plan shall be not less than 100% of Fair Market Value on the date of the
grant. A stock option granted under the Plan shall be exercisable in whole or in
such installments and at such times and upon such terms as may be determined by
the Committee, provided that no stock option shall be exercisable more than ten
years after the date of grant. A participant may pay the exercise price of a
stock option in cash, Shares or a combination of cash and Shares. The Committee
shall establish appropriate procedures for accepting Shares in payment of the
exercise price of a stock option and may impose such conditions as it deems
appropriate on such use of Shares.
(b) Stock Appreciation Rights. Awards may be granted in the form of stock
appreciation rights ("SARs"). SARs shall entitle the recipient to receive a
payment, in cash or Shares, equal to the
2
<PAGE> 22
appreciation in market value of a stated number of Shares from the price stated
in the Award Agreement to the Fair Market Value on the date of exercise or
surrender. SARs may be granted either separately or in conjunction with other
Awards granted under the Plan. Any SAR related to a non-statutory stock option
may be granted at the same time such option is granted or any time thereafter
before exercise or expiration of such option. Any SAR related to an incentive
stock option must be granted at the same time such option is granted. Any SAR
related to an option shall be exercisable only to the extent the related option
is exercisable. In the case of any SAR related to any option, the SAR or
applicable portion thereof shall terminate and no longer be exercisable upon the
termination or exercise of the related option. Similarly, upon exercise of an
SAR as to some or all of the Shares covered by a related option, the related
option shall be canceled automatically to the extent of the SARs exercised, and
such Shares shall not thereafter be eligible for grant. The Committee may impose
such conditions or restrictions upon the exercise of any SAR as it shall deem
appropriate.
(c) Restricted Shares. Awards may be granted in the form of restricted
Shares in such numbers and at such times as the Committee shall determine.
Awards of restricted Shares shall be subject to such terms, conditions or
restrictions as the Committee deems appropriate including, but not limited to,
restrictions on transferability, requirements of continued employment,
individual performance or financial performance of the Company. The period of
vesting and forfeiture restrictions shall be established by the Committee at the
time of grant, except that no restriction period shall be less than 12 months.
During the period in which any restricted Shares are subject to forfeiture
restrictions, the Committee may, in its discretion, grant to the Participant to
whom such restricted Shares have been awarded, all or any of the rights of a
shareholder with respect to such restricted Shares, including the right to vote
such Shares and to receive dividends with respect to such Shares.
(d) Performance Shares. Awards may be made in the form of Shares that are
earned only after the attainment of predetermined performance targets as
established by the Committee at the time an Award is made ("Performance
Shares"). A performance target shall be based upon one or any combination of the
following: (i) revenues of the Company; (ii) operating income of the Company;
(iii) net income of the Company; (iv) earnings per Share; (v) the Company's
return on equity; (vi) cash flow of the Company; (vii) Company shareholder total
return; (viii) return on assets; (ix) return on investment; (x) asset turnover;
(xi) liquidity; (xii) capitalization; (xiii) stock price; (xiv) expenses; (xv)
operating profit and margin; (xvi) retained earnings; (xvii) market share;
(xviii) sales to targeted customers; (xix) customer satisfaction; (xx) quality
measures; (xxi) productivity; (xxii) safety measures; or (xxiii) educational and
technical skills of employees. Performance targets may also be based on the
attainment of levels of performance of the Company and/or any of its affiliates
or divisions under one or more of the measures described above relative to the
performance of other businesses. The Committee shall be permitted to make
adjustments when determining the attainment of a performance target to reflect
extraordinary or nonrecurring items or events, or unusual nonrecurring gains or
losses identified in the Company's financial statements, as long as any such
adjustments are made in a manner consistent with Section 162(m) of the Code to
the extent applicable. Awards of Performance Shares made to Participants subject
to Section 162(m) of the Code are intended to qualify under Section 162(m) and
provisions of such Awards shall be interpreted in a manner consistent with that
intent to the extent appropriate. The foregoing provisions of this Section 5(d)
also shall be applicable to Awards of restricted Shares made under Section 5(c)
to the extent such Awards of restricted Shares are subject to the financial
performance of the Company. At the end of the applicable performance period,
Performance Shares shall be converted into Shares (or cash or a combination of
Shares and cash, as set forth in the Award Agreement) and distributed to
Participants based upon the applicable performance
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<PAGE> 23
entitlement. Award payments made in cash rather than the issuance of Shares
shall not, by reason of such payment in cash, result in additional Shares being
available under the Plan.
(e) Stock Awards. Awards may be made in Shares or on a basis valued in
whole or in part by reference to, or otherwise based upon, Shares. Share awards
shall be subject to conditions established by the Committee and set forth in the
Award Agreement.
6. PAYMENT OF AWARDS; DEFERRALS
Payment of Awards may be made in the form of Shares, cash or a combination
of Shares and cash and may include such restrictions as the Committee shall
determine, including restrictions on transfer and forfeiture provisions. With
Committee approval, payments may be deferred, either in the form of installments
or a future lump sum payment. The Committee may permit Participants to elect to
defer payments of some or all types of Awards in accordance with procedures
established by the Committee to assure that such deferrals comply with
applicable requirements of the Code including the capability to make further
deferrals for payment after retirement. The Committee may also establish rules
and procedures for the crediting of interest on deferred cash payments and
dividend equivalents for deferred payments denominated in Shares.
7. TAX WITHHOLDING
The Company shall have the authority to withhold, or to require a
Participant to remit to the Company, prior to issuance or delivery of any Shares
or cash relating to an Award made under the Plan, an amount sufficient to
satisfy federal, state and local tax withholding requirements associated with
any Award. In addition, the Company may, in its sole discretion, permit a
Participant to satisfy any tax withholding requirements, in whole or in part, by
(i) delivering to the Company Shares held by such Participant having a Fair
Market Value equal to the amount of the tax or (ii) directing the Company to
retain Shares having such Fair Market Value and otherwise issuable to the
Participant under the Plan.
8. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates for any reason, all
unexercised, deferred and unpaid Awards shall be exercisable or paid in
accordance with the applicable Award Agreement, which may provide that the
Committee may authorize, as it deems appropriate, the acceleration and/or
continuation of all or any part of Awards granted prior to such termination.
9. NONASSIGNABILITY
Except as may be otherwise provided in the relevant Award Agreement, no
Award or any benefit under the Plan shall be assignable or transferable, or
payable to or exercisable by, anyone other than the Participant to whom it was
granted.
10. CHANGE IN CONTROL
(a) In the event of a Change in Control (as defined below) of the Company,
and except as the Board may expressly provide otherwise, (i) all stock options
or SARs then outstanding shall become fully exercisable as of the date of the
Change in Control, whether or not then otherwise exercisable, (ii) all
restrictions and conditions of all Awards of restricted Shares then outstanding
shall be deemed satisfied as
4
<PAGE> 24
of the date of the Change in Control, and (iii) all Awards of Performance Shares
shall be deemed to have been fully earned as of the date of the Change in
Control.
(b) A "Change in Control" of the Company shall have occurred when any of
the following events shall occur:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such transaction;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale are held in the aggregate
by the holders of Voting Stock of the Company immediately prior to such
sale;
(iii) There is a report filed or required to be filed on Schedule 13D
on Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Exchange Act, disclosing that any person (as
the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner, is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or more
of the combined voting power of the then-outstanding securities entitled to
vote generally in the election of directors of the Company ("Voting
Stock");
(iv) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; or
(v) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof, provided,
however, that for purposes of this clause (v), each Director who is first
elected, or first nominated for election by the Company's shareholders by a
vote of at least two-thirds of the Directors of the Company (or a committee
thereof) then still in office who were Directors of the Company at the
beginning of any such period will be deemed to have been a Director of the
Company at the beginning of such period.
Notwithstanding the foregoing provisions of Section 10 (b)(iii) or (iv)
hereof, unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for purposes
of the Plan solely because (i) the Company, (ii) an entity in which the Company
directly or indirectly beneficially owns 50% or more of the voting securities or
interest, or (iii) any Company-sponsored employee stock ownership plan or any
other employee benefit plan of the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership.
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<PAGE> 25
11. ADJUSTMENTS UPON CHANGES OF CAPITALIZATION
In the event of any change in the outstanding Shares by reason of a
reorganization, recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the corporate
structure or Shares of the Company, the number of Shares as to which Awards may
be granted under the Plan, including limitations relating to incentive stock
option Awards and maximum Awards to individual Participants, the number of
Shares issuable pursuant to then outstanding Awards, and/or, if appropriate, the
prices of Shares related to outstanding Awards, shall be appropriately and
proportionately adjusted.
12. RIGHTS OF EMPLOYEES
Nothing in the Plan shall interfere with or limit in any way the right of
the Company or any subsidiary to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continued employment with the
Company or any subsidiary.
13. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN AND AWARDS
The Board may amend, suspend or terminate the Plan at any time, provided
that no such action shall be taken that would impair the rights under an
outstanding Award without the Participant's consent.
The Board may amend the terms of any outstanding Award, prospectively or
retroactively, but no such amendment shall impair the rights of any Participant
without the Participant's consent and no such amendment shall have the effect,
with respect to any employee subject to Section 162(m) of the Code, of
increasing the amount of any Award from the amount that would otherwise be
payable pursuant to the formula and/or goals previously established for such
Participant.
14. GOVERNING LAW
The Plan, together with all determinations and actions made or taken in
connection therewith, to the extent not otherwise governed by the Code or other
laws of the United States, shall be governed by the laws of the State of Ohio.
15. EFFECTIVE AND TERMINATION DATES
The Plan shall become effective on the date it is approved by the
shareholders of the Company. The Plan shall continue in effect for a period of
five (5) years from its effective date unless sooner terminated by the Board, at
which time all outstanding Awards shall remain outstanding in accordance with
their applicable terms and conditions.
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<PAGE> 26
SIFCO INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CHARLES H. SMITH, JR. and GEORGE D.
GOTSCHALL, and each of them, the proxies of the undersigned to vote the shares
of the undersigned at the Annual Meeting of the Shareholders of SIFCO
Industries, Inc., to be held on January 26, 1999, and at any and all
adjournments thereof, upon the following:
(1) ELECTION OF DIRECTORS. To elect the following persons for
three-year terms ending in 2002.
William R. Higgins Hudson D. Smith J. Douglas Whelan
<TABLE>
<S> <C>
[ ] FOR all nominees listed [ ] WITHHOLD Authority to
above vote for all nominees
</TABLE>
(INSTRUCTIONS: If you wish to withhold authority to vote for any individual
nominee, write that nominee's name in the space below.)
---------------------------------------------------------------------
(2) ADOPTION OF THE 1998 LONG-TERM INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF ARTHUR ANDERSEN LLP AS
INDEPENDENT AUDITORS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
[ ] GRANT AUTHORITY [ ] WITHHOLD AUTHORITY
The Board of Directors recommends that the Shareholders vote for the nominees
and proposals listed above.
(Continued on other side)
(Proxy - continued from other side)
Proxy No. Shares
IF NO INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES FOR DIRECTORS, FOR THE ADOPTION OF THE 1998 LONG-TERM INCENTIVE
PLAN, FOR THE PROPOSAL TO RATIFY THE DESIGNATION OF INDEPENDENT AUDITORS AND IN
THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY COME BEFORE THE
MEETING OR ANY ADJOURNMENT.
Dated____________________ 19 ____
_________________________________
_________________________________
NOTE: The signature of this proxy
should correspond with the name
(or names), as shown herein, in
which your stock is registered.
Where stock is registered jointly
in the name of two or more
persons, all should sign.
