HAWK CORP, S-1, 1997-11-19

HAWK CORP
S-1, 1997-11-19
AIRCRAFT PARTS & AUXILIARY EQUIPMENT, NEC

Previous: I LINK INC, 10QSB, 1997-11-19

Next: S3 INC, 10-Q, 1997-11-19

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1997
REGISTRATION NO. 333-
================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------

HAWK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 34-1608156 3499
- -------------------------------- -------------------------------- --------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) NO.) CLASSIFICATION CODE NO.)
</TABLE>

200 PUBLIC SQUARE, SUITE 30-5000
CLEVELAND, OHIO 44114
(216) 861-3553
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

NORMAN C. HARBERT
CHAIRMAN OF THE BOARD
200 PUBLIC SQUARE, SUITE 30-5000
CLEVELAND, OHIO 44114
(216) 861-3553
- --------------------------------------------------------------------------------
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

With copies to:

<TABLE>
<S> <C>
MARC C. KRANTZ, ESQ. GLENN E. MORRICAL, ESQ.
KOHRMAN JACKSON & KRANTZ P.L.L. ARTER & HADDEN LLP
ONE CLEVELAND CENTER, 20TH FLOOR 1100 HUNTINGTON BUILDING
1375 EAST NINTH STREET 925 EUCLID AVENUE
CLEVELAND, OHIO 44114 CLEVELAND, OHIO 44115
(216) 736-7204 (216) 696-1100
</TABLE>

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]__________________________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_______________________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_______________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]__________________________

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=======================================================================================================
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, $.01 par value per share(3).... $105,000,000 $31,819
=======================================================================================================
</TABLE>

(1) Includes shares of Class A Common Stock issuable pursuant to the
Underwriters' over-allotment option. See "Underwriting."
(2) Estimated, pursuant to Rule 457(o), solely for purposes of calculating the
registration fee.
(3) Includes associated Rights.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

HAWK CORPORATION

CROSS REFERENCE SHEET
PURSUANT TO
ITEM 501(b) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM
NO. FORM S-1 CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ---- --------------------------------------------- -----------------------------------------------
<C> <S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................... Forepart of Registration Statement and Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front and Outside Back Cover Pages of
Prospectus; Available Information; Reports to
Holders of Class A Common Stock
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges......................... Summary; Risk Factors; Selected Consolidated
Financial Data
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Underwriting
6. Dilution.......................................... Dilution
7. Selling Security Holders.......................... Principal and Selling Stockholders
8. Plan of Distribution.............................. Underwriting
9. Description of Securities to be Registered........ Outside Front and Outside Back Cover Pages of
Prospectus; Description of Capital Stock;
Underwriting
10. Interests of Named Experts and Counsel............ Certain Transactions; Legal Matters; Experts
11. Information with Respect to the Registrant
(a) Description of Business...................... Summary; Risk Factors; Management's Discussion
and Analysis of Financial Condition and Results
of Operations; Business
(b) Description of Property...................... Business
(c) Legal Proceedings............................ Business
(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters.......................... Summary; Description of Capital Stock; Dividend
Policy; Shares Eligible for Future Sale
(e) Financial Statements......................... Financial Statements; Unaudited Pro Forma
Consolidated Statements of Operations
(f) Selected Financial Data...................... Selected Consolidated Financial Data
(g) Supplementary Financial Information.......... *
(h) Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... Management's Discussion and Analysis of
Financial Condition and Results of Operations
(i) Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....... *
(j) Quantitative and Qualitative Disclosures
about Market Risk............................ *
(k) Directors and Executive Officers............. Management; Principal and Selling Stockholders
(l) Executive Compensation....................... Management
(m) Security Ownership of Certain Beneficial
Owners and Management........................ Principal and Selling Stockholders
(n) Certain Relationships and Related
Transactions................................. Management; Certain Transactions; Legal Matters
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... *
</TABLE>

- ---------------
* Not applicable or answer thereto is negative.
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1997

SHARES
LOGO

HAWK CORPORATION

CLASS A COMMON STOCK
($.01 PAR VALUE)

Of the shares of Class A Common Stock offered hereby (the
"Offering"), shares are being sold by Hawk Corporation ("Hawk" or the
"Company") and shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders."

Prior to the Offering, there has been no public market for the Company's
Class A Common Stock. It is currently expected that the public offering price
will be between $ and $ per share. See "Underwriting" for information
relating to the method of determining the public offering price.

The Company has applied to have the Class A Common Stock listed on the New
York Stock Exchange under the symbol "HWK."

THE CLASS A COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 9.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
================================================================================================
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
- ------------------------------------------------------------------------------------------------
Total(3)................ $ $ $ $
================================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements.

(2) Before deducting estimated expenses of $ payable by the Company.

(3) Certain of the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an aggregate of additional shares
of Class A Common Stock on the same terms and conditions as set forth above,
solely to cover over-allotments, if any. If this option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."

The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that Class A Common Stock will be available for delivery on or
about , 1997 at the offices of Schroder & Co. Inc., New York, New
York.

SCHRODER & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MCDONALD & COMPANY
SECURITIES, INC.

, 1997

<PAGE> 4

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK INCLUDING OVER-ALLOTMENTS, STABILIZING BIDS, SYNDICATE COVERING
TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 5

SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Hawk is a holding company, the principal
assets of which consist of the capital stock of its manufacturing subsidiaries,
Friction Products Co. ("FPC"), S.K. Wellman Corp. ("SKW"), Helsel, Inc.
("Helsel"), Logan Metal Stampings, Inc. ("Logan"), Hutchinson Products
Corporation ("Hutchinson") and Sinterloy Corporation ("Sinterloy"). Unless
otherwise indicated, the information in this Prospectus (1) reflects a
-for-one split of each share of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), and Class B Non-Voting Common Stock, par
value $.01 per share (the "Class B Common Stock," and together with the Class A
Common Stock, the "Common Stock") prior to the Offering, (2) assumes the
Company's replacement of its existing senior revolving credit facility with a
new unsecured revolving credit facility (the "New Revolving Credit Facility")
concurrently with the closing of the Offering, (3) assumes completion of the
Preferred Stock Redemption, as described in this Prospectus, concurrently with
the closing of the Offering, and (4) assumes no exercise of the Underwriters'
over-allotment option.

THE COMPANY

GENERAL

Hawk designs, engineers, manufactures and markets specialized components,
principally made from powder metals, used in a wide variety of aerospace,
industrial and commercial applications. The Company is a leading worldwide
supplier of friction products for brakes, clutches and transmissions used in
aerospace, industrial and specialty applications. Friction products represented
68.9% of Company sales in the first nine months of 1997. Hawk is also a leading
supplier of powder metal components for industrial applications, including pump,
motor and transmission elements, gears, pistons and anti-lock brake sensor
rings. In addition, the Company designs and manufactures die-cast aluminum
rotors for small electric motors used in appliances, business equipment and
exhaust fans. The Company focuses on manufacturing products requiring
sophisticated engineering and production techniques for applications in markets
in which it has achieved a significant market share.

Hawk is the largest independent supplier of original equipment and
replacement friction materials to the manufacturers of braking systems for the
Boeing 727, 737 and 757, the McDonnell Douglas DC-9, DC-10 and MD-80 and the
Canadair CRJ aircraft. The Company is also the largest supplier of friction
materials to the general aviation (non-commercial, non-military) market,
supplying friction materials for aircraft manufacturers such as Cessna, Lear,
Gulfstream and Fokker. The Company believes that it is a leading supplier of
friction materials to manufacturers of construction and agricultural equipment
and truck clutches, including Caterpillar, John Deere, New Holland and Eaton. In
addition, the Company is a major supplier of friction products for use in
specialty applications, such as brakes for Harley-Davidson motorcycles, AM
General Humvees and Bombardier, Polaris and Arctco ("Arctic Cat") snowmobiles.

The Company's powder metal components are used primarily in industrial
applications, often as lower cost replacements for parts manufactured by
traditional forging, casting or stamping technologies. The Company targets three
areas of the powder metal component marketplace: high precision components that
are used in fluid power applications requiring tight tolerances; large
structural powder metal parts used in construction, agricultural and truck
applications; and smaller, high volume parts for which the Company can utilize
its efficient pressing and sintering capabilities. The Company is also the
largest independent U.S. manufacturer of die-cast aluminum rotors for use in
subfractional (less than 1/20 horsepower) electric motors.

3
<PAGE> 6

in the domestic and international marketplace and are associated with quality
and extensive customer support, including specialized product engineering and
strong aftermarket service.

Since its formation in 1989, Hawk has pursued a strategic growth plan by
making complementary acquisitions and broadening its customer base. From 1991
through the 12 month period ended September 30, 1997, the Company's net sales
and income from operations increased at a compound annual rate of 38.3% and
35.5%, respectively. For the first nine months of 1997, the Company's net sales
and income from operations (before non-recurring costs in 1996 of $3.7 million
for plant consolidation expenses) increased 24.2% and 55.8%, respectively,
compared to the corresponding period in 1996. Since 1994, sales growth has been
primarily driven by the acquisitions of Helsel, SKW and Hutchinson. These
acquisitions tripled the net sales of the Company. In addition, pro forma for
all acquisitions, the Company's net sales during the period from 1991 through
the 12 month period ended September 30, 1997 grew internally at a compound
annual rate of 9.7%.

BUSINESS STRATEGY

The Company's business strategy includes the following principal elements:

- Focus on High-Margin, Specialty Applications. The Company operates
primarily in aerospace, industrial and commercial markets that require
sophisticated engineering and production techniques. In developing new
applications, as well as in evaluating acquisitions, the Company seeks to
compete in markets requiring such engineering expertise and technical
capability, rather than in markets in which the primary competitive factor
is price. The Company believes margins for its products in these markets
are higher than in other manufacturing markets that use standardized
products. The Company's gross margins in 1996 and the first nine months of
1997 were 25.9% and 28.7%, respectively.

- New Product Introduction. A key part of the Company's strategy is
the introduction of new products which incorporate improved performance
characteristics or reduced costs in response to customer needs. Because
friction products are the consumable, or wear, component of brake, clutch
and transmission systems, the introduction of new friction products in
conjunction with a new system provides the Company with the opportunity to
supply the aftermarket for the life of the system. For example, the ability
to service the aftermarket for a particular aircraft braking system will
likely provide the Company with a stable market for its friction products
for the life of an aircraft, which can be 30 years or more. The Company
also seeks to grow by applying its existing products and technologies to
new specialized applications where its products have a performance or
technological advantage. For example, the Company recently developed a
powder metal pump element for a customer's power steering unit that
improved pumping efficiency and dependability while reducing noise and
cost.

- Pursuit of Strategic Acquisitions. Many of the markets in which the
Company competes are fragmented, providing the Company with attractive
acquisition opportunities. The Company will continue to seek to acquire
complementary businesses with leading market positions that will enable it
to expand its product offerings, technical capabilities and customer base.
Historically, the Company has been able to achieve significant cost
reductions through the integration of its acquisitions. For example, since
the acquisition of SKW in 1995, the Company has consolidated SKW's
headquarters facility and one of SKW's two U.S. manufacturing facilities
into its existing facilities, resulting in $5.4 million of annualized cost
savings.

- Expanding International Sales. To take advantage of worldwide
growth in its end user markets, the Company expanded its international
presence through the acquisition of SKW in 1995, which resulted in the
addition of manufacturing facilities in Italy and Canada and a worldwide
distribution network. The Company continues to expand its European
operations to meet strong demand in established markets throughout Europe.
The Company also believes that further opportunities to expand sales exist
in emerging economies. Sales from the Company's international

4
<PAGE> 7

facilities have grown from $15.7 million in 1995 to $20.3 million for the
12 month period ended September 30, 1997.

- Leveraging Customer Relationships. The Company's engineers work
closely with customers to develop and design new products and improve the
performance of existing products. The Company believes that its commitment
to quality, service and just-in-time delivery enables it to build and
maintain strong and stable customer relationships. The Company believes
that more than 80% of its sales are from products and materials for which
it is the sole source provider for specific customer applications. Each of
the Company's ten largest customers have been customers of the Company or
its predecessors for more than ten years. The Company believes that strong
relationships with its customers provide it with significant competitive
advantages in obtaining and securing new business opportunities.

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

Unless the context otherwise requires, the terms "Company" and "Hawk" as
used in this Prospectus refer to Hawk Corporation, a Delaware corporation, its
consolidated subsidiaries and its predecessors by merger. The Company's
principal executive offices are located at 200 Public Square, Suite 30-5000,
Cleveland, Ohio 44114, and its telephone number is (216) 861-3553.

Hawk has applied for the registration of the Wellman Friction Products
trademark. Velvetouch(R), Fibertuff(R), Feramic(R),Velvetouch Feramic(R),
Velvetouch Ceramic(R), Velvetouch Organik(R) and Velvetouch Metalik(R) are
registered trademarks of the Company and Hawk Brake is a tradename of the
Company. Trademarks and tradenames of corporations other than the Company are
also referred to in this Prospectus.

5
<PAGE> 8

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered:
By the Company............................. shares(1)
By the Selling Stockholders................ shares(1)(2)
Total.............................. shares(1)
Class A Common Stock outstanding after the
Offering................................... shares(1)(2)(3)
Class B Common Stock outstanding after the
Offering................................... 0 shares
Total Common Stock outstanding after the
Offering................................... shares(1)(2)(3)
Use of proceeds.............................. To redeem all of the Company's 12% senior
subordinated notes, to effect the Preferred
Stock Redemption and for working capital and
general corporate purposes.
Proposed NYSE symbol......................... HWK
</TABLE>

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

(1) Does not include shares that may be sold by certain of the Selling
Stockholders pursuant to the Underwriters' over-allotment option. See
"Principal and Selling Stockholders" and "Underwriting."

(2) The Company will not receive any proceeds from the sale of Class A Common
Stock by the Selling Stockholders. See "Use of Proceeds."

(3) Does not include shares of Class A Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan (of which
shares will be reserved for options to be outstanding as of the closing of
the Offering), or shares of Class A Common Stock, based on an
assumed public offering price of $ per share, issuable upon
conversion of 8.0% two-year notes that were issued by the Company in
connection with the acquisition of Hutchinson. Up to $500,000 of the
then-outstanding principal balance of the notes is convertible at the option
of the holders thereof into shares of Class A Common Stock at the public
offering price.

6
<PAGE> 9

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL
AND OPERATING DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
-------- -------- ------------------------- -------- -------------------------

<CAPTION>
ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
-------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................... $ 41,395 $ 84,643 $123,997 $144,215 $ 93,672 $116,362 $124,985
Gross profit................... 14,624 23,479 32,113 39,133 24,649 33,422 37,374
Plant consolidation
expense(2)................... -- -- 4,028 4,028 3,749 50 50
Income from operations......... 7,376 9,980 9,811 14,257 6,880 16,556 19,617
Interest expense............... 3,267 7,323 10,648 13,527 7,321 10,639 11,039
Extraordinary item(3).......... -- -- (1,196) (1,196) -- -- --
Net income (loss).............. 2,287 762 (3,078) (2,207) (1,359) 3,261 4,894
Net income (loss) per share
applicable to common
stockholders................. $ $ $ $ $ $ $
Number of shares used to
compute per share data.......

AS ADJUSTED FOR THE OFFERING(4):
Interest expense............... $ $
Net income (loss)..............
Net income (loss) per share
applicable to common
stockholders.................
Number of shares used to
compute per share data.......

OTHER DATA:
Depreciation and
amortization................. $ 2,466 $ 5,527 $ 8,418 $ 9,967 $ 6,688 $ 7,166 $ 7,669
Capital expenditures (including
capital leases).............. 1,871 3,781 10,294 12,646 9,142 4,975 5,245
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------
ACTUAL AS ADJUSTED(5)
-------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 3,629 $
Working capital..................................................... 30,596
Total assets........................................................ 170,915
Total long-term debt................................................ 131,296
Detachable stock warrants, subject to put option(6)................. 9,300 --
Stockholders' equity (deficit)...................................... (1,448)
</TABLE>

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

(1) The pro forma income statement data and pro forma other data for the year
ended December 31, 1996 and the nine months ended September 30, 1997 include
the historical operations of the Company and give effect to the Hutchinson
and Sinterloy acquisitions as if they occurred as of January 1, 1996. This
data should be read in conjunction with the more detailed information
contained in the "Unaudited Pro Forma Consolidated Statements of Operations"
and notes thereto included elsewhere in this Prospectus.

(2) Reflects charges in 1996 and 1997 relating primarily to the relocation of
machinery and equipment.

(3) Reflects write-off of deferred financing costs, net of $798,000 in income
taxes.

(4) As adjusted income statement data for the year ended December 31, 1996 and
for the nine months ended September 30, 1997 assume the sale by the Company
of shares of Class A Common Stock in the Offering as of January 1,
1996 and the application of net proceeds thereof as set forth under "Use of
Proceeds."

(footnotes continued on the following page)

7
<PAGE> 10

(5) As adjusted balance sheet data assume the sale by the Company of
shares of Class A Common Stock in the Offering as of September 30, 1997 and
the application of net proceeds therefrom as set forth under "Use of
Proceeds," the exchange of the detachable warrants for shares of
Class B Common Stock, and the redemption of all 1,375 outstanding shares of
Series A Preferred Stock, 351 of the outstanding shares of Series B
Preferred Stock and seven of the outstanding shares of Series C Preferred
Stock, together with accrued and unpaid dividends thereon.

(6) Effective June 30, 1995, the Company issued $30.0 million aggregate
principal amount of 12% senior subordinated notes with detachable warrants
that provide the holders the option to purchase shares of the
Company's Class B Common Stock at a nominal price. Beginning in the year
2001, the warrant holders have the right to put the warrants to the Company
for cash, at prices based on the fair market value of the Company at the
date of put, as determined by an independent third party. The warrant
holders' put option is terminated upon the closing of an initial public
offering. For financial reporting purposes, the carrying value of the
warrants, including the put option (classified as detachable stock warrants,
subject to put option, on the Company's balance sheet), was adjusted to $9.3
million as of September 30, 1997, based on revisions to the estimated
present value of the future fair market value of the Company.

8
<PAGE> 11

RISK FACTORS

This Prospectus contains forward-looking statements that involve certain
risks and uncertainties. Statements in this Prospectus regarding future
financial performance and other statements containing the words "expect,"
"believe," "anticipate," "project," "estimate," "predict," "intend" and similar
expressions are forward-looking statements. Actual results and events could
differ materially from those anticipated in such forward-looking statements as a
result of a variety of factors, including those set forth in the following risk
factors and elsewhere in this Prospectus. Prospective investors should consider
carefully the following factors, in addition to the other information contained
in this Prospectus, prior to making an investment in the Class A Common Stock.

RECENT LOSS

In 1996, the Company incurred $4.0 million of non-recurring charges related
to plant consolidation expenses and $2.0 million ($1.2 million after tax) of
non-recurring extraordinary charges as a result of the write-off of previously
capitalized deferred financing costs arising from the termination of a then-
existing credit facility. In 1996, the Company reported a loss before
extraordinary item of $1.9 million and a loss applicable to holders of the
Company's common stock of $3.3 million. On a pro forma basis, after giving
effect to the Hutchinson and Sinterloy acquisitions as if they occurred as of
January 1, 1996, the Company's 1996 loss before extraordinary item would have
been $1.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

SUBSTANTIAL LEVERAGE

The Company has, and following the Offering will continue to have,
substantial indebtedness under the indenture ("Senior Note Indenture") relating
to the Company's 10 1/4% Senior Notes due 2003 (the "Senior Notes"). In the
future, the Company may incur additional indebtedness under the New Revolving
Credit Facility to be entered into concurrently with the Offering or under
additional facilities for working capital and to finance the acquisition of
additional businesses. Leverage increases the risk to the Company of any
variations in its results of operations or any other factors affecting its cash
flow or liquidity.

As of September 30, 1997, the Company had total indebtedness, including
current maturities, of $131.3 million. On an as adjusted basis, after giving
effect to the Offering, the Company's total indebtedness as of September 30,
1997 would have been $104.4 million. The Company's ability to make scheduled
payments of the principal of or interest on, or to refinance, its indebtedness
and to make scheduled payments under its lease agreements depends on its future
performance, which is subject to economic, financial, competitive and other
factors beyond its control. Any default under the documents governing
indebtedness of the Company could have a significant adverse effect on the
market value of the Class A Common Stock. Certain of the Company's competitors
currently operate on a less leveraged basis and may have greater operating and
financing flexibility than the Company. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

ACQUISITION STRATEGY

The Company expects to continue a strategy of identifying and acquiring
complementary businesses. There is no assurance that the Company will continue
to identify suitable new acquisition candidates, obtain financing necessary to
complete such acquisitions, acquire businesses on satisfactory terms, enter into
any definitive acquisition agreements or, if entered into, that future
acquisitions will be successful or will achieve results comparable to the
Company's existing business. The Company could incur substantial additional
indebtedness in connection with its acquisition strategy. See
"Business -- Business Strategy" and "Business -- Acquisitions."

9
<PAGE> 12

FLUCTUATIONS IN QUARTERLY RESULTS

The Company's results of operations are subject to fluctuations from
quarter to quarter due to changes in demand for its products and other factors.
Demand for the Company's products in each of the geographic end markets it
serves can vary significantly from quarter to quarter due to changes in demand
for products that incorporate or utilize the Company's products and other
factors beyond the Company's control. Therefore, year-to-year comparisons of
quarterly results may not be meaningful, and quarterly results during the year
are not necessarily indicative of the results that may be expected for any
future period or for the entire year. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Quarterly Results of
Operations."

COMPETITION

The principal industries in which the Company competes are competitive and
fragmented, with many small manufacturers and only a few manufacturers that
generate sales in excess of $50 million. The larger competitors may have
financial and other resources substantially greater than those of the Company.
The Company competes for new business principally at the beginning of the
development of new applications and at the redesign of existing applications by
its customers. For example, new model development for the Company's aircraft
braking system customers generally begins two to five years prior to full scale
production of new braking systems. Product redesign initiatives by customers
typically involve long lead times as well. Although the Company has been
successful in the past in obtaining this new business, there is no assurance
that the Company will continue to obtain such business in the future. The
Company also competes with manufacturers using different technologies, such as
carbon composite ("carbon-carbon") friction materials for aircraft braking
systems. There is no assurance that competition from these technologies or
others will not adversely affect the Company's business, financial condition and
results of operations. See "Business -- Competition."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

Sales from the Company's international facilities have grown from $15.7
million for 1995 to $20.3 million for the 12 month period ended September 30,
1997. One of the elements of the Company's business strategy is its continued
expansion into international markets, and the Company anticipates that
international sales will continue to account for a significant portion of its
net sales in the foreseeable future. As a result, the Company is subject to
certain risks inherent in conducting business internationally, including
unexpected changes in regulatory requirements, export restrictions, currency
controls, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, political and economic instability, fluctuations in
currency exchange rates, difficulty in accounts receivable collection and
potentially adverse tax consequences. The Company is also subject to risks
associated with the imposition of protective legislation and regulations,
including those relating to import or export or otherwise resulting from trade
or foreign policy. In addition, because a significant portion of the Company's
revenues and expenses are denominated in currencies other than U.S. dollars,
changes in exchange rates may have a significant effect on the Company's
business, financial condition and results of operations. The Company does not
currently participate in currency hedging transactions. However, as the
Company's international operations expand, the Company may participate in such
hedging transactions in the future. There is no assurance that one or more of
the foregoing international operation risks will not have a material adverse
effect on the Company's international operations, and, consequently, on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Business Strategy."

RELIANCE ON SIGNIFICANT CUSTOMERS

The Company's top five customers accounted for 40.1% of the Company's
consolidated net sales in 1996 and 34.2% of the Company's consolidated net sales
in the first nine months of 1997. Thus, a significant decrease or interruption
in business from any of the Company's larger customers could have

10
<PAGE> 13

a material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Customers."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant extent upon the performance
of its senior management team, including Norman C. Harbert, the Company's
Chairman of the Board, Chief Executive Officer and President, and Ronald E.
Weinberg, Vice-Chairman of the Board and Treasurer. Although the Company
believes that its senior management team has significant depth, the loss of
services of any of the Company's executive officers could have an adverse impact
on the Company. The future success of the Company will depend in large part on
its continued ability to attract and retain qualified engineers and other
professionals, either through direct hiring or acquisition of other businesses
employing such professionals. There is no assurance that the Company will be
able to attract and retain such personnel. See "Management."

COLLECTIVE BARGAINING AGREEMENTS

As of September 30, 1997, 43% of the Company's employees were represented
by unions, including approximately 75 employees at Hutchinson who are covered
under a collective bargaining agreement with the International Association of
Machinists and Aerospace Workers that expires in June 1998, and approximately
100 employees at SKW's Orzinuovi, Italy plant who are represented by a national
mechanics union under an agreement that expires in December 1998. Although the
Company believes its relations with its union employees are good, there is no
assurance that Hutchinson and SKW will be successful in negotiating new
agreements with the unions representing their employees on terms favorable to
the Company or can do so without experiencing work stoppages by some of their
employees. Because of the importance of Hutchinson and SKW's Orzinuovi, Italy
plant to the profitability of the Company, any work stoppage could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Employees."

SUPPLY AND PRICE OF RAW MATERIALS

The principal raw materials used by the Company are copper, steel and iron
powder and custom-fabricated cellulose sheet. The Company has no long-term
supply agreements with any of its major suppliers. However, the Company has
generally been able to obtain sufficient supplies of raw materials for its
operations and changes in prices of such supplies over the past few years have
not had a significant effect on its operations. Although the Company believes
that such raw materials are readily available from alternate sources, an
interruption in the Company's supply of powder metal or cellulose sheet or a
substantial increase in the price of any of these raw materials could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Suppliers and Raw Materials."

EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDERS

Upon the closing of the Offering, the Company's directors and executive
officers will beneficially own an aggregate of approximately % of the
outstanding shares of Class A Common Stock (approximately % if the
Underwriters' over-allotment option is exercised in full) and 100% of the
outstanding shares of the Company's Series D Preferred Stock, par value $.01 per
share (the "Series D Preferred Stock"). Norman C. Harbert, Chairman of the
Board, Chief Executive Officer, President and a Director of the Company, Ronald
E. Weinberg, Vice-Chairman of the Board, Treasurer and a Director of the
Company, and Byron S. Krantz, Secretary and Director of the Company will
beneficially own approximately %, % and %, respectively, of the
outstanding shares of Class A Common Stock (approximately %, % and
%, respectively, if the Underwriters' over-allotment option is exercised in
full), and will beneficially own 45%, 45% and 10%, respectively, of the
outstanding shares of Series D Preferred Stock, after the Offering. The Series D
Preferred Stock is entitled to elect a majority of the members of the Board of
Directors of the Company and to vote as a separate class on

11
<PAGE> 14

fundamental corporate transactions. Accordingly, if any two of these
stockholders vote their shares of Series D Preferred Stock in the same manner,
they will have sufficient voting power (without the consent of the Company's
other holders of Class A Common Stock) to elect a majority of the members of the
Board of Directors, to thereby control and direct the policies of the Board of
Directors and, in general, to determine the outcome of various matters submitted
to the stockholders for approval, including fundamental corporate transactions.
In addition, Messrs. Harbert, Weinberg and Krantz have entered into an agreement
regarding the election of the Company's Board of Directors. This agreement and
the voting rights of the Series D Preferred Stock may render more difficult or
tend to discourage mergers, acquisitions, tender offers or proxy contests, even
when stockholders other than Messrs. Harbert, Weinberg and Krantz consider such
a transaction to be in their best interests. See "Principal and Selling
Stockholders," "Certain Transactions -- Transactions Concurrent with the
Offering" and "Description of Capital Stock."

GOVERNMENT REGULATION

The Company's sales to manufacturers of aircraft braking systems
represented 20.8% of the Company's consolidated net sales in 1996, and 18.6% of
the Company's consolidated net sales in the first nine months of 1997. Each
aircraft braking system, including the friction products supplied by the
Company, must meet stringent Federal Aviation Administration ("FAA") criteria
and testing requirements. The Company has been able to meet these requirements
in the past. However, there is no assurance that a review by the FAA of a
braking system including the Company's materials will not result in
determinations that could have a material adverse effect on the Company's
business, financial condition and results of operations, nor can there be any
assurance that the Company or its customers will be able to continue to meet FAA
requirements in the future. See "Business -- Government Regulation."

ENVIRONMENTAL MATTERS

Manufacturers such as the Company are subject to stringent environmental
standards imposed by federal, state, local and foreign environmental and worker
health and safety laws, regulations and ordinances, including those related to
air emissions, wastewater discharges and chemical and hazardous waste management
and disposal. Certain of these environmental laws hold owners or operators of
land or businesses liable for their own and for previous owners' or operators'
releases of hazardous or toxic substances, materials or wastes, pollutants or
contaminants. Compliance with environmental laws also may require the
acquisition of permits or other authorizations for certain activities and
compliance with various standards or procedural requirements. The nature of the
Company's operations, the long history of industrial uses at some of its current
or former facilities, and the operations of predecessor owners or operators of
certain of the businesses expose the Company to risk of liabilities or claims
with respect to environmental and worker health and safety matters. The Company
believes that it is in substantial compliance with all material environmental
and worker health and safety laws applicable to its operations. There can be no
assurance, however, that a review of the Company's past, present or future
environmental or worker health and safety compliance by courts or regulatory
authorities will not result in determinations that could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Environmental Matters."

INTELLECTUAL PROPERTY MATTERS

The Company relies on a combination of internal procedures, confidentiality
agreements, patents, trademarks and trade secrets law and common law, including
the law of unfair competition, to protect its intellectual property. There is no
assurance that the Company's intellectual property rights can be successfully
asserted in the future or will not be invalidated, circumvented or challenged.
In addition, the laws of certain foreign countries in which the Company's
products may be sold do not protect the Company's intellectual property rights
to the same extent as the laws of the United States. The failure or inability of
the Company to protect its proprietary information could have a material adverse
effect on the

12
<PAGE> 15

Company's business, financial condition and results of operations. See
"Business -- Intellectual Property Matters."

ANTI-TAKEOVER EFFECT OF THE COMPANY'S GOVERNING DOCUMENTS

Certain provisions of the Company's Second Amended and Restated Certificate
of Incorporation and Amended and Restated By-laws may be deemed to have
anti-takeover effects and may discourage, defer or prevent a change of control
of the Company. These provisions (1) enable the holders of the Series D
Preferred Stock to elect a majority of the Board of Directors, (2) provide that
only the Board of Directors, the Chairman or Vice-Chairman of the Board or
holders of at least 25% of the outstanding voting stock of the Company may call
special meetings of the stockholders, (3) establish certain advance notice
procedures for nomination of candidates for election as directors and for
stockholder proposals to be considered at stockholders' meetings, (4) authorize
preferred stock, the terms of which (including voting rights, if any) may be
determined by the Board of Directors and which may be issued without stockholder
approval and (5) prohibit action by stockholders other than at a meeting. See
"Description of Capital Stock -- Anti-Takeover Effects of the Company's
Governing Documents" and "Description of Capital Stock -- Preferred Stock."

In addition, on November 13, 1997, the Board of Directors of the Company
declared a dividend of one preferred share purchase right (a "Right") for each
share of Common Stock outstanding at the close of business on November , 1997.
A Right will also be attached, until it is redeemed or exchanged or expires, to
each share of Common Stock subsequently issued (including the shares of Class A
Common Stock offered hereby). The Rights will have certain anti-takeover
effects. If triggered, the Rights would cause substantial dilution to a person
or group of persons (other than certain exempt persons, which include Norman C.
Harbert, Ronald E. Weinberg, William J. O'Neill, Jr. or any of their respective
affiliates) that acquires more than 15% of the Class A Common Stock on terms not
approved by the Board of Directors. The Rights could discourage or make more
difficult a merger, tender offer or similar transaction. See "Description of
Capital Stock -- Rights Agreement."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Class A Common Stock in the
public market following the Offering could adversely affect the market price for
the Class A Common Stock. Upon the closing of the Offering, the Company will
have shares of Class A Common Stock outstanding. The holders of the
shares of Common Stock outstanding prior to the Offering and all the
directors, executive officers and significant employees of the Company who held
Class A Common Stock prior to the Offering have agreed not to offer, sell or
otherwise dispose of such shares or any shares of Common Stock purchased by them
directly from the Company after the effective date of the Offering, until 180
days after the effective date, without the prior written consent of Schroder &
Co. Inc. After such date, all such shares may be sold subject to the limitations
of Rule 144 of the Securities Act of 1933, as amended (the "Securities Act").
See "Shares Eligible for Future Sale."

LACK OF PRIOR PUBLIC MARKET

Prior to the Offering, there has been no public market for the Company's
Common Stock. The Company has applied to have the Class A Common Stock listed on
the New York Stock Exchange. Regardless of whether the Class A Common Stock is
approved for listing on the New York Stock Exchange, there is no assurance as to
the development or liquidity of any trading market for the Class A Common Stock
or that the purchasers of the Class A Common Stock will be able to resell their
shares at prices equal to or greater than the public offering price. The public
offering price for the Class A Common Stock will be determined by negotiations
between the Company and Schroder & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and McDonald & Company Securities, Inc., as
representatives (the "Representatives") of the Underwriters. See "Underwriting"
for a discussion of the factors to be considered in determining the public
offering price of the shares of Class A Common Stock.

13
<PAGE> 16

POSSIBLE VOLATILITY OF STOCK PRICE

After completion of the Offering, the market price of the Class A Common
Stock could be subject to significant fluctuations due to variations in the
quarterly financial results of the Company and other factors, such as changes in
earnings estimates by analysts, conditions in the overall economy and the
financial markets, natural disasters and other developments affecting the
Company and its competitors. In addition, the securities markets have recently
experienced significant price and volume fluctuations. This volatility has had a
significant effect on the market price of securities issued by many companies
for reasons unrelated to their operating performance, and these fluctuations may
adversely affect the market price of the Class A Common Stock.

DILUTION

Based on the September 30, 1997 financial statements of the Company,
purchasers of the Class A Common Stock will experience immediate dilution of
$ in the tangible net book value per share of the Class A Common Stock,
assuming a public offering price of $ per share. See "Dilution."

14
<PAGE> 17

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class
A Common Stock offered hereby (based on an assumed public offering price of
$ per share) are estimated to be $ million ($ million if the
Underwriters' over-allotment option is exercised in full) after deduction of the
estimated underwriting discounts and commissions and expenses of the Offering.
The Company expects to use such net proceeds to redeem all of its 12% senior
subordinated notes (the "Senior Subordinated Notes") and to redeem (the
"Preferred Stock Redemption") all of the Company's Series A Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), a portion of the
Company's Series B Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock"), and a portion of the Company's Series C Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock"). Any remaining proceeds
will be used for working capital and general corporate purposes, including
planned capital expenditures and possible acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain
Transactions -- Transactions Concurrent with the Offering." Pending use, the
Company will invest these remaining proceeds in money market funds or other
short-term interest bearing securities. The Company will not receive any
proceeds from the sale of Class A Common Stock by the Selling Stockholders.

As part of its strategy of identifying and acquiring complementary
businesses, the Company has from time to time engaged, and expects to engage in
the future, in discussions relating to such potential acquisitions. There is no
assurance that the Company will continue to identify suitable new acquisition
candidates, obtain financing necessary to complete such acquisitions, acquire
businesses on satisfactory terms or enter into any definitive acquisition
agreements or, if entered into, that future acquisitions will be successful or
will achieve results comparable to the Company's existing business. See "Risk
Factors -- Acquisition Strategy."

The following table sets forth the estimated use of the net proceeds (in
thousands):

<TABLE>
<S> <C>
Redemption of Senior Subordinated Notes(1)....................... $ 30,000
Preferred Stock Redemption(2).................................... 1,757
Working Capital and General Corporate Purposes...................
--------
Total Uses............................................. $
========
</TABLE>

- ---------------
(1) Represents payment in full of the Senior Subordinated Notes, together with
accrued and unpaid interest thereon. Principal payments on the Senior
Subordinated Notes are due in equal installments of $10.0 million on January
31, 2004 and June 30, 2004 and 2005. Interest on the Senior Subordinated
Notes is payable quarterly at 12.0% per annum.

(2) Represents the redemption of all 1,375 outstanding shares of Series A
Preferred Stock, 351 of the outstanding shares of Series B Preferred Stock
and seven of the outstanding shares of Series C Preferred Stock, together
with accrued and unpaid dividends thereon (assuming a redemption date of
December 31, 1997). See "Certain Transactions -- Transactions Concurrent
with the Offering."

DIVIDEND POLICY

The Company has never declared or paid cash dividends on the Class A Common
Stock. The Company currently intends to retain earnings, if any, to finance the
growth and development of its business and does not anticipate paying any cash
dividends in the foreseeable future. Any future dividends will depend on the
earnings, capital requirements and financial condition of the Company, and on
such other factors as the Company's Board of Directors may consider relevant. In
addition, the New Revolving Credit Facility and the Senior Note Indenture
prohibit the payment of cash dividends on the Class A Common Stock except upon
compliance with certain conditions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at September 30, 1997, as adjusted to reflect the sale of
shares of Class A Common Stock offered by the Company hereby (at an assumed
public offering price of $ per share), the exercise of warrants to purchase
shares of Class B Common Stock (which will be automatically converted
on a one-for-one basis into shares of Class A Common Stock upon the sale by
certain of the Selling Stockholders in the Offering), and the application of the
net proceeds therefrom as described under "Use of Proceeds," the replacement of
the Company's existing senior revolving credit facility (the "Old Revolving
Credit Facility") with the New Revolving Credit Facility, and the completion of
the Preferred Stock Redemption as described under "Certain
Transactions -- Transactions Concurrent with the Offering." This table should be
read in conjunction with the historical consolidated financial statements of the
Company and the notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(in thousands)
<S> <C> <C>
Long-term debt (including current portion)
Old Revolving Credit Facility(1)................................... -- --
New Revolving Credit Facility(2)................................... --
Senior Notes....................................................... $100,000
Senior Subordinated Notes(3)....................................... 26,862 --
Hutchinson acquisition notes....................................... 1,500
Other obligations.................................................. 2,934
------- -------
Total long-term debt............................................ $131,296 $
======= =======
Detachable stock warrants, subject to put option(3).................. $ 9,300 $ --
------- -------
Stockholders' equity
Series A Preferred Stock, $.01 par value: authorized: 2,625 shares;
issued and outstanding: 1,375 shares, $1,375,000 aggregate
liquidation value (actual); issued and outstanding: none (as
adjusted); Series B Preferred Stock, $.01 par value: authorized:
702 shares; issued and outstanding: 702 shares, $702,000
aggregate liquidation value (actual); issued and outstanding:
none (as adjusted); and Series C Preferred Stock, $.01 par
value: authorized: 1,189 shares; issued and outstanding: 1,189
shares, $1,189,000 aggregate liquidation value (actual); issued
and outstanding: none (as adjusted)............................. $ 1 --
Series D Preferred Stock, $.01 par value: authorized: 1,530 shares;
issued and outstanding: none (actual); issued and outstanding:
1,530 shares, $1,530,000 aggregate liquidation value (as
adjusted)....................................................... -- $
Series E Preferred Stock, $.01 par value: authorized: 100,000
shares; issued and outstanding: none (actual and as adjusted)... -- --
Class A Common Stock, $.01 par value: authorized: 2,200,000 shares;
issued and outstanding: 1,443,978 shares (actual)(4);
authorized: 75,000,000 shares; issued and outstanding:
shares (as adjusted)(4)............................... 14
Class B Common Stock, $.01 par value: authorized: 10,000,000
shares; issued and outstanding: none (actual and as adjusted)... -- --
Additional paid-in capital......................................... 1,964
Retained earnings (deficit)........................................ (2,653)
Other equity adjustments........................................... (774)
------- -------
Total stockholders' equity (deficit)............................ (1,448)
------- -------
Total capitalization....................................... $139,148 $
======= =======
</TABLE>

(footnotes on the following page)

16
<PAGE> 19

- ---------------
(1) Borrowings of up to the lesser of (1) $25.0 million, or (2) the sum of 85.0%
of eligible accounts receivable and 60.0% of eligible inventory, under the
Company's existing bank credit facility (the "Old Revolving Credit
Facility") were available at LIBOR plus 2.25% per annum or, at the Company's
option, a variable rate based on the lending bank's prime rate plus 1.0% per
annum, for working capital and general corporate purposes. Amounts
outstanding under the Old Revolving Credit Facility are due November 27,
1999. The Old Revolving Credit Facility was secured by substantially all of
the accounts receivable, inventory and intangibles of the Company and its
domestic subsidiaries. The Old Revolving Credit Facility will be terminated
at the closing of the Offering.

(2) Concurrently with the closing of the Offering, the Company will enter into
the New Revolving Credit Facility. Amounts outstanding under the New
Revolving Credit Facility will be due , 2002, and will bear interest at
a variable rate based on the Eurodollar Rate plus 0.75% per annum or, at the
Company's option, a variable rate based on the lending bank's prime rate,
with both rates subject to increase in the event the Company does not meet
certain debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA") ratios. The New Revolving Credit Facility will be
unsecured and will be used for working capital and general corporate
purposes. The commitment fee on the unused portion of the New Revolving
Credit Facility is 0.25% per annum of such unused portion, which fee is
subject to increase in the event the Company does not meet certain debt to
EBITDA ratios.

(3) Effective June 30, 1995, the Company issued $30.0 million aggregate
principal amount of Senior Subordinated Notes with detachable warrants that
provide the holders the option to purchase shares of the Company's
Class B Common Stock at a nominal price. Beginning in the year 2001, the
warrant holders have the right to put the warrants back to the Company for
cash, at prices based on the fair market value of the Company at the date of
put, as determined by an independent third party. The warrant holders' put
option is terminated upon the closing of an initial public offering. For
financial reporting purposes, at June 30, 1995, the fair value of the
warrants, including the put option, was estimated to be $4.6 million and
classified as detachable stock warrants, subject to put option, on the
Company's balance sheet. The resulting discount is being amortized over the
life of the debt as non-cash, imputed interest. This discount is based on an
effective interest rate of 14.2%. The unamortized discount at September 30,
1997 was $3.1 million. Adjustments to the carrying value of the detachable
stock warrants are determined by management based on revisions to the
estimated present value of the future fair market value of the Company. The
carrying value of the warrants, including the put option, was adjusted to
$9.3 million as of September 30, 1997.

(4) Does not include shares of Class A Common Stock reserved for issuance
under the Company's 1997 Stock Option Plan (of which shares will be
reserved for options to be outstanding as of the closing of the Offering),
or shares of Class A Common Stock, based on an assumed public offering
price of $ per share, issuable upon conversion of 8.0% two-year notes that
were issued by the Company in connection with the acquisition of Hutchinson.
Up to $500,000 of the then-outstanding principal balance is convertible at
the option of the holders thereof into shares of Class A Common Stock at the
public offering price.

17
<PAGE> 20

DILUTION

At September 30, 1997, the Company's net tangible book value was $
million or $ per share of Class A Common Stock. Net tangible book value
per share represents the Company's tangible assets less total liabilities
divided by the number of shares of Class A Common Stock, assuming the exercise
of warrants to purchase shares of Class B Common Stock which will be
converted on a one-for-one basis into shares of Class A Common Stock upon the
sale by the Selling Stockholders in the Offering and the application of the net
proceeds of the Offering to effect the Preferred Stock Redemption. After giving
effect to the sale of the shares of Class A Common Stock offered
hereby (at an assumed public offering price of $ per share of Class A
Common Stock) and after deduction of underwriting discounts and commissions and
estimated offering expenses (estimated at $ million), the net tangible book
value of the Company at September 30, 1997 would have been $ , or
$ per share of Class A Common Stock. This represents an immediate
increase in net tangible book value of $ per share of Class A Common
Stock to existing stockholders and an immediate dilution of $ per share
of Class A Common Stock to new purchasers. The following table illustrates this
dilution per share of Class A Common Stock:

<TABLE>
<S> <C> <C>
Public offering price per share of Class A Common Stock...... $
Net tangible book value per share of Class A Common Stock
as of September 30, 1997(1)............................. $
Increase per share of Class A Common Stock attributable to
the sale of Class A Common Stock in the Offering........
Pro forma net tangible book value per share of Class A Common
Stock after giving effect to the Offering(1)...............
--------
Dilution per share of Class A Common Stock to new
purchasers(1).............................................. $
========
</TABLE>

The following table summarizes, on a pro forma basis as of September 30,
1997, the difference between the number of shares of Class A Common Stock
purchased from the Company, the aggregate consideration paid and the average
price per share of Class A Common Stock paid by existing stockholders and by new
purchasers who purchase Class A Common Stock in the Offering (based upon an
assumed public offering price of $ per share of Class A Common Stock),
without giving effect to estimated underwriting, discounts and commissions and
expenses of the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... % $1,426,500 % $
New purchasers.............
Total(1)......... 100% $ 100% $
</TABLE>

- ---------------
(1) Does not include shares of Class A Common Stock reserved for
issuance under the Company's 1997 Stock Option Plan (of which
shares will be reserved for options to be outstanding as of the
closing of the Offering). See "Management -- Stock Option Plan." Also does
not include shares of Class A Common Stock, based on an assumed
public offering price of $ per share, issuable upon conversion of 8.0%
two-year notes that were issued by the Company in connection with the
acquisition of Hutchinson. Up to $500,000 of the then-outstanding principal
balance is convertible at the option of the holders thereof into shares of
Class A Common Stock at the public offering price.

18
<PAGE> 21

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

The unaudited pro forma consolidated statements of operations of the
Company for the year ended December 31, 1996 and the nine months ended September
30, 1997, include the historical operations of the Company and give effect to
the Hutchinson acquisition in January 1997 and the Sinterloy acquisition in
August 1997 as if they occurred as of January 1, 1996. The unaudited pro forma
consolidated statements of operations have been prepared by the Company's
management. The information is not designed to represent and does not represent
what the Company's results of operations actually would have been had the
aforementioned transactions been completed as of January 1, 1996, or to project
the Company's results of operations for any future period. The pro forma
adjustments are based on available information and certain assumptions that the
Company currently believes are reasonable under the circumstances. The unaudited
pro forma consolidated statements of operations should be read in conjunction
with the more detailed information contained in the historical consolidated
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.

19
<PAGE> 22

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996

(in thousands, except share and per share data)

<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS
HAWK HUTCHINSON SINTERLOY FOR
CORPORATION ACQUISITION ACQUISITION ACQUISITIONS PRO FORMA
----------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 123,997 $8,621 $11,597 -- $144,215
Cost of sales.............................. 91,884 5,776 7,422 -- 105,082
--------- ------- ------- -------- ------
Gross profit............................... 32,113 2,845 4,175 -- 39,133
Expenses:
Selling, technical, and administrative
expenses............................... 15,468 794 1,053 $ 11(1) 17,326
Amortization of intangibles.............. 2,806 149 -- 567(2) 3,522
Plant consolidation expense.............. 4,028 -- -- -- 4,028
--------- ------- ------- -------- ------
Total expenses............................. 22,302 943 1,053 578 24,876
Income from operations..................... 9,811 1,902 3,122 (578) 14,257
Interest expense........................... 10,648 23 9 2,847(3) 13,527
Other (income) expense, net................ 256 (20) (32) -- 204
Income (loss) before income taxes and
extraordinary item....................... (1,093) 1,899 3,145 (3,425) 526
Income taxes............................... 789 791 34 (77)(4) 1,537
Income (loss) before extraordinary item.... $ (1,882) $1,108 $ 3,111 $(3,348) $ (1,011)
========= ======= ======= ======== ======
Preferred stock dividend requirements...... $ (226) $ (226)
Loss applicable to common stockholders,
excluding extraordinary item of $1,196... $ (2,108) $ (1,237)
Loss per share applicable to common
stockholders............................. $ $
Number of shares used to compute per share
data.....................................
</TABLE>

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

<TABLE>
<S> <C> <C>
(1) Represents incremental depreciation expense due to the write up of plant, property and
equipment to fair market value under the purchase method of accounting in the acquisition
of Sinterloy............................................................................... $ 11
======
(2) Represents incremental amortization due to an increase in intangible assets from applying
the purchase method of accounting in the Sinterloy and Hutchinson acquisitions. Intangible
assets include goodwill that is amortized over 30 years.
Sinterloy.................................................................................. $ 317
Hutchinson................................................................................. 250
------
$ 567
======
(3) Represents incremental interest expense, assuming an interest rate of 10.25%, based on the
imputed funding required to effect the acquisitions of:
Sinterloy.................................................................................. 1,801
Hutchinson................................................................................. 1,046
------
$2,847
======
(4) Represents income taxes that would have been incurred had Hutchinson and Sinterloy been
included in the Company's consolidated group for tax reporting purposes.................... $ (77)
======
</TABLE>

20
<PAGE> 23

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997

(in thousands, except share and per share data)

<TABLE>
<CAPTION>
HISTORICAL
HAWK SINTERLOY ADJUSTMENTS
CORPORATION ACQUISITION FOR ACQUISITION PRO FORMA
----------- ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $ 116,362 $ 8,623 -- $124,985
Cost of sales.................................. 82,940 4,671 -- 87,611
--------- ------ ------- --------
Gross profit................................... 33,422 3,952 -- 37,374
Expenses:
Selling, technical, and administrative
expenses................................... 14,241 643 $ 9(1) 14,893
Amortization of intangibles.................. 2,575 -- 239(2) 2,814
Plant consolidation expenses................. 50 -- 50
--------- ------ ------- --------
Total expenses............................... 16,866 643 248 17,757
Income from operations......................... 16,556 3,309 (248) 19,617
Interest expense............................... 10,639 -- 400(3) 11,039
Other (income) expense, net.................... 122 (61) -- 61
--------- ------ ------- --------
Income before income taxes..................... 5,795 3,370 (648) 8,517
Income taxes................................... 2,534 -- 1,089(4) 3,623
--------- ------ ------- --------
Net income..................................... $ 3,261 $ 3,370 $ (1,737) $ 4,894
Preferred stock dividend requirements.......... $ (240) $ (240)
Net income applicable to common stockholders... $ 3,021 $ 4,654
Net income per share applicable to common
stockholders................................. $ $
Number of shares used to compute per share
data.........................................
</TABLE>

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

<TABLE>
<S> <C> <C>
(1) Represents incremental depreciation expense due to the write-up of plant, property and
equipment to fair market value under the purchase method of accounting in the acquisition
of Sinterloy............................................................................... $ 9
======
(2) Represents incremental amortization due to an increase in intangible assets from applying
the purchase method of accounting in the acquisition of Sinterloy. Intangible assets
include goodwill that is amortized over 30 years........................................... $ 239
======
(3) Represents the net adjustment to interest expense, assuming an interest rate of 10.25%,
based on the imputed funding required to effect the acquisition of Sinterloy............... $ 400
======
(4) Represents income taxes that would have been incurred had Sinterloy been included in the
Company's consolidated group for tax reporting purposes.................................... $1,089
======
</TABLE>

21
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

The selected consolidated financial data presented below under the captions
"Income Statement Data," "Other Data" and "Balance Sheet Data" as of and for
each of the five years ended December 31, 1992, 1993, 1994, 1995 and 1996, have
been derived from the audited consolidated financial statements of the Company.
The selected consolidated financial data as of and for the nine months ended
September 30, 1996 and 1997 have been derived from the unaudited consolidated
financial statements of the Company, which have been prepared by management on
the same basis as the audited consolidated financial statements of the Company,
and, in the opinion of management of the Company, reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of such data for such periods and as of such dates. Operating results for the
nine month period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for any other interim period or the full year. The
acquisitions of Helsel, SKW, Hutchinson and Sinterloy occurred in June 1994,
June 1995, January 1997 and August 1997, respectively. This data should be read
in conjunction with the more detailed information contained in the consolidated
financial statements and notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other financial information
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................... $ 24,931 $ 28,417 $ 41,395 $ 84,643 $123,997 $ 93,672 $116,362
Cost of sales........................... 14,929 16,834 26,771 61,164 91,884 69,023 82,940
-------- -------- -------- -------- -------- -------- --------
Gross profit.......................... 10,002 11,583 14,624 23,479 32,113 24,649 33,422
Selling, technical and administrative... 4,582 4,833 6,294 11,575 15,468 11,612 14,241
Amortization of intangibles............. 1,304 954 954 1,924 2,806 2,408 2,575
Plant consolidation expense(1).......... -- -- -- -- 4,028 3,749 50
-------- -------- -------- -------- -------- -------- --------
Income from operations................ 4,116 5,796 7,376 9,980 9,811 6,880 16,556
Interest expense........................ 2,903 2,654 3,267 7,323 10,648 7,321 10,639
Other expense (income), net............. -- -- (234) (130) 256 55 122
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes,
minority interest, extraordinary
item and cumulative effect of change
in accounting principle............. 1,213 3,142 4,343 2,787 (1,093) (496) 5,795
Income taxes............................ 494 1,716 1,845 1,593 789 863 2,534
Minority interest....................... -- -- 211 432 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item and cumulative effect of change
in accounting principle............. 719 1,426 2,287 762 (1,882) (1,359) 3,261
Extraordinary item(2)................... 233 -- -- -- (1,196) -- --
Cumulative effect of change in
accounting for income taxes........... -- 284 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 952 $ 1,142 $ 2,287 $ 762 $ (3,078) $ (1,359) $ 3,261
======== ======== ======== ======== ======== ======== ========
Preferred stock dividend requirements... $ (263) $ (263) $ (294) $ (326) $ (226) $ (170) $ (240)
Income (loss) before extraordinary
item applicable to common
stockholders........................ 456 879 1,993 436 (2,108) (1,529) 3,021
Net income (loss) applicable to common
stockholders........................ 689 879 1,993 436 (3,304) (1,529) 3,021
Income (loss) before extraordinary item
per share applicable to common
stockholders..........................
Net income (loss) per share applicable
to common stockholders................
Number of shares used to compute per
share data............................
OTHER DATA:
Depreciation and amortization........... $ 2,174 $ 1,920 $ 2,466 $ 5,527 $ 8,418 $ 6,688 $ 7,166
Capital expenditures (including capital
leases)............................... 446 586 1,871 3,781 10,294 9,142 4,975
</TABLE>

(footnotes on the following page)

22
<PAGE> 25

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 68 $ 63 $ 730 $ 771 $ 25,774 $ 1,894 $ 3,629
Working capital (deficit)............... 1,053 (3,709) (4,076) 15,565 48,700 19,009 30,596
Property, plant and equipment, net...... 6,020 5,627 10,166 39,460 44,142 44,284 51,963
Total assets............................ 33,729 33,925 43,645 127,419 158,441 132,894 170,915
Total long-term debt.................... 26,457 24,050 26,726 94,906 129,183 102,146 131,296
Detachable stock warrants, subject to
put option(3)......................... -- -- -- 4,600 4,600 4,600 9,300
Stockholders' equity (deficit).......... 2,488 3,377 5,898 3,948 1,190 2,698 (1,448)
</TABLE>

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

(1) Reflects charges in 1996 and 1997 relating primarily to the relocation of
machinery and equipment.

(2) Reflects utilization of tax loss carryforward in 1992 and write-off in 1996
of deferred financing costs, net of $798,000 in income taxes.

23
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in connection with the Company's
consolidated financial statements and notes thereto and other financial
information, included elsewhere in this Prospectus.

OVERVIEW

Hawk is a manufacturing holding company that, through its operating
subsidiaries, designs, engineers, manufactures and markets specialized
components, principally made from powder metals, used in a wide variety of
aerospace, industrial and commercial applications. Since 1989, Hawk has pursued
a strategic growth plan by making complementary acquisitions and broadening its
customer base:

<TABLE>
<CAPTION>
EFFECTIVE DATE YEAR
ACQUISITION OF ACQUISITION BUSINESS FOUNDED
- ----------------- -------------- --------------------------------------------- -------
<S> <C> <C> <C>
FPC and Logan March 1989 Friction products for brakes, clutches and 1961
transmissions used in aerospace, industrial
and specialty applications
Helsel June 1994 High precision powder metal components used 1974
primarily in fluid power applications
SKW June 1995 Friction products for industrial applications 1924
Hutchinson January 1997 Die-cast aluminum rotors for small electric 1947
motors used in business equipment, appliances
and exhaust fans
Sinterloy August 1997 Powder metal components for business 1969
equipment
</TABLE>

The above acquisitions were accounted for under the purchase method of
accounting, with the purchase price allocated to the estimated fair market value
of the assets acquired and liabilities assumed. In the acquisitions, any excess
of the purchase price paid over the estimated fair value of the net assets
acquired was allocated to goodwill, which resulted in approximately $40.1
million of goodwill reflected on the September 30, 1997 balance sheet. The
annual amortization of goodwill will result in non-cash charges to future
operations of approximately $1.8 million per year (of which the majority of such
amortization is deductible for tax purposes) based on amortization periods
ranging from 15 to 40 years.

The acquisitions of Helsel, SKW, Hutchinson and Sinterloy caused a
significant change in the Company's product mix and resulted in a reduction in
the Company's gross profit margin. The Company's gross profit margin in 1993 was
40.8%. The acquisition of Helsel had the effect of reducing the Company's
overall gross profit margin to 35.3% in 1994. The acquisition of SKW had the
effect of further reducing the Company's overall gross profit margin to 27.7% in
1995 and 25.9% in 1996. The Company believes that the gross profit margins of
the industrial and specialty friction products and powder metal components
produced by SKW and Helsel, respectively, exceed gross profit margins realized
in other markets that use standardized products. However, these margins are
exceeded by those achieved by the Company's FPC business, as a result of FPC's
proprietary products and leading position in the aerospace friction products
market.

In 1995, the Company consolidated SKW's headquarters facility into the
Company's existing facilities, which resulted in an annualized cost savings of
$1.8 million due to the elimination of redundant expenses. During 1996, the
Company consolidated one of SKW's two U.S. manufacturing facilities into the
Company's existing facilities, which resulted in $3.6 million in annualized cost
savings from reduction of overhead expenses. The Company incurred $4.0 million
of costs relating primarily to the relocation of machinery and equipment in
1996. In addition, the manufacturing facility consolidation program had the
effect of decreasing the gross profit margins in 1996 primarily as a result of
the temporary production inefficiencies arising from the relocation of
manufacturing operations. Partly as a result of the elimination of these
temporary production inefficiencies, gross margins increased to 28.7% for the
nine months ended September 30, 1997 from 26.3% for the corresponding period in
1996.

24
<PAGE> 27

In November 1996, the Company incurred $2.0 million ($1.2 million
after-tax) of non-recurring extraordinary charges as a result of the write-off
of previously capitalized deferred financing costs arising from the termination
of the Company's previous senior credit facility. Primarily because of the
non-recurring charges relating to the manufacturing facility consolidation
program and the deferred financing costs, the Company incurred a net loss of
$3.1 million in 1996.

The Company's foreign operations expose it to the risk of exchange rate
fluctuations. For example, because the Company's Italian operation typically
generates positive net cash flow, which is denominated in lire, a decline in the
value of the lira relative to the dollar would adversely affect the Company's
reported sales and earnings. In addition, the restatement of foreign currency
denominated assets and liabilities into U.S. dollars gives rise to foreign
exchange gains or losses which are recorded in stockholders' equity. The Company
does not currently participate in hedging transactions related to foreign
currency.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, items in the
Company's income statements as a percentage of net sales:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............................. 35.3 27.8 25.9 26.3 28.7
Selling, technical and administrative
expenses................................. 15.2 13.7 12.5 12.4 12.2
Amortization of intangible assets.......... 2.3 2.3 2.2 2.6 2.2
Plant consolidation expense................ -- -- 3.2 4.0 --
Income from operations................... 17.8 11.8 7.9 7.3 14.2
Interest expense........................... 7.9 8.7 8.6 7.8 9.1
Other (income) expense, net................ (0.6) (0.2) 0.2 -- 0.1
Income (loss) before income taxes........ 10.5 3.3 (0.9) (0.5) 5.0
Income taxes............................... 4.5 1.9 0.6 0.9 2.2
Minority interest.......................... 0.5 0.5 -- -- --
Income before extraordinary item......... 5.5 0.9 (1.5) (1.5) 2.8
Extraordinary item......................... -- -- (1.0) -- --
Net income (loss)........................ 5.5 0.9 (2.5) (1.5) 2.8
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996

Net Sales. Net sales increased by $22.7 million, or 24.2%, from $93.7
million during the first nine months of 1996 to $116.4 million during the first
nine months of 1997. The net sales increase was attributable to the acquisitions
of Hutchinson and, to a lesser extent, Sinterloy and strong customer demand in
all of the Company's product lines.

Gross Profit. Gross profit increased $8.8 million to $33.4 million during
the first nine months of 1997, a 35.6% increase over gross profit of $24.6
million during the first nine months of 1996. The gross profit margin increased
to 28.7% during the first nine months of 1997 from 26.3% during the comparable
period in 1996. The increase was attributable to cost savings resulting from the
consolidation of one of the Company's manufacturing facilities during 1996 into
existing Company facilities, as well as favorable product mix.

Selling, Technical and Administrative Expenses. Selling, technical and
administrative ("ST&A") expenses increased $2.6 million, or 22.6%, from $11.6
million during the first nine months of 1996 to $14.2 million during the first
nine months of 1997. As a percentage of net sales, ST&A remained

25
<PAGE> 28

relatively constant at 12.2% during the first nine months of 1997 compared to
12.4% during the comparable period of 1996.

Income from Operations. Income from operations increased $9.7 million, or
140.6%, from $6.9 million in the first nine months of 1996 to $16.6 million in
the first nine months of 1997. Income from operations as a percentage of net
sales increased to 14.2% in the first nine months of 1997 from 7.3% in the
comparable nine month period of 1996, reflecting cost savings from the
consolidation of facilities, reduced plant consolidation expenses, increased
sales and a more favorable product mix.

Interest Expense. Interest expense increased $3.3 million, or 45.3%, to
$10.6 million in the first nine months of 1997 from $7.3 million in the
comparable nine month period in 1996. The increase is attributable to higher
debt levels, a result of the issuance of the Senior Notes in the fourth quarter
of 1996.

Income Taxes. The provision for income taxes increased $1.6 million to
$2.5 million in the first nine months of 1997 (43.7% of pre-tax income) from
$0.9 million in the comparable period of 1996, reflecting the increase in
pre-tax income.

Net Income (Loss). As a result of the factors noted above, net income was
$3.3 million in the first nine months of 1997 compared to a loss of $1.4 million
in the comparable nine month period of 1996.

1996 COMPARED TO 1995

Net Sales. Net sales increased $39.4 million, or 46.5%, from $84.6 million
in 1995 to $124.0 million in 1996. Net friction product sales increased $39.2
million, or 61.1%, from $64.2 million in 1995 to $103.4 million in 1996. The net
friction product sales increase was primarily attributable to the purchase of
SKW in June 1995. Sales attributable to the acquired company in 1996 were $68.9
million compared to $32.3 million of SKW sales that were included in the
Company's results for 1995, representing a net increase of $36.6 million, or
93.3%, of the friction product net sales increase. The remaining net friction
product sales increase of $2.6 million in 1996, or 6.7% of the increase, was
primarily attributable to increased aftermarket sales of friction products used
in construction and agricultural equipment and increased sales of specialty
friction products. These sales increases were partially offset by lower sales of
friction products for heavy truck clutches resulting from lower truck
production. Powder metal component net sales increased $212,000, or 1.0%, from
$20.4 million in 1995 to $20.6 million in 1996. The increase in powder metal
component sales was primarily attributable to higher sales of powder metal
components used in hydraulic mechanisms.

Gross Profit. Gross profit in 1996 was $32.1 million, an increase of $8.6
million, or 36.8%, from $23.5 million in 1995. As a percentage of net sales,
gross profit was 25.9% in 1996 and 27.8% in 1995. Gross profit as a percentage
of sales decreased primarily as a result of the change in product mix resulting
from the SKW acquisition and costs associated with the start-up of production
(other than moving expenses) in connection with the manufacturing facility
consolidation program. As a result of the SKW acquisition, sales of the
Company's higher margin aerospace friction products declined from 25.5% of net
sales in 1995 to 20.8% of net sales in 1996. Combined sales of the Company's
lower margin construction and agriculture friction products increased from 17.6%
of net sales in 1995 to 34.2% of net sales in 1996.

ST&A Expenses. ST&A expenses increased $3.9 million, or 33.6%, from $11.6
million in 1995 to $15.5 million in 1996. As a percentage of net sales, ST&A
expenses declined from 13.7% to 12.5% over such periods, primarily as a result
of the reductions in the overhead of SKW and the increase in net sales, as a
result of the SKW acquisition, partially offset by higher incentive compensation
at the Company's friction product facilities.

Income from Operations. Income from operations of $9.8 million in 1996
decreased $169,000, or 1.7%, from $10.0 million in 1995. As a percentage of net
sales, income from operations declined from 11.8% in 1995 to 7.9% in 1996. In
addition to the change in product mix resulting from the SKW acquisition and
production start-up costs and increased ST&A expenses referred to above, the de-

26
<PAGE> 29

crease reflects $4.0 million in non-recurring costs in 1996 in connection with
the SKW manufacturing facility consolidation program and $882,000 in increased
amortization of goodwill and deferred financing costs primarily resulting from
the acquisition of SKW.

Interest Expense. Interest expense increased $3.3 million, or 45.4%, from
$7.3 million in 1995 to $10.6 million in 1996. The increase is primarily related
to the higher average amount of outstanding indebtedness in 1996 resulting from
the acquisition of SKW.

Income Taxes. The provision for income taxes decreased $804,000 from $1.6
million in 1995 (57.2% of pre-tax income) to $789,000 of expense in 1996.

Extraordinary Item. In 1996, the Company incurred $2.0 million of
non-recurring extraordinary charges as a result of the write-off of previously
capitalized deferred financing costs arising from the termination of the Old
Credit Facility.

Net Income (Loss). The net loss for 1996 was $3.1 million, a change of
$3.8 million compared to net income of $762,000 in 1995, as a result of the
factors noted above.

1995 COMPARED TO 1994

Net Sales. Net sales increased $43.2 million, or 104.5%, from $41.4
million in 1994 to $84.6 million in 1995. Friction product net sales increased
$33.8 million, or 110.9%, from $30.4 million in 1994 to $64.2 million in 1995.
The net friction product sales increase was attributable to the purchase of SKW
in June 1995, and to a lesser extent, to increased sales of linings for aircraft
braking systems due to the sustained improvement of the U.S. commercial airline
industry. Sales attributable to SKW in 1995, including brake lining sales, were
$32.3 million, or 95.7%, of the friction product net sales increase. Sales for
the Company's other friction products businesses were unchanged as increased
aftermarket sales and sales of heavy truck clutches resulting from increased
truck production were offset by sales declines to original equipment
manufacturers of construction and agricultural equipment. Powder metal component
net sales increased $9.5 million, or 86.6%, from $10.9 million in 1994 to $20.4
million in 1995, primarily as a result of the full year inclusion of Helsel
which was acquired in June 1994. The full year inclusion of Helsel accounted for
$9.2 million, or 97.4%, of the net sales increase in 1995. The remaining powder
metal component sales increase was primarily due to increased sales of powder
metal components for fluid power applications and for anti-lock brake sensor
rings for use in heavy trucks.

Gross Profit. Gross profit in 1995 was $23.5 million, an increase of $8.9
million, or 60.6%, from $14.6 million in 1994. As a percentage of net sales,
gross profit was 35.3% in 1994 and 27.8% in 1995. This change was primarily a
result of a change in product mix resulting from the acquisitions of SKW and
Helsel and $2.4 million in additional cost of sales as a result of the write up
of inventory purchased in the SKW acquisition to fair value. Gross profit
margins in the existing friction products business grew slightly due to the
increased proportion of high margin aircraft brake lining sales.

ST&A Expenses. ST&A expenses increased $5.3 million, or 83.9%, from $6.3
million in 1994 to $11.6 million in 1995. As a percentage of net sales, ST&A
expenses declined from 15.2% to 13.7% over such periods, primarily as a result
of the reductions in the overhead of SKW and the increase in net sales, as a
result of the SKW acquisition.

Income from Operations. Income from operations increased $2.6 million, or
35.3%, from $7.4 million in 1994 to $10.0 million in 1995. As a percentage of
net sales, income from operations declined from 17.8% in 1994 to 11.8% in 1995,
primarily as a result of the change in product mix following the SKW and Helsel
acquisitions and, to a lesser extent, increased amortization of goodwill and
deferred financing costs of $910,000, primarily as a result of the acquisitions.

Interest Expense. Interest expense increased $4.1 million, or 124.2%, from
$3.3 million in 1994 to $7.3 million in 1995. The increase is primarily related
to the higher average amount of outstanding indebtedness in 1995 resulting from
the acquisition of SKW.

27
<PAGE> 30

Income Taxes. The provision for income taxes decreased $252,000 from $1.8
million in 1994 (42.5% of pre-tax income) to $1.6 million in 1995 (57.2% of
pre-tax income). The increase in the effective tax rate in 1995 was primarily
the result of increased non-deductible amortization, earnings from foreign
operations and adjustments to the Company's worldwide tax liability.

Net Income. Net income decreased $1.5 million, or 66.7%, from $2.3 million
in 1994 to $762,000 in 1995, as a result of the factors noted above.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the recent acquisitions and the issuance of the Senior
Notes, the Company has, and will continue to have, substantial indebtedness. The
Company will therefore be required to use a substantial portion of its cash flow
from operations for the payment of interest expense on indebtedness.

The Company's primary source of funds for conducting its business
activities and servicing its indebtedness has been cash generated from
operations and borrowings under its Old Revolving Credit Facility (subject to a
borrowing base of a portion of the eligible accounts receivable and inventory).
As of September 30, 1997, there were no amounts outstanding under the Old
Revolving Credit Facility.

Concurrently with closing of the Offering, the Company will enter into the
New Revolving Credit Facility and will terminate the Old Revolving Credit
Facility. The New Revolving Credit Facility will be unsecured and will be used
for working capital and general corporate purposes. The New Revolving Credit
Facility will contain financial and other covenants with respect to the Company
and its subsidiaries that, among other matters, will prohibit the payment of
cash dividends on the Class A Common Stock except upon compliance with certain
conditions, restrict the creation of liens, sales of assets, sale-leaseback
transactions and transactions with affiliates and require the maintenance of
certain minimum debt and interest coverage ratios. Amounts outstanding under the
New Revolving Credit Facility will be due , 2002, and bear interest
at a variable rate based on the Eurodollar Rate plus 0.75% per annum or, at the
Company's option, a variable rate based on the lending bank's prime rate, with
both rates subject to increase in the event the Company does not meet certain
debt to EBITDA ratios. Replacement of the Old Revolving Credit Facility with the
New Revolving Credit Facility is subject to the closing of the Offering.

The Company has outstanding $100.0 million of Senior Notes, which are
unsecured senior obligations of the Company. The Senior Notes, which mature on
December 1, 2003, are guaranteed on a senior unsecured basis by each of the
present and future domestic subsidiaries of the Company. Principal payments on
the Senior Notes are due semi-annually in arrears on June 1 and December 1 of
each year, commencing on June 1, 1997, to holders of record on the immediately
preceding May 15 and November 15, respectively. Interest on the Senior Notes
accrues at the rate of 10 1/4% per annum. The Company is subject to certain
restrictive covenants contained in the Senior Note Indenture, including, but not
limited to, covenants imposing limitations on: the incurrence of additional
indebtedness; certain payments, including dividends and investments; the
creation of liens; sales of assets and preferred stock; transactions with
interested persons; payment and stock issuance restrictions affecting
subsidiaries; sale-leaseback transactions; and mergers and consolidations.

As of September 30, 1997, the Company was in compliance with the terms of
its indebtedness.

Net cash provided by operating activities was $10.2 million for the nine
month period ended September 30, 1997 as compared to $2.8 million in the
comparable period of 1996. The increase in net income of $4.6 million and
non-cash charges in addition to an improved working capital position at
September 30, 1997 accounted for the increased operating cash flow.

Net cash used in investing activities was $30.7 million and $7.5 million
for the nine month periods ending September 30, 1997 and 1996, respectively. The
cash used in investing activities in the 1997 period consisted of $26.0 million
attributable to the acquisitions of Hutchinson and Sinterloy and $4.8 million
for the purchases of property, plant and equipment. In the comparable period of
1996, cash used in investing activities consisted primarily of expenditures for
property, plant and equipment.

28
<PAGE> 31

Net cash used in financing activities was $1.6 million for the nine month
period ended September 30, 1997 and was used primarily for payment of capital
lease obligations. In the comparable nine month period of 1996, net cash
provided by financing activities of $5.8 million was primarily attributable to
an increase in borrowing under the Company's previous credit facilities.

The primary uses of capital by the Company are (1) to pay interest on, and
to repay principal of, indebtedness, (2) for capital expenditures for
maintenance, replacement and acquisitions of equipment, expansion of capacity,
productivity improvements and product development, and (3) for making additional
strategic acquisitions of complementary businesses. The Company's capital
expenditures were $9.1 million in the nine month period ended September 30, 1996
and $5.0 million for the comparable period of 1997. The Company anticipates that
1998 capital expenditures will be approximately $14.1 million, primarily for the
expansion of the Company's existing manufacturing facilities and the purchase of
additional equipment to expand the Company's manufacturing capacity.

The Company believes that cash flow from operating activities, funds
available from the sale of the Class A Common Stock in the Offering and
additional funds available under the New Revolving Credit Facility will be
sufficient to meet its currently anticipated operating and capital expenditure
requirements and service its indebtedness for the next 12 months. If the Company
cannot generate sufficient cash flow from operating activities or borrow under
the New Revolving Credit Facility to meet such obligations, then the Company may
be required to take certain actions, including refinancing all or a portion of
its existing debt, selling assets or obtaining additional financing. There is no
assurance that any such refinancing or asset sales would be possible or that any
additional financing could be obtained.

29
<PAGE> 32

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain quarterly statement of operations
data. This unaudited quarterly information has been prepared on the same basis
as the annual information presented elsewhere herein and, in management's
opinion, includes all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the information for each of the quarters
presented.

<TABLE>
<CAPTION>
1996 1997
------------------------------------------- -------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $31,422 $31,501 $30,749 $30,325 $36,884 $40,097 $39,381
Gross profit.................. 8,366 8,208 8,075 7,464 10,516 12,420 10,486
Selling, technical and
administrative expenses..... 3,669 3,986 3,957 3,856 4,554 4,893 4,794
Amortization of intangibles... 651 932 825 398 829 797 949
Plant consolidation
expenses.................... 600 1,539 1,610 279 -- -- 50
Income from operations........ 3,446 1,751 1,683 2,931 5,133 6,730 4,693
Interest expense.............. 2,513 2,461 2,347 3,327 3,679 3,380 3,580
Other expense (income), net... 5 5 45 201 (250) 280 92
Income (loss) before income
taxes and extraordinary
item........................ 928 (715) (709) (597) 1,704 3,070 1,021
Income (loss) before
extraordinary item.......... 512 (721) (1,150) (523) 898 1,887 476
Extraordinary item............ -- -- -- (1,196) -- -- --
Net income (loss)............. $ 512 $ (721) $(1,150) $(1,719) $ 898 $ 1,887 $ 476
</TABLE>

The Company's results of operations are subject to fluctuations from
quarter to quarter due to changes in demand for its products and other factors.
Demand for the Company's products in each of the geographic end markets it
serves can vary significantly from quarter to quarter due to changes in demand
for products that incorporate or utilize the Company's products and other
factors beyond the Company's control. In the fourth quarter, demand for, and
production of, the Company's products is typically lower than other quarters
because of holiday-related manufacturing facility shut downs by the Company and
its customers. Therefore, year-to-year comparisons of quarterly results may not
be meaningful, and quarterly results during the year are not necessarily
indicative of the results for any future period or for the entire year. See
"Risk Factors -- Fluctuation in Quarterly Results."

INFLATION

Inflation generally affects the Company by increasing interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. The Company believes that the relatively moderate rate of
inflation over the past few years has not had a significant effect on its
results of operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." SFAS
No. 128 specifies modifications to the calculation of earnings per share from
that currently used by the Company. Under SFAS No. 128, "basic earnings per
share" will be calculated based upon the weighted average number of shares
actually outstanding, and "diluted earnings per share" will be calculated based
upon the weighted average number of common shares outstanding and other
potential common shares if they are dilutive. SFAS No. 128 will be adopted by
the Company on December 31, 1997 and all prior periods will be

30
<PAGE> 33

restated. The adoption of SFAS No. 128 is not expected to have a material impact
on the Company's earnings per share for any of the periods presented.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which requires that an enterprise classify
items of other comprehensive income, as defined therein, by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. The Company intends to fully comply with
the provisions of this statement upon its required adoption in the first quarter
of 1998, and does not anticipate a significant impact on the financial
statements.

Also in June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information." This
statement establishes standards for reporting financial and descriptive
information about operating segments. Under SFAS No. 131, information pertaining
to the Company's operating segments will be reported on the basis that is used
internally for evaluating segment performance and making resource allocation
determinations. Management is currently studying the potential effects of
adoption of this statement, which is required in 1998.

31
<PAGE> 34

BUSINESS

OVERVIEW

The Company believes that its diverse customer base and extensive sales to
the aerospace and industrial aftermarkets reduce its exposure to economic
fluctuations. The Company estimates that aftermarket sales of friction products
have comprised approximately 50% of the Company's net friction product sales in
recent years. The Company also believes that its principal tradenames are
well-known in the domestic and international marketplace and are associated with
quality and extensive customer support, including specialized product
engineering and strong aftermarket service.

32
<PAGE> 35

BUSINESS STRATEGY

The Company's business strategy includes the following principal elements:

33
<PAGE> 36

HISTORY

The Company believes that its management team has demonstrated the ability
to identify, complete and integrate strategic acquisitions. In 1989, an investor
group led by Norman C. Harbert, Chairman of the Board, President and Chief
Executive Officer and a stockholder of the Company, and Ronald E. Weinberg,
Vice-Chairman of the Board, Treasurer and a stockholder of the Company, formed
The Hawk Group of Companies, Inc., an Ohio corporation, to acquire the assets
and liabilities of FPC and Logan, each an Ohio corporation that is a
wholly-owned subsidiary of the Company. The assets of Helsel were acquired in
June 1994 by a group led by Mr. Harbert and Mr. Weinberg, and, in June 1995,
Helsel became a wholly-owned subsidiary of the Company upon its merger with a
subsidiary of the Company. The Company acquired the capital stock of SKW in June
1995, at which time the Company was reincorporated as a Delaware corporation by
means of a parent-subsidiary merger. In October 1996, the Company changed its
name to Hawk Corporation. In November 1996, Hawk Holding Corp., a Delaware
corporation that was a principal stockholder of the Company, merged with and
into the Company. In January 1997, the Company acquired the capital stock of
Hutchinson and, in August 1997, the Company purchased the assets of Sinterloy.

ACQUISITIONS

Building on the base of its original FPC and Logan subsidiaries, the
Company has successfully made the following acquisitions:

- Helsel. The June 1994 Helsel acquisition provided the Company with
the ability to manufacture medium sized, high precision powder metal
components used primarily in fluid power applications. Following the
acquisition, the Company made approximately $5 million in capital
improvements at Helsel, increasing its capacity by approximately 30%. By
focusing on its expertise in fluid power applications and by increasing
capacity, Helsel has increased its sales over 50% since its acquisition by
the Company.

- S.K. Wellman. The June 1995 SKW acquisition furthered the Company's
strategy of consolidating friction product manufacturers. Tracing its
history back to the manufacture of transmission friction discs for the
Model T in the 1920s, SKW brought an established, well-known original
equipment and aftermarket industrial product line to the Company to
complement FPC's core aerospace product line. In addition, the acquisition
provided the Company with strategic access to international markets through
SKW's manufacturing facilities in Italy and Canada and an established
distribution network throughout Europe and the Far East. Following the
acquisition, the Company consolidated one of SKW's two U.S. manufacturing
facilities and SKW's executive offices into other facilities of the
Company.

- Hutchinson. The January 1997 Hutchinson acquisition furthered the
Company's strategy of acquiring complementary businesses and expanded the
Company's product offerings, technical capabilities and customer base.
Hutchinson designs and manufactures die-cast aluminum rotors. The Company
believes that Hutchinson is one of the largest independent domestic
suppliers of these rotors, which are used in subfractional (less than 1/20
horsepower) electric motors for use in business equipment, appliances and
exhaust fans. The Company also believes Hutchinson has growth opportunities
arising from the trend by original equipment motor manufacturers to
outsource production of rotors. Additionally, Hutchinson manufactures
extruded aluminum fan spacers used in commercial diesel engines for heavy
trucks and off-road equipment and precision metal castings used in hand
power tools and gasoline pumping units.

- Sinterloy. The August 1997 acquisition of Sinterloy expanded the
Company's powder metal components business primarily into the business
equipment market. Sinterloy's ability to manufacture high volume small to
medium sized powder metal components complements the Company's other powder
metal businesses, which generally produce lower volume, higher precision
components.

34
<PAGE> 37

Both the friction product and powder metal component industries are
fragmented and are undergoing consolidation due in part to the additional
resources needed (1) to perform the research and development necessary to
satisfy customers' increasingly stringent quality and performance criteria, and
(2) to meet just-in-time delivery requirements. As a result, the Company
believes that it can continue to make strategic acquisitions that may include
other friction product and powder metal component manufacturers. To effect its
acquisition strategy, the Company engages in discussions, from time to time,
with other manufacturers in friction products, powder metal component and other
complementary businesses. At this time, the Company has no outstanding
commitments or agreements regarding any future acquisitions. See "Risk
Factors -- Acquisition Strategy."

PRODUCTS AND MARKETS

The Company focuses on supplying components to the aerospace, industrial
and commercial markets that require sophisticated engineering and production
techniques for applications in markets in which it has achieved a significant
market share. Through acquisitions and product line expansions, the Company has
diversified its end markets, which diversification, the Company believes, has
reduced its economic exposure to the cyclicality of any particular industry. In
the first nine months of 1997, the Company's sales by principal products and
principal end markets were:

Principal Products

<TABLE>
<S> <C> <C> <C> <C>
Friction Products 69%
Powder Metal Components 18%
Rotors 5%
Other* 8%
</TABLE>

Principal Markets

<TABLE>
<S> <C> <C> <C> <C>
Aerospace 19%
Truck 15%
Construction 19%
Agricultural 12%
Other** 20%
Pump & Motor 10%
Lawn & Garden 5%
</TABLE>

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

* Includes steel stampings, precision metal castings and extruded aluminum fan
spacers.

** Includes motorcycles and snowmobiles, performance racing automotive,
automotive (original equipment and aftermarket) and power hand tools.

35
<PAGE> 38

Friction Products

The Company's friction products are made from proprietary formulations of
composite materials that primarily consist of metal powders and synthetic and
natural fibers. Friction products are the replacement elements used in brakes,
clutches and transmissions to absorb vehicular energy and dissipate it through
heat and normal mechanical wear. For example, the friction brake linings in
aircraft braking systems slow and stop airplanes when landing or taxiing.
Friction products manufactured by the Company also include friction linings for
use in automatic and power shift transmissions, clutch facings that serve as the
main contact point between an engine and a transmission, and brake linings for
use in other types of braking systems.

The Company's friction products are custom-designed to meet the performance
requirements of a specific application and must meet or exceed the customer's
performance specifications, including temperature, pressure, component life and
noise level criteria. The engineering required in designing a friction material
for a specific application dictates a balance between the component life cycle
and the performance application of the friction material in, for example,
stopping or starting movement. Friction products are consumed through customary
use in a brake, clutch or transmission system and require regular replacement.
Because the friction material is the consumable, or wear, component of such
systems, new friction product introduction in conjunction with a new system
provides the Company with the opportunity to supply the aftermarket with that
friction product for the life of the system.

The principal markets served by the Company's friction products business
include manufacturers of aircraft brakes, truck clutches, heavy-duty
construction and agricultural vehicle brakes, clutches and transmissions, as
well as manufacturers of motorcycle, snowmobile and performance racing brakes.
Based upon net sales, the Company believes that it is among the top three
worldwide manufacturers of friction products used in aerospace and industrial
applications. The Company estimates that aftermarket sales of friction products
have comprised approximately 50% of the Company's net friction product sales in
recent years. The Company believes that its stable aftermarket sales component
enables the Company to reduce its exposure to adverse economic cycles.

Aerospace. The Company is the largest independent supplier of friction
materials to the manufacturers of braking systems for the Boeing 727, 737 and
757, the McDonnell Douglas DC-9, DC-10 and MD-80 and the Canadair CRJ aircraft.
The Company is also the largest supplier of friction materials to the general
aviation (non-commercial, non-military) market, supplying friction materials for
aircraft manufacturers such as Cessna, Lear, Gulfstream and Fokker. Each
aircraft braking system, including the friction materials supplied by the
Company, must meet stringent FAA criteria and certification requirements. New
model development and FAA testing for the Company's aircraft braking system
customers generally begins two to five years prior to full scale production of
new braking systems. If the Company and its aircraft brake system manufacturing
partner are successful in obtaining the rights to supply a particular model of
aircraft, the Company will typically supply its friction products to that
model's aircraft braking system for as long as the model continues to fly
because it is generally too expensive to redesign a braking system and meet FAA
requirements. Moreover, FAA maintenance requirements mandate that brake linings
be changed after a specified number of take-offs and landings, which the Company
expects to result in a continued and steady market for its aerospace friction
products.

The Company's friction products for commercial aerospace applications are
primarily used on "single-aisle" aircraft that are flown on shorter routes,
resulting in more takeoffs and landings than larger aircraft. The Company
believes its friction products provide an attractive combination of performance
and cost effectiveness in these applications. According to Boeing's 1997 Current
Market Outlook, there were over 7,500 single-aisle commercial aircraft in the
world at the end of 1996, and this number is projected to increase to
approximately 11,000 by the end of 2006. The Boeing report also states that
world airline traffic is projected to increase 5.5% per year through 2006. The
Company expects that continued growth in world airline traffic, combined with
the increasing number of single-aisle aircraft, will cause demand for the
Company's aerospace friction products to remain strong. For example, Boeing is

36
<PAGE> 39

utilizing BFGoodrich braking systems with the Company's friction material on
many of its new 737-600, - 700 and -800 series aircraft.

Construction/Agricultural/Trucks. The Company supplies a variety of
friction products for use in brakes, clutches and transmissions on construction
and agricultural vehicles and equipment and trucks. These components are
designed to precise tolerances and permit brakes to stop or slow a moving
vehicle and the clutch or transmission systems to engage or disengage. The
Company believes it is a leading supplier to original equipment manufacturers
and to the aftermarket. The Company believes that its trademark, Velvetouch(R)
is well-known in the aftermarket for these components. As with the Company's
aerospace friction products, new friction product introduction in conjunction
with a new brake, clutch or transmission system provides the Company with the
opportunity to supply the aftermarket with the friction product for the life of
the system. The Company expects to grow with its domestic customers in these
applications as they continue to penetrate worldwide markets. The Company also
expects strong sales growth from its facility in Italy as its primary customers,
New Holland, Same Deutz and Clark Hurth, continue to grow in European and
emerging economic markets.

Construction Equipment. The Company supplies friction products such as
transmission discs, clutch facings and brake linings to manufacturers of
construction equipment, including Caterpillar. The Company believes it is the
second largest domestic supplier of these types of friction products.
Replacement components for construction equipment are sold through manufacturers
such as Caterpillar, as well as various aftermarket distributors.

Demand for Hawk's friction products in the construction sector is partially
driven by demand for new construction equipment and the overall level of
construction activity. According to an industry publication, unit sales of
construction equipment in North America have grown 10.1% per year from 1992 to
1996. This growth has been driven by economic expansion, a favorable interest
rate environment and the evolution of the rental market for construction
equipment. Additionally, there has been strong demand for construction equipment
overseas, driven principally by infrastructure development in emerging
economies. Currently, the Company is experiencing healthy demand in this market
sector as a result of these favorable trends.

Agricultural Equipment. The Company supplies friction products such as
clutch facings, transmission discs and brake linings for manufacturers of
agricultural equipment, including John Deere and New Holland. The Company
believes it is the second largest domestic supplier of such friction products.
Replacement components for agricultural equipment are sold through original
equipment manufacturers as well as various aftermarket distributors.

Demand for Hawk's friction products in the agricultural sector is partially
driven by a healthy domestic farm economy and the replacement of aging equipment
resulting from underinvestment during the 1980s. According to an industry
publication, since 1992, unit sales of U.S. two wheel drive tractors over 100
horsepower have grown at a compound annual rate of 8.0%. In addition, the
Company has been experiencing strong demand from the agricultural equipment
market in Europe.

Medium and Heavy Trucks. The Company supplies friction products for clutch
facings used in medium and heavy trucks to original equipment manufacturers,
such as Eaton. The Company believes it is the leading domestic supplier of
replacement friction products used in these applications. Replacement components
are sold through Eaton and various aftermarket distributors.

Demand for Hawk's friction products in the truck sector is driven by
utilization and original equipment manufacturing volume. Demand for Class 8
(heavy) trucks has been strong over the past several years. According to an
industry publication, sales of Class 8 diesel trucks in 1996 were an estimated
185,000 units, which represents a 46% increase over the 127,000 units sold in
1992. Class 8 truck sales volumes have continued to grow in 1997. As a result,
the Company is currently experiencing strong demand for friction products in the
truck sector.

Specialty. The Company supplies friction products for use in other
specialty applications, such as brake pads for Harley-Davidson motorcycles, AM
General Humvees and Bombardier, Polaris Industries

37
<PAGE> 40

and Arctic Cat snowmobiles. The Company believes that these markets are
experiencing significant growth and the Company will continue to increase its
market share with its combination of superior quality and longer product life.
Under the "Hawk Brake" tradename, the Company also supplies high performance
friction material for use in racing car brakes. The Company's high performance
brake pad for race cars can operate in temperatures of over 1,100 degrees
Fahrenheit. The Company believes that this performance racing material may have
additional applications such as braking systems for passenger and school buses,
police cars and commercial delivery vehicles.

Other. In addition to providing metal stampings for its friction business,
the Company's Logan subsidiary also sells transmission plates and other
components to the automotive and trucking industries.

Powder Metal Components

The Company is a leading supplier of powder metal components consisting
primarily of pump, motor and transmission elements, gears, pistons and anti-lock
brake sensor rings for applications ranging from lawn and garden tractors to
industrial equipment. Since Hawk's founding in 1989, it has participated in the
growing powder metal parts and products industry with a focus on the North
American industrial market, which the Metal Powder Industries Federation
("MPIF"), an industry trade group, estimates had sales of over $1.0 billion in
1996. According to MPIF, the value of iron powder shipments in North America
increased by over 10% per year from 1991 to 1996, and North American powder
manufacturers are anticipating an average annual growth rate of almost 6% per
year for the next ten years.

Fluid Power and Industrial Applications. The Company manufactures a
variety of components made from powder metals for use in (1) fluid power
applications, such as pumps and other hydraulic mechanisms, and (2)
transmissions, other drive mechanisms and anti-lock braking systems used in
trucks and off-road equipment. The Company believes that the market for powder
metal components will continue to grow as the Company's core powder metal
technology benefits from advances that permit production of powder metal
components with increased design flexibility, greater densities and closer
tolerances that provide improved strength, hardness and durability for demanding
applications, and enable the Company's powder metal components to be substituted
for wrought steel or iron components produced with forging, casting or stamping
technologies. Powder metal components can often be produced at a lower cost per
unit than products manufactured with forging, casting or stamping technologies
due to the elimination of, or substantial reduction in, secondary machining,
lower material costs and the virtual elimination of raw material waste. The
Company believes that the current trend of substituting powder metal components
for forged, cast or stamped components in industrial applications will continue
for the foreseeable future, providing the Company with increased product and
market opportunities.

The Company produces powder metal components in three facilities, each
targeting an important aspect of the market place:

- High Precision. Helsel's pressing and finishing capabilities enable
it to specialize in tight tolerance fluid power components such as pump
elements and gears. In addition, the Company believes that Helsel's
machining capabilities provide it with a competitive advantage by giving it
the ability to supply a completed part to its customers, typically without
any subcontracted precision machining. The Company believes that Helsel's
growth will be driven by existing customers' new design requirements and
new product applications primarily for pumps, motors and transmissions.

- Large Size Capability. While Helsel and Sinterloy have small to
medium sized powder metal part capability, FPC has the capability to make
structural powder metal components that are among the largest used in North
America. The Company expects its sales of larger powder metal components to
continue to grow as the Company creates new designs for existing customers
and benefits from market growth, primarily in current construction,
agricultural and truck applications. For example, the Company believes that
sales of its powder metal components used in anti-lock

38
<PAGE> 41

braking systems will benefit as domestic trucks comply with the U.S.
Department of Transportation's regulations requiring the installation of
anti-lock braking systems on new trucks.

- High Volume. Sinterloy targets smaller, high volume parts where it
can utilize its efficient pressing and sintering capabilities to their best
advantage. Sinterloy's primary market for growth is powder metal components
for the business equipment market. The Company believes that the addition
of Sinterloy's capabilities will provide the Company with cross-selling
opportunities from the Company's other powder metal facilities.

Die-Cast Aluminum Rotors

The Company believes that Hutchinson is the largest independent U.S.
manufacturer of die-cast aluminum rotors for use in subfractional electric
motors. These motors are used in a wide variety of applications such as business
equipment, small household appliances and exhaust fans.

The Company believes that more than 90 million subfractional motors are
manufactured in the United States annually. Hutchinson manufactured
approximately 30 million rotors for these motors in 1996. Increased office
automation, increased sales of small household appliances and increased sales of
exhaust fans for heating, ventilation and air conditioning systems in commercial
buildings and residential buildings are all factors that are expected to
increase the growth of subfractional motor sales.

The Company estimates that approximately 50% of all rotors in the
subfractional motor market are made internally by motor manufacturers such as
Emerson and General Electric. However, the Company believes Hutchinson has
growth opportunities arising from the trend by original equipment motor
manufacturers to outsource their production of rotors.

MANUFACTURING

The manufacturing processes for most of the Company's friction products and
powder metal components are essentially similar. In general, both use composite
metal alloys in powder form to make high quality powder metal components. The
basic manufacturing steps, consisting of blending/compounding,
molding/compacting, sintering (or bonding) and secondary machining/treatment,
are as follows:

- Blending/compounding: Composite metal alloys in powder form are
blended with lubricants and other additives according to scientific
formulas, many of which are proprietary to the Company. The formulas are
designed to produce precise performance characteristics necessary for a
customer's particular application, and the Company often works together
with its customers to develop new formulas that will produce materials with
greater energy absorption characteristics, durability and strength.

- Molding/compacting: At room temperature, a specific amount of a
powder alloy is compacted under pressure into a desired shape. The
Company's molding presses are capable of producing pressures of up to 3,000
tons. The Company believes that it has some of the largest presses in the
powder metal industry, enabling it to produce large, complex components.

- Sintering: After compacting, molded parts are heated in furnaces to
specific temperatures, enabling metal powders to metallurgically bond,
harden and strengthen the molded parts while retaining their desired shape.
For friction materials, the friction composite part is also bonded directly
to a steel plate or core, creating a strong continuous metallic part.

- Secondary machining/treatment: If required by customer
specifications, a molded part undergoes additional processing. These
processing operations are generally necessary to attain increased hardness
or strength, tighter dimensional tolerances or corrosion resistance. To
achieve these specifications, parts are heat treated, precision coined,
ground or drilled or treated with a corrosion resistant coating, such as
oil.

39
<PAGE> 42

Certain of the Company's friction products, which are primarily used in
oil-cooled brakes and power shift transmissions, do not require all of the
foregoing steps. For example, molded composite friction materials are molded
under high temperatures and cured in electronically-controlled ovens and then
bonded to a steel plate or core with a resin-based polymer. Cellulose composite
friction materials are blended and formed into continuous sheets and then
stamped into precise shapes by computer-controlled die cutting machines. Like
molded composite friction materials, cellulose composite friction materials are
then bonded to a steel plate or core with a resin-based polymer.

The Company's die-cast aluminum rotors are produced in a three-step
process. Steel stamped disks forming the laminations of the rotors are first
skewed (stacked) and then loaded into dies into which molten aluminum is
injected to create the rotors. The rotor castings created in the dies are then
machined to produce finished rotors. These rotors are manufactured in a variety
of sizes and shapes to customers' design specifications.

Quality Control. Throughout its design and manufacturing process, the
Company focuses on quality control. For product design, each Company
manufacturing facility uses state-of-the-art testing equipment to replicate
virtually any application required by the Company's customers. This equipment is
essential to the Company's ability to manufacture components that meet stringent
customer specifications. To ensure that tight tolerances have been met and that
the requisite quality is inherent in its finished products, the Company uses
statistical process controls, a variety of electronic measuring equipment and
computer-controlled testing machinery. The Company has also established programs
within each of its facilities to detect and prevent potential quality problems.

TECHNOLOGY

The Company believes that it is an industry leader in the development of
systems, processes and technologies which enable it to manufacture friction
products with numerous performance advantages, such as greater wear resistance,
increased stopping power, lower noise and smoother engagement. The Company's
expertise is evidenced by its aircraft brake linings, which are currently being
installed on the braking systems of the newly-designed Boeing 737-600, -700 and
- -800 series of aircraft.

The Company maintains an extensive library of proprietary friction product
formulas that serve as starting points for new product development. Each formula
has a specific set of ingredients and processes to generate repeatability in
production. Some formulas may have as many as 15 different components. A slight
change in a mixture can produce significantly different performance
characteristics. The Company uses a variety of technologies and materials in
developing and producing its products, such as graphitic and cellulose
composites. The Company believes its expertise in the development and production
of products using these different technologies and materials gives it a
competitive advantage over other friction product manufacturers, which typically
have expertise in only one or two types of friction material.

The Company also believes that its powder metal components business is able
to produce a wide range of products from small precise components to large
structural parts. The Company has presses that produce some of the largest
powder metal parts in the world, and its powder metal technology permits the
manufacture of complex components with specific performance characteristics and
close dimensional tolerances that would be impractical to produce using
conventional metalworking processes.

CUSTOMERS

The Company's engineers work closely with customers to develop and design
new products and improve the performance of existing products. The Company
believes that its working relationship with its customers on development and
design, and the Company's commitment to quality, service and just-in-time
delivery have enabled it to build and maintain strong and stable customer
relationships. Each of the Company's ten largest customers have been customers
of the Company or its predecessors for

40
<PAGE> 43

more than ten years, and the Company believes that more than 80% of its sales
are from products and materials for which it is the sole source provider for
specific customer applications.

The Company believes that its recent acquisitions have broadened product
lines, increased its technological capabilities and will further enhance its
customer relationships and expand its preferred supplier status. As a result of
its commitment to customer service and satisfaction, the Company has received
numerous preferred supplier awards from its leading customers, including
Aircraft Braking Systems, BFGoodrich Aerospace, Caterpillar, John Deere and New
Holland.

The Company's sales to Aircraft Braking Systems represented 10.4% of the
Company's consolidated net sales in 1996 and 8.7% of the Company's consolidated
net sales in the first nine months of 1997. In addition, the Company's top five
customers accounted for 40.1% of the Company's consolidated net sales in 1996
and 34.2% of the Company's consolidated net sales in the first nine months of
1997. See "Risk Factors -- Reliance on Significant Customers."

MARKETING AND SALES

The Company markets its products globally through eleven product managers,
who operate from the Company's facilities in the United States, Italy and Canada
and a sales office in the United Kingdom. The Company's product managers and
sales force work directly with the Company's engineers who provide the technical
expertise necessary for the development and design of new products and for the
improvement of the performance of existing products.

The Company's friction products are sold both directly to original
equipment manufacturers and to the aftermarket through its original equipment
customers and a network of distributors and representatives throughout the
world.

The Company's marketing and sales of its powder metal components and
die-cast aluminum rotors are directed by six product managers. The Company sells
its powder metal components and rotors to original equipment manufacturers
through independent sales representatives.

SUPPLIERS AND RAW MATERIALS

The principal raw materials used by the Company are copper, steel and iron
powder and custom-formulated cellulose sheet. The Company believes that its
relationships with its suppliers are good. In an effort to ensure a continued
source of supply of the Company's raw materials at competitive prices, the
Company concentrates on developing relationships with its suppliers. In many
instances, the Company works in close consultation with its suppliers in the
development of new combinations of powder metal. Thus, although the Company has
no long-term supply agreements with any of its major suppliers, the Company has
generally been able to obtain sufficient supplies of these raw materials for its
operations. See "Risk Factors -- Supply and Price of Raw Materials."

COMPETITION

The Company competes for new business principally at the beginning of the
development of new applications and at the redesign of existing applications by
its customers. For example, new model development for the Company's aircraft
braking system customers generally begins two to five years

41
<PAGE> 44

prior to full scale production of new braking systems. Product redesign
initiatives by customers typically involve long lead times as well.

The Company also competes with manufacturers that use different
technologies. The metallic aircraft braking systems for which the Company
supplies friction materials compete with a "carbon-carbon" braking system.
Carbon-carbon braking systems are significantly lighter than the metallic
aircraft braking systems for which the Company supplies friction materials, but
are more expensive. The carbon-carbon brakes are typically used on wide-body
aircraft, such as the Boeing 747 and military aircraft, where the advantages in
reduced weight justify the additional expense. In addition, as the Company's
core powder metal technology improves, enabling its components to be substituted
for wrought steel or iron components, the Company also increasingly competes
with companies using forging, casting or stamping technologies. Powder metal
components can often be produced at a lower cost per unit than products
manufactured with forging, casting or stamping technologies due to the
elimination of, or substantial reduction in, secondary machining, lower material
costs and the virtual elimination of raw material waste. As a result, powder
metal components are increasingly being substituted for metal parts manufactured
using more traditional technologies. There is no assurance that competition from
these technologies or others will not adversely affect the Company's business,
financial condition and results of operations. See "Risk
Factors -- Competition."

GOVERNMENT REGULATION

The Company's sales to manufacturers of aircraft braking systems
represented 20.8% of the Company's consolidated net sales in 1996 and 18.6% of
the Company's consolidated net sales in the first nine months of 1997. Each
aircraft braking system, including the friction products supplied by the
Company, must meet stringent FAA criteria and testing requirements. The Company
has been able to meet these requirements in the past and continuously reviews
FAA compliance procedures to help ensure continued and future compliance. See
"Risk Factors -- Government Regulation."

ENVIRONMENTAL MATTERS

Manufacturers such as the Company are subject to stringent environmental
standards imposed by federal, state, local and foreign environmental laws and
regulations, including those related to air emissions, wastewater discharges and
chemical and hazardous waste management and disposal. Certain of these
environmental laws hold owners or operators of land or businesses liable for
their own and for previous owners' or operators' releases of hazardous or toxic
substances, materials or wastes, pollutants or contaminants. Compliance with
environmental laws also may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. The Company is also subject to the federal Occupational
Safety and Health Act and similar foreign and state laws. The nature of the
Company's operations, the long history of industrial uses at some of its current
or former facilities, and the operations of predecessor owners or operators of
certain of the businesses expose the Company to risk of liabilities or claims
with respect to environmental and worker health and safety matters. The Company
reviews its procedures and policies for compliance with environmental and health
and safety laws and regulations and believes that it is in substantial
compliance with all such material laws and regulations applicable to its
operations. The costs of compliance with environmental, health and safety
requirements have not been material to the Company. See "Risk
Factors -- Environmental Matters."

42
<PAGE> 45

MANUFACTURING FACILITIES AND OTHER PROPERTIES

The Company's material operations are conducted through the following
facilities, all of which are owned, except as noted:

<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE PRINCIPAL FUNCTIONS
- --------------------------- -------------- -------------------------------------------------
<S> <C> <C>
Medina, Ohio............... 148,000 Manufacturing of friction products and powder
metal components, sales and marketing, research
and development, product engineering, customer
service and support, and administration

Brook Park, Ohio........... 111,000 Manufacturing of friction products, domestic and
international sales and marketing, product
engineering, customer service and support, and
administration

Orzinuovi, Italy........... 97,000 Manufacturing of friction products, international
sales and marketing, research and development,
and administration

Akron, Ohio................ 81,000 Manufacturing of metal stampings

Campbellsburg, Indiana..... 75,000 Manufacturing of powder metal components, sales
and marketing, product engineering, customer
service and support, and administration

Solon, Ohio(1)............. 58,000 Research and development

Solon Mills, Illinois(2)... 42,000 Manufacturing of powder metal components, sales
and marketing, customer service and support

Alton, Illinois............ 37,000 Manufacturing of die-cast aluminum rotors, sales
and marketing, customer service and support, and
administration

Concord, Ontario, 15,000 Manufacturing of friction products, distribution
Canada(2)................ and warehousing

Cleveland, Ohio(3)......... 6,200 Principal executive offices
</TABLE>

- ---------------
(1) Approximately 20,000 square feet of the Solon facility is leased to a third
party.

(2) Leased.

(3) Leased. The Company is party to an expense sharing arrangement under which
the Company shares the expenses of its corporate headquarters located in
Cleveland with a company owned by Mr. Weinberg. See "Certain
Transactions -- Other Transactions."

In June 1996, the Company closed its manufacturing facility in LaVergne,
Tennessee that it acquired in the SKW acquisition and consolidated its
operations with existing Company facilities. The Company has placed the LaVergne
facility on the market for sale and does not anticipate incurring any material
gain or loss as a result of the sale.

The Company's Italian facility is subject to certain security interests
granted to its lenders.

The Company believes that substantially all of its property and equipment
is in good condition. Several of the Company's facilities are operating at or
near capacity. With the planned expansion of these facilities, as described
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources," the Company believes that it
will have sufficient capacity to accommodate its needs through 1999.

43
<PAGE> 46

EMPLOYEES

As of September 30, 1997, the Company had 1,258 employees, consisting of
107 management, supervisory and administrative personnel, 114 engineering,
quality control and laboratory personnel, 36 sales and marketing personnel and
1,001 manufacturing personnel.

Approximately 300 employees at the Company's Brook Park, Ohio plant are
covered under a collective bargaining agreement with the United International
Paperworkers Union expiring in October 2000; approximately 80 employees at the
Company's Akron, Ohio facility are covered under a collective bargaining
agreement with the United Automobile Workers expiring in July 2000; and
approximately 100 employees at the Company's Orzinuovi, Italy plant are
represented by a national mechanics union under an agreement that expires in
December 1998 and by a local union under an agreement that expires in December
2000. Approximately 75 hourly employees of Hutchinson are covered under a
collective bargaining agreement with the International Association of Machinists
and Aerospace Workers expiring in June 1998. The Company has experienced no
strikes and believes its relations with its employees and their unions to be
good. See "Risk Factors -- Collective Bargaining Agreements" and "Risk
Factors -- Dependence on Key Personnel."

INTELLECTUAL PROPERTY MATTERS

Velvetouch(R), Fibertuff(R), Feramic(R), Velvetouch Feramic(R), Velvetouch
Ceramic(R), Velvetouch Organik(R) and Velvetouch Metalik(R) are among the
federally registered trademarks of the Company. Velvetouch(R) is the Company's
principal trademark for use in the friction products aftermarket and is
registered in 26 countries. In addition, the Company has a pending application
with the United States Patent and Trademark Office to register the trademark
"Wellman Friction Products."

Although the Company maintains patents related to its business, the Company
does not believe that its competitive position is dependent on patent protection
or that its operations are dependent on any individual patent.

To protect its intellectual property, the Company relies on a combination
of internal procedures, confidentiality agreements, patents, trademarks, trade
secrets law and common law, including the law of unfair competition. The Company
is not aware of any pending claims of infringement or other challenges to the
Company's right to use any of its intellectual property. See "Risk
Factors -- Intellectual Property Matters."

LEGAL PROCEEDINGS

The Company is involved in lawsuits that arise in the ordinary course of
its business. In the Company's opinion, the outcome of these matters will not
have a material adverse effect on the Company's business, financial condition or
results of operations.

44
<PAGE> 47

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The directors, executive officers and significant employees of the Company
and their respective ages and positions held with the Company, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Norman C. Harbert(1)................ 64 Chairman of the Board, Chief Executive Officer,
President and Director
Ronald E. Weinberg(1)............... 56 Vice-Chairman of the Board, Treasurer and
Director
Jeffrey H. Berlin................... 35 Executive Vice President
Douglas D. Wilson................... 53 Executive Vice President, President -- FPC and
President -- SKW
Thomas A. Gilbride.................. 44 Vice President-Finance
Jess F. Helsel...................... 72 President -- Helsel
Timothy J. Houghton................. 53 President -- Hutchinson
Paul R. Bishop(2)(3)................ 54 Director
Byron S. Krantz(3).................. 62 Secretary and Director
Dan T. Moore, III(1)................ 57 Director
William J. O'Neill, Jr.(2).......... 64 Director
</TABLE>

- ---------------
(1) Member of the Nominating Committee

(2) Member of the Audit Committee

(3) Member of the Compensation Committee

Norman C. Harbert has served as the Chairman of the Board, President, Chief
Executive Officer and Director of the Company since March 1989. Mr. Harbert has
over 39 years of manufacturing experience. From 1987 to 1988, Mr. Harbert was
Chairman, President and CEO of Maverick Tube Corporation, an oil drilling
equipment manufacturer, and from 1981 to 1986, he served as President and CEO of
Ajax Magnethermic Corporation, an international manufacturer of induction
heating and melting equipment. Prior to that time, Mr. Harbert served at
Reliance Electric Company for 22 years where, in 1980, his last position was as
General Manager, Rotating Products Group, with primary responsibility for a
division with annual sales of $250 million. Mr. Harbert is a director of New
West Eyeworks, Inc., a retail eyewear chain that operates throughout the western
United States, Second Bancorp Inc., a bank holding company, and Caliber System,
Inc., a transportation company (formerly known as Roadway Services, Inc.).

Ronald E. Weinberg has served as Vice-Chairman of the Board, Treasurer and
Director of the Company since March 1989. Mr. Weinberg has over 28 years of
experience in the ownership and management of operating companies, including a
number of manufacturing companies. In 1988, Mr. Weinberg led an investor group
in the acquisition of New West Eyeworks, Inc., a retail eyewear chain that
operates throughout the western United States, and Mr. Weinberg has served as
Chairman of the Board of that company since that date. In 1986, Mr. Weinberg led
an investor group in the acquisition of SunMedia Corp., which publishes a chain
of weekly newspapers in the Cleveland market and operates a direct marketing
company, and Mr. Weinberg has served as Chairman of the Board of that company
since the acquisition date.

Jeffrey H. Berlin has served as an Executive Vice President of the Company
since May 1997. Between July 1994 and May 1997, Mr. Berlin served as the Vice
President -- Marketing and Corporate Development of the Company. From August
1991 to July 1994, Mr. Berlin served the Company as its Director of Corporate
Development. From 1984 to 1991, Mr. Berlin held various corporate finance
positions including Director of Corporate Development for American Consumer
Products, Inc., a manufacturer of consumer hardware products.

45
<PAGE> 48

Thomas A. Gilbride has served as Vice President -- Finance of the Company
since January 1993. Between March 1989 and January 1993, Mr. Gilbride was
employed by the Company in various financial and administrative capacities.

Douglas D. Wilson has served as an Executive Vice President of the Company
since September 1996, the President of FPC since January 1992 and the President
of SKW since June 1995. From November 1990 to December 1991, he was the
Executive Vice President of FPC. Mr. Wilson was President and Chief Executive
Officer of Cleveland Gear Company, a gear manufacturing business, from 1986 to
1990. Mr. Wilson has been the Chairman of the Industry Advisory Group of the
Center for Advanced Friction Studies at the University of Illinois at Carbondale
since its formation in April 1996.

Jess F. Helsel has served as President of Helco, Inc. (the predecessor to
Helsel) since 1974 and has continued in that capacity since the sale of Helsel's
assets to the Company in June 1994. Mr. Helsel has over 52 years of experience
in the powder metal industry.

Timothy J. Houghton has served as President of Hutchinson Foundry Products
Company (the predecessor to Hutchinson) since 1992 and has continued in that
capacity since the acquisition of Hutchinson by the Company in January 1997. Mr.
Houghton also served as Chief Executive Officer of Hutchinson Foundry Products
Company from 1992 until January 1997.

Paul R. Bishop has served as a Director since May 1993. Mr. Bishop has
served as the Chairman, President and Chief Executive Officer of H-P Products,
Inc., a manufacturer of central vacuum systems and fabricated tubing and
fittings, since 1977. Mr. Bishop was a director of Belden & Blake Corporation,
an oil and gas drilling company, from April 1994 to July 1997 and a director of
Key Bank National Association from July 1992 to June 1997.

Byron S. Krantz has been the Secretary and a Director since March 1989. Mr.
Krantz has been a partner in the law firm of Kohrman Jackson & Krantz P.L.L.
since its formation in 1984.

Dan T. Moore, III has served as a Director since March 1989. Mr. Moore has
been the founder, owner and President of Dan T. Moore Company, Inc. since 1969,
Soundwich, Inc. since 1988, Flow Polymers, Inc. since 1985 and Perfect
Impression, Inc. since July 1994, all of which are manufacturing companies. Mr.
Moore has also been Chairman of the Board of Advanced Ceramics Corporation since
March 1993. He has been a director of Invacare Corporation, a manufacturer of
health care equipment, since 1979.

William J. O'Neill, Jr. has served as a Director since March 1989. Mr.
O'Neill has been the President and Chief Executive Officer of Clanco Management
Corp., an O'Neill family management company, since 1983. He has also served as
the Managing Partner of Clanco Partners I, an Ohio general partnership, since
March 1989.

The Company's executive officers serve at the discretion of the Board of
Directors, although the Company or its subsidiaries have entered into employment
agreements with Messrs. Harbert, Weinberg, Helsel and Houghton. See "Employment
Agreements."

COMPOSITION OF BOARD OF DIRECTORS

The Board of Directors of the Company consists of six members elected by
the holders of the Class A Common Stock and Series D Preferred Stock. The
Company's Second Amended and Restated Certificate of Incorporation provides that
the holders of the Series D Preferred Stock have the right to elect a majority
of the directors and that the holders of the Class A Common Stock have the right
to elect the remainder. The directors are elected at the annual meeting of
stockholders of the Company and each director holds office until the next annual
meeting of the stockholders and until his successor has been duly elected and
qualified. See "Risk Factors -- Effective Voting Control by Existing
Stockholders" and "Description of Capital Stock -- Preferred Stock."

46
<PAGE> 49

Certain transactions among the Company and its directors or entities
affiliated with certain directors of the Company are described below in
"Principal and Selling Stockholders -- Stockholder Agreement" and "Certain
Transactions."

BOARD COMMITTEES

The Nominating Committee of the Board of Directors recommends qualified
candidates for election as directors of the Company. The Audit Committee of the
Board of Directors reviews the accounting and reporting principles, policies and
practices followed by the Company and the adequacy of the Company's internal,
financial and operating controls. The Compensation Committee of the Board of
Directors reviews and makes recommendations regarding the compensation of
executive officers of the Company and reviews general policy relating to the
compensation and benefits of employees of the Company. The Compensation
Committee also administers option grants under the Company's 1997 Stock Option
Plan (the "1997 Plan").

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the formation of the Compensation Committee in September 1996, the
Board of Directors made all determinations with respect to executive officer
compensation. The Compensation Committee consists of Messrs. Bishop and Krantz.
Mr. Bishop was not at any time during 1996, or at any other time, an officer or
employee of the Company. Mr. Krantz is Secretary of the Company and a partner in
the law firm of Kohrman Jackson & Krantz P.L.L., which provides legal services
to the Company. See "Certain Transactions -- Other Transactions."

DIRECTOR COMPENSATION

The Company pays each director, other than Messrs. Harbert, Weinberg or
Krantz, an annual fee of $10,000 that is payable $5,000 in cash and $5,000 in
shares of Class A Common Stock at the then current market price, rounded to the
nearest 50 shares. In addition, the Company pays each such director $1,000 in
cash for each board meeting that such director attends and $500 in cash for each
telephonic board meeting that such director participates in. The Company also
reimburses all directors for all expenses incurred in connection with their
services as directors. No additional consideration is paid to the directors for
committee participation.

47
<PAGE> 50

EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded or paid by the
Company during 1995 and 1996 to its President and Chief Executive Officer and
the Company's four other most highly compensated officers and key employees
(collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION COMPENSATION
- ----------------------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Norman C. Harbert........................ 1996 $377,000 $410,000 $ 14,500(2) $ 20,306(3)
Chairman of the Board, President and 1995 340,000 350,000 11,400(2) 12,500(3)
Chief Executive Officer

Ronald E. Weinberg....................... 1996 266,000 410,000 20,300(4) --
Vice-Chairman of the Board and 1995 231,000 350,000 13,400(4) --
Treasurer

Douglas D. Wilson........................ 1996 166,000 120,000 1,600(5) --
Executive Vice President; President -- 1995 159,000 100,000 -- --
FPC; and President -- SKW
Jess F. Helsel........................... 1996 150,000 912,000(6) 12,300(7) --
President -- Helsel 1995 150,000 910,000(6) 12,300(7) --

Jeffrey H. Berlin........................ 1996 137,000 100,000 10,700(8) --
Executive Vice President 1995 96,000 75,000 2,500(8) --
</TABLE>

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

(1) Bonuses earned in 1995 were paid in 1996 and bonuses earned in 1996 were
paid in 1997.

(2) Includes $9,200 and $9,500 contributed in 1995 and 1996, respectively, by
FPC to FPC's profit sharing plan on behalf of Mr. Harbert and $2,200 and
$5,000 in medical reimbursements made in 1995 and 1996, respectively.

(3) Represents the premiums paid by the Company for a term life insurance policy
of which Mr. Harbert is the insured and Mr. Harbert's wife is the
beneficiary.

(4) Includes $9,200 and $9,500 contributed in 1995 and 1996, respectively, by
FPC to FPC's profit sharing plan on behalf of Mr. Weinberg and $4,200 and
$10,800 in medical reimbursements made in 1995 and 1996, respectively.

(5) Consists entirely of medical reimbursements.

(6) Upon the Company's acquisition of Helsel, the Company entered into an
Employment Agreement with Mr. Helsel. Mr. Helsel's bonus is determined in
accordance with an earnings formula set forth in that Employment Agreement.
See "Employment Agreements."

(7) Includes $1,800 contributed by Helsel to Helsel's Employee's Savings and
Investment Plan, as matching contributions relating to before-tax
contributions made by Mr. Helsel under such plan, and $10,500 contributed by
Helsel to Helsel's profit sharing plan on behalf of Mr. Helsel.

(8) Includes $2,500 and $9,500 contributed in 1995 and 1996, respectively, by
FPC to FPC's profit sharing plan on behalf of Mr. Berlin and $1,200 in
medical reimbursements made in 1996.

None of the Named Executive Officers received any perquisites or other
personal benefits, securities or property that exceeded the lesser of $50,000 or
10% of the salary and bonus for each Named Executive Officer during 1995 or
1996.

STOCK OPTION PLAN

The 1997 Plan was adopted in November 1997, and provides for the grant of
options to purchase an aggregate of shares of the Company's Class A
Common Stock. The 1997 Plan provides for the grant to employees of incentive
stock options within the meaning of sec.422 of the Internal Revenue

48
<PAGE> 51

Code of 1986, as amended (the "Code"), and for the grant of nonstatutory stock
options to eligible employees (including directors and officers) and
non-employee directors. Incentive stock options may be exercisable for up to ten
years at an option price of not less than the fair market value of the Common
Stock on the date that the option is granted, or for up to five years at an
option price of not less than 110% of the fair market value of the Common Stock
on the date the option is granted in the case of an officer or other key
employee who owns, at the time the option is granted, more than ten percent of
the Common Stock. Nonstatutory stock options may be exercisable for up to ten
years at such exercise price and upon such terms and conditions as the
Compensation Committee of the Board of Directors may determine.

The 1997 Plan is administered by the Compensation Committee of the Board of
Directors, which is charged with designating those persons to whom options are
to be granted and determining the terms of options granted, including the
exercise price, the number of shares subject to the option, and the time of the
exercise. In granting options the Compensation Committee will take into
consideration the past performance and anticipated future contribution of the
potential option recipient and such other considerations the Committee deems
relevant.

Options granted under the 1997 Plan are subject to the following
restrictions, among others: (1) the per share exercise price must be equal to or
greater than 100%, or equal to or greater than 110% in the case of an officer or
other key employee who owns, at the time an incentive stock option is granted,
more than ten percent of the Class A Common Stock, of the fair market value of a
share of Common Stock on the date of grant of the option, except in the case of
a nonstatutory stock option in which the committee has discretion to set a per
share exercise price of less than 100% of fair market value on the date of grant
of the option; and (2) no option may be exercisable after the expiration of ten
years from the date of its grant, and in the case of an incentive stock option
granted to an officer or other key employee who owns, at the time an incentive
stock option is granted, more than ten percent of the Class A Common Stock, no
option is exercisable after the expiration of five years from the date of grant.
If the option holder ceases to be employed by the Company because he or she is
terminated for Cause (as defined in the 1997 Plan), any options held by the
terminated employee will automatically expire. If an option holder's employment
by the Company is terminated by reason of a mental or physical disability or
death, then his or her options will expire one year after the date of
termination. If an option holder's employment is terminated for any other
reason, then his or her options will terminate three months from the date of
termination. The 1997 Plan provides that unless otherwise provided in an
individual grant, an option will become immediately fully exercisable upon the
occurrence of certain transactions, such as the merger or sale of the Company.

The 1997 Plan authorizes the Company to make loans to option holders to
enable them to exercise their options. Such loans must (1) provide for recourse
to the optionee, (2) bear interest at a rate no less than the prime rate of
interest of the Company's principal lender and (3) be secured by the shares of
Common Stock purchased. The Board of Directors has the authority to amend or
terminate the 1997 Plan, provided that no such action impairs the rights of the
holder of any outstanding option without the written consent of such holder, and
provided further that certain amendments of the 1997 Plan are subject to
stockholder approval. Unless terminated sooner, the 1997 Plan will terminate ten
years from its effective date.

At the closing of the Offering, options to purchase shares of
Class A Common Stock will be outstanding under the 1997 Plan at an exercise
price equal to the public offering price and options to purchase
shares of Class A Common Stock remained available for grant.

BENEFIT PLANS

FPC Profit Sharing Plan. FPC maintains a tax-qualified profit sharing
plan, including features under section 401(k) of the Code, that covers
substantially all of its employees. The plan generally provides for voluntary
employee pre-tax contributions ranging from 1% to 10% and a discretionary FPC
contribution allocated to each employee based on compensation.

49
<PAGE> 52

SKW Retirement Savings and Profit Sharing Plan. SKW also sponsors a
tax-qualified defined contribution plan, including features under section 401(k)
of the Code, that covers substantially all of its non-union U.S. employees. The
plan generally provides for voluntary employee pre-tax contributions ranging
from 1% to 15%, a matching SKW contribution in an amount equal to 10% of the
first 6% of the employee's contribution, and a discretionary SKW contribution
allocated to each employee based on compensation.

Helsel Employee's Savings and Investment Plan. Helsel maintains a
tax-qualified savings and investment plan, including features under section
401(k) of the Code, that covers substantially all of its employees. The plan
generally provides for voluntary employee pre-tax contributions ranging from 1%
to 23%, a 50% matching contribution by Helsel (up to a maximum of 2% of an
employee's compensation), and a discretionary Helsel contribution.

Helsel Employee's Retirement Plan. Helsel sponsors a tax-qualified defined
contribution plan that covers substantially all of its employees. The retirement
plan provides eligible employees with an annual Helsel contribution equal to 7%
of their compensation.

FPC Pension Plan. FPC sponsors a tax-qualified non-contributory, defined
benefit pension plan covering substantially all of its employees and Logan's
non-union employees. The plan provides participating employees with retirement
benefits at normal retirement age (as defined in the plan) based on specified
formulas. In no event will the amount of annual retirement income determined
under these formulas and payable at the participant's retirement date be greater
than $90,000. In addition, federal law defines the maximum amount of annual
compensation that may be taken into account in calculating the amount of the
pension benefit as follows: 1989 -- $200,000; 1990 -- $209,200;
1991 -- $222,220; 1992 -- $228,860; 1993 -- $235,840; 1994 through
1996 -- $150,000; 1997 -- $160,000 (indexed for inflation). The estimated annual
benefit payable at normal retirement age for each Named Executive Officer who is
eligible to participate in the FPC pension plan is as follows: Mr.
Harbert -- $59,200; Mr. Weinberg -- $88,100; Mr. Wilson -- $90,000; and Mr.
Berlin -- $90,000.

EMPLOYMENT AGREEMENTS

Pursuant to Employment Agreements, each dated as of November 1, 1996, and
Wage Continuation Agreements, each dated June 30, 1995, as amended, Mr. Harbert
has agreed to serve as Chairman of the Board, President and Chief Executive
Officer of Hawk, and Mr. Weinberg has agreed to serve as Vice-Chairman of the
Board and Treasurer, through December 2004. Mr. Harbert will receive an annual
base salary of $403,625 in 1997. Mr. Weinberg will receive an annual base salary
of $303,625 in 1997. Each receives an annual bonus based on the incentive
compensation programs in effect for the Company's subsidiaries. The base salary
may be adjusted by the Compensation Committee of the Board. Neither Mr. Harbert
nor Mr. Weinberg may engage in any competitive business while he is employed by
the Company and for a period of two years thereafter.

Mr. Harbert is required to devote substantially all of his business time
and effort to the Company but may serve on the boards of other companies and
charitable organizations. Mr. Weinberg devotes a substantial amount of his time
and effort to the business of the Company, but under the terms of his employment
agreement, he is not required to devote all of his time and effort to the
business of the Company. Mr. Weinberg also serves as Chairman of the Board of
New West Eyeworks, Inc. and Chairman of the Board of SunMedia Corp. and devotes
a significant amount of his time and effort to the business of those companies.
Under the current terms of the Wage Continuation Agreements, if either Mr.
Harbert or Mr. Weinberg dies during the term of their respective employment
agreements or is no longer in the active employ of the Company solely because of
a mental or physical disability, the Company will pay 50% of his annual base
salary, but in no event less than 50% of his average salary in the preceding two
years before his death or disability, to his spouse annually until the date of
her death. Prior to the Offering, the Company intends to replace this wage
continuation benefit with split-dollar life insurance, the premiums of which
will be paid by the Company and the beneficiaries of which will be the
respective spouses of Mr. Harbert and Mr. Weinberg. Under the terms of the
split-dollar life insurance policies, the Company would be reimbursed from the
policies for the lesser of the cash value or all

50
<PAGE> 53

premiums paid during the term of the policies. If either becomes mentally or
physically disabled during the term, the Company will pay his annual base
salary, at the same rate preceding the disability, for the remainder of the term
of the employment agreement. In the event of the death or disability of either
Mr. Harbert or Mr. Weinberg during the term, the Company will also pay any of
his bonus earned but not paid.

Upon the acquisition of Helsel by a group led by Mr. Harbert and Mr.
Weinberg, Jess F. Helsel entered into an Employment Agreement and a Consulting
Agreement, each effective July 1, 1994. Mr. Helsel agreed to serve as President
of Helsel through the expiration of the term of the employment agreement in June
1997. In June 1997, these agreements were amended to extend the term of the
employment agreement by an additional year ending in June 1998 and to delay the
commencement of the term of the consulting agreement until July 1998. Mr. Helsel
receives an annual base salary of $150,000 and an annual bonus determined in
accordance with specified formulas based on the amount by which Helsel's
earnings before interest, income taxes, depreciation, amortization, certain
corporate charges and payment of Mr. Helsel's bonus exceeds specified targets.
If Mr. Helsel becomes mentally or physically disabled during the term, the
Company will pay his annual base salary and bonus for the remainder of the term.
Under the amended consulting agreement, the Company will pay Mr. Helsel $150,000
for each of the first two years after the expiration of the extended term of the
employment agreement and $75,000 for each of the third and fourth years after
the expiration of such term. Mr. Helsel may not engage in any competitive
business while he is employed by the Company and for a period of five years
after the expiration of the extended term of his employment agreement.

Upon the acquisition of Hutchinson, the Company entered into an Employment
Agreement, dated January 2, 1997, with Timothy J. Houghton, President of
Hutchinson. Under the terms of the three year employment agreement, Mr. Houghton
will receive an annual base salary of $160,000 and a bonus determined in
accordance with a specified formula based on the growth in Hutchinson's earnings
before interest, income taxes, depreciation and amortization during 1997, 1998
and 1999. Mr. Houghton may not engage in any competitive business while he is
engaged by the Company and for a period of five years after the expiration of
his employment agreement.

51
<PAGE> 54

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus,
information regarding the beneficial ownership of the Company's Class A Common
Stock and Series D Preferred Stock (collectively, the "Voting Stock"), by (1)
each stockholder known by the Company to be the beneficial owner of more than
five percent of each class of the Company's outstanding shares of Voting Stock,
(2) each director or executive officer who beneficially owns any shares of
Voting Stock, and (3) all directors and executive officers of the Company as a
group. The information set forth in the table below does not include shares
of Class A Common Stock reserved for issuance under the 1997 Plan (of which
shares will be reserved for options to be outstanding as of the closing of the
Offering), or shares of Class A Common Stock reserved for issuance upon
conversion of 8.0% two-year notes in the aggregate principal amount of $1.5
million (of which up to $500,000 of the then-outstanding principal balance is
convertible at the option of the holders thereof into shares of Class A Common
Stock) that were issued by the Company in connection with the acquisition of
Hutchinson, and assumes the exercise of warrants to purchase shares of Class
B Common Stock (which will be automatically converted on a one-for-one basis
into shares of Class A Common Stock upon the sale by certain of the Selling
Stockholders in the Offering). See "Management -- Stock Option Plan" and
"Certain Transactions -- Transactions Concurrent with the Offering." Unless
otherwise indicated, the Company believes that all persons named in the tables
have sole investment and voting power over the shares of Voting Stock owned.
Unless otherwise specified, the address of all the stockholders is the address
of the Company set forth in this Prospectus.

<TABLE>
<CAPTION>
OWNERSHIP PRIOR OWNERSHIP AFTER THE OFFERING
TO THE OFFERING -------------------------------------
-------------------
SHARES OF CLASS A
CLASS A CLASS A COMMON STOCK(1) SERIES D
COMMON STOCK(1) COMMON PREFERRED STOCK(1)
------------------- STOCK ---------------- ------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT SHARES PERCENT
- ----------------------------- --------- ------- ------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
William J. O'Neill, Jr.(2)... 26.3% % -- --
Norman C. Harbert(3)(4)...... 21.6% -- % 689 45%
Ronald E. Weinberg(3)(5)..... 21.1% -- % 689 45%
Connecticut General Life
Insurance Company(6)....... 12.0% -- -- -- --
CIGNA Mezzanine Partners III,
L.P.(7).................... 6.0% -- -- -- --
Byron S. Krantz(3)(8)........ 4.8% -- % 152 10%
Jeffrey H. Berlin............ 4.6% -- % -- --
Douglas D. Wilson............ * -- * -- --
Thomas A. Gilbride........... * -- * -- --
Dan T. Moore, III............ * -- * -- --
Jess F. Helsel............... * -- * -- --
Paul R. Bishop............... * -- * -- --
All directors and executive
officers as a group (11
individuals)............... 81.0% % 1,530 100%
</TABLE>

- ---------------
* Less than 1.0%.

(1) The Class A Common Stock and Series D Preferred Stock are the only voting
securities of the Company that will be outstanding after the Offering. See
"Description of Capital Stock."

(2) Includes shares held by Clanco Partners I, an Ohio general partnership,
prior to the Offering and shares after the Offering. Mr. O'Neill is the
managing partner of Clanco Partners I and as a result has voting and
dispositive power over the shares held by Clanco Partners I. Clanco Partners
I is an Ohio general partnership whose address is c/o William J. O'Neill,
Jr., 30195 Chagrin Boulevard, Suite 310, Pepper Pike, Ohio 44124.

52
<PAGE> 55

(3) Each of these stockholders is a party to an agreement governing the voting
and disposition of all shares of Class A Common Stock of which such
stockholders are the legal or beneficial owners. Each such stockholder
disclaims beneficial ownership of the shares of Class A Common Stock owned
by the other such stockholders. See "Stockholder Agreement."

(4) Includes shares held by the Harbert Family Limited Partnership. The
Harbert Family Limited Partnership is an Ohio limited partnership. Mr.
Harbert is the managing general partner of the Harbert Family Limited
Partnership and as a result has voting and dispositive power over the shares
held by the Harbert Family Limited Partnership.

(5) Includes shares held by the Weinberg Family Limited Partnership. The
Weinberg Family Limited Partnership is an Ohio limited partnership. Mr.
Weinberg is the managing general partner of the Weinberg Family Limited
Partnership and as a result has voting and dispositive power over the shares
held by the Weinberg Family Limited Partnership.

(6) Connecticut General Life Insurance Company is a Connecticut corporation
whose address is c/o CIGNA Investments, Inc., 900 Cottage Grove Road,
Hartford, Connecticut 06152-2206. Assumes the exercise of warrants to
purchase shares of Class B Common Stock which will be converted on a
one-for-one basis into shares of Class A Common Stock upon sale by
Connecticut General Life Insurance Company in the Offering.

(7) CIGNA Mezzanine Partners III, L.P. is a Delaware limited partnership whose
address is c/o CIGNA Investments, Inc., 900 Cottage Grove Road, Hartford,
Connecticut 06152-2206. Assumes the exercise of warrants to purchase
shares of Class B Common Stock which will be converted on a one-for-one
basis into shares of Class A Common Stock upon sale by CIGNA Mezzanine
Partners III, L.P. in the Offering.

(8) Includes shares held by the Krantz Family Limited Partnership. The Krantz
Family Limited Partnership is an Ohio limited partnership whose address is
c/o Byron S. Krantz, One Cleveland Center, 20th Floor, Cleveland, Ohio
44114. Mr. Krantz is the managing general partner of the Krantz Family
Limited Partnership and as a result has voting and dispositive power over
the shares held by the Krantz Family Limited Partnership.

STOCKHOLDER AGREEMENT

Messrs. Harbert, Weinberg and Krantz are parties to a Stockholders' Voting
Agreement, effective as of November 27, 1996, that as amended provides that to
the extent that any of them is the legal or beneficial owner of any shares of
voting stock of the Company, including any shares of Class A Common Stock or
Series D Preferred Stock, they will vote those shares (1) in favor of electing
Messrs. Harbert, Weinberg and Krantz (so long as each desires to serve) or their
respective designees to the Board of Directors of the Company, (2) in favor of
electing such other directors to the Board of Directors as a majority of Messrs.
Harbert, Weinberg and Krantz or their respective designees shall direct and (3)
with respect to such matters as are submitted to a vote of the stockholders of
the Company as a majority of Messrs. Harbert, Weinberg and Krantz or their
respective designees shall direct. If any of Messrs. Harbert, Weinberg or Krantz
or their respective affiliates sells more than 50% of the Class A Common Stock
beneficially owned by such individual on the date of the Offering, the
obligation of the other parties to continue to vote their shares of Class A
Common Stock and Series D Preferred Stock for the selling stockholder or his
designee as a director will terminate. The agreement will terminate upon the
first to occur of the mutual written agreement of the parties to terminate the
agreement or the death of the last to die of Mr. Harbert, Mr. Weinberg or their
respective designees; provided that the provisions described in clauses (1) and
(2) above will terminate sooner in the event that none of Messrs. Harbert,
Weinberg and Krantz (or any designee thereof) remains on the Board of Directors.

53
<PAGE> 56

CERTAIN TRANSACTIONS

TRANSACTIONS CONCURRENT WITH THE OFFERING

Upon the closing of the Offering, the Company will effect the Preferred
Stock Redemption by (1) redeeming all of the outstanding shares of Series A
Preferred Stock, 351 of the 702 outstanding shares of Series B Preferred Stock
and seven of the 1,189 outstanding shares of Series C Preferred Stock, at their
liquidation value, plus accrued and unpaid dividends, and (2) exchanging the
remaining outstanding shares of Series B and Series C Preferred Stock for an
equal number of shares of Series D Preferred Stock. Assuming such transactions
are consummated as of December 31, 1997, the Series A Preferred Stock will be
redeemed for approximately $1.4 million, the Series B Preferred Stock for
approximately $351,000 and the Series C Preferred Stock for approximately
$7,000, including accrued and unpaid dividends. See "Use of Proceeds."

The Series A Preferred Stock redemption proceeds will be distributed to the
holders of Series A Preferred Stock, including approximately: $1.0 million to
Clanco Partners I, of which William J. O'Neill, Jr. is the managing partner;
$295,000 to Clanco Family Partners, L.P., of which Mr. O'Neill is a director to
its general partner; and $101,000 to the Dorothy K. O'Neill Revocable Trust, of
which Mr. O'Neill is also a co-trustee. The Series B Preferred Stock redemption
proceeds will be distributed to certain holders of Series B Preferred Stock,
including approximately $315,000 to Clanco Family Partners, L.P.

Following the Preferred Stock Redemption, the Company will exchange all
shares of Series B and Series C Preferred Stock of which each of Messrs.
Harbert, Weinberg and Krantz is the legal and beneficial owner for an equal
number of shares of Series D Preferred Stock. Immediately prior to the Preferred
Stock Redemption, Mr. Weinberg will purchase certain shares of Series C
Preferred Stock from other stockholders so that, following the exchange
described in the preceding sentence, he will own the same amount of shares of
Series D Preferred Stock as Mr. Harbert. Upon the closing of the Offering,
Messrs. Harbert, Weinberg and Krantz will own all of the outstanding shares of
Series D Preferred Stock and there will be no shares of Series A, Series B or
Series C Preferred Stock outstanding. See "Principal and Selling Stockholders"
and "Description of Capital Stock -- Preferred Stock."

All shares of Series A, Series B and Series C Preferred Stock redeemed or
exchanged in the Preferred Stock Redemption will be cancelled and permanently
retired. For a description of the terms of the Series D Preferred Stock, see
"Description of Capital Stock -- Preferred Stock."

The Company will not implement the Preferred Stock Redemption or exchange
of Series B and Series C Preferred Stock for Series D Preferred Stock unless the
Offering is consummated.

HAWK CONTROLLING STOCKHOLDER MERGER

In November 1996, concurrently with the closing of the offering of the
Senior Notes, the Company completed the merger of Hawk Holding Corp., a Delaware
corporation and a principal stockholder of the Company ("Hawk Holding"), with
and into the Company in a tax-free reorganization under Section 368(a)(1)(A) of
the Code (the "Hawk Controlling Stockholder Merger"). Hawk Holding had no
material assets other than the capital stock of the Company. Prior to the
merger, Hawk Holding owned 33.9% of the outstanding shares of Class A Common
Stock of the Company and 1,250 shares of the Series A Preferred Stock with a
liquidation value of $1.25 million, plus accrued and unpaid dividends. Hawk
Holding's only liabilities were its debts to the Company and Hawk Holding's
stockholders in the aggregate amount of approximately $870,000. As a result of
the merger, the Series A Preferred Stock owned by Hawk Holding was canceled, and
the Company issued its Series C Preferred Stock in the aggregate amount of
approximately $1.19 million ($1.25 million less $61,000), which was equal to the
liquidation value of the Series A Preferred Stock owned by Hawk Holding less
$61,000 of indebtedness of Hawk Holding to the Company, which was cancelled in
the merger. In the merger, the Company also canceled the shares of Class A
Common Stock of the Company owned by Hawk Holding and then reissued the

54
<PAGE> 57

same amount of shares of Class A Common Stock pro rata to the Hawk Holding
stockholders. The common stockholders of Hawk Holding included: Norman C.
Harbert, Chairman of the Board, President, Chief Executive Officer and a
Director and stockholder of the Company who owned 44.2% of Hawk Holding; Ronald
E. Weinberg, Vice-Chairman of the Board, Treasurer and a Director and
stockholder of the Company who owned 42.1%; Byron S. Krantz, Secretary and a
Director and stockholder of the Company who owned 9.7%; Thomas A. Gilbride, Vice
President - Finance and a stockholder of the Company who owned 1.9%; and Dan T.
Moore, III, a Director of the Company, Douglas D. Wilson, Executive Vice
President and a stockholder of the Company, and Clanco Partners I, each of whom
owned less than 1.0%. William J. O'Neill, Jr., a Director and a stockholder of
the Company, is the managing partner of Clanco Partners I.

Hawk Holding's liabilities included $61,000 of indebtedness to the Company
under a note that bore interest at the prime rate and was due on demand, and
approximately $809,000 of indebtedness to certain of its stockholders under a
note that bore interest at the prime rate plus 1.75% per annum and was due March
14, 1994. Upon the effectiveness of the Hawk Controlling Stockholder Merger, the
$61,000 indebtedness of Hawk Holding to the Company was canceled. Of the
$809,000 aggregate principal amount of indebtedness to stockholders,
approximately $364,000 was owed to Mr. Harbert for his portion of the note,
$347,000 was owed to Mr. Weinberg for his portion and $81,000 was owed to Mr.
Krantz for his portion. Upon the effectiveness of the Hawk Controlling
Stockholder Merger, the $809,000 aggregate principal amount of indebtedness was
converted into Series C Preferred Stock with a liquidation value of $809,000,
and the Company issued Series C Preferred Stock with a liquidation value of
$380,000 pro rata to the Hawk Holding stockholders.

STOCKHOLDER NOTES

Certain stockholders of the Company issued notes to the Company on June 30,
1995 (the "June 1995 Notes") in order to repay certain indebtedness incurred by
them with respect to the acquisition of Helsel as follows: by Mr. Harbert in the
original principal amount of approximately $802,000; by Mr. Weinberg in the
original principal amount of approximately $802,000; by Mr. Wilson in the
original principal amount of $162,500; and by Mr. Krantz in the original
principal amount of approximately $60,000. The June 1995 Notes are due and
payable on July 1, 2002 and bore interest at the prime rate plus 1.25% per annum
through September 30, 1996, and at the prime rate thereafter. The June 1995
Notes remain outstanding.

In addition, Clanco Partners I issued a note to the Company on June 30,
1995 with the same terms as the June 1995 Notes. The original principal amount
of Clanco Partners I's note was $162,500. Clanco Partners I repaid its note to
the Company in full in August 1996.

OTHER TRANSACTIONS

The Company is a party to an expense sharing arrangement under which the
Company shares certain expenses of its Cleveland, Ohio headquarters with
Weinberg Capital Corporation, of which Mr. Weinberg is President and sole
shareholder. Pursuant to a formula based on full-time equivalent personnel, the
Company pays approximately 54% of the overhead costs of the headquarters,
including, without limitation, rent, utilities and copying, telephone and other
expenses. The aggregate amount of the payments by the Company for the shared
headquarters were approximately $170,000 in the first nine months of 1997,
$128,000 in 1996, $130,000 in 1995 and $95,000 in 1994.

The Company purchases raw materials from a corporation of which Dan T.
Moore, III is an officer and a principal shareholder. Mr. Moore is a Director of
the Company. The Company paid approximately $860,000 for such raw materials in
the first nine months of 1997 and $901,000 in 1996.

Byron S. Krantz, a Director and the Secretary of the Company, is a partner
of the law firm of Kohrman Jackson & Krantz P.L.L., which provides legal
services to the Company. The Company paid legal fees to Kohrman Jackson & Krantz
P.L.L. in 1996 of $469,000 for services in connection with a

55
<PAGE> 58

variety of matters, including the registration, sale and exchange of the Senior
Notes and the Hawk Controlling Stockholder Merger.

The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties. On-going and future transactions
with related parties will be: (1) on terms at least as favorable as those that
the Company would be able to obtain from unrelated parties; (2) for bona fide
business purposes; and (3) approved by a majority of the disinterested and
non-employee directors.

DESCRIPTION OF CAPITAL STOCK

At the time of the Offering, the authorized capital stock of the Company
consists of (1) 75,000,000 authorized shares of Class A Common Stock, $.01 par
value per share, shares of which will be outstanding upon consummation
of the Offering, (2) 10,000,000 authorized shares of Class B Common Stock, none
of which will be outstanding upon consummation of the Offering, and (3) 500,000
authorized shares of Serial Preferred Stock, $.01 par value per share
("Preferred Stock"), of which no shares of Series A, Series B or Series C
Preferred Stock and 1,530 shares of Series D Preferred Stock will be outstanding
upon consummation of the Offering and of which 100,000 shares of Series E
Preferred Stock, par value $.01 per share (the "Series E Preferred Stock"), will
be reserved for issuance upon consummation of the Offering. The foregoing
description of the Company's capital stock assumes (1) the sale by the Selling
Stockholders of shares of Class A Common Stock in the Offering, (2)
the exercise of warrants to purchase shares of Class B Common Stock
(which will be automatically converted on a one-for-one basis into shares of
Class A Common Stock upon the sale by certain of the Selling Stockholders in the
Offering) and (3) the consummation of the Preferred Stock Redemption. See "Use
of Proceeds" and "Certain Transactions -- Transactions Concurrent with the
Offering." The following summary description of the capital stock of the Company
does not purport to be complete and is qualified in its entirety by reference to
the Second Amended and Restated Certificate of Incorporation of the Company (the
"Certificate") and to the Amended and Restated By-laws of the Company (the
"By-laws"), copies of which are available as described under "Available
Information."

COMMON STOCK

The powers, preferences and rights of the Class A Common Stock, and the
qualifications, limitations and restrictions thereof, are in all respects
identical to those of the Class B Common Stock, except for voting and conversion
rights. The Class B Common Stock was issued to comply with certain regulatory
requirements imposed upon stockholders that are affiliates of insurance
institutions.

Each holder of Class A Common Stock is entitled to one vote per share owned
of record on the applicable record date on all matters presented to a vote of
the stockholders, including the election of certain directors. See
"Management -- Composition of Board of Directors" and "Preferred Stock." Except
as may otherwise be required by the Delaware General Corporation Law and the
Certificate, the holders of Class B Common Stock are not entitled to vote on any
matters to be voted on by the stockholders of the Company.

The Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis (1) automatically upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act, and (2) at the request of a third party transferee under certain
circumstances. In case of any merger or consolidation of the Company with any
other entity as a result of which the holders of Class A Common Stock are
entitled to receive cash, property, stock or other securities with respect to or
in exchange for their Class A Common Stock, or in case of any sale or conveyance
of all or substantially all of the assets of the Company, the holders of each
share of Class B Common Stock have the right thereafter to convert such share of
Class B Common Stock into the kind and amount of cash, property, stock or other
securities receivable upon such consolidation, merger, sale or conveyance by a
holder of one share of Class A Common Stock.

56
<PAGE> 59

Subject to the rights of the holders of any outstanding Preferred Stock,
each holder of Common Stock is entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation or dissolution of the Company, each holder of Common Stock will be
entitled to share pro rata in any distribution of the Company's assets after the
payment of all debts and other liabilities, subject to the rights of the holders
of any outstanding Preferred Stock.

The holders of the Class A and Class B Common Stock have no preemptive
rights to purchase or subscribe for any stock or other securities and there are
no conversion rights (other than as stated herein) or redemption or sinking fund
provisions with respect to such stock.

All outstanding shares of Common Stock are, and when issued the shares of
Class A Common Stock offered hereby will be, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority (without action by the
stockholders) to issue the authorized and unissued Preferred Stock in one or
more additional series, to designate the number of shares constituting any such
series, and to fix, by resolution, the preferences, rights, privileges,
restrictions and other rights thereof, including voting rights, liquidation
preferences, dividend rights and conversion and redemption rights of such
series. Under certain circumstances, the Company could issue this Preferred
Stock as a method of discouraging, delaying or preventing a change of control of
the Company. The Company does not currently intend to issue any additional
shares of Preferred Stock.

Concurrently with the closing of the Offering and pursuant to the Preferred
Stock Redemption, the Company will (1) redeem all of the outstanding shares of
Series A Preferred Stock, 351 of the 702 outstanding shares of Series B
Preferred Stock and seven of the 1,189 outstanding shares of Series C Preferred
Stock, and (2) exchange the remaining outstanding shares of Series B and Series
C Preferred Stock for an equal number of shares of Series D Preferred Stock. As
a result of the Preferred Stock Redemption, all redeemed or exchanged shares of
Series A, Series B and Series C Preferred Stock will be cancelled and
permanently retired. See "Certain Transactions -- Transactions Concurrent with
the Offering."

The following is a description of the terms of the Series D Preferred
Stock:

- Dividends on the Series D Preferred Stock are cumulative and accrue at
the rate of 9.8% per annum, payable quarterly.

- The holders of the Series D Preferred Stock have the right to elect a
majority of the members of the Board of Directors and to vote separately
as a class on any proposal to effect a fundamental corporate change (such
as a merger, consolidation, recapitalization or sale of all or
substantially all of the assets of the Company) that is submitted to the
stockholders of the Company for a vote. The voting rights of the shares
of Series D Preferred Stock will terminate: (1) as to any of the Harbert,
Weinberg or Krantz family groups owning such shares on the date of
consummation of the Offering (each, a "Family Group") in the event that
such Family Group sells or otherwise ceases to control more than 50% of
the total number of shares of Class A Common Stock owned by it on the
date of consummation of the Offering, as adjusted; (2) as to all of such
shares upon the earlier to occur of (a) the date of death of the last to
die of Mr. Harbert, his son (Carl J. Harbert, II), Mr. Weinberg or his
son (Ronald E. Weinberg, Jr.) or (b) the date that both the Harbert and
Weinberg Family Groups sell or cease to control more than 50% of the
total number of shares of Class A Common Stock owned by them on the date
of consummation of the Offering, as adjusted; and (3) as to any of the
Family Groups in the event of the breach by such Family Group of the
restrictions on transfer of the Series D Preferred Stock described below.
See "Management -- Composition of Board of Directors" and "Anti-Takeover
Effects of the Company's Governing Documents."

- Shares of Series D Preferred Stock may only be sold or transferred
between any of the Family Groups or any of the members of such Family
Groups. Any Family Group that sells or transfers

57
<PAGE> 60

shares in violation of such transfer restrictions and any transferee
receiving such shares will not be entitled to vote its shares of Series D
Preferred Stock.

- The Company may, either (1) with the consent of all holders of the Series
D Preferred Stock for as long as they have the voting rights described
above, or (2) without the consent of such holders following the
termination of such voting rights, redeem all of the outstanding shares
of Series D Preferred Stock, provided the Company is not in default in
the payment of any dividends on such series of Preferred Stock then
outstanding, for $1,000 per share plus all accrued and unpaid dividends
to the date of redemption.

- Each share of Series D Preferred Stock is entitled to a liquidation
preference equal to $1,000 per share plus any accrued and unpaid
dividends thereon after payment of all debts and other liabilities of the
Company and before any payment or distribution is made on the Common
Stock (or any other subordinate class or series of stock of the Company).
The holders of the Series D Preferred Stock have no preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or sinking fund provisions with respect to such stock.
The Series D Preferred Stock is not listed or quoted on any stock
exchange or market.

In addition, the Board of Directors has authorized the issuance of up to
100,000 shares of Series E Preferred Stock in connection with the Rights
Agreement. For a description of the Rights Agreement and the terms of the Series
E Preferred Stock, see "Rights Agreement."

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Generally, Section 203 of the Delaware General Corporation Law prohibits a
publicly-held Delaware corporation from engaging in a broad range of "business
combinations" with an "interested stockholder" (defined generally as a person
owning 15% of more of a corporation's outstanding voting stock) for three years
following the date such person became an interested stockholder unless: (1)
before the person becomes an interested stockholder, the board of directors of
the corporation approves either the transaction resulting in such person
becoming an interested stockholder or the business combination; (2) upon
consummation of the transaction that resulted in the person becoming an
interested stockholder, the interested stockholder owns 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by directors
who are also officers of the corporation or shares held by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (3) following the date on which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of the stockholders,
and not by written consent, by the affirmative vote of at least two-thirds of
the corporation's outstanding voting stock, excluding shares owned by the
interested stockholder. In the Certificate, the Company has opted to be governed
by the foregoing provisions of Section 203.

ANTI-TAKEOVER EFFECTS OF THE COMPANY'S GOVERNING DOCUMENTS

Certain provisions of the Certificate and By-laws of the Company may be
deemed to have an anti-takeover effect and may delay, discourage or prevent a
change of control of the Company. In addition to the ability of the Board of
Directors to issue Preferred Stock, these provisions include the following:

Vacancies on Board of Directors. The Certificate provides that, subject to
the terms of the Preferred Stock, only the Board of Directors may fill vacant
directorships. As a result, a stockholder interested in gaining control of the
Company will be precluded from removing incumbent directors and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
such removal with its own nominees.

Special Meetings of Stockholders. The Certificate provides that special
meetings of stockholders of the Company may be called only by a majority of the
Board of Directors, the Chairman or Vice-

58
<PAGE> 61

Chairman of the Board or at least 25% of the stockholders of the Company
entitled to vote. This provision will make it more difficult for stockholders to
take actions opposed by the Board of Directors.

Elimination of Actions by Written Consent. The Certificate provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and cannot be taken by written consent in lieu of a meeting.

Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The By-laws provide that stockholders seeking to bring business
before an annual or special meeting of stockholders, or to nominate candidates
for election as directors at an annual or special meeting of stockholders, must
give the Company not less than 60 days nor more than 90 days prior notice of
such intent; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, such stockholder must give the Company notice of its proposal or
nomination in compliance with the provisions of the By-laws no later than the
close of business on the tenth day following the notice of the meeting. These
provisions may preclude some stockholders from bringing matters before the
stockholders at an annual or special meeting or from making nominations for
directors at an annual or special meeting.

None of the foregoing provisions may be amended or repealed except by an
affirmative vote of the holders of at least two-thirds of the outstanding shares
of voting stock of the Company.

RIGHTS AGREEMENT

Adoption of Rights Agreement. On November 13, 1997, the Board of Directors
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of Common Stock. The dividend is payable to the stockholders
of record as of 5:00 P.M., Cleveland, Ohio time, on November , 1997 (the
"Effective Date"), and with respect to Common Stock issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Stock issued after the Distribution Date. Except as set forth below,
each Right, when it becomes exercisable, entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series E Preferred
Stock (the "Preferred Shares") at a price of $ per one one-thousandth
of a Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement, dated
as of November , 1997 (the "Rights Agreement"), between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agent").

The following summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
(a copy of which is available as described under "Available Information"),
including the definitions therein of certain terms used in the foregoing
description.

Issue of Right Certificates. The Rights are attached to all certificates
representing outstanding Common Stock, and no separate Right Certificates (as
defined below) have been distributed. The Rights will separate from the Common
Stock on the earliest to occur of (1) the first date of public announcement that
any person or entity, alone or together with its affiliates and associates (a
"Person"), other than those that are Exempt Persons (as defined below), has
acquired beneficial ownership of 15% or more of the outstanding Class A Common
Stock (other than pursuant to certain permitted offers), or (2) the close of
business on the tenth business day (or such later date as the Board of Directors
of the Company may determine) following the commencement of, or first public
announcement of an intention to commence, a tender or exchange offer the
consummation of which would result in any Person becoming an Acquiring Person
(as defined below), including, in the case of both clauses (1) and (2) above,
any such date which is after the date of the Rights Agreement and prior to the
issuance of the Rights (the earliest of such dates being called the
"Distribution Date"). Any Person whose acquisition of Common Stock causes a
Distribution Date pursuant to clause (1) above is an "Acquiring Person." The
first date of public announcement that a Person has become an Acquiring Person
is the "Shares Acquisition Date." For purposes of the Rights Agreement, the
definition of Acquiring Person excludes

59
<PAGE> 62

certain Persons (the "Exempt Persons"), including Mr. Harbert, Mr. Weinberg, Mr.
O'Neill and their respective affiliates and associates.

The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock. Until the Distribution
Date (or earlier redemption, exchange, or expiration of the Rights), new Common
Stock certificates issued after the Effective Date upon transfer or new issuance
of Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption, exchange, or
expiration of the Rights), the surrender for transfer of any certificates for
Common Stock outstanding as of the Effective Date will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As promptly as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date (and to each initial record holder of certain Common Stock
issued after the Distribution Date), and such separate Right Certificates alone
will evidence the Rights.

Exercise and Expiration of Rights. The Rights are not exercisable until
the Distribution Date and will expire at 5:00 P.M., Cleveland, Ohio time, on
November , 2007, unless earlier redeemed or exchanged by the Company as
described below. Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.

Flip-In Provision. In the event that any Person, other than those that are
Exempt Persons, becomes an Acquiring Person other than pursuant to certain
permitted offers, each holder of a Right will have (subject to the terms of the
Rights Agreement) the right to receive upon exercise the number of shares of
Common Stock, or, in the discretion of the Board of Directors, the number of one
one-thousandths of a Preferred Share (or, in certain circumstances, other
securities of the Company) determined in accordance with a formula based on the
then Purchase Price divided by 50% of the then current per share market price of
the Class A Common Stock (the "Flip-In Right"). Notwithstanding the foregoing,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person or any affiliate or
associate thereof will be null and void.

Flip-Over Provision. In the event that, at any time following the Shares
Acquisition Date, (1) the Company is acquired in a merger or other business
combination transaction in which the holders of all of the outstanding Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (2) more than 50%
of the Company's assets or earning power is sold or transferred, in either case
with or to an Acquiring Person or any affiliate or associate thereof, or any
other person in which such Acquiring Person, affiliate or associate has an
interest, or any Person acting on behalf of or in concert with such Acquiring
Person, affiliate or associate, or, if in such transaction all holders of Common
Stock are not treated alike, then each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
(the "Flip-Over Right") to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company or the Company, as the case may be, having a value
determined in accordance with a formula based on the then Purchase Price divided
by 50% of the then current per share market price of the common stock of such
acquiring company. The holder of a Right will continue to have the Flip-Over
Right whether or not such holder exercises or surrenders the Flip-In Right.

Adjustment of Purchase Price. The Purchase Price payable, and the number
of one one-thousandths of a Preferred Share or other securities issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (1) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Preferred Shares, (2) upon the grant to holders of
the Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares at a price, or securities convertible into Preferred Shares
with a conversion price, less than the then current market price of the
Preferred Shares or (3) upon the distribution to holders of the Preferred Shares
of evidences of indebtedness or assets (excluding regular quarterly cash
dividends or a dividend payable in preferred

60
<PAGE> 63

shares) or of subscription rights or warrants (other than "equivalent preferred
shares," as defined in the Rights Agreement). The Purchase Price is also subject
to adjustment in the event of a stock split of the Common Stock, or a stock
dividend on the Common Stock payable in Common Stock, or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.

Redemption of Rights. At any time prior to the earlier to occur of either
(1) a Person becoming an Acquiring Person or (2) the expiration of the Rights,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (the "Redemption Price"), which redemption shall be effective upon the
action of the Board of Directors. The Company may at its option pay the
Redemption Price in cash or Common Stock. Additionally, the Company may redeem
the then outstanding Rights in whole, but not in part, at the Redemption Price
after a Shares Acquisition Date and before the expiration of any period during
which the Flip-Over Right may be exercised in connection with a merger or other
business combination transaction or series of transactions involving the Company
in which all holders of Common Stock are treated alike but not involving (other
than as a holder of Common Stock being treated like all other such holders) any
Person acting directly or indirectly on behalf of, or in concert with, any
Acquiring Person, or its affiliates or associates. The Board of Directors may
only redeem Rights if a majority of the Continuing Directors (as defined in the
Rights Agreement) authorizes such redemption. Upon the effective date of the
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

Exchange of Rights. At any time after a Person becomes an Acquiring Person
but before such Acquiring Person, together with all affiliates and associates
thereof, becomes the "Beneficial Owner" (defined in the Rights Agreement) of 50%
or more of the Common Stock then outstanding, the Company may, at its option,
exchange all or part of the then outstanding and exercisable Rights (other than
those owned by the Acquiring Person, together with any affiliates and associates
of such Acquiring Person, which have become null and void) at an exchange ratio
of one share of Common Stock per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction involving either the Common
Stock or the Preferred Shares occurring after the date of the Rights Agreement
(the "Exchange Ratio"). The Board of Directors may only exchange Rights if a
majority of the Continuing Directors authorizes such exchange. Immediately upon
the action of the Board of Directors ordering the exchange of any Rights and
without any further action and without any notice, the right to exercise such
rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the number of
such rights held by such holder multiplied by the Exchange Ratio.

Amendment of Rights Agreement. Prior to the Distribution Date, the Company
may supplement or amend any provision of the Rights Agreement without the
approval of the holders of Common Stock. From and after the Distribution Date,
the Company generally may supplement or amend the Rights Agreement without the
approval of the holders of Right Certificates in order (1) to cure any
ambiguity, (2) to correct or supplement any provision which may be defective or
inconsistent with any other provisions, (3) to shorten or lengthen any time
period or (4) to change or supplement the provisions in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Right Certificates (other than an Acquiring Person
or an affiliate or associate of an Acquiring Person). The Company may not
supplement or amend any provision of the Rights Agreement unless a majority of
the Continuing Directors authorizes such supplement or amendment.

Anti-Takeover Effects of Rights. The Rights have certain anti-takeover
effects. If triggered, the Rights would cause substantial dilution to an
Acquiring Person that acquires more than 15% of the Class A Common Stock on
terms not approved by the Board of Directors. The Rights could discourage or
make more difficult a merger, tender offer or similar transaction. However, the
Rights should not interfere with any merger or other business combination
approved by the Board of Directors prior to the time an Acquiring Person becomes
such, because until such time the Rights may be redeemed by the Company.

61
<PAGE> 64

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Certificate provides that directors and officers shall be indemnified
against liabilities arising from their service as directors or officers to the
fullest extent permitted by law, including payment in advance of a final
disposition of a director's or officer's expenses and attorneys' fees incurred
in defending any action, suit or proceeding. Except in the case of an action,
suit or proceeding brought by or in the right of the Company against an officer
or director, a court must approve such indemnification if the officer or
director is adjudged liable. Presently, the Delaware General Corporation Law
provides that to be entitled to indemnification an individual must have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
Company's best interests, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful.

Delaware law permits a corporation to purchase and maintain insurance or
furnish similar protection on behalf of any officer or director against any
liability asserted against him and incurred by him in his capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him against such liability under the Delaware
General Corporation Law. The Company maintains a directors' and officers'
liability insurance policy.

At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought,
nor is the Company aware of any threatened litigation that may result in claims
for indemnification by any director or officer.

LIMITATION ON DIRECTOR LIABILITY

The Certificate also provides that, to the fullest extent permitted by the
Delaware General Corporation Law, a director of the Company shall not be liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. This provision presently limits a director's liability
except where a director (1) breaches his or her duty of loyalty to the Company
or its stockholders, (2) fails to act in good faith or engages in intentional
misconduct or a knowing violation of law, (3) authorizes payment of an unlawful
dividend or stock repurchase or redemption or (4) obtains an improper personal
benefit.

This provision is consistent with Section 102(b)(7) of the Delaware General
Corporation Law, which is designed, among other things, to encourage qualified
individuals to serve as directors of Delaware corporations. The Company believes
this provision will assist it in maintaining and securing the services of
qualified directors who are not employees of the Company. This provision has no
effect on the availability of non-monetary equitable remedies, such as
injunction or rescission. If equitable remedies are found not to be available to
stockholders for any particular case, stockholders may not have any effective
remedy against actions taken by directors that constitute negligence or gross
negligence.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Class A Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have shares of
Class A Common Stock (excluding shares that may be sold by the Company upon
exercise of the Underwriters' over-allotment option) and no shares of Class B
Common Stock outstanding. Of these shares, shares of Class A Common
Stock sold in the Offering will be freely tradeable without restriction (except
as to affiliates of the Company) or registration under the Securities Act. The
remaining outstanding shares of Class A Common Stock held by existing
stockholders of the Company will be "restricted securities" within the meaning
of Rule 144 under the Securities Act ("Rule 144"). Of those shares,
shares held by non-affiliates of the Company are available for
immediate sale in the public market subject to the limitations of Rule 144. All
of the Company's directors and executive officers have

62
<PAGE> 65

agreed that for a period of 180 days after the date of the Offering they will
not, without the prior written consent of Schroder & Co. Inc., offer, sell or
otherwise dispose of any shares of Class A Common Stock held by them as of the
effective date of the Offering or purchased by them directly from the Company
thereafter. Given these contractual restrictions, beginning 180 days after the
date of the Offering, of such shares would be available for immediate
sale in the public market subject to the limitations of Rule 144. In addition, a
substantial number of shares of Class A Common Stock issuable upon exercise of
options granted pursuant to the 1997 Plan will become eligible for future sale
in the public market at prescribed times.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted shares from the Company
or any "affiliate" of the Company, as that term is defined under the Securities
Act, the acquiror or subsequent holder is entitled to sell within any three-
month period a number of shares that does not exceed the greater of 1% of the
then outstanding shares of the Company's Class A Common Stock (approximately
shares immediately after the Offering) or the average weekly trading
volume of the Class A Common Stock on the New York Stock Exchange during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission, Washington, D.C. (the "Commission").
Sales under Rule 144 are also subject to certain manner of sales provisions,
notice requirements and the availability of current public information about the
Company. If two years have elapsed since the later of the date of acquisition of
restricted shares from the Company or from any affiliate of the Company, and the
acquiror or subsequent holder thereof is deemed not to have been an affiliate of
the Company at any time during the 90 days preceding a sale, such person would
be entitled to sell such shares in the public market under Rule 144 without
regard to the volume limitations, manner of sale provisions, public information
requirements or notice requirements.

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register an aggregate of shares of Class A Common
Stock reserved for issuance under the 1997 Plan. The registration statement is
expected to be filed and to become effective within 180 days following the date
of this Prospectus. Shares of Common Stock issued upon exercise of options
granted under the 1997 Plan after the effective date of such registration
statement will be eligible for sale in the public market subject to the
contractual restrictions described above and, in the case of options exercised
by affiliates, the Rule 144 volume limitations applicable to affiliates.

Since there has been no public market for shares of Class A Common Stock of
the Company, the Company is unable to predict the effect, if any, that sales
made under Rule 144, pursuant to future registration statements, or otherwise,
may have on any then prevailing market price of the Class A Common Stock.
Nevertheless, sales of a substantial amount of the Class A Common Stock in the
public market could adversely affect market prices, as well as the Company's
ability to raise additional capital through an offering of securities.

63
<PAGE> 66

UNDERWRITING

The Underwriters named below have severally agreed, subject to certain
conditions, to purchase from the Company and the Selling Stockholders the
aggregate number of shares of Class A Common Stock set forth opposite their
respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
--------------------------------------------------------------- -----------
<S> <C>
Schroder & Co. Inc. ...........................................
Donaldson, Lufkin & Jenrette Securities Corporation............
McDonald & Company Securities, Inc. ...........................

------------
Total................................................
============
</TABLE>

The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the shares of Class A Common Stock offered hereby, if
any are purchased. The Representatives have advised the Company and the Selling
Stockholders that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters propose initially to offer a concession not in
excess of $ per share to certain dealers, including the Underwriters;
that the Underwriters and such dealers may initially allow a discount not in
excess of $ per share to other dealers; and that the public offering
price and the concession and discount to dealers may be changed by the
Representatives after the commencement of the Offering.

Certain of the Selling Stockholders have granted to the Underwriters
options expiring at the close of business on the 30th day after the date of the
Underwriting Agreement, to purchase up to an aggregate of additional
shares of Class A Common Stock, at the public offering price less underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. The Underwriters may exercise the options only to cover
over-allotments, if any. To the extent that the Underwriters exercise these
options, each Underwriter will be committed, subject to certain conditions, to
purchase a number of the additional shares proportionate to such Underwriter's
initial commitment.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against liabilities, including liabilities under the
Securities Act.

The Company and all its directors, executive officers, significant
employees and existing stockholders have agreed not to offer to sell, grant any
option to purchase or otherwise dispose of any shares of Class A Common Stock
held by them for a period of 180 days after the date of this Prospectus, without
the prior written consent of Schroder & Co. Inc. See "Shares Eligible for Future
Sale."

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.

Application has been made to have the Class A Common Stock approved for
quotation on the New York Stock Exchange under the symbol HWK.

The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
certain persons participating in the Offering may engage in transactions,
including over-allotments, stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the Class A Common Stock at a level above that
which might otherwise prevail in the open market. An "over-allotment" refers to
the Underwriters' sale of more shares of Class A Common Stock than they are
required to purchase from the Company and the Selling Stockholders in the
Offering, thereby creating a short position in the Class A Common Stock for the
account of the

64
<PAGE> 67

Underwriters. A "stabilizing bid" is a bid for or the purchase of Common Stock
on behalf of the Underwriters for the purpose of fixing or maintaining the
market price of the Class A Common Stock. A "syndicate covering transaction" is
a bid for or the purchase of Class A Common Stock on behalf of the Underwriters
to reduce a short position incurred by the Underwriters in connection with the
Offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or syndicate
member in connection with the Offering if the shares of Class A Common Stock
originally sold by such Underwriter or syndicate member are purchased by the
Representatives in a syndicate covering transaction and therefore have not been
effectively placed by such Underwriter or syndicate member. The Representatives
have advised the Company that such transactions may be effected on the New York
Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

Prior to the Offering, there has been no public market for the Class A
Common Stock. The public offering price will be negotiated between the Company
and the Representatives. Among the factors to be considered in determining the
public offering price, in addition to prevailing market conditions, will be the
Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related business.

Schroder & Co. Inc. and McDonald & Co. Securities, Inc. acted as placement
agents for the Senior Notes and received customary compensation.

LEGAL MATTERS

Certain legal matters with respect to the Class A Common Stock will be
passed upon for the Company by Kohrman Jackson & Krantz P.L.L., Cleveland, Ohio.
Byron S. Krantz, a partner in Kohrman Jackson & Krantz P.L.L., owns
shares of Class A Common Stock and 152 shares of Series D Preferred Stock, has
been granted an option to purchase shares of Class A Common Stock
pursuant to the 1997 Plan and is the Secretary and a Director of the Company.
Marc C. Krantz, a son of Byron S. Krantz and a partner in Kohrman Jackson &
Krantz P.L.L., is the Assistant Secretary of the Company. The Company paid legal
fees to Kohrman Jackson & Krantz P.L.L. in 1996 of $469,000 for services in
connection with a variety of matters, including the registration, sale and
exchange of the Senior Notes and the Hawk Controlling Stockholder Merger.
Certain legal matters will be passed upon for the Underwriters by Arter & Hadden
LLP, Cleveland, Ohio.

EXPERTS

The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

The financial statements of Helco, Inc. as of June 30, 1994, and the
related statements of income, stockholder's equity and cash flows for the year
then ended included in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

The consolidated financial statements of SKW and subsidiaries as of
December 31, 1994 and 1993, and for each of the two years in the period ended
December 31, 1994, and for the statements of operations and cash flows for the
six month period ended June 30, 1995, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

65
<PAGE> 68

The balance sheets of Houghton Acquisition Corporation d/b/a Hutchinson
Foundry Products Company as of December 31, 1996 and 1995 and the related
statements of income, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1996, 1995 and 1994 included in this Prospectus have
been audited by Coopers & Lybrand L.L.P., independent accountants, as set forth
in their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.

The financial statements of Sinterloy Inc. as of December 31, 1996 and
1995, and the related statements of income, stockholder's equity and cash flows
for the years then ended included in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

AVAILABLE INFORMATION

The Company is currently subject to certain of the informational
requirements of the Exchange Act, and in accordance therewith and the terms of
the Senior Note Indenture, files reports, statements, and other information with
the Commission. Such reports, statements and other information filed by the
Company may be inspected and copied at the Commission's principal office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 upon payment of fees prescribed by the Commission. In addition, the
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission, including the Company.

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Offering. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference to such exhibit. For further information with
respect to the Company and the Offering, reference is made to the Registration
Statement, which may be inspected at the office of the Commission without charge
and copies of which may be obtained from and upon request of the Commission and
payment of the prescribed fee.

REPORTS TO HOLDERS OF CLASS A COMMON STOCK

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.

66
<PAGE> 69

HAWK CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HAWK CORPORATION
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and (Unaudited) as of
September 30, 1997................................................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and (Unaudited) for the nine months ended September 30, 1996 and 1997......... F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1994, 1995 and 1996 and (Unaudited) for the nine months ended September 30, 1997... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and (Unaudited) for the nine months ended September 30, 1996 and 1997......... F-7
Notes to Consolidated Financial Statements........................................... F-9

HELCO, INC.
Report of Independent Auditors....................................................... F-28
Balance Sheet as of June 30, 1994.................................................... F-29
Statement of Income for the year ended June 30, 1994................................. F-30
Statement of Shareholder's Equity for the year ended June 30, 1994................... F-31
Statement of Cash Flows for the year ended June 30, 1994............................. F-32
Notes to Financial Statements........................................................ F-33

S.K. WELLMAN LIMITED, INC. FINANCIAL STATEMENTS
Report of Independent Auditors....................................................... F-36
Consolidated Balance Sheets as of December 31, 1993 and 1994......................... F-37
Consolidated Statements of Operations for the years ended December 31, 1993 and 1994
and the six months ended June 30, 1995............................................. F-38
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993
and 1994........................................................................... F-39
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and 1994,
and the six months ended June 30, 1995............................................. F-40
Notes to Consolidated Financial Statements........................................... F-41

HOUGHTON ACQUISITION CORPORATION D/B/A HUTCHINSON FOUNDRY PRODUCTS COMPANY FINANCIAL
STATEMENTS
Report of Independent Accountants.................................................... F-48
Balance Sheets as of December 31, 1995 and 1996...................................... F-49
Statements of Income for the years ended December 31, 1994, 1995 and 1996............ F-50
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1994,
1995 and 1996...................................................................... F-51
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996........ F-52
Notes to Financial Statements........................................................ F-53

SINTERLOY, INC. FINANCIAL STATEMENTS
Report of Independent Auditors....................................................... F-61
Balance Sheets as of December 31, 1995 and 1996...................................... F-62
Statements of Income for the years ended December 31, 1995 and 1996.................. F-63
Statements of Shareholder's Equity for the years ended December 31, 1995 and 1996.... F-64
Statements of Cash Flows for the years ended December 31, 1995 and 1996.............. F-65
Notes to Financial Statements........................................................ F-66
</TABLE>

F-1
<PAGE> 70

The following is the report we would anticipate issuing upon the completion
of the audit of the 1994 financial statements. The audits of the 1995 and 1996
financial statements have been completed.

ERNST & YOUNG LLP
November 19, 1997

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Hawk Corporation

We have audited the accompanying consolidated balance sheets of Hawk
Corporation and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hawk
Corporation and subsidiaries at December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

Cleveland, Ohio
November , 1997

F-2
<PAGE> 71

HAWK CORPORATION

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 771 $ 25,774 $ 3,629
Accounts receivable, less allowance of $276 in 1995, $182
in 1996 and $216 in 1997.............................. 17,307 16,783 24,962
Inventories:
Raw materials and work-in-process..................... 14,575 16,707 18,102
Finished products..................................... 5,530 4,157 4,465
-------- -------- ---------
20,105 20,864 22,567
Deferred income taxes.................................... 1,042 2,432 1,983
Other current assets..................................... 1,189 935 1,703
-------- -------- ---------
Total current assets................................ 40,414 66,788 54,844
PROPERTY, PLANT AND EQUIPMENT:
Land..................................................... 1,080 1,080 1,218
Buildings and improvements............................... 6,619 7,615 10,283
Machinery and equipment.................................. 38,990 45,766 57,012
Furniture and fixtures................................... 1,118 1,611 1,988
Construction in progress................................. 653 2,825 808
-------- -------- ---------
48,460 58,897 71,309
Less accumulated depreciation............................ 9,000 14,755 19,346
-------- -------- ---------
Total property, plant and equipment................. 39,460 44,142 51,963
OTHER ASSETS:
Intangible assets........................................ 39,821 39,939 56,569
Net assets held for sale................................. 3,604 3,604 3,604
Shareholder notes........................................ 2,000 1,838 1,675
Other.................................................... 2,120 2,130 2,260
-------- -------- ---------
Total other assets.................................. 47,545 47,511 64,108
-------- -------- ---------
TOTAL ASSETS............................................... $127,419 $158,441 $ 170,915
======== ======== =========
</TABLE>

F-3
<PAGE> 72

HAWK CORPORATION

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
-------------------- SEPTEMBER 30, PRO FORMA
1995 1996 1997 SHAREHOLDERS' EQUITY(1)
-------- -------- ------------- -----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................... $ 8,488 $ 8,194 $ 11,878
Accrued compensation...................... 7,364 6,775 7,206
Other accrued expenses.................... 3,537 2,405 4,342
Current portion of long-term debt......... 5,460 714 822
-------- -------- ---------
Total current liabilities.......... 24,849 18,088 24,248
LONG-TERM LIABILITIES:
Long-term debt............................ 89,446 128,469 130,474
Deferred income taxes..................... 2,348 4,090 6,283
Other..................................... 2,228 2,004 2,058
-------- -------- ---------
Total long-term liabilities........ 94,022 134,563 138,815
DETACHABLE STOCK WARRANTS, SUBJECT TO PUT
OPTION.................................... 4,600 4,600 9,300 $ --
SHAREHOLDERS' EQUITY (DEFICIT):
Series A preferred stock, $.01 par value
and an aggregate liquidation value of
$2,625, plus any accrued and unpaid
dividends, with 10% cumulative dividend
(2,625 shares authorized, 1,375 shares
issued and outstanding); Series B
preferred stock, $.01 par value and an
aggregate liquidation value of $702,
plus any accrued and unpaid dividends,
with 9% cumulative dividend (702 shares
authorized, issued and outstanding);
Series C preferred stock, $.01 par value
and an aggregate liquidation value of
$1,190, plus any accrued and unpaid
dividends with 10% cumulative dividend
(1,190 shares authorized, issued and
outstanding)............................ 1 1 1 1
Class A common stock, $.01 par value;
2,200,000 shares authorized, 1,443,978
issued and outstanding.................. 14 14 14 14
Class B common stock, $.01 par value,
375,000 shares authorized, none issued
or outstanding.......................... 3
Additional paid-in capital................ 1,724 1,964 1,964 1,964
Retained earnings (deficit)............... 2,330 (974) (2,653) 4,891
Other equity adjustments.................. (121) 185 (774) (774)
-------- -------- --------- --------
Total shareholders' equity
(deficit)........................ 3,948 1,190 (1,448) $ 6,099
========
-------- -------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)................................. $127,419 $158,441 $ 170,915
======== ======== =========
</TABLE>

(1) The Unaudited Pro Forma Shareholders' Equity above gives effect to the
exchange of the detachable stock warrants, subject to put option, for
shares of Class B Common Stock, and the redemption of all 1,375
outstanding shares of Series A Preferred Stock, 351 of the outstanding
shares of Series B Preferred Stock and seven of the outstanding shares of
Series C Preferred Stock, together with accrued and unpaid dividends
thereon.

See notes to consolidated financial statements.

F-4
<PAGE> 73

HAWK CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 41,395 $ 84,643 $ 123,997 $ 93,672 $ 116,362
Cost of sales...................... 26,771 61,164 91,884 69,023 82,940
--------- --------- --------- --------- ---------
Gross profit....................... 14,624 23,479 32,113 24,649 33,422
Expenses:
Selling, technical and
administrative expenses....... 6,294 11,575 15,468 11,612 14,241
Amortization of intangibles...... 954 1,924 2,806 2,408 2,575
Plant consolidation expense...... 4,028 3,749 50
--------- --------- --------- --------- ---------
Total expenses..................... 7,248 13,499 22,302 17,769 16,866
--------- --------- --------- --------- ---------
Income from operations............. 7,376 9,980 9,811 6,880 16,556
Interest expense................... 3,267 7,323 10,648 7,321 10,639
Other (income) expense, net........ (234) (130) 256 55 122
--------- --------- --------- --------- ---------
Income (loss) before income taxes,
minority interest and
extraordinary item............... 4,343 2,787 (1,093) (496) 5,795
Income taxes....................... 1,845 1,593 789 863 2,534
Minority interest.................. 211 432
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
item............................. 2,287 762 (1,882) (1,359) 3,261
Extraordinary item--write-off of
deferred financing costs, net of
$798 income taxes................ (1,196)
--------- --------- --------- --------- ---------
Net income (loss).................. $ 2,287 $ 762 $ (3,078) $ (1,359) $ 3,261
========= ========= ========= ========= =========
Preferred stock dividend
requirements..................... $ (294) $ (326) $ (226) $ (170) $ (240)
========= ========= ========= ========= =========
Income (loss) before extraordinary
item applicable to common
shareholders..................... $ 1,993 $ 436 $ (2,108) $ (1,529) $ 3,021
========= ========= ========= ========= =========
Net income (loss) applicable to
common shareholders.............. $ 1,993 $ 436 $ (3,304) $ (1,529) $ 3,021
========= ========= ========= ========= =========
Income (loss) before extraordinary
item per share applicable to
common shareholders.............. $ 1.76 $ .28 $ (1.20) $ (.87) $ 1.72
========= ========= ========= ========= =========
Net income (loss) per share
applicable to common
shareholders..................... $ 1.76 $ .28 $ (1.88) $ (.87) $ 1.72
========= ========= ========= ========= =========
Number of shares used to compute
per share data................... 1,132,689 1,538,162 1,760,946 1,760,946 1,760,946
========= ========= ========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 74

HAWK CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
PREFERRED COMMON COMMON STOCK
PREFERRED PREFERRED STOCK STOCK STOCK $.01 ADDITIONAL
STOCK STOCK $.01 PAR NO PAR $3 PAR PAR PAID-IN
10% 9% VALUE VALUE VALUE VALUE CAPITAL
--------- --------- --------- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994............................. $ 2,625 $ 377
Issuance of stock............................ $ 370 $ 158
Net income...................................
Preferred stock dividend.....................
------- ----- ----- ----- ----- ---- -------
Balance at
December 31, 1994........................... 2,625 370 377 158
Merger of Helsel and Hawk.................... (2,625) (370) $ 1 (377) (158) $ 14 $ 8,724
Net income...................................
Preferred stock dividend.....................
Purchase of warrants......................... (7,000)
Foreign currency translation adjustment......
Additional minimum pension liability.........
------- ----- ----- ----- ----- ---- -------
Balance at
December 31, 1995........................... 1 14 1,724
Merger of Hawk Holding Corp. and Hawk........ 240
Net loss.....................................
Preferred stock dividend.....................
Foreign currency translation adjustment......
Additional minimum pension liability.........
------- ----- ----- ----- ----- ---- -------
Balance at
December 31, 1996........................... 1 14 1,964
Adjustment to carrying value of detachable
warrants (unaudited)........................
Net income (unaudited).......................
Preferred stock dividend (unaudited).........
Foreign currency translation adjustment
(unaudited).................................
Additional minimum pension liability
(unaudited).................................
------- ----- ----- ----- ----- ---- -------
Balance at September 30, 1997 (unaudited).... $ $ $ 1 $ $ $ 14 $ 1,964
======= ===== ===== ===== ===== ==== =======

RETAINED OTHER
EARNINGS EQUITY
(DEFICIT) ADJUSTMENTS TOTAL
-------- ----------- -------
<S> <<C> <C> <C>
Balance at
January 1, 1994............................. $ 375 $ 3,377
Issuance of stock............................ 528
Net income................................... 2,287 2,287
Preferred stock dividend..................... (294) (294)
------- ------- -------
Balance at
December 31, 1994........................... 2,368 5,898
Merger of Helsel and Hawk.................... (474) 4,735
Net income................................... 762 762
Preferred stock dividend..................... (326) (326)
Purchase of warrants......................... (7,000)
Foreign currency translation adjustment...... $ 207 207
Additional minimum pension liability......... (328) (328)
------- ------- -------
Balance at
December 31, 1995........................... 2,330 (121) 3,948
Merger of Hawk Holding Corp. and Hawk........ 240
Net loss..................................... (3,078) (3,078)
Preferred stock dividend..................... (226) (226)
Foreign currency translation adjustment...... 315 315
Additional minimum pension liability......... (9) (9)
------- ------- -------
Balance at
December 31, 1996........................... (974) 185 1,190
Adjustment to carrying value of detachable
warrants (unaudited)........................ (4,700) (4,700)
Net income (unaudited)....................... 3,261 3,261
Preferred stock dividend (unaudited)......... (240) (240)
Foreign currency translation adjustment
(unaudited)................................. (1,296) (1,296)
Additional minimum pension liability
(unaudited)................................. 337 337
------- ------- -------
Balance at September 30, 1997 (unaudited).... $(2,653) $ (774) $(1,448)
======= ======= =======
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 75

HAWK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------
1994 1995 1996 1996 1997
------- -------- --------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................ $ 2,287 $ 762 $ (3,078) $(1,359) $ 3,261
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization.............. 2,466 5,527 8,418 6,688 7,166
Accretion of discount on debt.............. 325 650 488 487
Deferred income taxes...................... 302 377 352 2,343
Minority interest.......................... 211 432
Extraordinary item, net of tax............. 1,196
Changes in operating assets and liabilities,
net of acquired assets:
Accounts receivable........................ (451) (53) 524 (1,208) (5,319)
Inventories................................ (380) (1,398) (759) (241) (865)
Other assets............................... 4 1,115 4 (1,126) (925)
Accounts payable........................... 235 196 (294) 350 2,800
Other liabilities.......................... 147 430 (1,147) (805) 1,248
------- -------- --------- ------- --------
Net cash provided by operating activities.... 4,821 7,713 5,866 2,787 10,196
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Helco, Inc....................... (4,627)
Purchase of S.K. Wellman Limited, Inc., net
of cash acquired........................... (61,607)
Purchase of Hutchinson Foundry Products
Company.................................... (10,639)
Purchase of Sinterloy, Inc................... (15,449)
Purchases of property, plant and equipment... (1,871) (3,781) (8,275) (7,669) (4,798)
Loans to shareholders........................ (2,000)
Payments received on shareholder notes....... 162 162 163
------- -------- --------- ------- --------
Net cash used in investing activities........ (6,498) (67,388) (8,113) (7,507) (30,723)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings on long-term debt... 3,880 102,000 181,373 5,317
Payments on long-term debt................... (3,555) (30,726) (149,765) (783)
Net borrowings (payments) under revolving
credit lines............................... 1,280 (1,280)
Purchase of warrants......................... (7,000)
Proceeds from sale of preferred stock,
including minority interest................ 702
Proceeds from sale of common stock, including
minority interest.......................... 300
Deferred financing costs..................... (2,799) (4,678) 417 (565)
Payments of preferred stock dividends........ (295) (326) (226) (170) (240)
Other........................................ (121) 546 279 (30)
------- -------- --------- ------- --------
Net cash provided by (used in) financing
activities................................. 2,312 59,748 27,250 5,843 (1,618)
------- -------- --------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 635 73 25,003 1,123 (22,145)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....................................... 63 698 771 771 25,774
------- -------- --------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 698 $ 771 $ 25,774 $ 1,894 $ 3,629
======= ======== ========= ======= ========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 76

HAWK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED

(DOLLARS IN THOUSANDS)

SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Cash payments for interest................................... $2,743 $6,260 $11,024
====== ====== =======
Cash payments for income taxes............................... $1,852 $1,929 $ 1,153
====== ====== =======
Noncash investing and financing activities:
Equipment purchased with capital leases.................... $ 2,019
=======
Acquisition of Helsel minority interest through issuance of
stock................................................... $4,735
======
Reconciliation of assets acquired and liabilities assumed
</TABLE>

<TABLE>
<CAPTION>
HELCO -- 1994
------------
<S> <C>
Fair value of assets acquired............................................... $ 8,615
Liabilities assumed......................................................... (3,488)
Subordinated note payable issued............................................ (500)
--------
Cash paid for acquisition................................................... $ 4,627
========
</TABLE>

<TABLE>
<CAPTION>
SK
WELLMAN -- 1995
-----------------
<S> <C>
Fair value of assets acquired, net of cash acquired...................... $ 76,666
Liabilities assumed...................................................... (15,059)
---------
Cash paid for acquisition, net of cash received.......................... $ 61,607
=========
</TABLE>

See notes to consolidated financial statements.

F-8
<PAGE> 77

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)

A. BASIS OF PRESENTATION

The consolidated financial statements of Hawk Corporation and its
wholly-owned subsidiaries, also include, effective July 1, 1994, the accounts of
Helsel, Inc. (Helsel), effective July 1, 1995, the accounts of S.K. Wellman
Corp. (Wellman), effective January 2, 1997, the accounts of Hutchinson Products
Corporation (Hutchinson) and, effective August 1, 1997, the accounts of
Sinterloy Corporation (Sinterloy) (collectively, the Company). See Note C. All
significant intercompany accounts and transactions have been eliminated in the
accompanying financial statements. Certain amounts have been reclassified in
1994, 1995 and 1996 to conform with the 1997 presentation.

The Company designs, engineers, manufactures and markets specialized
components, principally made from powder metals, used in a wide variety of
aerospace, industrial and commercial applications.

The accompanying unaudited consolidated financial statements at September
30, 1997 and for the nine months ended September 30, 1996 and 1997 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine month period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.

B. SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

The Company considers all highly-liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and include expenditures
for additions and major improvements. Expenditures for repairs and maintenance
are charged to operations as incurred. The Company principally uses either the
straight-line or the unit method of depreciation for financial reporting
purposes based on annual rates sufficient to amortize the cost of the assets
over their estimated useful lives (5 to 40 years). Accelerated methods of
depreciation are used for federal income tax purposes.

INTANGIBLE ASSETS

Intangible assets are amortized using the straight-line method over periods
ranging from 3 to 40 years. The ongoing value and remaining useful life of
intangible assets are subject to periodic evaluation and the Company currently
expects the carrying amounts to be fully recoverable. If events and
circumstances indicate that intangible assets might be impaired, an undiscounted
cash flow methodology would be used to determine whether an impairment loss
should be recognized. See Note D.

F-9
<PAGE> 78

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at year-end exchange rates. Revenues and expenses
are translated at weighted average exchange rates. Gains and losses resulting
from translation are included in other equity adjustments in the consolidated
balance sheets.

REVENUE RECOGNITION

Revenue from the sale of the Company's products is recognized upon shipment
to the customer. Costs and related expenses to manufacture the products are
recorded as cost of sales when the related revenue is recognized.

SIGNIFICANT CONCENTRATIONS

The Company provides credit, in the normal course of its business, to
original equipment and after-market manufacturers. The Company's customers are
not concentrated in any specific geographic region. The Company performs ongoing
credit evaluations of its customers and maintains allowances for potential
credit losses which, when realized, have been within the range of management's
expectations.

The percentage of consolidated net sales to major customers are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A................................................. 22.6% 13.8% 10.4%
Customer B................................................. 11.0 9.8 8.9
</TABLE>

Accounts receivable balances from these customers represent approximately
18% and 13% of the Company's consolidated accounts receivable at December 31,
1995 and 1996, respectively.

PRODUCT RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. The Company's
expenditures for product development and engineering were approximately
$1,158,000 in 1994, $2,000,000 in 1995 and $2,639,000 in 1996.

ADVERTISING

Advertising costs are expensed as incurred. Advertising expenses amounted
to approximately $106,000, $385,000 and $197,000 in 1994, 1995 and 1996,
respectively.

INCOME TAXES

The Company uses the liability method in measuring the provision for income
taxes and recognizing deferred tax assets and liabilities in the balance sheet.
The liability method requires that deferred income taxes reflect the tax
consequences of currently enacted rates for differences between the tax and
financial reporting bases of assets and liabilities.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1995 and 1996, the carrying value of the Company's
financial instruments, which include cash, cash equivalents and long-term debt,
approximate their fair value.

F-10
<PAGE> 79

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is based on the weighted average number of
common shares and common share equivalents (warrants) outstanding during the
respective periods. Earnings available to common shareholders reflects an
adjustment for preferred stock dividends paid during the respective periods.

SUPPLEMENTAL NET INCOME (LOSS) PER SHARE

Supplemental pro forma income (loss) before taxes and net income (loss),
considering only the repayment of the Senior Subordinated Notes (see Note E)
with a portion of the proceeds of a contemplated public offering of shares of
common stock, would have been $ and $ , respectively, for the
year ended December 31, 1996, and $ and $ , respectively, for
the nine months ended September 30, 1997. Supplemental pro forma income (loss)
per share would have been $ for the year ended December 31, 1996 and
$ for the nine months ended September 30, 1997, based on the weighted
average number of shares of common stock outstanding during the period plus the
estimated number of shares necessary to be issued in such public offering in
order to obtain sufficient proceeds to repay the Senior Subordinated Notes.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the asset's carrying amount. The Company adopted SFAS No.
121 effective January 1, 1996. The adoption of SFAS No. 121 did not have a
material effect on the Company's financial position or results of operations.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." SFAS No. 128 specifies modifications to the
calculation of earnings per share from that currently used by the Company. Under
SFAS No. 128, "basic earnings per share" will be calculated based upon the
weighted average number of shares actually outstanding, and "diluted earnings
per share" will be calculated based upon the weighted average number of common
shares outstanding and other potential common shares if they are dilutive. SFAS
No. 128 will be adopted by the Company on December 31,1997 and all prior periods
will be restated. The adoption of SFAS No. 128 is not expected to have a
material impact on the Company's earnings per share for any of the periods
presented.

F-11
<PAGE> 80

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

C. BUSINESS ACQUISITIONS

Effective June 30, 1994, Helsel, a corporation owned 53% by a control group
of Company shareholders (Hawk Control Group) and 47% by other investors,
commenced operations and acquired substantially all of the net assets of Helco,
Inc. (Helco) for approximately $8.6 million. The acquisition was accounted for
as a purchase. Accordingly, the purchase price was allocated to assets and
liabilities based on their estimated fair values as of the date of the
acquisition. The excess of fair market value of identifiable assets less
liabilities over the purchase price resulted in negative goodwill, which was
applied to reduce property, plant and equipment. The acquisition was financed
through long-term debt and the sale of $702,000 of preferred stock and $300,000
of common stock. Effective June 30, 1995, Helsel became a wholly-owned
subsidiary of the Company whereby each outstanding share of common stock of
Helsel was exchanged, based on an independent valuation, for .0693955 shares of
common stock of the Company. Additionally, the Company issued one share of 9%
preferred stock for each share of Helsel preferred stock. In total, 6,940 Class
A common shares and 702 Series B preferred shares were issued to the Helsel
shareholders. Because the Hawk Control Group owned a controlling interest in
Helsel, the 1995 transaction has been accounted for as a merger of entities
under common control and the Company's 1994 financial statements have been
restated to include Helsel since June 30, 1994. In addition, the acquisition of
the other investors' 47% interest in Helsel, effective June 30, 1995, has been
accounted for as the purchase of a minority interest. Accordingly, the excess of
the purchase price over the estimated fair value of the minority interest ($3.6
million) was recorded as goodwill and is being amortized over 30 years.

A summary of the combination and financial results for Helsel and the
Company, as of December 31, 1994 and for the period July 1, 1994 through
December 31, 1994, follows:

<TABLE>
<CAPTION>
LESS: CONSOLIDATED
MINORITY HAWK
HELSEL HAWK INTEREST CORPORATION
------ ------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Total assets.................... $8,804 $34,841 $ 43,645
Shareholders' equity............ 1,417 5,166 $ (685) 5,898
Net sales....................... 8,555 32,840 41,395
Income before income taxes...... 787 3,556 4,343
Net income...................... 446 2,052 (211) 2,287
</TABLE>

In connection with the acquisition, the Company entered into an employment
agreement through June 1997 with the previous shareholder of Helco, who
continues to serve as President of Helsel. Terms of the employment agreement
include an annual salary of $150,000 and a bonus based on earnings. Amounts
earned under this contract are charged to current operations.

Effective June 30, 1995, Wellman acquired for cash substantially all of the
net assets of S.K. Wellman Limited, Inc. for approximately $62 million. The
acquisition was accounted for as a purchase. The excess of the purchase price
over the estimated fair value of the net assets acquired in the amount of $15.8
million is being amortized over 15 years and is included in intangible assets.
The operating results of Wellman are included in the Company's consolidated
statements of operations since the date

F-12
<PAGE> 81

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

of acquisition. As a result of this acquisition, the Company consolidated
certain operating facilities. Accordingly, the net carrying value of the
facilities the Company closed and is planning to sell are reflected as net
assets held for sale on the accompanying balance sheets at December 31, 1995 and
1996 and September 30, 1997. The net assets held for sale are stated at the
lower of the carrying amount or fair value less costs to sell and consist
primarily of land and buildings. In addition, for the year ended December 31,
1996, the Company incurred and expended approximately $4.0 million of costs
relating primarily to the relocation of machinery and equipment.

Effective January 2, 1997, Hutchinson acquired all of the outstanding
capital stock of Hutchinson Foundry Products Company for (1) $10.6 million in
cash; (2) $1.5 million in 8.0% two-year convertible notes; and (3) contingent
payments to be made by the Company if certain earnings targets are met. The
acquisition has been accounted for as a purchase. The excess of the purchase
price over the estimated fair value of the capital stock acquired in the amount
of $7.7 million is being amortized over 30 years and is included in intangible
assets. The results of operations of Hutchinson are included in the Company's
consolidated statements of income since the date of acquisition.

Effective August 1, 1997, Sinterloy acquired substantially all of the
assets (except cash) and assumed certain liabilities of Sinterloy, Inc., for
$15.4 million in cash, subject to an adjustment based on the adjusted net equity
position of Sinterloy, Inc. at closing. As of September 30, 1997, a closing
adjustment had not been determined. The acquisition was accounted for as a
purchase. The excess of the purchase price over the estimated fair value of the
assets less the assumed liabilities in the amount of $10.4 million is being
amortized over 30 years and is included in intangible assets. The results of
operations of Sinterloy are included in the Company's consolidated statements of
operations since the date of acquisition.

The following unaudited pro forma consolidated results of operations give
effect to the Hutchinson and Sinterloy acquisitions as though they had occurred
on January 1, 1996 and include certain adjustments, such as additional
amortization expense as a result of goodwill and increased interest expense
related to debt incurred for the acquisitions.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales....................................... $108,834 $124,985
======== ========
Net (loss) income............................... $ (506) $ 4,894
======== ========
</TABLE>

Pro forma net sales and net income are not necessarily indicative of the
net sales and net income that would have occurred had the acquisitions been made
at the beginning of the respective years or the results which may occur in the
future.

In November 1996, the Company merged with Hawk Holding Corp. (Old Hawk), a
corporation that owned approximately 34% of the outstanding common stock of the
Company, in a tax-free reorganization. At the time of the merger, Old Hawk was
96% owned by the Hawk Control Group and 4% owned by other investors. In the
merger, the Company acquired and canceled the shares of Class A common stock of
the Company owned by Old Hawk and reissued the same amount of shares of Class A
common stock pro rata to the Old Hawk stockholders. In addition, the Company
acquired and canceled the Class A preferred stock of the Company owned by Old
Hawk, and issued 1,190 shares of Class C preferred stock, which has a
liquidation value substantially equal to the aggregate liquidation value of the
Class A preferred stock previously owned by Old Hawk. Since the Company and Old
Hawk were under common control, the Company has recorded the acquisition of the
Hawk Control Group's interest in Old Hawk at historical cost and the acquisition
of the other investors' ownership interest as a purchase of minority interest.
Accordingly, the excess of the purchase price over the estimated fair value

F-13
<PAGE> 82

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

of the minority interest acquired in the amount of $240,000 was recorded as
goodwill and is being amortized over 30 years.

D. INTANGIBLE ASSETS

The components of intangible assets and related amortization periods are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Product certifications (19 to 40
years)................................. $20,820 $20,820 $20,820
Goodwill (15 to 40 years)................ 21,772 22,012 40,103
Deferred financing costs (3 to 7
years)................................. 2,779 4,678 5,611
Proprietary formulations and patents (10
years)................................. 1,806 1,806 1,806
Other.................................... 779 779 960
------- ------- -------
47,956 50,095 69,300
Accumulated amortization................. (8,135) (10,156) (12,731)
------- ------- -------
$39,821 $39,939 $56,569
======= ======= =======
</TABLE>

Product certifications were acquired and valued based on the Company's
position as a certified supplier of friction materials to the major
manufacturers of commercial aircraft brakes.

E. LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
------- -------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Term Loans.............................. $57,090
Revolving Credit Line................... 10,400
Senior Subordinated Notes............... 25,725 $ 26,375 $ 26,862
Senior Notes............................ 100,000 100,000
Other................................... 1,691 2,808 4,434
------- -------- --------
94,906 129,183 131,296
Less current portion.................... 5,460 714 822
------- -------- --------
$89,446 $128,469 $ 130,474
======= ======== ========
</TABLE>

As a result of the acquisition of Wellman in June 1995, the Company entered
into a Secured Credit Agreement Facility (Credit Agreement) with several
participating banks, and repaid all previous credit facilities. In November
1996, in connection with the issuance of new Senior Notes (discussed below), the
Credit Agreement was cancelled, all outstanding borrowings were repaid, and the
Company incurred an extraordinary charge of $1,994,000 relating to the write-off
of previously capitalized deferred financing costs. Prior to its cancellation in
November 1996, the Credit Agreement consisted of (1) two term loans requiring
quarterly interest payments, based on certain published rates, and quarterly
principal payments in accordance with payment schedules from September 1995
through June 2002; and (2) a $22,000,000 revolving credit line with a commitment
fee of one half percent per annum on the unused portion and interest payable
quarterly based on certain published rates.

In addition, effective June 30, 1995, the Company issued $30,000,000 in
Senior Subordinated Notes with $10,000,000 maturing on January 31, 2004, and
June 30, 2004 and 2005. Interest is payable quarterly at a fixed rate of 12%. In
connection with the senior subordinated notes, the Company issued

F-14
<PAGE> 83

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

detachable warrants to the lender that provide the lender the option to purchase
316,970 shares of the Company's Class B common stock at a per share price of
$.01. The warrants are exercisable through the year 2005. Beginning in the year
2001, the Company has the option to repurchase the warrants and the warrant
holders have the right to put the warrants to the Company for cash, at prices
based on the fair market value of the Company at the date of put as determined
by an independent third party. The warrant holders' put option is terminated
upon the occurrence of certain events, including the closing of an initial
public offering.

For financial reporting purposes, at June 30, 1995, the fair value of the
warrants, including the put option, was estimated to be $4,600,000 and
classified as detachable stock warrants, subject to put option on the
accompanying balance sheet. The resulting discount is being amortized over the
life of the debt as non-cash, imputed interest. The discount is based on an
effective interest rate of 14.2%. The unamortized discount at December 31, 1995,
December 31, 1996, and September 30, 1997 totaled $4,275,000, $3,625,000, and
$3,138,000, respectively. Adjustments to the carrying value of the detachable
stock warrants are based on revisions to the estimated present value of the
future fair market value of the Company, with a corresponding charge or credit
to retained earnings. The carrying value of the warrants, including the put
option, was adjusted to $9.3 million as of September 30, 1997.

In November 1996, the Company issued $100,000,000 in Senior Notes due on
December 1, 2003, unless previously redeemed, at the Company's option, in
accordance with the terms of the Notes. Interest is payable semi-annually on
June 1 and December 1 of each year commencing June 1, 1997, at a fixed rate of
10.25%. The Senior Notes and the notes for which certain of the Senior Notes
have been exchanged (Exchange Notes and, together with the Senior Notes, the
Senior Notes) are fully and unconditionally guaranteed on a joint and several
basis by each of the direct or indirect wholly-owned domestic subsidiaries of
the Company (Guarantor Subsidiaries). (See Note M).

Also, in November 1996, the Company executed a new $25,000,000 Revolving
Credit Facility (Credit Facility) which matures in November 1999. The Company
pays a commitment fee of 0.5% per annum on the unused portion. Interest is
payable monthly at LIBOR plus 2.25% per annum, or at the Company's option, a
variable rate based on the prime rate plus 1.0% per annum, payable at various
interest periods per the Credit Facility. The Credit Facility contains covenants
with respect to the Company and its subsidiaries that, among other things,
prohibit the payment of any dividends to the Company by the subsidiaries of the
Company (including the Guarantor Subsidiaries) in the event of a default under
the terms of the Credit Facility. There were no outstanding borrowings under the
Credit Facility at December 31, 1996 or September 30, 1997.

Aggregate principal payments due on long-term debt as of December 31, 1996
are as follows (in thousands): 1997 -- $714; 1998 -- $771; 1999 -- $574;
2000 -- $255; 2001 -- $267; thereafter -- $126,602.

F. SHAREHOLDERS' EQUITY

In accordance with a Merger Agreement and Plan of Reorganization dated June
30, 1995, the Company, formerly an Ohio corporation, was merged with and into a
Delaware corporation under the same name. Concurrently, each issued and
outstanding share of common stock, without par value, of the previous
corporation was converted into one fully paid share of Class A common stock, par
value $.01 per share, of the merged corporation. Additionally, each issued and
outstanding share of preferred stock, $1,000 par value per share, of the
previous corporation was converted into one fully paid share of Series A
preferred stock, par value $.01 per share, of the merged corporation.

The Company's authorized preferred stock includes 2,625 shares of Class A
preferred stock, 702 shares of Class B preferred stock and 1,190 shares of Class
C preferred stock. Dividends are cumula-

F-15
<PAGE> 84

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

tive at the rate of 10% of $1,000 per share for Class A and Class C preferred
stock and 9% of $1,000 per share for Class B preferred stock. Each share of
preferred stock is: (1) entitled to a liquidation preference equal to $1,000 per
share plus any accrued and unpaid dividends, (2) not entitled to vote, except in
certain circumstances, (3) redeemable in whole, at the option of the Company,
for $1,000 per share plus all accrued dividends to the date of redemption.

The Company's authorized common shares of 2,575,000 includes 2,200,000
shares of Class A voting and 375,000 shares of Class B non-voting. Each share of
the Class B common stock is convertible into one share of Class A common stock
upon the occurrence of certain events. All of the outstanding shares are Class
A.

In June 1995, the Company repurchased detachable warrants covering 2,000
shares of Class B common stock for a negotiated price of $7,000,000. The
warrants were originally issued in connection with a subordinated note that was
paid in full when the Company entered into the Credit Agreement as described in
Note E.

G. EMPLOYEE BENEFITS

The Company has several defined benefit pension plans which cover certain
employees. Benefits payable are based primarily on compensation and years of
service or a fixed annual benefit for each year of service. Certain hourly
employees are also covered under collective bargaining agreements. The Company
funds the plans in amounts sufficient to satisfy the minimum amounts required
under ERISA.

A summary of the components of net periodic pension cost (income) for the
plans is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................. $ 246 $ 382 $ 400
Interest cost................................. 421 665 727
Actual return on plan assets.................. (165) (1,732) (1,435)
Net amortization and deferral................. (293) 673 576
------- ------- -------
$ 209 $ (12) $ 268
======= ======= =======
</TABLE>

A summary of the actuarially determined benefit obligations and trustees
net assets for Company administered defined benefit pension plans is presented
below, along with a reconciliation of the plans'

F-16
<PAGE> 85

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

funded status to amounts recognized in the Company's balance sheets. The plans'
assets are primarily invested in fixed income and equity securities.

<TABLE>
<CAPTION>
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
-------------------- --------------------
1995 1996 1995 1996
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested......................................... $(5,960) $(6,186) $(2,559) $(2,594)
Non-vested..................................... (60) (57) (214) (198)
------- ------- ------- -------
$(6,020) $(6,243) $(2,773) $(2,792)
======= ======= ======= =======
Projected benefit obligations.................... $(6,634) $(6,943) $(2,773) $(2,909)
Plan assets at fair value........................ 7,524 8,677 1,693 2,261
------- ------- ------- -------
Projected benefit obligations less than (in
excess of) plan assets......................... 890 1,733 (1,080) (648)
Unrecognized net loss............................ 371 (263) 328 (65)
Prior service cost not yet recognized in net
periodic pension cost.......................... 134 134 361 347
Unrecognized net (asset) obligation.............. (231) (208) 151 125
Adjustment required to recognize minimum
liability...................................... (840)
PREPAID (ACCRUED) PENSION COST AT DECEMBER 31.... $ 1,164 $ 1,396 $(1,080) $ (241)
======= ======= ======= =======
</TABLE>

The following assumptions were used in accounting for the defined benefit
plans:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Used to compute the projected benefit obligation as of December 31:
Discount rate...................................................... 8.0% 8.0% 7.5 %
Annual salary increase............................................. 3.0 3.0 3.0
Expected long-term rate of return on plan assets for the year ended
December 31........................................................ 10.0 10.0 9.5
</TABLE>

The Company also sponsors several defined contribution plans which provide
voluntary employee contributions and, in certain plans, matching and
discretionary employer contributions. Expenses associated with these plans were
approximately $290,000 in 1994, $920,000 in 1995 and $690,000 in 1996.

H. LEASE OBLIGATIONS

The Company has capital lease commitments for buildings and equipment.
Future minimum annual rentals are: 1997 -- $813,000, 1998 -- $791,000,
1999 -- $558,000, 2000 -- $323,000, 2001 -- $313,000, thereafter -- $239,000.
Amount representing interest is $625,000. Total capital lease obligations are
included in other long-term debt. Amortization of assets recorded under capital
leases is included with depreciation expense.

The Company leases certain office and warehouse facilities and equipment
under operating leases. Rental expense was approximately $77,000 in 1994,
$270,000 in 1995 and $609,000 in 1996. Future minimum lease commitments under
these agreements which have an original or existing term in excess of one year
as of December 31, 1996 are as follows: 1997 -- $490,000; 1998 -- $328,000;
1999 -- $304,000; 2000 -- $244,000 and thereafter -- $1,222,000.

F-17
<PAGE> 86

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

I. INCOME TAXES

The provision for income taxes, except for the effect of the extraordinary
item, consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1994 1995 1996
------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................ $1,369 $ 907 $(624)
State and local................................ 174 235 129
Foreign........................................ 74 932
------ ------ -----
1,543 1,216 437
Deferred:
Federal........................................ 237 365 299
State and local................................ 65 12 53
------ ------ -----
302 377 352
------ ------ -----
TOTAL INCOME TAXES............................... $1,845 $1,593 $ 789
====== ====== =====
</TABLE>

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. At December 31, 1996 the Company had net operating loss
carryforwards of approximately $1,600,000 which expire in 2011. The Company also
had $622,000 of Alternative Minimum Tax (AMT) credit carryforwards that do not
expire. Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward......................... $ 545
Reserve for severance costs............................. $ 237
Accrued vacation........................................ 259 318
Accrued pension costs................................... 466
AMT credit carryforward................................. 622
Other accruals.......................................... 509 595
Other................................................... 302 352
------ ------
Total deferred tax assets................................. 1,773 2,432
Deferred tax liabilities:
Tax over book depreciation and amortization............. 2,659 4,090
Other................................................... 420
------ ------
Total deferred tax liabilities............................ 3,079 4,090
------ ------
NET DEFERRED TAX LIABILITIES.............................. $1,306 $1,658
====== ======
</TABLE>

F-18
<PAGE> 87

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The provision for income taxes, including the tax effect of the
extraordinary item, differs from the amounts computed by applying the federal
statutory rate as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
---- ----- ------
<S> <C> <C> <C>
Income tax credit at federal statutory rate......... 34.0% 34.0% (34.0)%
State and local tax, net of federal tax benefit..... 3.0 5.7 3.9
Nondeductible goodwill amortization................. 2.2 7.2 3.7
Adjustment for worldwide tax rates and other, net... 3.1 9.0 26.4
---- ---- ----
Provision for income taxes.......................... 42.3% 55.9% 0.0%
==== ==== ====
</TABLE>

Undistributed earnings of the Company's foreign subsidiaries are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. federal
and state income taxes has been provided. Upon distribution of these earnings in
the form of dividends or otherwise, the Company would be subject to both U.S.
income taxes which may be offset by foreign tax credits and withholding taxes
payable to various foreign countries.

J. CONTINGENCIES

The Company has wage continuation agreements with two of its
officers/shareholders. In the event the officer/shareholder dies or becomes
permanently disabled while employed by the Company, each agreement provides for
payments to be made annually to the officer/shareholder's spouse based on a
compensation formula, until the spouse's death.

K. RELATED PARTIES

In June 1995, certain shareholders of the Company issued interest-bearing
notes to the Company in the amount of $2 million, in order to enable them to
repay certain indebtedness incurred by them with respect to the acquisition of
Helsel. The notes are due and payable on July 1, 2002 and bear interest at the
prime rate plus 1.25% through September 30, 1996 and at the prime rate
thereafter.

L. GEOGRAPHIC INFORMATION

Geographic information for the years ended December 31, 1995 and 1996 is as
follows:

<TABLE>
<CAPTION>
1995 1996
------------------------------------ ------------------------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- -------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales................... $ 76,570 $ 8,073 $ 84,643 $104,622 $ 19,375 $123,997
Income from operations...... 9,242 738 9,980 7,326 2,485 9,811
Net income (loss)........... 481 281 762 (3,788) 710 (3,078)
Total assets................ 113,293 14,126 127,419 141,139 17,302 158,441
</TABLE>

The Company has foreign operations in Canada and Italy. The Company had no
foreign operations in 1994.

M. SUPPLEMENTAL GUARANTOR INFORMATION

As discussed in Note E, each of the Guarantor Subsidiaries of the Senior
Notes has fully and unconditionally guaranteed on a joint and several basis the
obligation to pay principal, premium, if any, and interest with respect to the
Senior Notes. The Guarantor Subsidiaries are direct or indirect wholly-owned
subsidiaries of the Company.

F-19
<PAGE> 88

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The following supplemental consolidating condensed financial statements
present (in thousands):

1. Consolidating condensed balance sheets as of December 31, 1995,
December 31, 1996, and September 30, 1997 consolidating condensed
statements of income for the years ended December 31, 1995 and 1996
and for the nine months ended September 30, 1996 and 1997 and
consolidating condensed statements of cash flows for the years
ended December 31, 1995 and 1996 and for the nine months ended
September 30, 1996 and 1997.

2. Hawk Corporation (Parent), combined Guarantor Subsidiaries and
combined Non-Guarantor Subsidiaries (consisting of the Company's
subsidiaries in Canada and Italy acquired in 1995) with their
investments in subsidiaries accounted for using the equity method.

3. Elimination entries necessary to consolidate the Parent and all of
its subsidiaries.

Management does not believe that separate financial statements of the
Guarantor Subsidiaries of the Senior Notes are material to investors. Therefore,
separate financial statements and other disclosures concerning the Guarantor
Subsidiaries are not presented. The Credit Facility contains covenants with
respect to the Company and its subsidiaries that, among other things, would
prohibit the payment of any dividends to the Company by the subsidiaries of the
Company (including the Guarantor Subsidiaries) in the event of a default under
the terms of the Credit Facility.

F-20
<PAGE> 89

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 408 $ 78 $ 285 $ 771
Accounts receivable, net........... 11,978 5,329 17,307
Inventories, net................... 16,435 3,670 20,105
Deferred income taxes.............. 1,042 1,042
Other current assets............... 654 535 1,189
-------- -------- ------- ---------- --------
Total current assets........ 408 30,187 9,819 40,414
OTHER ASSETS:
Investment in subsidiaries......... 1,165 4,108 $ (5,273)
Inter-company advances, net........ 94,978 5,353 (100,331)
Property, plant and equipment...... 35,534 3,926 39,460
Intangible assets.................. 2,846 36,616 359 39,821
Other.............................. 2,061 5,641 22 7,724
-------- -------- ------- ---------- --------
Total other assets.......... 101,050 87,252 4,307 (105,604) 87,005
-------- -------- ------- ---------- --------
Total Assets......................... $101,458 $117,439 $14,126 $ (105,604) $127,419
-------- -------- ------- ---------- --------

LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ 5,693 $ 2,795 $ 8,488
Accrued compensation............... $ 33 6,572 759 7,364
Other accrued expenses............. 2,793 744 3,537
Current portion of long-term
debt............................. 4,923 125 412 5,460
-------- -------- ------- ---------- --------
Total current liabilities... 4,956 15,183 4,710 24,849
-------- -------- ------- ---------- --------
LONG-TERM LIABILITIES:
Long-term debt..................... 87,954 457 1,035 89,446
Deferred income taxes.............. 2,348 2,348
Other.............................. 1,578 650 2,228
Inter-company advances, net........ 98,256 2,075 $ (100,331)
-------- -------- ------- ---------- --------
Total long-term
liabilities............... 87,954 102,639 3,760 (100,331) 94,022
-------- -------- ------- ---------- --------
Total liabilities........... 92,910 117,822 8,470 (100,331) 118,871
-------- -------- ------- ---------- --------
Detachable Stock Warrants, Subject to
Put Option......................... 4,600 4,600
Shareholders' Equity (Deficit)....... 3,948 (383) 5,656 (5,273) 3,948
-------- -------- ------- ---------- --------
Total Liabilities and Shareholders'
Equity............................. $101,458 $117,439 $14,126 $ (105,604) $127,419
======== ======== ======= ========== ========
</TABLE>

F-21
<PAGE> 90

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 25,187 $ 5 $ 582 $ 25,774
Accounts receivable, net........... 189 10,884 5,710 16,783
Inventories, net................... 16,120 4,744 20,864
Deferred income taxes.............. 1,390 1,042 2,432
Other current assets............... 67 373 495 935
-------- -------- ------- ---------- --------
Total current assets........ 26,833 28,424 11,531 66,788
OTHER ASSETS:
Investment in subsidiaries......... 775 6,457 $ (7,232)
Inter-company advances, net........ 108,607 19,543 (128,150)
Property, plant and equipment...... 38,394 5,748 44,142
Intangible assets.................. 504 39,435 39,939
Other.............................. 1,838 5,318 416 7,572
-------- -------- ------- ---------- --------
Total other assets.......... 111,724 109,147 6,164 (135,382) 91,653
-------- -------- ------- ---------- --------
Total Assets......................... $138,557 $137,571 $17,695 $ (135,382) $158,441
======== ======== ======= ========== ========

LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ (157) $ 5,167 $ 3,184 $ 8,194
Accrued compensation............... 100 5,856 819 6,775
Other accrued expenses............. (719) 2,728 396 2,405
Current portion of long-term
debt............................. 289 425 714
-------- -------- ------- ---------- --------
Total current liabilities... (776) 14,040 4,824 18,088
LONG-TERM LIABILITIES:
Long-term debt..................... 126,375 1,290 804 128,469
Deferred income taxes.............. 2,729 1,057 304 4,090
Other.............................. 1,272 732 2,004
Inter-company advances, net........ 3,532 120,819 4,574 $ (128,925)
-------- -------- ------- ---------- --------
Total long-term
liabilities............... 132,636 124,438 6,414 (128,925) 134,563
-------- -------- ------- ---------- --------
Total liabilities........... 131,860 138,478 11,238 (128,925) 152,651
Detachable stock warrants, subject to
put option......................... 4,600 4,600
Shareholders' equity (deficit)....... 2,097 (907) 6,457 (6,457) 1,190
-------- -------- ------- ---------- --------
Total Liabilities and Shareholders'
Equity............................. $138,557 $137,571 $17,695 $ (135,382) $158,441
======== ======== ======= ========== ========
</TABLE>

F-22
<PAGE> 91

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 3,540 $ 40 $ 49 $ 3,629
Accounts receivable, net........... 67 18,703 6,576 $ (384) 24,962
Inventories, net................... 17,801 4,766 22,567
Deferred income taxes.............. 890 1,093 1,983
Other current assets............... 142 614 947 1,703
-------- -------- ------- ---------- --------
Total current assets........ 4,639 38,251 12,338 (384) 54,844
OTHER ASSETS:
Investment in subsidiaries......... 790 5,765 (6,555)
Inter-company advances, net........ 132,535 1,463 9 (134,007)
Property, plant and equipment...... 46,385 5,578 51,963
Intangible assets.................. 233 56,336 56,569
Other.............................. 1,675 7,180 459 (1,775) 7,539
-------- -------- ------- ---------- --------
Total other assets.......... 135,233 117,129 6,046 (142,337) 116,071
-------- -------- ------- ---------- --------
Total assets......................... $139,872 $155,380 $18,384 $ (142,721) $170,915
======== ======== ======= ========== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable................... $ 7,982 $ 3,896 $ 11,878
Accrued compensation............... $ 64 6,278 864 7,206
Other accrued expenses............. (2,586) 7,242 70 $ (384) 4,342
Current portion of long-term
debt............................. 402 420 822
-------- -------- ------- ---------- --------
Total current liabilities... (2,522) 21,904 5,250 (384) 24,248
LONG-TERM LIABILITIES:
Long-term debt..................... 126,862 3,612 130,474
Deferred income taxes.............. 5,596 350 337 6,283
Other.............................. 484 1,574 2,058
Inter-company advances, net........ 2,986 127,338 5,458 (135,782)
-------- -------- ------- ---------- --------
Total long-term
liabilities............... 135,444 131,784 7,369 (135,782) 138,815
-------- -------- ------- ---------- --------
Total liabilities........... 132,922 153,688 12,619 (136,166) 163,063
-------- -------- ------- ---------- --------
Detachable stock warrants, subject to
put option......................... 9,300 9,300
Shareholders' equity (deficit)....... (2,350) 1,692 5,765 (6,555) (1,448)
-------- -------- ------- ---------- --------
Total liabilities and shareholders'
equity............................. $139,872 $155,380 $18,384 $ (142,721) $170,915
======== ======== ======= ========== ========
</TABLE>

F-23
<PAGE> 92

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED INCOME STATEMENT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................. $ 76,570 $ 8,073 $ 84,643
Cost of sales......................... 54,391 6,773 61,164
------- -------- ------- -------- --------
Gross profit.......................... 22,179 1,300 23,479
Expenses:
Selling, technical and
administrative expenses........... 11,013 562 11,575
Amortization of intangible assets... 1,924 1,924
------- -------- ------- -------- --------
Total expenses........................ 12,937 562 13,499
------- -------- ------- -------- --------
Income from operations................ 9,242 738 9,980
Interest (income) expense, net........ $ (95) 7,032 119 $ 267 7,323
Income from equity investees.......... 1,099 281 (1,380)
Other (income) expense, net........... (127) 264 (267) (130)
------- -------- ------- -------- --------
Income before income taxes and
minority interest................... 1,194 2,618 355 (1,380) 2,787
Income taxes.......................... 1,519 74 1,593
Minority interest..................... 432 432
------- -------- ------- -------- --------
Net income............................ $ 762 $ 1,099 $ 281 $ (1,380) $ 762
======= ======== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $104,262 $19,735 $123,997
Cost of sales........................ 76,232 15,652 91,884
------- -------- ------- -------- --------
Gross profit......................... 28,030 4,083 32,113
Expenses:
Selling, technical and
administrative expenses.......... 13,932 1,536 15,468
Amortization of intangible
assets........................... 2,744 62 2,806
Plant consolidation expense........ 4,028 4,028
------- -------- ------- -------- --------
Total expenses....................... 20,704 1,598 22,302
------- -------- ------- -------- --------
Income from operations............... 7,326 2,485 9,811
Interest (income) expense, net....... $ (540) 10,447 369 $ 372 10,648
Income (loss) from equity
investees.......................... (2,422) 710 1,712
Other expense, net................... 155 473 (372) 256
------- -------- ------- -------- --------
Income (loss) before income taxes and
extraordinary item................. (1,882) (2,566) 1,643 1,712 (1,093)
Income taxes (credit)................ (144) 933 789
------- -------- ------- -------- --------
Income (loss) before extraordinary
item............................... (1,882) (2,422) 710 1,712 (1,882)
Extraordinary item -- write-off of
deferred financing costs, net of
income taxes....................... (1,196) (1,196)
------- -------- ------- -------- --------
Net income (loss).................... $ (3,078) $ (2,422) $ 710 $ 1,712 $ (3,078)
======= ======== ======= ======== ========
</TABLE>

F-24
<PAGE> 93

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED INCOME STATEMENT (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ $ 79,001 $14,671 $ $ 93,672
Cost of sales.......................... 57,902 11,121 69,023
------- -------- ------- -------- --------
Gross profit........................... 21,099 3,550 24,649
Expenses:
Selling, technical and administrative
expenses........................... 10,498 1,114 11,612
Amortization of intangible assets.... 2,408 2,408
Plant consolidation expense.......... 3,749 3,749
------- -------- ------- -------- --------
Total expenses......................... 16,655 1,114 17,769
Income from operations................. 4,444 2,436 6,880
Interest expense, net.................. 198 6,588 256 279 7,321
Income (loss) from equity investees.... (1,161) 633 528
Other (income) expense, net............ (148) 482 (279) 55
------- -------- ------- -------- --------
Income (loss) before income taxes...... (1,359) (1,363) 1,698 528 (496)
Income taxes (credit).................. (202) 1,065 863
------- -------- ------- -------- --------
Net income (loss)...................... $(1,359) $ (1,161) $ 633 $ 528 $ (1,359)
======= ======== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................ $ $101,113 $15,249 $ $116,362
Cost of sales........................ 70,609 12,331 82,940
------- -------- ------- -------- --------
Gross profit......................... 30,504 2,918 33,422
Expenses:
Selling, technical and
administrative expenses.......... 12,053 2,188 14,241
Amortization of intangible
assets........................... 8 2,528 39 2,575
Plant consolidation expense........ 50 50
------- -------- ------- -------- --------
Total expenses....................... 8 14,631 2,227 16,866
Income (loss) from operations........ (8) 15,873 691 16,556
Interest expense, net................ 487 9,830 322 10,639
Income from equity investees......... 3,173 285 (3,458)
Other (income) expense, net.......... (635) 757 122
------- -------- ------- -------- --------
Income before income taxes........... 3,313 5,571 369 (3,458) 5,795
------- -------- ------- -------- --------
Income taxes......................... 52 2,398 84 2,534
------- -------- ------- -------- --------
Net income........................... $ 3,261 $ 3,173 $ 285 $ (3,458) $ 3,261
======= ======== ======= ======== ========
</TABLE>

F-25
<PAGE> 94

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash and cash equivalents
provided by operating activities... $ 3,934 $ 2,738 $ 1,041 $ 7,713
Cash flows from investing activities:
Purchase of net assets of Wellman,
net of cash acquired............. (61,607) (61,607)
Purchase of property, plant and
equipment........................ (3,145) (636) (3,781)
Loans to shareholders.............. (2,000) (2,000)
-------- -------- ------- -------- --------
Net cash and cash equivalents used in
investing activities............... (63,607) (3,145) (636) (67,388)
Cash flows from financing activities:
Proceeds from borrowings of long-
term debt........................ 102,000 102,000
Payments on long-term debt......... (30,606) (120) (30,726)
Net borrowings under revolving
credit lines..................... (1,280) (1,280)
Purchase of warrants............... (7,000) (7,000)
Deferred financing costs........... (2,799) (2,799)
Payment of preferred stock
dividend......................... (326) (326)
Other.............................. (121) (121)
-------- -------- ------- -------- --------
Net cash and cash equivalents
provided by financing activities... 59,989 (121) (120) 59,748
Net increase (decrease) in cash and
cash equivalents................. 316 (528) 285 73
Cash and cash equivalents, at
beginning of period................ 92 606 698
-------- -------- ------- -------- --------
Cash and cash equivalents, at end of
period............................. $ 408 $ 78 $ 285 $ 771
======== ======== ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash and cash equivalents and
cash equivalents provided by (used
in) operating activities........... $ (408) $ 4,168 $ 2,106 $ 5,866
Cash flows from investing activities:
Purchase of property, plant and
equipment........................ (6,247) (2,028) (8,275)
Other.............................. 162 162
-------- -------- ------- -------- --------
Net cash and cash equivalents used in
investing activities............... (6,085) (2,028) (8,113)
Cash flows from financing activities:
Proceeds from borrowings of long-
term debt........................ 178,901 1,966 506 181,373
Payments on long-term debt......... (149,314) (164) (287) (149,765)
Deferred financing costs........... (4,678) (4,678)
Payment of preferred stock
dividend......................... (226) (226)
Other.............................. 546 546
-------- -------- ------- -------- --------
Net cash and cash equivalents
provided by financing activities... 24,683 2,348 219 27,250
Net increase (decrease) in cash.... 24,275 431 297 25,003
Cash and cash equivalents, at
beginning of period................ 408 78 285 771
-------- -------- ------- -------- --------
Cash and cash equivalents, at end of
period............................. $ 24,683 $ 509 $ 582 $ 25,774
======== ======== ======= ======== ========
</TABLE>

F-26
<PAGE> 95

HAWK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

SUPPLEMENTAL CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by
operating activities............... $ (4,920) $ 4,640 $ 3,067 $ 2,787
Cash flows from investing activities:
Purchase of property, plant and
equipment........................ (6,053) (1,616) (7,669)
Payments received on shareholder
notes............................ 162 162
-------- -------- ------- -------- --------
Net cash provided by (used in)
investing activities............... 162 (6,053) (1,616) (7,507)
Cash flows from financing activities:
Proceeds (payments) from borrowings
of long-term debt................ 5,935 274 (892) 5,317
Payment of preferred stock
dividend......................... (170) (170)
Deferred financing costs........... 55 362 417
Other.............................. 279 279
-------- -------- ------- -------- --------
Net cash provided by (used in)
financing activities............... 5,820 915 (892) 5,843
-------- -------- ------- -------- --------
Net increase (decrease) in cash and
cash equivalents................... 1,062 (498) 559 1,123
Cash and cash equivalents at
beginning of period................ 408 46 317 771
-------- -------- ------- -------- --------
Cash and cash equivalents at end of
period............................. $ 1,470 $ (452) $ 876 $ 1,894
======== ======== ======= ======== ========
</TABLE>

Cash flows from financing activities:
(Payments) proceeds on long-term
debt............................. (1,751) 1,591 (623) (783)
Deferred financing costs........... (565) (565)
Payment of preferred stock
dividend......................... (240) (240)
Other.............................. (30) (28) 28 (30)
-------- -------- ------- -------- --------
Net cash (used in) provided by
financing activities............... (2,021) 998 (595) (1,618)
-------- -------- ------- -------- --------
Net (decrease) increase in cash and
cash equivalents................... (21,647) 35 (533) (22,145)
Cash and cash equivalents at
beginning of period................ 25,187 5 582 25,774
-------- -------- ------- -------- --------
Cash and cash equivalents at end of
period............................. $ 3,540 $ 40 $ 49 $ 3,629
======== ======== ======= ======== ========
</TABLE>

F-27
<PAGE> 96

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Helco, Inc.

We have audited the accompanying balance sheet of Helco, Inc. as of June
30, 1994, and the related statements of income, shareholder's equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Helco, Inc. at June 30,
1994, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
July 26, 1994

F-28
<PAGE> 97

HELCO, INC.

BALANCE SHEET

JUNE 30, 1994

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 563,854
Accounts receivable.......................................................... 2,240,231
Inventories:
Raw materials............................................................. 246,179
Work-in-process........................................................... 579,186
Finished products......................................................... 513,975
----------
1,339,340
Prepaid expenses............................................................. 63,935
----------
Total current assets........................................................... 4,207,360
Property, plant and equipment:
Land......................................................................... 236,996
Building..................................................................... 2,052,734
Manufacturing equipment...................................................... 6,161,719
Office equipment............................................................. 217,709
----------
8,669,158
Less accumulated depreciation................................................ 5,039,901
----------
3,629,257
Other assets................................................................... 119,601
----------
TOTAL ASSETS................................................................... $ 7,956,218
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................. $ 747,893
Accrued payroll and payroll taxes............................................ 259,402
Accrued pension expense...................................................... 214,986
Income taxes payable......................................................... 526,118
Current portion of long-term debt............................................ 432,360
----------
Total current liabilities...................................................... 2,180,759
Long-term debt, less current portion........................................... 1,418,339
Deferred income taxes.......................................................... 299,539
Shareholder's Equity:
Common stock, no par value; 1,000 shares authorized, 80 shares issued and
outstanding............................................................... 40,000
Retained earnings............................................................ 4,017,581
----------
Total shareholder's equity..................................................... 4,057,581
----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY..................................... $ 7,956,218
==========
</TABLE>

See notes to financial statements.

F-29
<PAGE> 98

HELCO, INC.

STATEMENT OF INCOME

YEAR ENDED JUNE 30, 1994

<TABLE>
<S> <C>
Net sales..................................................................... $ 13,529,367
Cost of products sold......................................................... 9,865,987
Gross margin.................................................................. 3,663,380
Selling, general and administrative expenses.................................. 1,247,383
Research and development...................................................... 221,270
-----------
2,194,727
Other income (expense):
Interest expense............................................................ (138,705)
Interest income............................................................. 11,485
Miscellaneous income........................................................ 64,358
-----------
(62,862)
-----------
Income before income taxes.................................................... 2,131,865
Provision for income taxes:
Current..................................................................... 838,963
Deferred.................................................................... 26,852
-----------
865,815
-----------
NET INCOME.................................................................... $ 1,266,050
===========
</TABLE>

See notes to financial statements.

F-30
<PAGE> 99

HELCO, INC.

STATEMENT OF SHAREHOLDER'S EQUITY

YEAR ENDED JUNE 30, 1994

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------- ---------- ----------
<S> <C> <C> <C>
Balance at July 1, 1993.............................. $40,000 $2,751,531 $2,791,531
Net income........................................... 1,266,050 1,266,050
------- ---------- ----------
Balance at June 30, 1994............................. $40,000 $4,017,581 $4,057,581
======= ========== ==========
</TABLE>

See notes to financial statements.

F-31
<PAGE> 100

HELCO, INC.

STATEMENT OF CASH FLOWS

YEAR ENDED JUNE 30, 1994

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................................... $1,266,050
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 542,251
Deferred income taxes..................................................... 26,852
Changes in operating assets and liabilities:
Accounts receivable..................................................... (942,556)
Inventories and prepaid expenses........................................ (249,734)
Accounts payable and accrued expenses................................... 752,895
----------
Net cash provided by operating activities.................................... 1,395,758
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property, plant and equipment................................. (445,645)
----------
Net cash used in investing activities.......................................... (445,645)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term debt................................................. (200,000)
Proceeds from long-term debt................................................. 17,445
Repayments of long-term debt................................................. (411,292)
----------
Net cash used in financing activities.......................................... (593,847)
----------
NET INCREASE IN CASH........................................................... 356,266
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................. 207,588
----------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................................... $ 563,854
==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash payments for interest................................................... $ 141,381
==========
Cash payments for income taxes............................................... $ 400,149
==========
</TABLE>

See notes to financial statements.

F-32
<PAGE> 101

HELCO, INC.

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 1994

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

Helco, Inc. (the Company), previously doing business as Helsel, Inc.,
manufactures, markets and distributes powdered metal parts for its customers
located primarily throughout the midwestern United States.

CASH AND CASH EQUIVALENTS

The Company considers all highly-liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are stated at lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation is provided
over the estimated service lives of the respective classes of property, plant
and equipment assets using accelerated methods. Gains and losses upon disposal
or retirement are recorded in current operations.

PRODUCT RESEARCH AND DEVELOPMENT

Costs incurred in research, product development and engineering ($221,270)
are charged to operations as incurred.

INCOME TAXES

Deferred income taxes arise from temporary differences between income tax
and financial reporting and principally relate to accruals recorded for book
purposes that are not deductible for tax purposes until paid and the use of
accelerated depreciation methods for property, plant and equipment for income
tax purposes.

FAIR VALUE OF FINANCIAL INSTRUMENTS

At June 30, 1994, the carrying value of the Company's financial
instruments, which include cash, cash equivalents and long-term debt,
approximate their fair value. All of the Company's long-term debt bears interest
at variable rates. See Note B.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.

F-33
<PAGE> 102

HELCO, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

B. LONG-TERM DEBT

Long-term debt at June 30, 1994 was as follows:

<TABLE>
<S> <C>
Variable rate (currently 8.25%) equipment purchase obligation due
in monthly installments of $14,000, including interest........... $ 509,068
Variable rate (currently 7.25%) equipment purchase obligation, due
in monthly installments of $16,000, including interest........... 182,194
Variable rate (currently 8.0%) equipment purchase obligation, due
in monthly installments of 43,550, including interest............ 95,862
Variable rate (currently 6.5%) mortgage note payable in monthly
installments of $9,300, including interest....................... 902,019
Variable rate (currently 8.0%) equipment purchase obligation, due
in monthly installments of $3,000 including interest............. 145,292
Other.............................................................. 16,264
----------
1,850,699
Less payments due within one year.................................. 432,360
----------
TOTAL LONG-TERM DEBT............................................... $1,418,339
==========
</TABLE>

The above debt is secured by the Company's inventories, accounts receivable
and equipment.

The following is a schedule by years of maturity requirements on long-term
debt as of June 30, 1994:

<TABLE>
<S> <C>
1995............................................................... $ 432,360
1996............................................................... 270,324
1997............................................................... 269,987
1998............................................................... 184,000
1999............................................................... 105,521
Later years........................................................ 588,507
----------
TOTAL DEBT......................................................... $1,850,699
==========
</TABLE>

C. EMPLOYEE BENEFITS

The Company has a qualified defined contribution pension plan covering
substantially all of its employees. Contributions are based on a percent of the
individual employee's earnings. Expenses associated with the plan totaled
$214,986 during the year ended June 30, 1994.

The Company also sponsors an employees' savings and retirement plan in
which certain of its employees are eligible to participate. Participants may
elect to contribute a portion of their compensation to the plan. The Company is
required to contribute 50% of the participant's contribution, not to exceed 2%
of the participant's earnings. Expenses associated with the plan totaled $29,967
during the year ended June 30, 1994.

F-34
<PAGE> 103

HELCO, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

D. INCOME TAXES

Income taxes set forth in the statement of income are as follows:

<TABLE>
<S> <C>
Current:
Federal............................................................ $670,212
State.............................................................. 168,751
--------
838,963
Deferred............................................................. 26,852
--------
$865,815
========
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

The provision for income taxes differ from the amounts computed by applying
the federal statutory rate as follows:

<TABLE>
<S> <C>
Income tax at federal statutory rate..................................... 34.0%
State and local tax, net................................................. 5.2
Other, net............................................................... 1.4
----
40.6%
====
</TABLE>

E. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISKS

During the year ended June 30, 1994, the Company had sales approximating
$9,068,879 to four customers. At June 30, 1994 amounts due from these customers
included in accounts receivable was $1,458,672.

F. SUBSEQUENT EVENT

Effective July 1, 1994, substantially all of the net assets of the Company
were sold to a group of outside investors.

F-35
<PAGE> 104

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
S.K. Wellman Limited, Inc.

We have audited the consolidated balance sheets of S.K. Wellman Limited,
Inc. and subsidiaries (a wholly-owned subsidiary of MLX Corp.) as of December
31, 1993 and 1994, and the related consolidated statements of operations,
shareholder's equity, and cash flows for the years then ended. We have also
audited the statements of operations and cash flows of S.K. Wellman Limited,
Inc. and subsidiaries for the six months ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of S.K. Wellman
Limited, Inc. and subsidiaries at December 31, 1993 and 1994, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1993 and 1994 and the six months ended June 30, 1995 in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
September 26, 1996

F-36
<PAGE> 105

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 290 $ 446
Accounts receivable................................................. 8,357 9,638
Inventories:
Raw materials and work-in-process................................ 6,151 7,328
Finished products................................................ 2,298 2,353
------- -------
8,449 9,681
Prepaid expenses and other current assets........................... 585 957
Deferred income taxes............................................... 825 618
------- -------
Total current assets.................................................. 18,506 21,340
Property, plant and equipment:
Land and improvements............................................... 1,179 1,239
Buildings and improvements.......................................... 6,908 7,376
Machinery and equipment............................................. 15,686 17,581
Construction in progress............................................ 533 1,178
------- -------
24,306 27,374
Less accumulated depreciation and amortization...................... 12,250 14,012
------- -------
12,056 13,362
Other assets:
Receivable from MLX Corp............................................ 1,467 2,151
Intangible assets, less accumulated amortization of $3,060 in 1993
and $3,558 in 1994............................................... 2,370 1,925
Other............................................................... 536 510
------- -------
TOTAL ASSETS.......................................................... $34,935 $39,288
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................................... $ 3,356 $ 4,615
Accrued compensation and benefits................................... 2,214 2,764
Accrued taxes....................................................... 403 769
Other accrued liabilities and expenses.............................. 1,481 1,552
Current portion of long-term debt................................... 53 61
------- -------
Total current liabilities............................................. 7,507 9,761
Long-term liabilities:
Debt................................................................ 12,390 10,997
Deferred income taxes............................................... 224 181
Other............................................................... 2,261 2,893
------- -------
Total long-term liabilities........................................... 14,875 14,071
Shareholder's equity:
Preferred stock, $100 par value -- authorized 20,000 shares; none
outstanding
Common stock, $1 par value -- authorized and outstanding 250,000
shares........................................................... 250 250
Retained earnings................................................... 14,044 16,838
Other equity adjustments............................................ (1,536) (1,427)
Cost of 3,750 shares of common stock held for retirement............ (205) (205)
------- -------
Total shareholder's equity............................................ 12,553 15,456
------- -------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................ $34,935 $39,288
======= =======
</TABLE>

See notes to consolidated financial statements.

F-37
<PAGE> 106

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
-------------------- JUNE 30,
1993 1994 1995
------- ------- ----------
<S> <C> <C> <C>
Net sales................................................ $57,036 $60,858 $ 34,916
Costs and expenses:
Cost of products sold.................................. 43,174 46,365 26,617
Selling, general and administrative expenses........... 6,196 6,772 3,085
MLX Corp. management fee............................... 950 1,200 600
Amortization of intangibles............................ 175 175 87
------- ------- --------
50,495 54,512 30,389
------- ------- --------
Operating earnings....................................... 6,541 6,346 4,527
Interest expense......................................... (1,746) (1,369) (660)
Intercompany interest income............................. 151 185 109
Other (expense) income................................... (122) 115 (6)
------- ------- --------
Earnings before income taxes............................. 4,824 5,277 3,970
Provision for income taxes:
Federal income taxes................................... 1,422 1,489 1,016
Foreign, state and local income taxes.................. 533 994 680
------- ------- --------
1,955 2,483 1,696
------- ------- --------
NET EARNINGS............................................. $ 2,869 $ 2,794 $ 2,274
======= ======= ========
</TABLE>

See notes to consolidated financial statements.

F-38
<PAGE> 107

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON
STOCK TOTAL
COMMON RETAINED OTHER EQUITY HELD FOR SHAREHOLDER'S
STOCK EARNINGS ADJUSTMENTS RETIREMENT EQUITY
------ -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993........ $250 $14,552 $ (1,026) $ (205) $13,571
Net earnings....................... 2,869 2,869
Dividend to MLX Corp............... (3,377) (3,377)
Foreign currency translation
adjustment....................... (445) (445)
Pension adjustment................. (65) (65)
---- ------- -------- ------ -------
Balances at December 31, 1993...... 250 14,044 (1,536) (205) 12,553
Net earnings....................... 2,794 2,794
Foreign currency translation
adjustment....................... 109 109
---- ------- -------- ------ -------
Balances at December 31, 1994...... $250 $16,838 $ (1,427) $ (205) $15,456
==== ======= ======== ====== =======
</TABLE>

See notes to consolidated financial statements.

F-39
<PAGE> 108

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER SIX MONTHS
31, ENDED
-------------------- JUNE 30,
1993 1994 1995
------- ------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.............................................. $ 2,869 $ 2,794 $ 2,274
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization........................... 2,501 2,269 1,099
Changes in operating assets and liabilities:
Accounts receivable.................................. (84) (1,281) (907)
Inventories and prepaid expenses..................... (507) (1,604) (891)
Accounts payable and accrued expenses................ 1,486 2,116 143
Deferred income taxes................................ (449) 191
Other................................................ (1,152) 124 301
------- ------- --------
Net cash provided by operating activities................. 4,664 4,609 2,019
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment................ (1,820) (2,983) (1,334)
Collection of intercompany advances and interest.......... 1,731 1,140 372
Advances to MLX Corp...................................... (1,247) (1,824)
------- ------- --------
Net cash used in investing activities..................... (1,336) (3,667) (962)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of long-term debt.............................. 10,740 365
Repayments of long-term debt.............................. (8,132) (1,750) (1,759)
Changes in capital lease obligations...................... 599 256
Dividends paid to MLX Corp................................ (5,900)
------- ------- --------
Net cash used in financing activities..................... (3,292) (786) (1,503)
------- ------- --------
Net increase (decrease) in cash........................... 36 156 (446)
Cash at beginning of period............................... 254 290 446
------- ------- --------
CASH AT END OF PERIOD..................................... $ 290 $ 446 $ 0
======= ======= ========
</TABLE>

See notes to consolidated financial statements.

F-40
<PAGE> 109

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1993 AND 1994
AND THE SIX MONTHS ENDED JUNE 30, 1995

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE BUSINESS

S.K. Wellman Limited, Inc. (S.K. Wellman or the Company), is a wholly-owned
subsidiary of MLX Corp. (MLX). The Company designs and manufactures proprietary
high-energy friction material and related products for original equipment and
aftermarket applications in the aircraft industry and for heavy equipment
brakes, transmissions and clutches. The Company serves many large manufacturing
companies around the world through subsidiary manufacturing and sales offices
located in Brook Park, Ohio; LaVergne, Tennessee; Solon, Ohio; Concord, Ontario;
Orzinuovi, Italy; and an affiliation with Tokai Carbon Co., Limited in Tokyo,
Japan.

On June 30, 1995, substantially all of the net assets of the Company were
acquired, for cash, by Hawk Corporation for a purchase price of approximately
$62 million. The acquisition was accounted for as a purchase. The operating
results of the Company have been included in Hawk Corporation's consolidated
financial statements since the date of acquisition.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of S.K. Wellman and its
wholly-owned subsidiaries. Upon consolidation, all significant intercompany
accounts and transactions have been eliminated.

INVENTORIES

Inventories are stated at lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost and include expenditures
for additions and major improvements. Expenditures for repairs and maintenance
are charged to operations as incurred. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
respective assets.

INTANGIBLE ASSETS

Intangible assets are amortized using the straight-line method over the
weighted average lives indicated in the following table. The components of
intangible assets are as follows:

<TABLE>
<CAPTION>
1993 1994 LIFE
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Excess of cost of acquired businesses over
the fair value of the net assets
acquired.................................. $ 1,699 $ 1,699 10 years
Deferred financing costs.................... 907 953 11 years
Proprietary formulations and patents........ 1,806 1,806 10 years
Pension costs............................... 1,018 1,025 15 years
------- --------
5,430 5,483
Accumulated amortization.................... (3,060) (3,558)
------- --------
$ 2,370 $ 1,925
======= ========
</TABLE>

F-41
<PAGE> 110

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

PRODUCT RESEARCH AND DEVELOPMENT

Costs incurred in research, product development and engineering ($3.4
million in 1993 and 1994 and $1.9 million for the six months ended June 30,
1995) are charged to operations as incurred. The Company recorded the research
and product development portion of this expense ($1.7 million in 1993, $1.4
million in 1994 and $.7 million for the six months ended June 30, 1995) as
selling, general and administrative expense in the Consolidated Statements of
Operations.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at current exchange rates with the resulting cumulative translation
adjustment reflected as an Other Equity Adjustment in shareholder's equity.
Exchange adjustments resulting from certain transactions, included in other
(expense) income in the accompanying Consolidated Statements of Operations were
a $255,000 loss in 1993, $95,000 income in 1994 and $10,000 income for the six
months ended June 30, 1995.

INCOME TAXES

In accordance with a tax sharing agreement between MLX and the Company, MLX
charges the Company for federal income taxes computed as if the Company was not
part of the consolidated federal income tax return. In addition, the Company
records provisions for foreign, state and local income taxes.

RECLASSIFICATION

Certain reclassifications have been made in the 1993 financial statements
to conform with the 1994 and 1995 presentation.

B. RELATIONSHIP WITH MLX CORP.

The Company has a Management Services Agreement with MLX under which MLX
provides certain senior management and financial services to the Company for a
fee.

The Company advanced $4 million in cash to MLX in 1990 and made additional
advances totaling $1.2 million in 1993 and $1.8 million in 1994. The Company
charges MLX interest on these advances at a rate which is equal to the rate
which the Company pays on its senior credit facility. The intercompany balance
is adjusted quarterly for charges by MLX for federal income taxes on the
Company's taxable income.

F-42
<PAGE> 111

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

C. LONG-TERM DEBT

The components of long-term debt are as follows:

<TABLE>
<CAPTION>
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Senior credit facility:
Revolving credit facility............................. $ 2,345 $ 1,981
Real estate term facility............................. 6,450 8,399
Mezzanine component................................... 1,350 550
Equipment term note................................... 420
Subordinated note....................................... 1,703
Note payable to bank.................................... 175 128
12,443 11,058
Less current portion.................................... 53 61
------- -------
$12,390 $10,997
======= =======
</TABLE>

The Company has available a $19.7 million credit facility (the senior
credit facility). During 1994, the loan and security agreement was amended to
extend the expiration of the facility through January 1998 and to consolidate
the real estate term facility, the original equipment term note and the proceeds
used to repay the seller note into the consolidated term loan.

The senior credit facility provides for four borrowing components with
varying rates and repayment obligations. Included in the senior credit facility
is a secured revolving credit component with a maximum borrowing limit of $7.2
million which expires in January 1998. This revolving loan bears interest at
prime rate plus 1.25% (9.75%) at December 31, 1994 compared to prime rate plus
2.0% (8%) at December 31, 1993. The amount which may be borrowed is subject to
certain availability formulas regarding accounts receivable and inventory.

The senior credit facility also includes a secured consolidated term loan
component with an initial balance of $8.5 million. This loan requires monthly
amortization of $101,000 with any remaining unpaid balance payable in January
1998. The loan bears an initial interest rate of prime plus 2% dropping to prime
plus 1.75% after certain conditions are met.

These components of the senior credit facility are secured by a lien on
substantially all the North American assets of the Company and a pledge of the
common stock of its Italian subsidiary. The agreements require the Company to,
among other things, maintain specified levels of working capital, net worth and
profitability. This agreement also limits cash dividends and loans to MLX. Under
the most restrictive covenants, retained earnings in the amount of approximately
$1.3 million were free from limitations on the payment of dividends to MLX at
December 31, 1994.

An additional component of the senior credit facility is a $2 million,
unsecured, 30-month mezzanine term facility expiring in July 1995 with monthly
amortization requirements of $67,000 and an interest rate of prime plus 3.5%.
This facility may be prepaid, under certain circumstances, with no penalty.

The senior credit facility also has available a line of credit intended to
fund capital expenditures up to a maximum of $2 million. This note bears
interest at prime rate plus 1.75% and requires equal monthly amortization
payments based on a five year term with any remaining unpaid balance payable in
January 1997. Advances are made at the Company's request and may occur at any
time until January 1997. At December 31, 1994 no amounts were outstanding under
the arrangement.

F-43
<PAGE> 112

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The note payable to bank was used to fund certain capital expenditures in
Italy. The note bears interest at 9%, is unsecured, and is due in varying
quarterly installments through December 1996.

The Company intends to finance current maturities of long-term borrowings,
except the Italian note payable to bank, through availability under the
revolving credit facility.

Aggregate maturities and other reductions of debt are: 1995 -- $61,000;
1996 -- $1.3 million; 1997 -- $1.2 million and 1998 -- $8.5 million.

Interest paid was $1.4 million in 1993, $1.2 million in 1994 and $.6
million for the six months ended June 30, 1995.

D. EMPLOYEE BENEFITS

The Company sponsors a defined contribution pension plan which covers a
majority of its U.S. employees. The plan provides for voluntary employee
contributions, a matching Company contribution and a discretionary Company
contribution. Expenses related to this plan were $470,000, $516,000 and $285,000
in 1993, 1994 and for the six months ended June 30, 1995, respectively.

The Company and certain of its subsidiaries sponsor two non-contributory
defined benefit pension plans covering certain of their U.S. and Canadian
employees. Benefits under one plan is based on compensation during the years
immediately preceding retirement. Under the other plan, the benefits are based
on a fixed annual benefit for each year of credited service. It is the Company's
policy to make contributions to these plans sufficient to meet minimum funding
requirements of the applicable laws and regulations, plus such additional
amounts, if any, as the Company's actuarial consultants advise to be
appropriate. Plan assets consist principally of equity securities and fixed
income instruments.

A summary of the components of net periodic pension costs for the plans is
as follows:

<TABLE>
<CAPTION>
1994 1993
------ ------
(IN THOUSANDS)
<S> <C> <C>
Service cost.................................................. $ 105 $ 125
Interest cost................................................. 259 160
Actual return on plan assets.................................. (281) 71
Net amortization and deferral................................. 88 (227)
------ ------
$ 171 $ 129
====== ======
Assumptions used were:
Weighted average discount rate.............................. 7.44% 8.38%
Rate of increase in compensation levels..................... 6.00% 5.00%
Weighted average expected long-term rate of return on
assets................................................... 8.63% 8.63%
</TABLE>

F-44
<PAGE> 113

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The following table presents the funded status and amounts recognized in
the consolidated financial statements at December 31, 1993 and 1994, related to
the defined benefit plans (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
---------------------------- ----------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT
OBLIGATIONS
Vested benefit obligations........ $ (423) $(1,407) $(372) $(1,558)
======= ======= ===== =======
Accumulated benefit obligations... $ (434) $(1,613) $(381) $(1,772)
======= ======= ===== =======
Projected benefit obligations..... $ (537) $(1,613) $(495) $(1,772)
Plan assets at fair value......... 1,012 984 891 1,038
------- ------- ----- -------
Projected benefit obligations less
than (in excess of) plan
assets.......................... 475 (629) 396 (734)
Unrecognized net loss............. 93 86 149
Prior service cost not yet
recognized in net periodic
pension cost.................... 200 170 349
Unrecognized net obligation
(asset) at January 1............ (284) 214 (246) 76
Adjustment required to recognize
minimum liability............... (500) (574)
------- ------- ----- -------
PREPAID (ACCRUED) PENSION COST AT
DECEMBER 31..................... $ 284 $ (629) $ 320 $ (734)
======= ======= ===== =======
</TABLE>

The Company provides a fixed noncontributory benefit toward postretirement
health care for certain of its U.S. retired union employees. Projected future
costs of providing postretirement health care benefits are recognized as expense
as employees render service. In 1993, the Company recognized a transition
obligation amounting to approximately $540,000, for prior service costs as of
January 1, 1993. This transition obligation is being amortized into general and
administrative expenses over 20 years. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation was 7%.
Postretirement benefit costs amounted to $62,000, $50,000 and $13,500 in 1993,
1994 and the six months ended June 30, 1995, respectively.

E. LEASES

The Company has lease commitments for buildings and equipment. Future
minimum annual rentals are: 1995 -- $211,000, 1996 -- $188,000, 1997 -- $158,000
1998 -- $115,000, 1999 -- $47,000, thereafter -- $135,000. Amount representing
interest is $211,000.

The Company leases certain office and warehouse facilities and equipment
under operating leases. Rental expense was $312,000, $367,000 and $162,000, in
1993, 1994 and the six months ended June 30, 1995, respectively. Future minimum
lease commitments under these agreements which have an original or existing term
in excess of one year as of December 31, 1994 are as follows: 1995 -- $259,000;
1996 -- $128,000; 1997 -- $76,000; 1998 -- $11,000 and 1999 -- $9,000.

F-45
<PAGE> 114

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

F. INCOME TAXES

The results of the Company's operations are included in the consolidated
federal income tax returns of MLX Corp. Income taxes set forth in the
Consolidated Statements of Operations are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
------------------ JUNE 30,
1993 1994 1995
------ ------ ----------
<S> <C> <C> <C>
Federal:
Current.................................... $1,810 $1,298 $1,016
Deferred................................... (388) 191 0
------ ------ ------
1,422 1,489 1,016
219... 699 424
Foreign,
State and local:
Current.................................... 375 295 256
Deferred................................... (61)
------ ------ ------
314 295 256
------ ------ ------
$1,955 $2,483 $1,696
====== ====== ======
</TABLE>

The provision for income taxes differ from the amounts computed by applying
the federal statutory rate as follows:

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
-------------- JUNE 30,
1993 1994 1995
---- ---- ----------
<S> <C> <C> <C>
Income tax at federal statutory rate.............. 34.0% 34.0% 34.0%
State and local tax, net.......................... 4.3 3.7 4.3
Nondeductible goodwill amortization and other..... 0.6 0.9 0.7
Foreign tax rate differential..................... 3.5 6.1 3.8
Other, net........................................ (1.9) 2.4 0.0
---- ---- ----
40.5% 47.1% 42.8%
==== ==== ====
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax

F-46
<PAGE> 115

S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

purposes. Significant components of the Company's net deferred tax assets as of
December 31, 1993 and 1994 are as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Deferred tax assets:
Accrued vacation.......................................... $ 321 $ 181
Inventory obsolescence.................................... 193 93
Accrued pension........................................... 138 8
Other reserves............................................ 173 336
----- -----
Total deferred tax assets................................... 825 618
Deferred tax liabilities:
Tax over book depreciation................................ (193) (201)
Other..................................................... (31) 20
----- -----
Total deferred tax liabilities.............................. (224) (181)
----- -----
Net deferred tax assets..................................... $ 601 $ 437
===== =====
</TABLE>

Undistributed earnings of the Company's foreign subsidiaries were not
significant at December 31, 1994. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided. Upon distribution of these earnings in the
form of dividends or otherwise, the Company would be subject to both U.S. income
taxes and withholding taxes payable to various foreign countries.

The Company paid foreign, state and local income taxes amounting to
$504,000 and $628,000 in 1993 and 1994, respectively.

G. OTHER MATTERS

Sales of foreign operations were $10.1 million, $11.8 million and $7.6
million in 1993, 1994 and for the six months ended June 30, 1995, respectively,
with operating earnings of $.9 million, $1.6 million and $1.2 million in 1993,
1994 and six months ended June 30, 1995, respectively, and net loss of $16,000,
net income of $514,000 and net income of $385,000 in 1993, 1994 and for the six
months ended June 30, 1995, respectively. Identifiable assets of foreign
operations were $9.4 million and $10.8 million at December 31, 1993 and 1994,
respectively.

The percentage of net sales to major customers was as follows:

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED
-------------- JUNE 30,
1993 1994 1995
---- ---- ----------
<S> <C> <C> <C>
Customer A.......................................... 16% 15% 17%
Customer B.......................................... 9% 9% 13%
Customer C.......................................... 14% 16% 12%
</TABLE>

The Company provides credit, in the normal course of its business, to
original equipment and after-market companies in the aircraft and heavy
equipment industries. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations.

F-47
<PAGE> 116

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Houghton Acquisition Corporation d/b/a
Hutchinson Foundry Products Company:

We have audited the accompanying balance sheets of Houghton Acquisition
Corporation d/b/a Hutchinson Foundry Products Company (the "Company") as of
December 31, 1996 and 1995 and the related statements of income, stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1996 and 1995 and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

St. Louis, Missouri
February 5, 1997

F-48
<PAGE> 117

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

BALANCE SHEETS

DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 289,620 $ 21,945
Accounts receivable, net of estimated allowance for doubtful
accounts of $-0- and $90,500 in 1996 and 1995,
respectively................................................ 1,378,577 1,007,205
Inventories.................................................... 444,751 226,150
Prepaid expenses and other assets.............................. 142,650 35,608
Refundable income taxes........................................ 141,259
Deferred income taxes.......................................... 51,000 124,000
---------- ----------
Total current assets...................................... 2,447,857 1,414,908
---------- ----------
Property, plant and equipment.................................... 3,957,584 3,248,921
Less accumulated depreciation.................................... 1,140,904 827,744
---------- ----------
2,816,680 2,421,177
---------- ----------
Other assets:
Prepaid pension cost........................................... 175,789 177,373
Debt financing costs, net of accumulated amortization of
$196,238 in 1995............................................ 10,586
Noncompete agreement, net of accumulated amortization of
$400,000 and $300,000 in 1996 and 1995, respectively........ 100,000 200,000
Goodwill, net of accumulated amortization of $104,933 and
$78,699 in 1996 and 1995, respectively...................... 789,314 815,548
Other intangible assets, net of accumulated amortization of
$57,512 and $45,484 in 1996 and 1995, respectively.......... 16,727 28,755
---------- ----------
Total other assets........................................ 1,081,830 1,232,262
---------- ----------
Total assets.............................................. $6,346,367 $5,068,347
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Borrowings on revolving line of credit......................... $ 131,950
Current portion of long-term debt.............................. $ 100,000 100,000
Current portion of capital lease obligations................... 79,584
Accounts payable............................................... 518,940 223,227
Accrued expenses............................................... 249,915 345,771
Income taxes payable........................................... 52,000
Preferred stock dividends payable.............................. 38,389
---------- ----------
Total current liabilities................................. 948,439 891,337
Long-term debt, net of current portion........................... 25,000 375,000
Capital lease obligations, net of current portion................ 545,157
Deferred income taxes............................................ 350,000 308,000
Cumulative redeemable preferred stock............................ 1,434,000 1,360,000
Common stock purchase warrants subject to put option............. 3,283,524 2,269,470
Stockholders' equity (deficit)................................... (239,753) (135,460)
---------- ----------
Total liabilities and stockholders' equity (deficit)...... $6,346,367 $5,068,347
========== ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-49
<PAGE> 118

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................ $8,621,385 $8,133,452 $8,687,853
Cost of goods sold................................... 5,776,692 5,417,039 5,860,256
----------- ----------- -----------
Gross profit....................................... 2,844,693 2,716,413 2,827,597
Selling, general and administrative expenses......... 793,944 868,470 876,046
Amortization expense................................. 148,848 493,160 689,260
----------- ----------- -----------
Income from operations............................. 1,901,901 1,354,783 1,262,291
----------- ----------- -----------
Other income (expense):
Interest expense................................... (23,530) (145,061) (254,775)
Other, net......................................... 20,390 7,150 8,975
----------- ----------- -----------
(3,140) (137,911) (245,800)
----------- ----------- -----------
Income before provision for income taxes........... 1,898,761 1,216,872 1,016,491
Provision for income taxes........................... 791,000 486,000 419,400
----------- ----------- -----------
Net income........................................... $1,107,761 $ 730,872 $ 597,091
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-50
<PAGE> 119

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1994...................... $5,000 $ 495,000 $ 42,044 $ 542,044
Net income.................................... 597,091 597,091
Dividends on preferred stock.................. (123,997) (123,997)
Accretion on preferred stock and stock
warrants.................................... (954,412) (954,412)
------- --------- ------------ -----------
Balance, December 31, 1994.................... 5,000 495,000 (439,274) 60,726
Net income.................................... 730,872 730,872
Dividends on preferred stock.................. (124,000) (124,000)
Accretion on preferred stock and stock
warrants.................................... (803,058) (803,058)
------- --------- ------------ -----------
Balance, December 31, 1995.................... 5,000 495,000 (635,460) (135,460)
Net income.................................... 1,107,761 1,107,761
Dividends on preferred stock.................. (124,000) (124,000)
Accretion on preferred stock and stock
warrants.................................... (1,088,054) (1,088,054)
------- --------- ------------ -----------
Balance, December 31, 1996.................... $5,000 $ 495,000 $ (739,753) $ (239,753)
======= ========= ============ ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-51
<PAGE> 120

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 1,107,761 $ 730,872 $ 597,091
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................... 313,160 289,064 282,642
Amortization..................................... 148,848 493,160 689,260
Deferred income taxes............................ 115,000 14,000 107,000
Loss on disposals of equipment................... 10,918
Changes in Assets and Liabilities:
Accounts receivable.............................. (371,372) 53,736 91,486
Inventories...................................... (218,601) 80,534 (27,470)
Prepaid expenses and other assets................ (107,042) (9,313) (15,511)
Prepaid pension cost............................. 1,584 (28,714) (17,061)
Accounts payable................................. 295,713 (76,871) 24,219
Accrued expenses................................. (95,856) (51,105) 43,954
Income taxes refundable/payable.................. (193,259) 30,825 14,175
---------- ------------ -----------
Net cash provided by operating activities........... 995,936 1,537,106 1,789,785
---------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.......... (58,035) (57,119) (93,278)
Proceeds from disposals of equipment................ 32,000 42,500
---------- ------------ -----------
Net cash used in investing activities............... (58,035) (25,119) (50,778)
---------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt........................ (350,000) (2,134,150) (1,350,044)
Repayments of capital lease obligations............. (25,887)
Borrowings under revolving line of credit........... 1,328,895 461,644 327,843
Repayments under revolving line of credit........... (1,460,845) (329,694) (327,843)
Dividends paid on preferred stock................... (162,389) (124,000) (123,318)
---------- ------------ -----------
Net cash used in financing activities............... (670,226) (2,126,200) (1,473,362)
---------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents...................................... 267,675 (614,213) 265,645
Cash and cash equivalents, beginning of year.......... 21,945 636,158 370,513
---------- ------------ -----------
Cash and cash equivalents, end of year................ $ 289,620 $ 21,945 $ 636,158
========== ============ ===========
SUPPLEMENTAL DISCLOSURES:
Income taxes paid................................... $ 869,000 $ 451,000 $ 298,000
========== ============ ===========
Interest paid....................................... $ 24,000 $ 170,000 $ 236,000
========== ============ ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease agreements..... $ 650,628
==========
Dividends declared but not paid as of December 31..... $ 38,389 $ 38,389
============ ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-52
<PAGE> 121

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994

1. DESCRIPTION OF BUSINESS:

Effective December 31, 1992, Houghton Acquisition Corporation (the
"Company") purchased substantially all of the assets of Hutchinson Foundry
Products Company. The Company's principal business is the production and sale of
rotors for use in subfractional horsepower motors and, to a lesser extent, the
machining and sale of aluminum extrusions and castings, principally fan spacers
used by engine manufacturers and gas nozzles used in gasoline pumping units. The
Company sells its products primarily in the Midwest region of the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash, bank
deposits and highly liquid investments purchased with original
maturities of three months or less.

B. INVENTORIES: Inventories are stated at the lower of cost or market.
Cost is determined principally using the first-in, first-out method.

C. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment acquired
in conjunction with the Acquisition (see Note 1) were recorded at their
estimated fair value at the acquisition date based on independent
appraisals obtained near the acquisition date. Property, plant and
equipment purchased subsequent to the acquisition are recorded at cost.
Depreciation is computed utilizing the straight-line method over the
estimated useful lives of the assets which are as follows:

<TABLE>
<S> <C>
Land improvements............................................ 15 years
Buildings.................................................... 20 years
Machinery and equipment...................................... 10 years
Vehicles and computers....................................... 3-5 years
</TABLE>

Upon retirement or replacement, the cost and related accumulated
depreciation are removed from the respective accounts and any resulting
gain or loss is included in earnings. Expenditures for maintenance and
repairs are charged to operations as incurred, while renewals and
betterments which extend the useful lives of the assets are capitalized.

D. DEBT FINANCING COSTS: Costs incurred in connection with obtaining and
securing the bank loan agreement have been capitalized and are being
amortized over the period of the related borrowings. Amortization
expense for 1996, 1995 and 1994 was $10,586, $68,948 and $68,957,
respectively.

E. NONCOMPETE AGREEMENT: In connection with the acquisition (see Note 1),
the Company entered into a noncompete agreement with the seller valued
at $500,000. Under this noncompete agreement, the seller has agreed not
to compete with the Company through December 31, 1997.

The value of the noncompete agreement is being amortized over the term
of the agreement using the straight-line method. Amortization expense
was $100,000 for 1996, 1995 and 1994.

F. GOODWILL: The excess of the purchase price of the Company over the fair
value of the tangible and identifiable intangible net assets acquired
(see Note 1) has been allocated to goodwill. Goodwill is being amortized
on a straight-line basis over a period of forty years. Amortization
expense was $26,234 for 1996, 1995 and 1994.

F-53
<PAGE> 122

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

At each balance sheet date, management assesses whether there has been a
permanent impairment of the value of goodwill. The factors considered by
management in performing this assessment include current operating
results, trends and prospects as well as the effects of obsolescence,
demand, competition and other economic factors. Management has concluded
that no impairment of the value of goodwill has occurred as of any of
the balance sheet dates presented.

G. OTHER INTANGIBLE ASSETS: Other intangible assets at December 31, 1996
consist of organization costs which are being amortized over five years.
Amortization expense related to these costs amounted to $12,028 for
1996.

Prior to 1996, other intangible assets also included a sales agreement
and a union employment agreement, the values of which were based on
independent appraisals at the date of acquisition (see Note 1). These
intangible assets were amortized on a straight-line basis over the terms
of the respective agreements and became fully amortized during 1995.
Amortization expense related to other intangible assets amounted to
$297,978 and $494,069 in 1995 and 1994, respectively.

H. INCOME TAXES: Deferred tax liabilities and assets are recognized for
the expected future tax consequences of events that have been included
in the financial statements or tax returns. Deferred tax liabilities and
assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax
rates as of the balance sheet date which are expected to be applied to
taxable income in the periods in which the deferred tax liability or
asset is expected to be settled or realized. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.

I. PREFERRED STOCK AND STOCK WARRANTS: The proceeds received related to
the preferred stock and stock warrants have been allocated to the
respective instruments based upon their estimated fair values as of
March 10, 1993, the effective date of the related Securities Purchase
Agreement. The preferred stock is being accreted to its redemption value
as of March 10, 1998 using the interest method. The stock warrants are
being accreted on a straight-line basis to their estimated value as of
their earliest put date, March 10, 1998, using a formula based on a
multiple of earnings adjusted for certain items as defined in the
Securities Purchase Agreement. Accretion is effected via corresponding
decreases to the Company's retained earnings and constitutes noncash
transactions for purposes of the accompanying statements of cash flows.

J. ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.

3. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:

The Company has entered into an agreement with one of its largest customers
which entitles the Company to be this customer's exclusive supplier of die cast
rotors, under certain terms and conditions. The current agreement extends
through August 31, 1998.

F-54
<PAGE> 123

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

The following is a summary of sales and uncollateralized accounts
receivable by year and as of December 31, respectively, to individual customers
in amounts that exceeded ten percent of total Company net sales and accounts
receivable, respectively:

<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS COMBINED PERCENT OF
WITH SALES TO TOTAL
SIGNIFICANT SIGNIFICANT COMPANY
YEAR ENDED DECEMBER 31, SALES CUSTOMERS NET SALES
------------------------------------------- ----------- -------------- ----------
<S> <C> <C> <C>
1996....................................... 2 $3.9 million 45%
1995....................................... 2 $3.9 million 48%
1994....................................... 3 $5.0 million 58%
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
CUSTOMERS COMBINED PERCENT OF
WITH ACCOUNTS TOTAL
SIGNIFICANT RECEIVABLE COMPANY
ACCOUNTS OF SIGNIFICANT ACCOUNTS
AS OF DECEMBER 31, RECEIVABLE CUSTOMERS RECEIVABLE
-------------------------------------------- ----------- -------------- ----------
<S> <C> <C> <C>
1996........................................ 3 $860,000 62%
1995........................................ 2 $577,000 57%
</TABLE>

Management expects that sales to the Company's major customers will
continue to be a significant portion of its annual sales. The Company performs
ongoing credit evaluations of its customers and has historically experienced
insignificant credit losses.

Substantially all of the Company's balances of cash and cash equivalents
are maintained in accounts at one financial institution.

4. INVENTORIES:

Inventories consist of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Raw materials........................................... $260,216 $102,455
Work-in-process......................................... 107,145 30,579
Finished goods.......................................... 77,390 93,116
--------- ---------
$444,751 $226,150
========= =========
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land and improvements................................ $ 179,450 $ 179,450
Buildings............................................ 694,841 677,664
Machinery and equipment.............................. 3,013,590 2,329,588
Vehicles and computers............................... 69,703 62,219
----------- -----------
$3,957,584 $3,248,921
=========== ===========
</TABLE>

As of December 31, 1996, machinery and equipment includes $650,628 of
assets acquired pursuant to capital lease agreements and accumulated
depreciation and depreciation expense include $21,688 related to those assets as
of December 31, 1996 and for the year then ended.

F-55
<PAGE> 124

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Depreciation expense amounted to $313,160, $289,064 and $282,642 for the
years ended December 31, 1996, 1995 and 1994, respectively.

6. DEBT:

Long-term debt consists of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Obligation under noncompete agreement -- Payable in
quarterly installments through January 1, 1998....... $ 125,000 $ 225,000
Subordinated debt -- Note payable to former owner,
interest payable quarterly at floating rate tied to a
bank's prime rate (10.5% at December 31, 1995),
repaid during 1996................................... 250,000
---------- ----------
125,000 475,000
Less current portion................................... (100,000) (100,000)
---------- ----------
$ 25,000 $ 375,000
========== ==========
</TABLE>

Management estimates that the fair value of its outstanding long-term debt
approximates its carrying value.

The Company also has a senior revolving line of credit agreement with a
bank which provides for borrowings up to the lesser of $1 million or an amount
based on specified percentages of the Company's eligible accounts receivable and
inventory, as defined in the agreement. Interest is payable monthly at a
floating rate tied to the bank's prime rate (8.25% at December 31, 1996), plus
.25% on the unused portion of the amount available. The Company had no
outstanding balance under the revolving line of credit agreement as of December
31, 1996.

7. CAPITAL LEASE OBLIGATIONS:

During 1996, the Company entered into various capital lease agreements for
certain machinery and equipment used in its operations.

The following is a schedule, by years, of future minimum lease payments
required under capital lease agreements, together with the present value of the
net minimum lease payments as of December 31, 1996:

<TABLE>
<S> <C>
1997.............................................................. $ 131,603
1998.............................................................. 131,603
1999.............................................................. 131,603
2000.............................................................. 131,603
2001.............................................................. 254,926
----------
Total minimum lease payments.................................... 781,338
Less amount representing interest................................. (156,597)
----------
Present value of minimum lease payments......................... 624,741
Less current portion.............................................. (79,584)
----------
Long-term portion............................................... $ 545,157
==========
</TABLE>

F-56
<PAGE> 125

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. COMMON STOCK, PREFERRED STOCK AND STOCK WARRANTS:

Common stock consists of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Common stock; voting; $1 par value; 30,000 shares
authorized; 5,000 shares issued and outstanding;
3,696 shares reserved for issuance upon exercise of
Common Stock Purchase Warrants..................... $ 5,000 $ 5,000
========== ==========
</TABLE>

Preferred stock consists of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Class A Cumulative Redeemable Preferred Stock;
voting; $100 par value; 15,500 shares issued and
outstanding; mandatory dividend rate of 8% per
annum payable quarterly; redeemable by the Company
at any time, however, redemption is mandatory by
March 10, 1998; holders have the option to redeem
upon an event of default as defined in the related
Securities Purchase Agreement, registration of
securities or if the Company's president ceases to
hold a majority of voting securities; redemption
price of $100 per share............................ $1,434,000 $1,360,000
========== ==========
</TABLE>

Stock warrants consist of the following as of December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Common Stock Purchase Warrants; issued to holders of
Class A Cumulative Redeemable Preferred Stock;
rights to purchase an aggregate of 3,479 shares of
Company's common stock, exercisable at any time for
$1 per share; on or after March 10, 1998, warrant
holders have the option to require the Company to
purchase such warrants, or any common stock
obtained as result of prior exercise of warrants,
at a price based on a multiple of the Company's
adjusted earnings, as defined in the related
Securities Purchase Agreement; holders of stock
issued upon exercise of warrants have the right to
cause the Company to register such shares under the
Securities Act of 1933; if not exercised, warrants
terminate on the sixth anniversary of the date all
preferred stock has been redeemed.................. $3,283,524 $2,269,470
========== ==========
</TABLE>

The Company has also issued other common stock purchase warrants to two
individuals to purchase an aggregate of 217 shares of the Company's common stock
on or before March 15, 1998 at an exercise price of approximately $446 per
share.

Pursuant to the terms of the Securities Purchase Agreement, preferred
stockholders and warrant holders are protected against dilution or other
impairment of their respective interests.

F-57
<PAGE> 126

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Amounts recorded for accretion of the Cumulative Redeemable Preferred Stock
and Common Stock Purchase Warrants were as follows for the years ended December
31:

<TABLE>
<CAPTION>
CUMULATIVE
REDEEMABLE COMMON STOCK
PREFERRED PURCHASE
STOCK WARRANTS
---------- ------------
<S> <C> <C>
1996............................................. $ 74,000 $1,014,054
1995............................................. $ 64,000 $ 739,058
1994............................................. $ 55,000 $ 899,412
</TABLE>

9. INCOME TAXES:

The Company's provision for income taxes consists of the following for the
years ended December 31:

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current................................ $550,000 $381,000 $254,000
Deferred............................... 100,000 12,000 93,000
-------- -------- --------
650,000 393,000 347,000
-------- -------- --------
State:
Current................................ 126,000 91,000 58,400
Deferred............................... 15,000 2,000 14,000
-------- -------- --------
141,000 93,000 72,400
-------- -------- --------
$791,000 $486,000 $419,400
======== ======== ========
</TABLE>

The provision for income taxes for the years ended December 31 differs from
the "expected" tax expense computed by applying the U.S. federal corporate tax
rate of 34% to income before provision for income taxes as follows:

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" income tax
provision.............................. $646,000 $414,000 $346,000
State income tax provision, net of
federal income tax benefit............. 82,000 59,000 51,000
Goodwill................................. 10,000 10,000 10,000
Other, net............................... 53,000 3,000 12,400
-------- -------- --------
$791,000 $486,000 $419,400
======== ======== ========
</TABLE>

F-58
<PAGE> 127

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

The significant components of the Company's deferred tax assets and
liabilities recognized in the accompanying balance sheets as of December 31 are
as follows:

<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued vacation.................................... $ 47,000 $ 47,000
Accrued compensation................................ 41,000
Allowance for doubtful accounts..................... 35,000
Other............................................... 4,000 1,000
-------- --------
Total deferred tax assets................... 51,000 124,000
Deferred tax liabilities -- Property, plant and
equipment basis differences......................... 350,000 308,000
-------- --------
Net deferred tax liabilities................ $299,000 $184,000
======== ========
</TABLE>

10. EMPLOYEE BENEFIT PLANS:

The Company has a defined benefit retirement plan, Hutchinson Foundry
Retirement Plan for Employees (the "Plan"), which covers substantially all
employees of the Company. The Plan provides benefits in accordance with a
formula equal to $16 per month multiplied by the participants' years of service
as of their retirement date. Benefit payments to retired participants commence
at age 65 (or at some earlier date at a discounted amount as defined by the
Plan, if so elected, for early retirees) and continue for the life of the
participant. Participants also have the option of electing a lump sum
distribution at retirement. The Plan is funded in accordance with ERISA.
Required contributions were $-0-, $18,000 and $-0- for 1996, 1995 and 1994,
respectively.

Net periodic pension (cost) income consists of the following for the years
ended December 31:

<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Actual return (loss) on plan assets...... $149,499 $ 160,672 $(83,820)
Service cost............................. (21,168) (17,134) (15,865)
Interest cost............................ (34,719) (31,426) (32,584)
Net amortization and deferral............ (95,196) (112,440) 149,330
Settlement gain.......................... 10,468
-------- --------- ---------
Net periodic pension (cost)
income....................... $ (1,584) $ 10,140 $ 17,061
======== ========= =========
</TABLE>

F-59
<PAGE> 128

HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

The following table presents the funded status of the Plan determined as of
December 31:

<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation:
Vested............................................. $ 492,089 $392,196
Nonvested.......................................... 20,381 15,261
--------- --------
Accumulated benefit obligation............. $ 512,470 $407,457
========= ========
Actuarial present value of projected benefit
obligation......................................... $ 512,470 $407,457
Plan assets at fair value............................ 781,655 646,550
--------- --------
Plan assets in excess of projected benefit
obligation............................... 269,185 239,093
Unrecognized prior service cost...................... 38,005
Unrecognized net gain................................ (131,401) (61,720)
========= ========
Prepaid pension cost....................... $ 175,789 $177,373
========= ========
</TABLE>

Plan assets consist of corporate stocks and bonds, mutual funds and money
market accounts. The applicable portion of the unrecognized net gain is being
amortized over the average future working lifetime of the participants. The
assumptions used in developing the present value of the benefit obligations and
pension cost were as follows:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rate.......................... 7.5 % 7.5 % 8.0 %
Long-term rate of return on plan assets................. 9.0 % 9.0 % 9.0 %
</TABLE>

The Company also has a 401(k) defined contribution plan for substantially
all of its employees. Participants may contribute up to 15% of their
compensation each year. The Company, at its discretion, may elect to match a
percentage of employees' contributions each year, as determined by its Board of
Directors, not to exceed the maximum amount deductible for federal income tax
purposes. The Company contributed $5,000, $5,000 and $10,000 to the 401(k) plan
in 1996, 1995 and 1994, respectively.

11. SUBSEQUENT EVENT:

In January 1997, all of the Company's common stock, preferred stock and
related common stock purchase warrants were sold to Hawk Corporation ("Hawk"), a
Delaware Corporation headquartered in Cleveland, Ohio. Hawk is a manufacturer of
various products requiring sophisticated engineering and production techniques
in numerous industrial markets. No adjustments have been reflected in the
accompanying financial statements as a result of this transaction.

F-60
<PAGE> 129

REPORT OF INDEPENDENT AUDITORS

Shareholder
Sinterloy, Inc.
Solon Mills, Illinois

We have audited the accompanying balance sheets of Sinterloy, Inc. as of
December 31, 1996 and 1995, and the related statements of income, shareholder's
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sinterloy, Inc. at December
31, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
August 22, 1997

F-61
<PAGE> 130

SINTERLOY, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $1,552,611 $ 545,412
Accounts receivable............................................ 1,294,066 965,982
Inventories.................................................... 506,835 316,640
Prepaid expenses............................................... 10,642 64,750
---------- ----------
Total current assets................................... $3,364,154 $1,892,784
Property and equipment:
Machinery and equipment........................................ 3,410,892 1,706,700
Office furniture and fixtures.................................. 65,314 91,642
---------- ----------
3,476,206 1,798,342
Less accumulated depreciation.................................. 1,350,392 869,347
---------- ----------
$2,125,814 $ 928,995
---------- ----------
TOTAL ASSETS..................................................... $5,489,968 $2,821,779
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable............................................... $ 755,503 $ 232,075
Accrued expenses............................................... 222,513 135,758
Accrued income taxes........................................... 30,000 16,000
Current portion of note payable................................ 23,687 22,174
---------- ----------
Total current liabilities.............................. $1,031,703 $ 406,007
Note payable..................................................... 86,209 109,896
Shareholder's equity:
Common stock, no par value, 100,000 shares authorized, issued
and outstanding............................................. 10,000 10,000
Retained earnings.............................................. 4,362,056 2,295,876
---------- ----------
Total shareholder's equity............................. 4,372,056 2,305,876
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY....................... $5,489,968 $2,821,779
========== ==========
</TABLE>

See notes to financial statements.

F-62
<PAGE> 131

SINTERLOY, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995
----------- ----------
<S> <C> <C>
Net sales....................................................... $11,596,950 $7,586,030
Cost of sales................................................... 7,422,194 5,215,868
----------- ----------
Gross profit.................................................... 4,174,756 2,370,162
General and administrative expenses............................. 1,053,213 868,970
----------- ----------
Operating income................................................ 3,121,543 1,501,192
Other income (expense):
Miscellaneous income.......................................... 783 5,720
Loss on sale of equipment..................................... (1,628)
Interest income............................................... 32,485 12,604
Interest expense.............................................. (8,668) (18,733)
----------- ----------
Other income (expense) -- net................................... 22,972 (409)
----------- ----------
Income before income taxes...................................... 3,144,515 1,500,783
Income taxes.................................................... 33,767 36,077
----------- ----------
NET INCOME...................................................... $ 3,110,748 $1,464,706
=========== ==========
</TABLE>

See notes to financial statements.

F-63
<PAGE> 132

SINTERLOY, INC.

STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1, 1995.......................... $10,000 $ 1,223,233 $ 1,233,233
Net income.......................................... 1,464,706 1,464,706
Cash distribution to shareholder.................... (392,063) (392,063)
------- ----------- -----------
Balance at December 31, 1995........................ 10,000 2,295,876 2,305,876
Net income.......................................... 3,110,748 3,110,748
Cash distributions to shareholder................... (1,044,568) (1,044,568)
------- ----------- -----------
Balance at December 31, 1996........................ $10,000 $ 4,362,056 $ 4,372,056
======= =========== ===========
</TABLE>

See notes to financial statements.

F-64
<PAGE> 133

SINTERLOY, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................... $ 3,110,748 $1,464,706
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 509,276 267,539
Loss on sale of equipment.................................. 1,628
Change in operating assets and liabilities:
Accounts receivable...................................... (328,084) (262,316)
Inventories.............................................. (190,195) (65,321)
Prepaid expenses......................................... (10,642) (53,983)
Accounts payable......................................... 523,428 83,207
Accrued expenses and other............................... 86,755 112,943
Accrued income taxes..................................... 14,000 11,500
----------- ----------
Net cash provided by operating activities..................... 3,716,914 1,558,275
INVESTING ACTIVITIES
Purchases of property and equipment........................... (1,642,973) (536,543)
FINANCING ACTIVITIES
Payments on line of credit.................................... (200,000)
Payments on note payable...................................... (22,174) (20,758)
Shareholder distributions..................................... (1,044,568) (392,063)
----------- ----------
Net cash used in financing activities......................... (1,066,742) (612,821)
----------- ----------
Net increase in cash.......................................... 1,007,199 408,911
Cash and cash equivalents at beginning of year................ 545,412 136,501
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $ 1,552,611 $ 545,412
=========== ==========
</TABLE>

See notes to financial statements.

F-65
<PAGE> 134

SINTERLOY, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1996 AND 1995

A. BASIS OF PRESENTATION

Sinterloy, Inc. (the Company) is primarily engaged in the production of
structural sintered metal parts. The plant facility is located in Solon Mills,
Illinois. The Company was incorporated in Illinois on March 23, 1988.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are carried at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.

Inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Raw material and supplies............................. $242,791 $ 92,799
Work in process....................................... 148,789 126,135
Finished goods........................................ 115,255 97,706
-------- --------
$506,835 $316,640
======== ========
</TABLE>

PROPERTY AND EQUIPMENT

Property and equipment has been recorded at cost.

Depreciation is provided by using an accelerated method over the useful
lives of the assets. Estimated useful lives range from 3 to 7 years.

INCOME TAXES

Effective October 1, 1994, the Company elected S Corporation status. Under
those provisions, the shareholder is liable for individual income taxes on the
Company's taxable income. The Company is responsible for paying Illinois
Replacement Tax of 1.5% of taxable income.

States taxes paid in 1996 and 1995 were $19,767 and $24,577, respectively.

USE OF ESTIMATES

F-66
<PAGE> 135

SINTERLOY, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

C. NOTE PAYABLE

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Payable to a former shareholder, in monthly
installments of $2,621 principal and interest,
bearing interest at 6.62%, due February, 2001,
unsecured........................................... $109,896 $132,070
Less current portion.................................. 23,687 22,174
-------- --------
LONG-TERM NOTE PAYABLE................................ $ 86,209 $109,896
======== ========
</TABLE>

Aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
1997.......................................... $ 23,687
1998.......................................... 25,304
1999.......................................... 27,081
2000.......................................... 28,875
2001.......................................... 4,949
---------
$ 109,896
=========
</TABLE>

During 1995 and 1996, the Company had a revolving line of credit with a
maximum of $500,000 bearing interest at prime. There were no borrowings on the
line of credit at December 31, 1996 and 1995.

Interest paid in 1996 and 1995 was $8,668 and $18,733, respectively.

D. LEASE COMMITMENT

In 1995, the Company leased its facilities from a third party with monthly
rental payments of $5,429. In February 1996 the facilities were purchased by the
Company's sole shareholder who leases the facilities to the Company under a five
year operating lease through January 31, 2001. Beginning March 1996, monthly
rental payments were increased to $13,150 due to a significant addition to the
facility in 1996. The Company also has operating leases for two vehicles and
other miscellaneous equipment. Rent expense was $148,650 and $56,288 for the
years ended December 31, 1996 and 1995, respectively.

Future minimum lease commitments are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
1997.......................................... $ 166,206
1998.......................................... 157,800
1999.......................................... 157,800
2000.......................................... 157,800
2001.......................................... 13,150
---------
$ 652,756
=========
</TABLE>

E. PROFIT SHARING PLAN

On September 1, 1993, the Company established a 401(k) profit sharing plan.
Eligible employees may elect to defer up to 10% of their total compensation or
as prescribed by the Internal Revenue Service regulations. The Company
contributes a matching fifty percent (50%) of each employee's

F-67
<PAGE> 136

SINTERLOY, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

elective deferral. Additionally, the plan allows for the Company to make
discretionary contributions. Company contributions for the years ended December
31, 1996 and 1995 were $59,203 and $53,375, respectively.

The discretionary portion of the contributions was $20,000 for the years
ended December 31, 1996 and 1995.

F. MAJOR CUSTOMERS

For the years ended December 31, 1996 and 1995, the Company generated
approximately 72% and 60%, respectively, of its revenue from three major
customers. Accounts receivable from the three customers was $887,525 and
$684,687, as of December 31, 1996 and 1995, respectively.

G. SUBSEQUENT EVENT

Effective August 1, 1997, the Company sold substantially all of its assets
except cash, and certain liabilities for $15,000,000 (the purchase price). The
purchase price will be adjusted dollar for dollar based on the adjusted net
equity position of the Company at closing compared to the net equity position of
the Company at December 31, 1996.

F-68
<PAGE> 137

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK, NOR DOES IT CONSTITUTE
AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION, OR AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................... 3
Risk Factors............................... 9
Use of Proceeds............................ 15
Dividend Policy............................ 15
Capitalization............................. 16
Dilution................................... 18
Unaudited Pro Forma Consolidated Statements
of Operations............................ 19
Selected Consolidated Financial Data....... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 24
Business................................... 32
Management................................. 45
Principal and Selling Stockholders......... 52
Certain Transactions....................... 54
Description of Capital Stock............... 56
Shares Eligible for Future Sale............ 62
Underwriting............................... 64
Legal Matters.............................. 65
Experts.................................... 65
Available Information...................... 66
Reports to Holders of Class A
Common Stock............................. 66
Index to Financial Statements.............. F-1
</TABLE>

======================================================

======================================================
Shares

LOGO

Hawk Corporation

Class A Common Stock
($.01 par value)

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

Schroder & Co. Inc.

Donaldson, Lufkin & Jenrette
Securities Corporation

McDonald & Company
Securities, Inc.

, 1997

======================================================
<PAGE> 138

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee...................... $ 31,819
NASD filing fee.......................................................... 11,000
NYSE listing fee......................................................... 88,100
Registrar and transfer agent's fees and expenses......................... *
Printing expenses........................................................ *
Accounting fees and expenses............................................. *
Legal fees and expenses.................................................. *
Miscellaneous............................................................ *
--------
Total.......................................................... $ *
========
</TABLE>

- ---------------
* To be provided by amendment.

All amounts except the Securities and Exchange Commission registration fee, the
NASD filing fee and the NYSE listing fee are estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law, which enables a corporation in its original certificate or an amendment
thereto to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) pursuant to Section 174 of the Delaware General
Corporation Law (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (4) for any transaction
from which a director derived an improper personal benefit. The Certificate, a
copy of which is filed as Exhibit 3.1 to this Registration Statement, contains
provisions permitted by Section 102(b)(7) of the Delaware General Corporation
Law.

Reference also is made to Section 145 of the Delaware General Corporation
Law, which grants a corporation power to indemnify any persons, including
officers and directors, who are, or are threatened to be made, parties to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of such corporation), by reason of the fact that such person was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such officer, director, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, for criminal proceedings, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses (including attorneys' fees)
which such officer or director actually and reasonably incurred. Any
indemnification made under Section 145, unless ordered by a

II-1
<PAGE> 139

court, shall be authorized upon a determination that indemnification of the
director, officer, employee or agent is proper because the person has met the
applicable standard of conduct required by this section. Such determination
shall be made with respect to a person who is a director or officer at the time
of such determination by a majority vote of the directors who are not parties to
such action, suit, or proceeding, even though less than a quorum, or by a
committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or if there are no such directors, or if such
directors so direct, by independent legal counsel, or by the stockholders. The
Certificate provides for the indemnification of directors and officers of the
Registrant to the fullest extent permitted by the Delaware General Corporation
Law.

The Registrant maintains an insurance policy that provides protection,
within the maximum liability limits of the policy and subject to a deductible
amount for each claim, to the Registrant under its indemnification obligations
and to the directors and officers of the Registrant with respect to certain
matters that are not covered by the Registrant's indemnification obligations.

At present, there is no pending litigation or proceeding involving any
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any director or officer.

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.

In addition, the Selling Stockholders have agreed to indemnify the
Registrant, each Underwriter, their respective directors and officers and each
person who controls the Registrant or any such Underwriter (within the meaning
of the Securities Act) against any losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses resulting from any untrue statement
or alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in this Registration Statement
or any prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein (in the case of
any prospectus, in light of the circumstances under which they were made) not
misleading, but only to the extent that such untrue statement is contained in,
or such omission is from, information so concerning a Selling Stockholder
furnished in writing by such Selling Stockholder expressly for use therein;
provided that the indemnification obligation of a Selling Stockholder is limited
to an amount equal to the proceeds received by such Selling Stockholder pursuant
to this Registration Statement.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The 1995 Parent-Subsidiary Merger. In June 1995, in connection with the
merger of Helsel into a subsidiary of the Registrant and the acquisition of SKW,
the Registrant, which until that time had been an Ohio corporation ("Old Hawk"),
reincorporated as a Delaware corporation in a parent-subsidiary merger. Pursuant
to the terms of the merger, each outstanding share of common stock of Old Hawk
was converted into one fully-paid share of Class A Common Stock of the
Registrant. In addition, each outstanding share of preferred stock of Old Hawk
was, by virtue of the merger, converted into one fully-paid share of Series A
Preferred Stock of the Registrant. The terms of the Series A Preferred Stock of
the Registrant are identical in all material respects to the terms of the Old
Hawk preferred stock.

The 1995 Helsel Merger. In June 1995, Helsel became a wholly-owned
subsidiary of the Registrant by merging with a subsidiary of the Registrant.
Pursuant to the terms of that merger, each outstanding share of common stock of
Helsel was converted into shares of the Class A Common Stock of the Registrant
at an exchange ratio based on an independent valuation. Each outstanding share
of the preferred stock of Helsel was surrendered in exchange for one fully paid
share of Series B Preferred Stock of the Registrant. The terms of the Series B
Preferred Stock of the Registrant are identical in all material respects to the
terms of the Helsel preferred stock.

II-2
<PAGE> 140

The 1995 Refinancing. During the refinancing of the Registrant on June 30,
1995, the Registrant issued warrants to purchase up to shares (subject
to adjustment) of Class B Common Stock to its subordinated lenders in connection
with their purchase of a total of $30,000,000 of Senior Subordinated Notes.

The Hutchinson Acquisition. In connection with its acquisition of
Hutchinson, the Registrant issued certain 8.0% two-year notes in the aggregate
principal amount of $1.5 million, of which up to $500,000 of the principal
balance thereof outstanding on the effective date of the Offering is convertible
at the option of the holders thereof into shares of Class A Common Stock at the
public offering price of the Class A Common Stock.

Exemptions from Registration. The sales of Preferred Stock, Class A Common
Stock and warrants described above were each made pursuant to an exemption from
registration under Section 4(2) of the Securities Act. The certificates
representing the shares of Preferred Stock, Common Stock and the warrants are
restricted as to transfer and legended to describe such restrictions. No
underwriters were involved in such transactions.

Issuances Concurrent with the Offering. Concurrently with the effective
date of the Offering, the Registrant will issue shares of Class B
Common Stock (which will be automatically converted on a one-for-one basis into
shares of Class A Common Stock at the time of the Offering) upon the exercise of
certain warrants held by the Selling Stockholders pursuant to an exemption from
registration under Section 4(2) of the Securities Act. As of the closing of the
Offering, pursuant to the Section 4(2) exemption, the Registrant will (1)
exchange the shares of Series B and Series C Preferred Stock owned beneficially
and of record by Norman C. Harbert, Ronald E. Weinberg and Byron S. Krantz for
an equal number of shares of Series D Preferred Stock, and (2) grant to various
directors and employees of the Registrant options to purchase an aggregate of
shares of Class A Common Stock pursuant to the Registrant's 1997 Plan.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits: See the Exhibit Index following the signature page to this
Registration Statement.

(b) Financial Statement Schedules: All schedules for which provision is
made in the applicable accounting regulations of the Commission are not required
under the related instructions or are not applicable, and therefore have been
omitted.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 141

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 142

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on November 19, 1997.

HAWK CORPORATION

By: /s/ NORMAN C. HARBERT
------------------------------------
Norman C. Harbert,
Chairman of the Board

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<C> <S> <C>
/s/ NORMAN C. HARBERT
- --------------------------------- Chairman of the Board, Chief November 19, 1997
Norman C. Harbert Executive Officer, President and
Director (principal executive
officer)

/s/ RONALD E. WEINBERG
- --------------------------------- Vice-Chairman of the Board, November 11, 1997
Ronald E. Weinberg Treasurer and Director (principal
financial officer)

/s/ THOMAS A. GILBRIDE Vice President - Finance
- --------------------------------- (principal November 11, 1997
Thomas A. Gilbride accounting officer)

/s/ BYRON S. KRANTZ
- --------------------------------- Secretary and Director November 11, 1997
Byron S. Krantz

/s/ PAUL R. BISHOP
- --------------------------------- Director November 12, 1997
Paul R. Bishop

/s/ DAN T. MOORE, III
- --------------------------------- Director November 11, 1997
Dan T. Moore, III

/s/ WILLIAM J. O'NEILL, JR.
- --------------------------------- Director November 19, 1997
William J. O'Neill, Jr.
</TABLE>

II-5
<PAGE> 143

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ---------- ----------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
2.1** Stock Purchase Agreement, dated November 7, 1996, among the Registrant, Timothy
Houghton, CFB Venture Fund II, L.P., MorAmerica Capital Corporation, Community
Investment Partners II, L.P. and St. Louis Community Foundation setting forth the
terms of the Hutchinson acquisition (omitting certain exhibits and schedules
setting forth the forms of opinions of counsel, relating to the purchase price
adjustment mechanism and relating to the business of Houghton Acquisition
Corporation d.b.a. Hutchinson Foundry Products Company, which the Registrant
undertakes to furnish supplementally to the Commission upon request)
2.2*** Asset Purchase Agreement, dated as of July 10, 1997, by and among the Registrant,
Sinterloy, Inc. and Robert G. Sierks setting forth the terms of the Sinterloy
acquisition (omitting the exhibits and schedules setting forth the form of various
ancillary documents and relating to the business of Sinterloy, which the
Registrant undertakes to furnish supplementally to the Commission upon request)
3.1 Form of the Registrant's Second Amended and Restated Certificate of Incorporation
3.2 Form of the Registrant's Amended and Restated By-laws
4.1* Specimen Common Stock certificate
4.2* Form of Rights Agreement, dated as of November , 1997, between the Registrant
and Continental Stock Transfer & Trust Company, as Rights Agent
4.3** Indenture, dated as of November 27, 1996, by and among the Registrant, Friction
Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K.
Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp.,
Hutchinson Products Corporation, and Bank One Trust Company, NA, as Trustee
4.4** Form of 10 1/4% Senior Note due 2003
4.5** Form of Series B 10 1/4% Senior Note due 2003
4.6** Stockholders' Voting Agreement, effective as of November 27, 1996, by and among
the Registrant, Norman C. Harbert, the Harbert Family Limited Partnership, Ronald
E. Weinberg, the Weinberg Family Limited Partnership, Byron S. Krantz and the
Krantz Family Limited Partnership
5.1* Opinion of Kohrman Jackson & Krantz P.L.L. as to the validity of the Class A
Common Stock being registered
10.1 Form of the Registrant's 1997 Stock Option Plan
10.2 Form of Incentive Stock Option Agreement
10.3 Form of Non-Statutory Stock Option Agreement
10.4** Employment Agreement, dated as of November 1, 1996, between the Registrant and
Norman C. Harbert
10.5** Wage Continuation Agreement, effective as of June 30, 1995, between the Registrant
and Norman C. Harbert
10.6** Letter agreement, dated November 1, 1996, amending the Wage Continuation
Agreement, effective as of June 30, 1995, between the Registrant and Norman C.
Harbert
10.7** Employment Agreement, dated as of November 1, 1996, between the Registrant and
Ronald E. Weinberg
10.8** Wage Continuation Agreement, effective as of June 30, 1995, between the Registrant
and Ronald E. Weinberg
10.9** Letter agreement, dated November 1, 1996, amending the Wage Continuation
Agreement, effective as of June 30, 1995, between the Registrant and Ronald E.
Weinberg
10.10** Employment Agreement, dated July 1, 1994, between Helsel, Inc. and Jess F. Helsel
10.11** Consulting Agreement, dated July 1, 1994, between Helsel, Inc. and Jess F. Helsel
</TABLE>
<PAGE> 144

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ---------- ----------------------------------------------------------------------------------
<S> <C>
10.12 Letter agreement, dated as of June 1997, amending the Employment Agreement and the
Consulting Agreement, each dated July 1, 1994, between Helsel, Inc. and Jess F.
Helsel
10.13 Employment Agreement, dated January 2, 1997, between the Registrant and Timothy J.
Houghton
10.14** Promissory Note, dated July 1, 1994, in the principal amount of $500,000, issued
by the Registrant to Helco, Inc.
10.15** Form of the Promissory Notes, each dated June 30, 1995, issued by each of Norman
C. Harbert, Ronald E. Weinberg, Byron S. Krantz and Douglas D. Wilson to the
Registrant
10.16** Letter agreement, dated October 1, 1996, amending the Promissory Notes, each dated
June 30, 1995, issued by each of Norman C. Harbert, Ronald E. Weinberg, Byron S.
Krantz and Douglas D. Wilson to the Registrant
10.17 Form of Convertible Promissory Note, dated January 2, 1997, in the aggregate
principal amount of $1.5 million, issued by the Registrant to each of Timothy
Houghton, CFB Venture Fund II, L.P., MorAmerica Capital Corporation, Community
Investment Partners II, L.P. and St. Louis Community Foundation
10.18** Credit Agreement, dated as of November 27, 1996, among Friction Products Co., Hawk
Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings,
Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp. and Hutchinson
Products Corporation, as Borrowers, and the Registrant, as Funds Administrator,
and BT Commercial Corporation, as Lender and Agent (omitting certain exhibits and
schedules setting forth the form of various ancillary documents and relating to
the business of the Registrant, which omitted exhibits and schedules the
Registrant undertakes to furnish supplementally to the Commission upon request)
10.19** General Security Agreement, dated as of November 27, 1996, made by Friction
Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K.
Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp.
and Hutchinson Products Corporation in favor of BT Commercial Corporation, as
Agent
10.20** Trademark Security Agreement, dated as of November 27, 1996, made by S.K. Wellman
Corp. in favor of BT Commercial Corporation, as Agent
10.21** Trademark Security Agreement, dated as of November 27, 1996, made by Friction
Products Co. in favor of BT Commercial Corporation, as Agent
10.22** Patent Security Agreement, dated as of November 27, 1996, made by S.K. Wellman
Corp. in favor of BT Commercial Corporation, as Agent
10.23** Patent Security Agreement, dated as of November 27, 1996, made by Friction
Products Co. in favor of BT Commercial Corporation, as Agent
10.24** Agency and Contribution Agreement, dated as of November 27, 1996, among the
Registrant, as Funds Administrator, and Friction Products Co., Hawk Brake, Inc.,
Logan Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings, Inc., S.K.
Wellman Corp., Wellman Friction Products U.K. Corp. and Hutchinson Products
Corporation, as Borrowers
10.25**** Assumption and Joinder Agreement, dated as of August 1, 1997, between Sinterloy
Corporation and BT Commercial Corporation, as Agent
10.26**** Substituted and Restated Revolving Note, dated as of August 1, 1997, in the
principal amount of up to $25,000,000, made by Friction Products Co., Hawk Brake,
Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings, Inc., S.K.
Wellman Corp., Wellman Friction Products U.K. Corp., Hutchinson Products
Corporation and Sinterloy Corporation in favor of BT Commercial Corporation, as
Agent
21.1 Subsidiaries of the Registrant
23.1* Consent of Kohrman Jackson & Krantz P.L.L. (included in its opinion filed as
Exhibit 5.1 hereto)
23.2 Consents of Ernst & Young LLP
23.3 Consent of Coopers & Lybrand L.L.P.
</TABLE>
<PAGE> 145

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ---------- ----------------------------------------------------------------------------------
<S> <C>
24.1 Reference is made to the Signatures section of this Registration Statement for the
Power of Attorney contained therein
</TABLE>

- ---------------
* To be filed by amendment.

** Incorporated by reference to the Registrant's Registration Statement on Form
S-4 (Reg. No. 333-18433), as filed with the Commission on December 20, 1996.

*** Incorporated by reference to the Registrant's Form 8-K (Reg. No.
333-18433), as filed with the Commission on July 16, 1997.

**** Incorporated by reference to the Registrant's Form 10-Q for the quarterly
period ended June 30, 1997 (Reg. No. 333-18433), as filed with the
Commission on August 14, 1997.

<PAGE> 1
Exhibit 3.1
FORM OF
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HAWK CORPORATION

ARTICLE I
NAME

The name of the corporation is Hawk Corporation (the "Corporation").

ARTICLE II
REGISTERED OFFICE IN DELAWARE

The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.

ARTICLE III
PURPOSE

The Corporation is formed for the purpose of engaging in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as it presently exists or may be
amended in the future (the "Delaware General Corporation Law").

ARTICLE IV
CAPITAL STRUCTURE

4.1 Authorized Capital Stock. The aggregate number of shares
of all classes of stock that the Corporation is authorized to issue is
85,500,000 shares, consisting of:

(a) 75,000,000 shares of Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock");

(b) 10,000,000 shares of Class B Non-Voting Common Stock,
par value $0.01 per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock"); and

<PAGE> 2

4.2 Class A Common Stock and Class B Common Stock.

(a) Powers, Preferences and Rights. Except as may
otherwise be provided by this Second Amended and Restated Certificate of
Incorporation, as may be amended from time to time by resolutions of the Board
of Directors designating a class or series of Preferred Stock pursuant to
Section 4.4 hereof (this "Certificate of Incorporation"), or by the Delaware
General Corporation Law, the powers, preferences and rights of the Class A
Common Stock and the Class B Common Stock, and the qualifications, limitations
or restrictions thereof, shall be in all respects identical.

(b) Voting Rights. Except as may otherwise be provided
by this Certificate of Incorporation or by the Delaware General Corporation Law,
(i) all rights to vote and all voting power shall be vested exclusively in the
holders of the Class A Common Stock and (ii) each holder of Class A Common Stock
shall be entitled to one vote for each share held of record on the applicable
record date on all matters presented for a vote of the stockholders of the
Corporation, including, without limitation, the election of directors. Except as
otherwise required by the Delaware General Corporation Law, the holders of Class
B Common Stock shall not be entitled to vote on any matters to be voted on by
the stockholders of the Corporation.

(c) Dividends; Recapitalizations. Except as may
otherwise be provided by this Certificate of Incorporation or by the Delaware
General Corporation Law, if, as and when dividends on the Class A Common Stock
and the Class B Common Stock are declared payable from time to time by the Board
of Directors as provided in this Section 4.2(c), whether payable in cash,
property, stock or other securities, the holders of Class A Common Stock and the
holders of Class B Common Stock shall be entitled to share equally, on a per
share basis, in such dividends; provided, however, that (i) if dividends are
declared that are payable in shares of Class A Common Stock, or in shares of
Class B Common Stock, dividends shall be declared that are payable at the same
rate on both classes of stock and the dividends payable in shares of Class A
Common Stock shall be payable only to holders of Class A Common Stock and
dividends payable in shares of Class B Common Stock shall be payable only to
holders of Class B Common Stock, and (ii) if the dividends consist of other
voting securities of the Corporation, the Corporation shall make available to
each holder of Class B Common Stock, at such holder's written request, dividends
consisting of non-voting securities (except as otherwise required by the
Delaware General Corporation Law) of the Corporation which non-voting securities
are otherwise identical to such voting securities and are convertible into such
voting securities on the same terms as the Class B Common Stock is convertible
into the Class A Common Stock. If the Corporation shall in any manner split,
subdivide, combine or reclassify the outstanding shares of Class A Common Stock
or Class B Common Stock, the outstanding shares of the other such class of
common stock shall be proportionally split, subdivided, combined or reclassified
in the same manner and on the same basis as the outstanding shares of Class A
Common Stock or Class B Common Stock, as the case may be, have been subdivided
or combined or reclassified.

(d) Mergers and Consolidations. In case of any merger
or consolidation of the Corporation with any other entity as a result of which
the holders of Class A Common Stock shall

- 2 -

<PAGE> 3

be entitled to receive cash, property, stock or other securities with respect to
or in exchange for Class A Common Stock, or in case of any sale or conveyance of
all or substantially all of the assets of the Corporation, a holder of one share
of Class B Common Stock shall have the right thereafter, so long as the
conversion rights set forth in Section 4.2(e) hereof shall exist, to convert
such share of Class B Common Stock into the kind and amount of cash, property,
stock or other securities receivable upon such consolidation, merger, sale or
conveyance by a holder of one share of Class A Common Stock, and shall have no
other conversion rights with regard to such share of Class B Common Stock. The
provisions of this Section 4.2(d) shall similarly apply to successive mergers,
consolidations, sales or conveyances.

(e) Conversion of Class B Common Stock.

(i) Conversion at Qualified Public Offering. Each
share of Class B Common Stock sold in an underwritten public offering
pursuant to an effective registration statement under the Securities
Act of 1933, as amended (a "Public Offering"), shall automatically be
converted into an equal number of shares of Class A Common Stock
immediately upon the closing of such sale.

(ii) Conversion Upon Certain Transfers. Each share of
Class B Common Stock shall be converted into an equal number of shares
of Class A Common Stock upon the written request (the "Conversion
Request") of any third party transferee ("Transferee") acquiring such
shares of Class B Common Stock from any holder of Class B Common Stock
so long as such Transferee (A) is not an affiliate of the transferor of
such Class B Common Stock and (B) makes such Conversion Request within
fifteen days of the date such Class B Common Stock is transferred by
such transferor to such Transferee.

Other than as set forth in Section 4.2(d) and in this
Section 4.2(e), a holder of Class B Common Stock shall have no conversion rights
with respect to such Class B Common Stock.

(f) Conversion Procedures. Any holder of shares of Class
B Common Stock desiring to convert such shares, or any such holder whose shares
shall have been automatically converted, into shares of Class A Common Stock
shall surrender the certificate or certificates representing the Class B Common
Stock being converted, or so converted, duly assigned or endorsed for transfer
to the Corporation (or accompanied by duly executed stock powers relating
thereto), at the principal executive office of the Corporation, or at such
office of a transfer agent for the Class B Common Stock or office in the
continental United States of an agent for conversion as may from time to time be
designated by notice to the holders of the Class B Common Stock by the
Corporation, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of Class B Common Stock that
are the subject of such conversion, (ii) the name or names in which such holder
wishes the certificate or certificates for Class A Common Stock and for any
Class B Common Stock not to be so converted to be issued, (iii) the address to
which such holder wishes delivery to be made of such new certificates to be
issued upon such conversion, (iv) the date upon which the person giving such
notice acquired the Class B Common Stock that is

- 3 -

<PAGE> 4

the subject of such notice of conversion and (v) that the conversion of such
Class B Common Stock is required pursuant to Section 4.2(e)(i) above or
permitted pursuant to Section 4.2(e)(ii) above. Upon surrender of a certificate
representing Class B Common Stock for conversion, the Corporation shall issue
and send by hand delivery, by courier or by overnight or first class mail
(postage prepaid) to the holder thereof or to such holder's designee, at the
address designated by such holder, a certificate or certificates for the number
of shares of Class A Common Stock to which such holder shall be entitled upon
conversion. In the event that there shall have been surrendered a certificate or
certificates representing Class B Common Stock, only part of which are to be
converted, the Corporation shall issue and send to such holder or such holder's
designee, in the manner set forth in the preceding sentence, a new certificate
or certificates representing the number of Class B Common Stock that shall not
have been converted. The issuance of certificates representing shares of Class A
Common Stock issuable upon the conversion of shares of Class B Common Stock by
the registered holder thereof pursuant to the provisions of this Certificate of
Incorporation shall be made without charge to the converting holder for any tax
imposed on the Corporation in respect of the issue thereof; provided that the
Corporation shall not be required to pay any tax that may be payable with
respect to any transfer involved in the issue and delivery of any certificate in
a name other than that of the registered holder of the shares of Class B Common
Stock being converted, and the Corporation shall not be required to issue or
deliver any such certificate unless and until the person requesting the issue
thereof shall have paid the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. Shares of the Class
B Common Stock converted into Class A Common Stock as provided in this Section
4.2(f) shall resume the status of authorized but unissued shares of Class B
Common Stock.

(g) Effective Date of Conversion. The issuance by the
Corporation of shares of Class A Common Stock upon a conversion of Class B
Common Stock into Class A Common Stock pursuant to Section 4.2(e)(i) above shall
be deemed to be effective upon the consummation or closing of the sale pursuant
to the Public Offering covering such Class B Common Stock. The issuance by the
Corporation of shares of Class A Common Stock upon conversion of Class B Common
Stock into Class A Common Stock pursuant to Section 4.2(e)(ii) above shall not
be deemed to be effective until receipt of a timely and complete Conversion
Request from the Transferee, reasonably satisfactory in form and substance to
the Corporation. The person or persons entitled to receive the Class A Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Class A Common Stock as of the
effective date of conversion.

(h) Liquidating Distributions. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or upon any sale or conveyance of all or substantially all of the assets of the
Corporation, after payment or provision for payment of all the liabilities of
the Corporation and the expenses of liquidation, and after the holders of the
Preferred Stock shall have been paid in full the amounts, if any, to which they
are entitled or a sum sufficient for such payment in full shall have been set
aside, the remaining assets of the Corporation available for distribution shall
be distributed ratably to the holders of the Class A Common Stock and Class B
Common Stock in accordance with their respective rights and interests. For the
purpose of this Section 4.2(h), a merger, consolidation, sale or conveyance
shall not be deemed to be a

- 4 -

<PAGE> 5

liquidation or winding up of the Corporation unless the transaction provides for
the cessation of the business of the Corporation.

(i) Reservation of Class A Common Stock. The Corporation
shall at all times reserve and keep available out of its authorized and unissued
Class A Common Stock, solely for issuance upon the conversion of Class B Common
Stock as herein provided, free from any preemptive rights or other obligations,
such number of shares of Class A Common Stock as shall from time to time be
issuable upon the conversion of all the Class B Common stock then outstanding;
provided that, except as provided in this Certificate of Incorporation, the
shares of Class A Common Stock so reserved shall not be reduced or affected in
any manner whatsoever so long as any shares of Class B Common Stock are
outstanding.

4.3 Amendment and Waiver. No amendment, modification or waiver of any
provisions of Sections 4.1 or 4.2 hereof or of this Section 4.3 that adversely
affects the rights, preferences or privileges of the Class A Common Stock or
Class B Common Stock shall be effective without the affirmative vote of the
holders of at least 51% of the outstanding shares of such class of Common Stock
entitled to vote at a meeting of the holders of such class of Common Stock
duly called for such purpose.

4.4 Preferred Stock.

(a) Designations by Board of Directors. The Preferred Stock
may be issued from time to time in one or more classes or series with such
voting rights, full or limited, or without voting rights, and with such
designations, preferences and relative, participating, optional or special
rights, and qualifications, limitations or restrictions as are stated herein and
as shall be stated and expressed in the resolution or resolutions providing for
the issue of such stock adopted by the Board of Directors as hereinafter
prescribed.

(b) Terms of the Preferred Stock. Subject to the rights of the
holders of the Class A Common Stock and Class B Common Stock, authority is
hereby expressly granted to and vested in the Board of Directors or any
designated committee thereof to authorize the issuance of the Preferred Stock
from time to time in one or more classes or series, to determine and take
necessary proceedings to fully effectuate the issuance and redemption of any
such Preferred Stock and, with respect to each class or series of Preferred
Stock, to fix and state from time to time, by resolution or resolutions
providing for the issuance thereof, the following:

(i) the number of shares to constitute the class or series
and the designations thereof;

(ii) whether the class or series is to have voting rights,
full or limited, or to be without voting rights;

(iii) the preferences and relative, participating, optional
or special rights, if any, and qualifications, limitations or
restrictions thereof, if any, of the class or series;

- 5 -

<PAGE> 6

(iv) whether the shares of the class or series will be
redeemable and, if redeemable, the redemption price or prices and the
time or times at which, and the terms and conditions upon which, such
shares will be redeemable and the manner of redemption;

(v) whether the shares of the class or series will be
subject to the operation of retirement or sinking funds to be applied
to the purchase or redemption of such shares for retirement and, if
such retirement or sinking funds are to be established, the annual
amount thereof and the terms and conditions relative to the operation
thereof;

(vi) the dividend rate, whether dividends are payable
in cash, stock or otherwise, the conditions upon which and the times
when such dividends are payable, the preference or relation to the
payment of dividends on any other class or series of stock, whether or
not such dividends will be cumulative or noncumulative and, if
cumulative, the date or dates from which such dividends will
accumulate;

(vii) the preferences, if any, and the amounts thereof that
the holders of the class or series will be entitled to receive upon the
voluntary or involuntary dissolution, liquidation or winding up of, or
upon any distribution of the assets of, the Corporation;

(viii) whether the shares of the class or series will be
convertible into, or exchangeable for, the shares of any other class or
classes, or of any other series of the same or any other class or
classes, of stock of the Corporation and the conversion price or
prices, or ratio or ratios, or rate or rates, at which such conversion
or exchange may be made, with such adjustments, if any, as shall be
expressed or provided for in such resolution or resolutions; and

(ix) such other special rights and protective provisions
with respect to the class or series as the Board of Directors or any
designated committee thereof may deem advisable.

The shares of each class or series of Preferred Stock may
vary from the shares of any other class or series thereof in any or all of the
foregoing respects. The Board of Directors or any designated committee thereof
may from time to time increase the number of shares of Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized but unissued shares of Preferred Stock not designated for
any other class or series thereof. The Board of Directors or any designated
committee thereof may from time to time decrease the number of shares of
Preferred Stock designated for any existing class or series by a resolution
subtracting from such class or series any unissued shares of Preferred Stock
designated for such class or series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of Preferred Stock.

- 6 -

<PAGE> 7

ARTICLE V
BOARD OF DIRECTORS

5.1 Number and Term of Directors. The Board of Directors shall
consist of not less than three nor more than fifteen members, with the exact
number to be fixed from time to time by resolution of the Board of Directors. No
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. The directors shall serve until their respective
successors are duly elected and qualified or until their earlier resignation,
death or removal from office. Except as may otherwise be provided by this
Certificate of Incorporation, the stockholders may remove a director from office
prior to the expiration of his or her term by an affirmative vote of two-thirds
of the outstanding shares of all capital stock entitled to vote at a
stockholders' meeting duly called for such purpose.

5.2 Director Vacancies. Except as may otherwise be provided by
this Certificate of Incorporation, (i) whenever any vacancy on the Board of
Directors occurs because of death, resignation, retirement, disqualification,
removal, increase in the number of directors or otherwise, a majority of the
directors then in office, although less than a majority of the entire Board of
Directors, may fill the vacancy or vacancies for the balance of the unexpired
term or terms, at which time a successor or successors shall be duly elected by
the stockholders and qualified, and (ii) only the remaining directors of the
Corporation shall have the authority, in accordance with the foregoing
procedure, to fill any vacancy that exists on the Board of Directors.

5.3 Elimination of Ballot for the Election of Directors.
The directors of the Corporation need not be elected by written ballot.

5.4 Amendment of By-laws. In furtherance and not in limitation of
the power conferred upon the Board of Directors by the Delaware General
Corporation Law, the Board of Directors shall have the power to make, adopt,
alter, amend and repeal from time to time the By-laws of the Corporation without
any action on the part of the stockholders except as otherwise specifically
provided in the By-laws of the Corporation.

5.5 Amendment. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, this Article V shall not be
altered, amended or repealed except by an affirmative vote of at least
two-thirds of the outstanding shares of all capital stock entitled to vote at a
stockholders' meeting duly called for such purpose.

ARTICLE VI
INDEMNIFICATION RIGHTS AND LIMITATION OF DIRECTOR LIABILITY

6.1 Indemnification Rights.

(a) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,

- 7 -

<PAGE> 8

administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.

(b) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit.

6.2 Advancement of Expenses.

(a) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall pay all expenses (including
attorneys' fees) actually and reasonably incurred by any person by reason of the
fact that such person is or was a director of the Corporation in defending any
civil, criminal, administrative or investigative action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such amount if it is
ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized by the Delaware General Corporation Law.

(b) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall pay all expenses (including
attorneys' fees) actually and reasonably incurred by any person by reason of the
fact that such person is or was an officer of the Corporation in defending any
civil, criminal, administrative or investigative action, suit or proceeding
(other than an action by the Corporation on its own behalf, it being understood
that such an action does not include any derivative suit instituted by a
stockholder of the Corporation) in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount if it is ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized by the Delaware
General Corporation Law.

6.3 Limitation on Liability of Directors. To the maximum extent
permitted under the Delaware General Corporation Law, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for the breach of his or her fiduciary duty as a director.

6.4 Nonexclusivity and Benefit. The indemnification rights granted
pursuant to this Article VI shall not be exclusive of other indemnification
rights, if any, granted to such person and shall inure to the benefit of the
heirs and legal representatives of such person.

- 8 -

<PAGE> 9

6.5 Effect of Repeal, Amendment or Termination. To the maximum
extent permitted under the Delaware General Corporation Law, no repeal of or
restrictive amendment of this Article VI and no repeal, restrictive amendment or
termination of effectiveness of any law authorizing this Article VI shall apply
to or affect adversely any right or protection of any director, officer,
employee or agent of the Corporation, for or with respect to any acts or
omissions of such person occurring prior to such repeal, amendment or
termination of effectiveness.

6.6 Retroactive Effect. To the maximum extent permitted under the
Delaware General Corporation Law, the indemnification and advancement of
expenses provided by this Article VI shall apply with respect to acts or
omissions occurring prior to the adoption of this Article VI.

ARTICLE VII
STOCKHOLDERS

7.1 Elimination of Right of Stockholders to Act by Consent. No
action required to be taken or that may be taken at any annual or special
meeting of holders of the Common Stock may be taken without a vote at a meeting
duly called and held for such purpose, and the right of such holders to consent
in writing, without a meeting, to the taking of any action is specifically
denied.

7.2 Special Meetings. Except as otherwise required by the Delaware
General Corporation Law, special meetings of holders of the Common Stock may be
called only by (i) the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors, (ii) the Chairman of the Board, (iii)
the Vice-Chairman of the Board or (iv) the holders of at least 25% of the
outstanding shares of Common Stock entitled to vote at the special meeting. The
business transacted at any special meeting shall be limited to the purposes
stated in the notice of such meeting.

7.3 Amendment. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, this Article VII shall not be
altered, amended or repealed except by an affirmative vote of at least
two-thirds of the outstanding shares of all capital stock entitled to vote at a
stockholders' meeting duly called for such purpose.

ARTICLE VIII
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS

The Corporation hereby elects to be governed by Section 203 of the
Delaware General Corporation Law; provided that this Article VIII shall not
apply to restrict a "business combination," as such term is defined in Section
203 of the Delaware General Corporation Law, between the Corporation and an
"interested stockholder," as such term is defined in Section 203 of the Delaware
General Corporation Law, if the interested stockholder became such prior to the
effective date of this Certificate of Incorporation.

- 9 -

<PAGE> 10

CERTIFICATE OF DESIGNATION

OF SERIES A AND SERIES B PREFERRED STOCK OF

THE HAWK GROUP OF COMPANIES, INC.

PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE

Ronald E. Weinberg and Byron S. Krantz, being the Vice-Chairman and
Secretary, respectively, of The Hawk Group of Companies, Inc., a Delaware
corporation (the "Corporation"), hereby certify that:

A. SERIES A PREFERRED STOCK. Pursuant to authority conferred upon the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors, at a
telephonic board meeting held on June 26, 1995, duly adopted a resolution
creating a series of 2,625 shares of Serial Preferred Stock, par value $0.01 per
share, as follows:

RESOLVED, that pursuant to the authority expressly vested in the
Board of Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation is
hereby created, consisting of 2,625 shares of Serial Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, shall be as follows:

1. Series A Preferred Stock.

(a) Dividends.

(i) The holders of Series A Preferred Stock shall be
entitled to receive, out of funds legally available for that purpose, cash
dividends at the rate of 10% of the Series A Liquidation Preference (as
defined in Section 1(b) below) per annum. Such dividends shall be
cumulative as of the day on which the Series A Preferred Stock is first
issued (the "Series A Issue Date") and shall be payable in arrears, when
and as declared by the Board, on the last business day in April, July,
October and January of each year such Series A Preferred Stock is
outstanding to holders of record on such date, commencing in October
following the Series A Issue Date and prorated from the Series A Issue
Date until October 31, 1995. Dividends on account of arrearages for any
past due dividends may be declared and paid on any date to holders of
record on such payment date. Arrearages must be paid prior to the payment
of current dividends and shall be deemed to be paid first on account of
the longest outstanding arrearage.
<PAGE> 11

(ii) If full cash dividends have been declared and
are not paid or made available to holders of all outstanding shares of
Series A Preferred Stock and funds legally available are insufficient to
permit payment in full in cash to all such holders of the preferential
amounts to which they are then entitled, the entire amount legally
available for payment of cash dividends shall be distributed among the
holders of the Series A Preferred Stock ratably in proportion to the full
amount to which they would otherwise be respectively entitled, and any
remainder not paid in cash to the holders of the Series A Preferred Stock
shall cumulate as provided in Section 1(a)(iii).

(iii) If, on any dividend payment date, the holders of
the Series A Preferred Stock have not received the full dividends provided
for in Section 1(a)(i), then such dividends shall cumulate, whether or not
declared, with additional dividends thereon for each succeeding full
dividend period during which such dividends shall remain unpaid. Unpaid
dividends for any period less than a full dividend period shall cumulate
on a day-to-day basis and shall be computed on the basis of a 365-day
year.

(iv) So long as any shares of Series A Preferred
Stock are outstanding, the Corporation shall not declare or pay on any
Class A Common Stock or Class B Common Stock (as defined in the
Certificate of Incorporation of the Corporation) any dividend whatsoever,
whether in cash, property or otherwise, nor shall the Corporation make any
distribution on any Class A Common Stock or Class B Common Stock, nor
shall any Class A Common Stock or Class B Common Stock be purchased or
redeemed by the Corporation, nor shall any monies be paid or made
available for a sinking fund for the purchase or redemption of any Class A
Common Stock or Class B Common Stock, unless all dividends to which the
holders of the Preferred Stock are entitled to for all previous dividend
periods have been paid or declared and a sum of money sufficient for the
payment thereof set apart.

(b) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, before any payment or distribution shall be made to the
holders of Class A Common Stock or Class B Common Stock, the holders of
each share of Series A Preferred Stock shall be entitled to receive an
amount equal to $1,000 per share (the "Series A Liquidation Preference")
plus any accrued or unpaid dividends thereon to such date. After the
payment or the setting apart for payment of amounts so payable to the
holders of the Series A Preferred Stock, the remaining assets of the
Corporation shall be available for distribution among the holders of Class
A Common Stock and Class B Common Stock according to their respective
rights and priorities. If the assets or surplus funds to be distributed to
the holders of the Series A Preferred Stock are insufficient to permit the
payment to such holders of the full preferential amounts to which they are
entitled, the assets and surplus funds legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred
Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive.

-2-
<PAGE> 12

(i) The holders of the issued and outstanding shares
of Series A Preferred Stock shall have no voting rights except as set
forth in this Section 1(c) and as required by the Delaware General
Corporation Law.

(ii) Subject to Section 1(c)(i), if and whenever the
Corporation fails to declare and pay in cash the full amount of dividends
payable on the Series A Preferred Stock on any six consecutive quarters,
then the holders of the Series A Preferred Stock, voting separately as a
class, shall be entitled at the next annual meeting of the stockholders of
the Corporation, or at any special meeting, to elect one director;
provided, however, that if the holders of the Series A Preferred Stock
previously have elected an additional director and the right to elect such
director has not terminated, the holders of the Series A Preferred Stock
shall not be entitled to elect an additional director under this Section
1(c)(ii) until such time as the holders of the Series A Preferred Stock
are no longer entitled to elect an additional director, subject, however,
to the right of the holders of the Series A Preferred Stock to vote for
the election of a successor director should the director previously
elected by the holders of the Series A Preferred Stock resign from the
Board, die or be removed by the holders of the Series A Preferred Stock.

Upon the effective date of such election, such
director shall become an additional director of the Corporation, and the
authorized number of directors of the Corporation thereupon automatically
shall be increased by one director. The holders of the Series A Preferred
Stock may exercise the right to elect a director until all dividends in
default on the Series A Preferred Stock have been paid in full, and
dividends for the current dividend period declared and funds therefor set
apart, and when so paid and set apart, the right of the holders of the
Series A Preferred Stock to elect a director pursuant to this Section
1(c)(ii) shall cease upon the day prior to the next annual meeting of the
stockholders of the Corporation, the term of such director shall thereupon
terminate, and the authorized number of directors of the Corporation shall
return to the number of authorized directors otherwise in effect, but
subject always to the same provisions for the vesting of such special
voting rights in the case of any such future dividend default or defaults.

At any time when special voting rights have been
vested in the holders of the Series A Preferred Stock pursuant to this
Section 1(c)(ii), the Secretary of the Corporation may, and upon the
written request of the holders of 10% or more of the number of shares of
the Series A Preferred Stock then outstanding addressed to such Secretary
at the principal office of the Corporation shall, call a special meeting
of the holders of the Series A Preferred Stock for the election of the
director to be elected by them as provided above, to be held in the case
of such written request within forty days after delivery of such request,
and in either case to be held at a place and upon the notice provided by
the Delaware General Corporation Law and in the By-Laws of the
Corporation.

(iii) If any amendment to the Certificate of
Incorporation of the Corporation is proposed that would change the
preferences herein provided or cause the

-3-
<PAGE> 13

issuance of preferred shares with attributes that are senior to the Series
A Preferred Stock or increase the number of shares of Class A Common Stock
or Class B Common Stock (except upon a public offering of the Class A
Common Stock or Class B Common Stock of the Corporation), then the holders
of the Series A Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and such
amendment shall not be effected and no Series A Preferred Stock prohibited
hereby shall be issued absent the affirmative vote of the holders of 75%
of the issued and outstanding Series A Preferred Stock.

(iv) Any holder of Series A Preferred Stock entitled
to vote on any matter pursuant to this Section 1(c) may assign such voting
rights, revocably or irrevocably, to any other holder of Series A
Preferred Stock.

(d) Redemption.

(i) The Corporation may, at any time and from time
to time as may be determined by the Board, redeem all but not less than
all, of the Series A Preferred Stock, provided the Corporation is not in
default in the payment of any dividends on the Series A Preferred Stock
then outstanding, for an amount equal to the Series A Liquidation
Preference plus all accrued dividends to the date of redemption.

(ii) The redemption provided for in Section 1(d)(i)
may be for cash or for a debt instrument with an interest rate of 10%
payable quarterly for no more than five years (except that the debt will
accelerate in the event of a sale of more than 50% of the aggregate issued
and outstanding shares of Class A Common Stock and Class B Common Stock or
a sale of substantially all of the assets of the Corporation) and a
principal amount equal to the Series A Liquidation Preference of any and
all accrued but unpaid dividends on the Series A Preferred Stock, a
subordinated position with regard to creditors (but not less than the same
position of the Series A Preferred Stock) and other rights comparable to
the Series A Preferred Stock, including the right to elect one director of
the Corporation as and to the extent provided below.

The debt instrument shall require that if the
Corporation fails to pay in cash the full amount of interest payable on
the debt for six consecutive quarters, then the holders of the debt,
voting in accordance with the principal amount of the debt and with each
$1,000 of debt constituting one vote, shall be entitled at the next annual
meeting of the stockholders of the Corporation, or at any special meeting,
to elect one director; provided, however, that if the holders of the debt
previously have elected an additional director and the right to elect such
director has not terminated, the holders of the debt shall not be entitled
to elect an additional director, subject, however, to the right of the
holders of the debt to vote for the election of a successor director
should the director previously elected by the holders of the debt resign
from the Board, die or be removed by the holders of the debt. This right
to elect a director shall be set forth in an agreement in form and
substance satisfactory to counsel for the Corporation as a condition
precedent to the redemption of the Series A Preferred Stock with a debt
instrument.

-4-
<PAGE> 14

(iii) The Corporation shall provide notice of any
redemption pursuant to this Section 1(d) specifying the time and place of
redemption, by first class or certified mail, postage prepaid, to each
holder of shares of Series A Preferred Stock at the address for such
holder last shown on the records of the Corporation or its transfer agent,
not more than sixty nor less than thirty days before the applicable
redemption date. Upon mailing of any such notice of redemption, the
Corporation shall become obligated to redeem Series A Preferred Stock
specified in such notice herein for cash or debt as provided in Section
1(d)(ii).

(iv) No redeemed shares of Series A Preferred Stock
shall be entitled to any dividends declared after the redemption date, and
on such date all rights of the holder of such shares as a stockholder of
the Corporation by reason of the ownership of such shares shall cease,
except the right to receive the price of or debt issued for such shares
without interest, upon presentation and surrender of the certificate
representing such shares, and such shares will not after such redemption
date be deemed to be outstanding.

(v) On or before the redemption date, if the shares
of Series A Preferred Stock are to be redeemed for cash, an amount equal
to the Series A Liquidation Preference, plus all accrued dividends to the
redemption date shall be deposited with a bank or trust company in a trust
fund for the benefit of the respective holders of the shares designated
for redemption with instructions and authority to the bank or trust
company to pay such price for such shares to the respective holders, after
the redemption date upon receipt of notification from the Corporation that
such holder has surrendered its share certificate to the Corporation. The
balance of any monies deposited by the Corporation remaining unclaimed at
the expiration of sixty days following the redemption date shall
thereafter be returned to the Corporation upon its request.

(e) Series. Except as set forth in this Certificate of
Designation, the Series A Preferred Stock shall have the same powers,
designations, preferences and relative, participating, optional or other
rights, and qualifications and restrictions, as the Series B Preferred
Stock.

B. SERIES B PREFERRED STOCK. Pursuant to authority conferred upon the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors, at a
telephonic board meeting held on June 26, 1995, duly adopted a resolution
creating a series of 702 shares of Serial Preferred Stock, par value $0.01 per
share, as follows:

RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation is
hereby created, consisting of 702 shares of Serial Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, shall be as follows:

-5-
<PAGE> 15

2. Series B Preferred Stock.

(a) Dividends.

(i) The holders of Series B Preferred Stock shall
be entitled to receive, out of funds legally available for that
purpose, cash dividends at the rate of 9% of the Series B Liquidation
Preference (as defined in Section 2(b) below) per annum. Such dividends
shall be cumulative from the day on which the Series B Preferred Stock
is first issued (the "Series B Issue Date") and shall be payable in
arrears, when and as declared by the Board, on the first business day
in April, July, October and January of each year such Series B
Preferred Stock is outstanding to holders of record on such date,
commencing in October following the Series B Issue Date and prorated
from the Series B Issue Date until October 2, 1995. Dividends on
account of arrearages for any past due dividends may be declared and
paid on any date to holders of record on such payment date. Arrearages
must be paid prior to the payment of current dividends and shall be
deemed to be paid first on account of the longest outstanding
arrearage.

(ii) If full cash dividends have been declared and
are not paid or made available to holders of all outstanding shares of
Series B Preferred Stock and funds legally available are insufficient
to permit payment in full in cash to all such holders of the
preferential amounts to which they are then entitled, the entire amount
legally available for payment of cash dividends shall be distributed
among the holders of the Series B Preferred Stock ratably in proportion
to the full amount to which they would otherwise be respectively
entitled, and any remainder not paid in cash to the holders of the
Series B Preferred Stock shall cumulate as provided in Section
2(a)(iii).

(iii) If, on any dividend payment date, the holders
of the Series B Preferred Stock have not received the full dividends
provided for in Section 2(a)(i), then such dividends shall cumulate,
whether or not declared, with additional dividends thereon for each
succeeding full dividend period during which such dividends shall
remain unpaid. Unpaid dividends for any period less than a full
dividend period shall cumulate on a day-to-day basis and shall be
computed on the basis of a 365-day year.

(iv) So long as any shares of Series B Preferred
Stock are outstanding, the Corporation shall not declare or pay on any
Class A Common Stock or Class B Common Stock any dividend whatsoever,
whether in cash, property or otherwise, nor shall the Corporation make
any distribution on any Class A Common Stock or Class B Common Stock,
nor shall any Class A Common Stock or Class B Common Stock be purchased
or redeemed by the Corporation, nor shall any monies be paid or made
available for a sinking fund for the purchase or redemption of any
Class A Common Stock or Class B Common Stock, unless all dividends to
which the holders of the Series B Preferred Stock are entitled to for
all previous dividend periods have been paid or declared and a sum of
money sufficient for the payment thereof set apart.

-6-
<PAGE> 16

(b) Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, before any payment or distribution shall be made
to the holders of Class A Common Stock or Class B Common Stock, the
holders of each share of Series B Preferred Stock shall be entitled to
receive an amount equal to $1,000 per share (the "Series B Liquidation
Preference") plus any accrued or unpaid dividends thereon to such
date. After the payment or the setting apart for payment of amounts so
payable to the holders of the Series B Preferred Stock, the remaining
assets of the Corporation shall be available for distribution among
the holders of Class A Common Stock and Class B Common Stock according
to their respective rights and priorities. If the assets or surplus
funds to be distributed to the holders of the Series B Preferred Stock
are insufficient to permit the payment to such holders of the full
preferential amounts to which they are entitled, the assets and
surplus funds legally available for distribution shall be distributed
ratably among the holders of the Series B Preferred Stock in
proportion to the full preferential amount each such holder is
otherwise entitled to receive.

(i) The holders of the issued and outstanding
shares of Series B Preferred Stock shall have no voting rights except
as set forth in this Section 2(c) and as required by the Delaware
General Corporation Law.

(ii) Subject to Section 2(c)(i), if and
whenever the Corporation fails to declare and pay in cash the full
amount of dividends payable on the Series B Preferred Stock on any six
consecutive quarters, then the holders of the Series B Preferred Stock,
voting separately as a class, shall be entitled at the next annual
meeting of the stockholders of the Corporation, or at any special
meeting, to elect one director; provided, however, that if the holders
of the Series B Preferred Stock previously have elected an additional
director and the right to elect such director has not terminated, the
holders of the Series B Preferred Stock shall not be entitled to elect
an additional director under this Section 2(c)(ii) until such time as
the holders of the Series B Preferred Stock are no longer entitled to
elect an additional director, subject, however, to the right of the
holders of the Series B Preferred Stock to vote for the election of a
successor director should the director previously elected by the
holders of the Series B Preferred Stock resign from the Board, die or
be removed by the holders of the Series B Preferred Stock.

Upon the effective date of such election,
such director shall become an additional director of the Corporation,
and the authorized number of directors of the Corporation thereupon
automatically shall be increased by one director. The holders of the
Series B Preferred Stock may exercise the right to elect a director
until all dividends in default on the Series B Preferred Stock have
been paid in full, and dividends for the current dividend period
declared and funds therefor set apart, and when so paid and set apart,
the right of the holders of the Series B Preferred Stock to elect a
director pursuant to this Section 2(c)(ii) shall cease upon the day
prior to the next annual meeting of the stockholders of the
Corporation, the term of such director shall thereupon terminate, and
the authorized number of directors of the Corporation shall return to
the number of authorized directors

- 6 -

<PAGE> 17

otherwise in effect, but subject always to the same provisions for the
vesting of such special voting rights in the case of any such future
dividend default or defaults.

At any time when special voting rights have
been vested in the holders of the Series B Preferred Stock pursuant to
this Section 2(c)(ii), the Secretary of the Corporation may, and upon
the written request of the holders of 10% or more of the number of
shares of the Series B Preferred Stock then outstanding addressed to
such Secretary at the principal office of the Corporation shall, call a
special meeting of the holders of the Series B Preferred Stock for the
election of the director to be elected by them as provided above, to be
held in the case of such written request within forty days after
delivery of such request, and in either case to be held at a place and
upon the notice provided by the Delaware General Corporation Law and in
the By-Laws of the Corporation.

(iii) If any amendment to the Certificate of
Incorporation of the Corporation is proposed that would change the
preferences herein provided or cause the issuance of preferred shares
with attributes that are senior to the Series B Preferred Stock or
increase the number of shares of Class A Common Stock or Class B Common
Stock (except upon a public offering of the Class A Common Stock or
Class B Common Stock of the Corporation), then the holders of the
Series B Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and
such amendment shall not be effected and no Series B Preferred Stock
prohibited hereby shall be issued absent the affirmative vote of the
holders of 75% of the issued and outstanding Series B Preferred Stock.

(iv) Any holder of Series B Preferred Stock
entitled to vote on any matter pursuant to this Section 2(c) may assign
such voting rights, revocably or irrevocably, to any other holder of
Series B Preferred Stock.

(d) Redemption.

(i) The Corporation may, at any time and from
time to time as may be determined by the Board, redeem all but not less
than all, of the Series B Preferred Stock, provided the Corporation is
not in default in the payment of any dividends on the Series B
Preferred Stock then outstanding, for an amount equal to the Series B
Liquidation Preference plus all accrued dividends to the date of
redemption.

(ii) The redemption provided for in Section
2(d)(i) may be for cash or for a debt instrument with an interest rate
of 9% payable quarterly for no more than seven years (except that the
debt will accelerate in the event of a sale of more than 50% of the
aggregate issued and outstanding shares of Class A Common Stock and
Class B Common Stock or a sale of substantially all of the assets of
the Corporation or of Helsel) and a principal amount equal to the
Series B Liquidation Preference of any and all accrued but unpaid
dividends on the Series B Preferred Stock, a subordinated position with
regard to creditors (but not less than the same position of the Series
B Preferred Stock) and other rights

-8-
<PAGE> 18

comparable to the Series B Preferred Stock, including the right to
elect one director of the Corporation as and to the extent provided
below.

The debt instrument shall require that if the
Corporation fails to pay in cash the full amount of interest payable on
the debt for six consecutive quarters, then the holders of the debt,
voting in accordance with the principal amount of the debt and with
each $1,000 of debt constituting one vote, shall be entitled at the
next annual meeting of the stockholders of the Corporation, or at any
special meeting, to elect one director; provided, however, that if the
holders of the debt previously have elected an additional director and
the right to elect such director has not terminated, the holders of the
debt shall not be entitled to elect an additional director, subject,
however, to the right of the holders of the debt to vote for the
election of a successor director should the director previously elected
by the holders of the debt resign from the Board, die or be removed by
the holders of the debt. This right to elect a director shall be set
forth in an agreement in form and substance satisfactory to counsel for
the Corporation as a condition precedent to the redemption of the
Series B Preferred Stock with a debt instrument.

(iii) The Corporation shall provide notice of any
redemption pursuant to this Section 2(d) specifying the time and place
of redemption, by first class or certified mail, postage prepaid, to
each holder of shares of Series B Preferred Stock at the address for
such holder last shown on the records of the Corporation or its
transfer agent, not more than sixty nor less than thirty days before
the applicable redemption date. Upon mailing of any such notice of
redemption, the Corporation shall become obligated to redeem Series B
Preferred Stock specified in such notice herein for cash or debt as
provided in Section 2(d)(ii).

(iv) No redeemed shares of Series B Preferred
Stock shall be entitled to any dividends declared after the redemption
date, and on such date all rights of the holder of such shares as a
stockholder of the Corporation by reason of the ownership of such
shares shall cease, except the right to receive the price of or debt
issued for such shares without interest, upon presentation and
surrender of the certificate representing such shares, and such shares
will not after such redemption date be deemed to be outstanding.

(v) On or before the redemption date, if the
shares of Series B Preferred Stock are to be redeemed for cash, an
amount equal to the Series B Liquidation Preference, plus all accrued
dividends to the redemption date shall be deposited with a bank or
trust company in a trust fund for the benefit of the respective holders
of the shares designated for redemption with instructions and authority
to the bank or trust company to pay such price for such shares to the
respective holders, after the redemption date upon receipt of
notification from the Corporation that such holder has surrendered its
share certificate to the Corporation. The balance of any monies
deposited by the Corporation remaining unclaimed at the expiration of
sixty days following the redemption date shall thereafter be returned
to the Corporation upon its request.

-9-
<PAGE> 19

(e) Series. Except as set forth in this Certificate
of Designation, the Series B Preferred Stock shall have the same
powers, designations, preferences and relative, participating, optional
or other rights, and qualifications and restrictions, as the Series A
Preferred Stock.

IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Designation as of this 30th day of June, 1995.

/s/ Ronald E. Weinberg
--------------------------------------
RONALD E. WEINBERG, Vice-Chairman

Attested by:

/s/ Byron S. Krantz
--------------------------------------
BYRON S. KRANTZ, Secretary

-10-
<PAGE> 20

CERTIFICATE OF DESIGNATION
OF
THE SERIES C PREFERRED STOCK
OF
HAWK CORPORATION

PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE

Ronald E. Weinberg and Byron S. Krantz, being the Vice-Chairman of the
Board and Secretary, respectively, of Hawk Corporation, a Delaware corporation
(the "Corporation"), hereby certify that:

Pursuant to authority conferred upon the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, and pursuant
to the provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors, at a telephonic board meeting held on November
16, 1996, duly adopted a resolution creating a new series of 1,189 shares of
Serial Preferred Stock, par value $0.01 per share, as follows:

RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation is
hereby created, consisting of 1,189 shares of Serial Preferred Stock, par value
$0.01 per share (the "Series C Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, shall be as follows:

3. Series C Preferred Stock.

(a) Dividends.

(i) The holders of Series C Preferred Stock
shall be entitled to receive, out of funds legally available for that
purpose, cash dividends at the rate of 10% of the Series C Liquidation
Preference (as defined in Section 3(b) below) per annum. Such dividends shall be
cumulative as of the day on which the Series C Preferred Stock is first issued
(the "Series C Issue Date") and shall be payable in arrears, when and as
declared by the Board (as defined in the Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") of the Corporation), on the
last business day in April, July, October and January of each year such Series C
Preferred Stock is outstanding to holders of record on such date, commencing in
October following the Series C Issue Date and prorated from the Series C Issue
Date until January 31, 1997. Dividends on account of arrearages for any past due
dividends may be declared and paid on any date to holders of record on such
payment date. Arrearages must be paid prior to the payment of current dividends
and shall be deemed to be paid first on account of the longest outstanding
arrearage.

<PAGE> 21

(ii) If full cash dividends have been declared
and are not paid or made available to holders of all outstanding shares of
Series C Preferred Stock and funds legally available are insufficient to permit
payment in full in cash to all such holders of the preferential amounts to which
they are then entitled, the entire amount legally available for payment of cash
dividends shall be distributed among the holders of the Series C Preferred Stock
ratably in proportion to the full amount to which they would otherwise be
respectively entitled, and any remainder not paid in cash to the holders of the
Series C Preferred Stock shall cumulate as provided in Section 3(a)(iii).

(iii) If, on any dividend payment date, the
holders of the Series C Preferred Stock have not received the full dividends
provided for in Section 3(a)(i), then such dividends shall cumulate, whether or
not declared, with additional dividends thereon for each succeeding full
dividend period during which such dividends shall remain unpaid. Unpaid
dividends for any period less than a full dividend period shall cumulate on a
day-to-day basis and shall be computed on the basis of a 365-day year.

(iv) So long as any shares of Series C Preferred
Stock are outstanding, the Corporation shall not declare or pay on any Class A
Common Stock or Class B Common Stock (as defined in the Certificate of
Incorporation of the Corporation) any dividend whatsoever, whether in cash,
property or otherwise, nor shall the Corporation make any distribution on any
Class A Common Stock or Class B Common Stock, nor shall any Class A Common Stock
or Class B Common Stock be purchased or redeemed by the Corporation, nor shall
any monies be paid or made available for a sinking fund for the purchase or
redemption of any Class A Common Stock or Class B Common Stock, unless all
dividends to which the holders of the Preferred Stock (as defined in the
Certificate of Incorporation of the Corporation) are entitled to for all
previous dividend periods have been paid or declared and a sum of money
sufficient for the payment thereof set apart.

(b) Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, before any payment or distribution shall be made to the holders of
Class A Common Stock or Class B Common Stock, the holders of each share of
Series C Preferred Stock shall be entitled to receive an amount equal to $1,000
per share (the "Series C Liquidation Preference") plus any accrued or unpaid
dividends thereon to such date. After the payment or the setting apart for
payment of amounts so payable to the holders of the Series C Preferred Stock,
the remaining assets of the Corporation shall be available for distribution
among the holders of Class A Common Stock and Class B Common Stock according to
their respective rights and priorities. If the assets or surplus funds to be
distributed to the holders of the Series C Preferred Stock are insufficient to
permit the payment to such holders of the full preferential amounts to which
they are entitled, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of the Series C
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive.

(i) The holders of the issued and outstanding
shares of Series C Preferred Stock shall have no voting rights except as set
forth in this Section 3(c) and as otherwise required

-2-

<PAGE> 22

by the Delaware General Corporation Law (as defined in the Certificate of
Incorporation of the Corporation).

(ii) Subject to Section 3(c)(i), if and whenever
the Corporation fails to declare and pay in cash the full amount of
dividends payable on the Series C Preferred Stock on any six consecutive
quarters, then the holders of the Series C Preferred Stock, voting separately as
a class, shall be entitled at the next annual meeting of the stockholders of the
Corporation, or at any special meeting, to elect one director; provided,
however, that if the holders of the Series C Preferred Stock previously have
elected an additional director and the right to elect such director has not
terminated, the holders of the Series C Preferred Stock shall not be entitled to
elect an additional director under this Section 3(c)(ii) until such time as the
holders of the Series C Preferred Stock are no longer entitled to elect an
additional director, subject, however, to the right of the holders of the Series
C Preferred Stock to vote for the election of a successor director should the
director previously elected by the holders of the Series C Preferred Stock
resign from the Board, die or be removed by the holders of the Series C
Preferred Stock.

Upon the effective date of such election,
such director shall become an additional director of the Corporation, and the
authorized number of directors of the Corporation thereupon automatically shall
be increased by one director. The holders of the Series C Preferred Stock may
exercise the right to elect a director until all dividends in default on the
Series C Preferred Stock have been paid in full, and dividends for the current
dividend period declared and funds therefor set apart, and when so paid and set
apart, the right of the holders of the Series C Preferred Stock to elect a
director pursuant to this Section 1(c)(ii) shall cease upon the day prior to the
next annual meeting of the stockholders of the Corporation, the term of such
director shall thereupon terminate, and the authorized number of directors of
the Corporation shall return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the vesting of such
special voting rights in the case of any such future dividend default or
defaults.

At any time when special voting rights have
been vested in the holders of the Series C Preferred Stock pursuant to this
Section 3(c)(ii), the Secretary of the Corporation may, and upon the written
request of the holders of 10% or more of the number of shares of the Series C
Preferred Stock then outstanding addressed to such Secretary at the principal
office of the Corporation shall, call a special meeting of the holders of the
Series C Preferred Stock for the election of the director to be elected by them
as provided above, to be held in the case of such written request within forty
days after delivery of such request, and in either case to be held at a place
and upon the notice provided by the Delaware General Corporation Law and in the
By-Laws of the Corporation.

(iii) If any amendment to the Certificate of
Incorporation of the Corporation is proposed that would change the preferences
herein provided or cause the issuance of preferred shares with attributes that
are senior to the Series C Preferred Stock or increase the number of shares of
Class A Common Stock or Class B Common Stock (except upon a public offering of
the Class A Common Stock or Class B Common Stock of the Corporation), then the
holders of the Series C Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and such
amendment shall not be effected and no Series C Preferred

-3-
<PAGE> 23

Stock prohibited hereby shall be issued absent the affirmative vote of the
holders of 75% of the issued and outstanding Series C Preferred Stock.

(iv) Any holder of Series C Preferred Stock
entitled to vote on any matter pursuant to this Section 3(c) may assign such
voting rights, revocably or irrevocably, to any other holder of Series C
Preferred Stock.

(d) Redemption.

(i) The Corporation may, at any time and from
time to time as may be determined by the Board, redeem all but not less than
all, of the Series C Preferred Stock, provided the Corporation is not in default
in the payment of any dividends on the Series C Preferred Stock then
outstanding, for an amount equal to the Series C Liquidation Preference plus all
accrued dividends to the date of redemption.

(ii) The redemption provided for in Section
3(d)(i) may be for cash or for a debt instrument with an interest rate of 10%
payable quarterly for no more than five years (except that the debt will
accelerate in the event of a sale of more than 50% of the aggregate issued and
outstanding shares of Class A Common Stock and Class B Common Stock or a sale of
substantially all of the assets of the Corporation) and a principal amount equal
to the Series C Liquidation Preference of any and all accrued but unpaid
dividends on the Series C Preferred Stock, a subordinated position with regard
to creditors (but not less than the same position of the Series C Preferred
Stock) and other rights comparable to the Series C Preferred Stock, including
the right to elect one director of the Corporation as and to the extent provided
below.

The debt instrument shall require that if
the Corporation fails to pay in cash the full amount of interest payable on the
debt for six consecutive quarters, then the holders of the debt, voting in
accordance with the principal amount of the debt and with each $1,000 of debt
constituting one vote, shall be entitled at the next annual meeting of the
stockholders of the Corporation, or at any special meeting, to elect one
director; provided, however, that if the holders of the debt previously have
elected an additional director and the right to elect such director has not
terminated, the holders of the debt shall not be entitled to elect an additional
director, subject, however, to the right of the holders of the debt to vote for
the election of a successor director should the director previously elected by
the holders of the debt resign from the Board, die or be removed by the holders
of the debt. This right to elect a director shall be set forth in an agreement
in form and substance satisfactory to counsel for the Corporation as a condition
precedent to the redemption of the Series C Preferred Stock with a debt
instrument.

(iii) The Corporation shall provide notice of any
redemption pursuant to this Section 3(d) specifying the time and place of
redemption, by first class or certified mail, postage prepaid, to each holder of
shares of Series C Preferred Stock at the address for such holder last shown on
the records of the Corporation or its transfer agent, not more than sixty nor
less than thirty days before the applicable redemption date. Upon mailing of any
such notice of redemption, the Corporation shall become obligated to redeem
Series C Preferred Stock specified in such notice herein for cash or debt as
provided in Section 3(d)(ii).

-4-
<PAGE> 24

(iv) No redeemed shares of Series C Preferred
Stock shall be entitled to any dividends declared after the redemption date, and
on such date all rights of the holder of such shares as a stockholder of the
Corporation by reason of the ownership of such shares shall cease, except the
right to receive the price of or debt issued for such shares without interest,
upon presentation and surrender of the certificate representing such shares, and
such shares will not after such redemption date be deemed to be outstanding.

(v) On or before the redemption date, if the
shares of Series C Preferred Stock are to be redeemed for cash, an amount
equal to the Series C Liquidation Preference, plus all accrued dividends to the
redemption date shall be deposited with a bank or trust company in a trust fund
for the benefit of the respective holders of the shares designated for
redemption with instructions and authority to the bank or trust company to pay
such price for such shares to the respective holders, after the redemption date
upon receipt of notification from the Corporation that such holder has
surrendered its share certificate to the Corporation. The balance of any monies
deposited by the Corporation remaining unclaimed at the expiration of sixty days
following the redemption date shall thereafter be returned to the Corporation
upon its request.

(e) Series. Except as set forth in this Certificate of
Designation, the Series C Preferred Stock shall have the same powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, as the Series A and Series B Preferred
Stock (as defined in the Certificate of Incorporation of the Corporation).

IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Designation as of this 27th day of November, 1996.

/s/ Ronald E. Weinberg
-----------------------------------
RONALD E. WEINBERG, Vice-Chairman

Attested by:

/s/ Byron S. Krantz
-----------------------------------
BYRON S. KRANTZ, Secretary

-5-

<PAGE> 1
Exhibit 3.2

FORM OF
AMENDED AND RESTATED BY-LAWS
OF
HAWK CORPORATION

ARTICLE I
STOCKHOLDERS

1.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors of the Corporation (the "Board"). Any other proper business
may be transacted at the annual meeting.

1.2. Special Meetings. Except as otherwise required by the General
Corporation Law of the State of Delaware as it presently exists or may be
amended in the future (the "Delaware General Corporation Law"), special meetings
of the holders of the Class A Common Stock, par value $0.01 per share, or Class
B Non-Voting Common Stock, par value $0.01 per share, of the Corporation
(together, the "Common Stock") may be called only as set forth in the
certificate of incorporation of the Corporation, as amended and/or restated
from time to time (the "Certificate of Incorporation").

1.3. Notice of Meetings. Written notice of every meeting of
stockholders shall be given not less than ten nor more than sixty days before
the date of the meeting by or at the direction of the President, the Secretary
or such other person as the Board may appoint, to each stockholder entitled to
vote at such meeting. The notice shall include the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. If mailed, notice shall be deemed to be given when
deposited in the mail, postage prepaid, directed to the stockholder at his
address as it appears on the records of the Corporation.

1.4. Waiver of Notice of Meetings of Stockholders. Any written
waiver of notice, signed by a stockholder entitled to notice, shall be deemed
equivalent to notice. Attendance of a stockholder at a meeting constitutes a
waiver of notice of such meeting, except when the stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, need be specified in any written
waiver of notice.

1.5. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such reconvened meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the reconvened meeting, the Corporation may transact any business
which could have been transacted at the original meeting. If the adjournment is
for more than thirty days,
<PAGE> 2

or if after the adjournment a new record date is fixed for the reconvened
meeting, a notice of the reconvened meeting shall be given to each
stockholder of record entitled to vote at the meeting.

1.6. Quorum. Except as otherwise provided by the Delaware
General Corporation Law, the Certificate of Incorporation or these By-laws, at
each meeting of stockholders the presence in person or by proxy of the holders
of shares of stock having a majority of the votes which could be cast by the
holders of all outstanding shares of stock entitled to vote at the meeting shall
be necessary and sufficient to constitute a quorum. Shares of stock of the
Corporation belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held, directly or indirectly, by the Corporation, will
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing does not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.

In the absence of a quorum, the stockholders so present
may, by majority vote, adjourn the meeting from time to time in the manner
provided in Section 1.5 of these Amended and Restated By-laws (the "By-laws")
until a quorum is in attendance.

1.7. Organization of Meetings. Meetings of stockholders shall
be presided over by the Chairman of the Board or, if the Chairman of the Board
is not present, by the Vice-Chairman of the Board or, in the absence of the
foregoing persons, by a chairman chosen by the stockholders at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.

1.8. Action by Vote. Except as otherwise provided by the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question.

Except as otherwise provided by the Certificate of
Incorporation, at all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect directors. Unless
otherwise provided by the Delaware General Corporation Law, the Certificate of
Incorporation or these By-laws, all other elections, proposals and questions
shall be determined by the vote of the holders of shares of stock having a
majority of the votes which could be cast by the holders of all shares of stock
entitled to vote thereon which are present in person or represented by proxy at
the meeting.

Voting at stockholder meetings need not be by written
ballot.

1.9. Representation by Proxy. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or persons to
act for him by proxy. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting
in person or by filing an

-2-
<PAGE> 3

instrument in writing revoking the proxy or another duly executed
proxy bearing a later date wi th the Secretary prior to the taking of a vote.

1.10. Inspectors of Election. The Board in advance of any meeting
of stockholders shall appoint one or more inspectors of election ("Inspectors of
Election") to act at the meeting or any adjournment of the meeting. Each
Inspector of Election, before entering upon the discharge of his duties, must
take and sign an oath faithfully to execute the duties of Inspector of Election
at such meeting with strict impartiality and according to the best of his
ability. Inspectors of Election shall take charge of the polls and, when the
vote is completed, shall make a certificate of the result of the vote taken and
of such other facts as may be required by the Delaware General Corporation Law.
The Inspectors of Election may appoint or retain other persons or entities to
assist them in the performance of their duties as inspectors.

1.11. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board and
which record date:

(a) in the case of determination of stockholders entitled
to notice of or to vote at any meeting of
stockholders or adjournment thereof, shall, unless
otherwise required by the Delaware General
Corporation Law, not be more than sixty nor less than
ten days before the date of such meeting; and

(b) in the case of any other action, shall not be more
than sixty days prior to such other action.

If no record date is fixed:

(a) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next
preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day
next preceding the day on which the meeting is held;
and

(b) the record date for determining stockholders for any
other purpose shall be at the close of business on
the day on which the Board adopts the resolution
relating thereto.

A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
reconvened meeting.

-3-
<PAGE> 4

1.12. List of Stockholders Entitled to Vote. The officer or agent
responsible for maintaining the stock ledger of the Corporation shall prepare,
at least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof and may be inspected
by any stockholder who is present. The stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.

1.13. Advance Notice of Stockholder Proposed Business. At a meeting
of the holders of the Common Stock, only such business may be conducted as is
properly brought before the meeting. To be properly brought before a meeting,
business must be either (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (ii) otherwise
properly brought before the meeting by or at the direction of the Board, or
(iii) otherwise properly brought before the meeting by a holder of Common Stock.
In addition to any other applicable requirements, for business to be properly
brought before a meeting of the holders of the Common Stock, the stockholder
must have given timely notice thereof in writing to the Secretary. To be timely,
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty days nor more
than ninety days prior to the meeting; provided, however, that in the event that
less than seventy days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever occurs first. A stockholder's notice
to the Secretary must set forth as to each matter the stockholder proposes to
bring before the meeting (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of Common Stock that are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.

Notwithstanding anything in these By-laws to the contrary, no
business shall be conducted at a meeting of the holders of the Common Stock
except in accordance with the procedures set forth in this Section 1.13;
provided, however, that nothing in this Section 1.13 shall be deemed to preclude
discussion by any stockholder of any business properly brought before such a
meeting in accordance with said procedure.

The chairman at a meeting of the holders of the Common
Stock shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section 1.13, and if he should so determine, he

-4-
<PAGE> 5

shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.

Notwithstanding anything contained in these By-laws to the
contrary, this Section 1.13 shall not be altered, amended or repealed except by
the Board pursuant to the Certificate of Incorporation or an affirmative vote of
at least two-thirds of the outstanding shares of all capital stock entitled to
vote at a stockholders' meeting duly called for such purpose.

1.14. Elimination of Action By Written Consent of Stockholders. No
action required to be taken or which may be taken at any annual or special
meeting of holders of the Common Stock may be taken without a vote at a meeting
duly called and held for such purpose, and the right of such holders to consent
in writing, without a meeting, to the taking of any action is specifically
denied.

Notwithstanding anything contained in these By-laws to the
contrary, this Section 1.14 shall not be altered, amended or repealed except by
the Board pursuant to the Certificate of Incorporation or an affirmative vote of
at least two-thirds of the outstanding shares of all capital stock entitled to
vote at a stockholders' meeting duly called for such purpose.

ARTICLE II
BOARD OF DIRECTORS

2.1. Powers. Subject to applicable provisions of the Delaware
General Corporation Law and any limitations in the Certificate of Incorporation
or these By-laws, the Board shall manage the business and affairs of the
Corporation and exercise all corporate powers.

2.2. Number and Term. The number of directors of the Corporation
and the terms of office of such directors shall be as set forth in the
Certificate of Incorporation.

2.3. Election; Removal; Vacancies; Resignation. The election and
removal of directors and the filling of vacancies on the Board shall be as set
forth in the Certificate of Incorporation. Any director may resign at any time
upon written notice to the Corporation. Such resignation shall take effect on
the date of receipt of such notice or at any later time set forth in such notice
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.

2.4. Regular Meetings. The Board shall hold a regular meeting
immediately after each annual meeting of stockholders. Other regular meetings of
the Board may be held at such places within or without the State of Delaware and
at such times as the Board may determine. Notice of a regular meeting need not
be given.

2.5. Special Meetings. Special meetings of the Board may be held
at any time or place within or without the State of Delaware whenever called
by the Chairman of the Board or the Vice-Chairman of the Board. Notice of a
special meeting of the Board shall be given by the officer calling the meeting
at least twenty-four hours before the special meeting.

-5-
<PAGE> 6

2.6. Waiver of Notice of Meetings of Directors. Any written waiver
of notice, signed by a director entitled to notice, shall be deemed equivalent
to notice. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except when the director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the directors, need be specified in any written
waiver of notice.

2.7. Quorum; Vote Required for Action. At all meetings of the
Board a majority of the whole Board shall constitute a quorum for the
transaction of business. In the absence of a quorum, the directors present at
the meeting may adjourn the meeting until a majority attends. Except in cases in
which the Certificate of Incorporation or these By-laws otherwise provide, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board.

2.8. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of the Corporation's directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of the Corporation's
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:

(a) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed
or are known to the Board or the committee, and the
Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though
the disinterested directors are less than a quorum;
or

(b) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote
thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or

(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved
or ratified, by the Board, a committee thereof, or
the stockholders.

Interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.

2.9. Organization of Meetings. Meetings of the Board shall be
presided over by the Chairman of the Board or, if the Chairman of the Board is
not present, by the Vice-Chairman of the Board or, in their absence, by a
chairman chosen by the directors at the meeting. The Secretary shall

-6-
<PAGE> 7
act as secretary of the meeting, but in his absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.

2.10. Telephonic Meetings Permitted. Members of the Board, or any
committee designated by the Board, may participate in meetings by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meetings can hear each other, and participation in
meetings pursuant to this Section shall constitute presence in person at such
meetings.

2.11. Action by Written Consent of Directors. Unless otherwise
restricted by the Certificate of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or such
committee.

2.12. Compensation of Directors. In the discretion of the Board, the
Corporation may pay each director such fees for his services as director and
reimburse him for his reasonable expenses incurred in the performance of his
duties as director, as determined by the Board. Nothing contained in this
Section may be construed to preclude any director from serving the Corporation
in any other capacity and receiving reasonable compensation for such service.
Members of any special or standing committees may be allowed like compensation
for attending committee meetings.

2.13. Committees. The Board may, by resolution, designate, change
the membership of or terminate the existence of any committee or committees.
Each committee shall consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member
of the committee, the member or members of the committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by the Delaware General Corporation Law and to the
extent provided in the resolution of the Board, shall have and may exercise all
the powers and authority of the Board in the management of the business and
affairs of the Corporation.

2.14. Committee Rules. Unless the Board otherwise provides, each
committee designated by the Board may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these By-laws.

2.15. Stockholder Nominations for Director Candidates. Except as may
otherwise be provided in the Certificate of Incorporation, only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors. Nominations of persons for election to the Board may be
made at a meeting of stockholders only (i) by or at the direction of the Board,
(ii) by any nominating committee or person appointed by the Board or (iii) by
any stockholder of
-7-
<PAGE> 8

the Corporation entitled to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Section 2.15. Such
nominations, other than those made by or at the direction of the Board, must be
made pursuant to timely notice in writing to the Secretary. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty days nor
more than ninety days prior to the meeting; provided, however, that in the
event that less than seventy days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the date on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever occurs first. Such
stockholder's notice to the Secretary must set forth: (i) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the class
and number of shares of capital stock of the Corporation that are beneficially
owned by the person, and (d) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to Rule 14(a) under the Securities Exchange Act of 1934, as
amended; and (ii) as to the stockholder giving the notice, (a) the name and
record address of the stockholder, and (b) the class and number of shares of
capital stock of the Corporation that are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth
herein.

The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure and, if he should so determine and
declare, the defective nomination shall be disregarded.

Notwithstanding anything contained in these By-laws to the
contrary, this Section 2.15 shall not be altered, amended or repealed except by
the Board pursuant to the Certificate of Incorporation or by an affirmative
vote of at least two-thirds of the outstanding shares of all capital stock
entitled to vote at a stockholders' meeting duly called for such purpose.

ARTICLE III
OFFICERS

3.1. Enumeration; Appointment. The Board shall appoint a President,
Secretary and Treasurer, and it may, if it so determines, elect a Chairman of
the Board and/or Vice-Chairman of the Board from among its members. The Board
may also appoint, or empower the Chairman or Vice-Chairman of the Board, or the
President, to appoint, such other officers and agents as the business of the
Corporation may require. Any number of offices may be held by the same person.
The Board may require any officer, agent or employee to give security for the
faithful performance of his duties.

-8-
<PAGE> 9

3.2. Term of Office; Resignation; Removal; Vacancies. Each officer
shall hold office until his successor is appointed and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. The Board may, when in its judgment the best
interests of the Corporation will be served, remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board.

3.3. Powers and Duties. The officers of the Corporation shall have
such powers and duties in the management of the Corporation as may be prescribed
in these By-laws and by the Board and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of
the Board.

3.4. Compensation of Officers. The Board shall determine the
officers' salaries, and no officer shall be prevented from receiving such
compensation by reason of the fact that he is also a director of the
Corporation.

ARTICLE IV
CAPITAL STOCK

4.1. Stock Certificates. Every stockholder, upon written request,
shall be entitled to a certificate signed by or in the name of the Corporation
by two officers of the Corporation, certifying the number of shares owned by him
in the Corporation. Any or all of the signatures on the certificate may be by
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.

4.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. Upon written request by a stockholder, the Corporation may issue a
new certificate of stock in the place of any certificate previously issued by
the Corporation, alleged to have been lost, stolen or destroyed. The Corporation
may require the owner of the lost, stolen or destroyed certificate, or his
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.

4.3. Transfer on Books. Subject to the restrictions, if any,
stated or noted on the stock certificate, shares of stock may be transferred on
the books of the Corporation by the surrender to the Corporation or its transfer
agent of the stock certificate properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with any necessary transfer
stamps affixed and with such proof of the authenticity of signature as the
Board or the transfer agent of the Corporation may reasonably require.

-9-
<PAGE> 10

4.4. Registered Stockholders. Except as may be otherwise required
by the Delaware General Corporation Law, by the Certificate of Incorporation or
by these By-laws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to receive notice and to vote
or to give any consent with respect to such stock and to be held liable for
such calls and assessments, if any, as may lawfully be made on such stock,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the Corporation. It shall
be the duty of each stockholder to notify the Corporation of his current
mailing address.

ARTICLE V
MISCELLANEOUS

5.1. Certificate of Incorporation. These By-laws are subject to the
Certificate of Incorporation and, in the case of any conflict with the
Certificate of Incorporation, the Certificate of Incorporation shall control.

5.2. Amendment of By-laws. These By-laws may be amended or
repealed, and new by-laws may be made, by the Board.

5.3. Location of Records. The books and records of the Corporation
may be kept outside of the State of Delaware at such location or locations as
may be designated from time to time by the Board.

5.4. Fiscal Year. The fiscal year of the Corporation shall be the
calendar year, unless otherwise fixed by resolution of the Board.

5.5. Corporate Seal. The Corporation shall not have a corporate
seal.

- 10 -

<PAGE> 1

Exhibit 10.1

[HAWK LOGO]
FORM OF
1997 STOCK OPTION PLAN

1. PURPOSE. The purpose of this Plan is to advance the
interests of HAWK CORPORATION, a Delaware corporation (the "Company"),
and its Subsidiaries by providing additional incentive to attract and retain
qualified and competent persons who are key to the Company or its Subsidiaries,
including key employees, Officers and Directors, and upon whose efforts and
judgment the success of the Company and its Subsidiaries is largely dependent,
by encouraging such persons to own stock in the Company.

2. DEFINITIONS. As used herein, the following terms shall have
the meaning indicated:

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Change of Control" shall mean the occurrence of any of
the following:

(i) any transaction (which shall include a series of
transactions occurring within sixty days or occurring pursuant to a plan), that
has the result that stockholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of the Company or of
any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;

(ii) the stockholders of the Company approve a plan
of merger, consolidation, reorganization, liquidation or dissolution in which
the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or

(iii) the stockholders of the Company approve a plan
for the sale, lease, exchange, transfer, assignment or other disposition of all
or substantially all the property and assets of the Company (unless such plan is
subsequently abandoned).

(d) "Committee" shall mean the compensation committee
appointed by the Board pursuant to Section 13 hereof or, if not appointed, the
full Board.

(e) "Common Stock" shall mean the Company's Class A Common
Stock, par value $0.01 per share.

(f) "Controlled Entity" shall mean any trust, partnership,
limited liability company or other entity in which such person that receives
Options under this Plan acts as trustee, managing partner, managing member or
otherwise controls; provided that, to the extent any such Option received under
this Plan is awarded to a spouse pursuant to any divorce proceeding, such

- 1 -

<PAGE> 2

interest shall be deemed to be terminated and forfeited notwithstanding any
vesting provisions or other terms herein or in the agreement evidencing such
Option.

(g) "Director" shall mean a member of the Board.

(h) "Effective Date" shall mean the closing date of the
initial public offering by the Company contemplated by the Registration
Statement filed on Form S-1 (File No. 333-_____).

(i) "Fair Market Value" of a Share on any date of reference
shall be the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee in its sole
discretion shall determine otherwise in a fair and consistent manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be (i) if the Common Stock is listed or admitted
for trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction reporting
system, the last reported sale price of Common Stock on such exchange or
reporting system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the mean between
the closing high bid and low asked quotations for such day of Common Stock on
such system, or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days.

(j) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.

(k) "Non-Employee Director" shall mean a Director who: (i) is
not an Officer or employee of the Company or any Subsidiary; (ii) does not (A)
receive compensation, directly or indirectly, from the Company or any Subsidiary
for services rendered as a consultant or in any other capacity other than as a
Director, except for an amount that does not exceed the dollar amount for which
disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R.
Section 229.404(a), or (B) possess an interest in any transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, 17 C.F.R.
Section 229.404(a); and (iii) is not engaged in a business relationship for
which disclosure would be required under Item 404(b) of Regulation S-K,
17 C.F.R. Section 229.404(b).

(l) "Non-Statutory Stock Option" shall mean an Option which is
not an Incentive Stock Option.

(m) "Officer" shall mean the Company's Chairman,
Vice-Chairman, president, principal financial officer, principal accounting
officer (or, if there is no such accounting officer, the controller), any vice
president of the Company in charge of a principal business unit, division or
function (such as sales, administration or finance), any other officer who
performs a policy-making function, or any other person who performs similar
policy-making functions for the Company.

- 2 -

<PAGE> 3

Officers of Subsidiaries shall be deemed Officers of the Company if they perform
such policy-making functions for the Company. As used in this paragraph, the
phrase "policy-making function" does not include policy-making functions that
are not significant.

(n) "Option" (when capitalized) shall mean any option granted
under this Plan.

(o) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.

(p) "Plan" shall mean this 1997 Stock Option Plan of the
Company.

(q) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

(r) "Share(s)" shall mean a share or shares of the Common
Stock.

(s) "Subsidiary" shall mean a "subsidiary corporation" as
defined in Section 424(f) of the Code.

3. SHARES AND OPTIONS. The Company may grant to Optionees from
time to time Options to purchase an aggregate of up to _______ Shares from
Shares held in the Company's treasury or from authorized and unissued Shares. If
any Option granted under this Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. Subject to the provisions of Section 14 hereof, an Option granted
hereunder shall be either an Incentive Stock Option or a Non-Statutory Stock
Option as determined by the Committee at the time of grant of such Option and
shall clearly state whether it is an Incentive Stock Option or Non-Statutory
Stock Option. Subject to Section 17 hereof, all Incentive Stock Options shall be
granted within ten years from the date this Plan is adopted by the Board or the
date this Plan is approved by the stockholders of the Company, whichever is
earlier.

4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive
Stock Options hereunder will not be treated as Incentive Stock Options to the
extent that the aggregate Fair Market Value (determined at the time the Option
is granted) of the Shares, with respect to which Options meeting the
requirements of Code Section 422(b) are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and any
Subsidiary), exceeds $100,000.

5. CONDITIONS FOR GRANT OF OPTIONS.

(a) Each Option shall be evidenced by a written agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all
Directors, Officers and regular employees of the Company or its Subsidiaries.
Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of

- 3 -

<PAGE> 4

eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.

(b) In granting Options to Directors, Officers and employees
of the Company or its Subsidiaries, the Committee shall take into consideration
the contribution the person has made to the success of the Company or its
Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options to Directors, Officers and employees of the Company or its
Subsidiaries under this Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) prescribing the date or dates on which the Option becomes exercisable, (ii)
providing that the Option rights accrue or become exercisable in installments
over a period of years, or upon the attainment of stated goals or both, or (iii)
relating an Option to the continued employment of the Optionee for a specified
period of time, provided that such terms and conditions are not more favorable
to an Optionee than those expressly permitted herein.

(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither this
Plan nor any Option granted under this Plan shall confer upon any person any
right to employment or continuance of employment by the Company or its
Subsidiaries.

6. OPTION PRICE. The option price per Share of any Option shall
be any price determined by the Committee but shall not be less than the par
value per Share; provided, however, that in no event shall the option price per
Share of any Incentive Stock Option be less than the Fair Market Value of the
Shares underlying such Option on the date such Option is granted.

7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when
(i) the Company has received written notice of such exercise in accordance with
the terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of an amount that is sufficient to satisfy
all applicable federal or state tax withholding requirements relating to
exercise of the Option, if any. Unless further limited by the Committee in any
Option, the option price of any Shares purchased shall be paid in cash, by
certified or official bank check, by money order, with Shares or by a
combination of the above; provided further, however, that the Committee in its
sole discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, the value
of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established in connection with this Plan,
lend money to an Optionee, guarantee a loan to an Optionee, or otherwise assist
an Optionee to obtain the cash necessary to exercise all or a portion of an
Option granted hereunder or to pay any tax liability of the Optionee
attributable to such exercise. If the exercise price is paid in whole or in part
with Optionee's promissory note, such note shall (i) provide for full recourse
to the maker, (ii) be

- 4 -

<PAGE> 5

collateralized by the pledge of the Shares that the Optionee purchases upon
exercise of such Option, (iii) bear interest at a rate no less than the base
lending rate of the Company's principal lender or if there is no such lender at
a rate no less than the prime rate as published from time to time in THE WALL
STREET JOURNAL, and (iv) contain such other terms as the Committee in its sole
discretion shall reasonably require. No Optionee shall be deemed to be a holder
of any Shares subject to an Option unless and until a stock certificate or
certificates for such Shares are issued to such person(s) under the terms of
this Plan. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 10 hereof.

8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable
in such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.

(a) The expiration date of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of ten years from the date of grant of the
Option.

(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable upon any Change in Control.

(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.

9. TERMINATION OF OPTION PERIOD.

(a) The unexercised portion of any Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:

(i) three months after the date on which the
Optionee's employment is terminated for any reason other than by reason of (A)
Cause, which, solely for purposes of this Plan, shall mean the termination of
the Optionee's employment by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the meaning of
Section 22(e)(3) of the Code) as determined by a medical doctor satisfactory
to the Committee, or (C) death;

(ii) immediately upon the termination of the
Optionee's employment for Cause;

(iii) one year after the date on which the Optionee's
employment is terminated by reason of a mental or physical disability (within
the meaning of Section 22(e)(3) of the Code) as determined by a medical doctor
satisfactory to the Committee; or

- 5 -

<PAGE> 6

(iv) (A) one year after the date of termination of
the Optionee's employment by reason of death of the Optionee, or (B) three
months after the date on which the Optionee dies if the Optionee dies during the
one year period specified in Section 9(a)(iii) hereof.

(b) The Committee in its sole discretion may, by giving written
notice (a "cancellation notice"), cancel, effective upon the date of the
consummation of any corporate transaction described in Sections 2(b)(ii) or
(iii) hereof, any Option that remains unexercised on such date. Such
cancellation notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.

10. ADJUSTMENT OF SHARES.

(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:

(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under this Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and

(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.

(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of any corporate transaction described in Sections 2(b)(ii) or (iii) hereof.

(c) Except as otherwise expressly provided herein, the issuance
by the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options granted under this Plan.

(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that

- 6 -

<PAGE> 7

would rank above the Shares subject to outstanding Options; (iv) the dissolution
or liquidation of the Company; (v) any sale, lease, exchange, transfer,
assignment or other disposition of all or any part of the assets or business of
the Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.

11. TRANSFERABILITY OF OPTIONS.

(a) No Incentive Stock Option shall be transferable by the
Optionee other than by will, the laws of descent and distribution, and each
Incentive Stock Option shall be exercisable during the Optionee's lifetime only
by the Optionee.

(b) A person that receives Non-Statutory Stock Options under
this Plan or such person's beneficiary shall have the power or right to sell,
exchange, pledge, transfer, assign or otherwise encumber or dispose of such
person's or beneficiary's Non-Statutory Stock Options received under this Plan
only as follows: (i) to the spouse or any children or grandchildren of such
person that receives Non-Statutory Stock Options under this Plan; (ii) as a
charitable contribution or gift to or for the use of any person or entity
described in Section 170(c) of the Code; (iii) to any Controlled Entity; or
(iv) by will or the laws of intestate succession.

12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such federal or state securities or other law or regulation
including, but not limited to, the following:

(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and

(ii) a representation, warranty and/or agreement to
be bound by any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Committee to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.

13. ADMINISTRATION OF THE PLAN.

(a) This Plan shall be administered by the Committee, which
shall consist of not less than two Directors. The Committee shall have all of
the powers of the Board with respect to this Plan; provided that if any member
of the Committee is not a Non-Employee Director, then the Board shall approve
any Option that the Committee proposes to grant hereunder. The Board may change
the membership of the Committee at any time and fill any vacancy occurring in
the membership of the Committee by appointment.

(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final and conclusive.

- 7 -

<PAGE> 8

(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written consent of the
members of the Committee.

14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any
other provisions of this Plan to the contrary, an Incentive Stock Option shall
not be granted to any person owning directly or indirectly (through attribution
under Section 424(d) of the Code) at the date of grant, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (or of its subsidiary as defined in Section 424 of the Code at the date
of grant) unless the option price of such Option is at least 110% of the Fair
Market Value of the Shares subject to such Option on the date the Option is
granted, and such Option by its terms is not exercisable after the expiration of
five years from the date such Option is granted.

15. INTERPRETATION.

(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof,
but instead this Plan shall be construed and enforced as if such provision had
never been included in this Plan.

(b) This Plan shall be governed by the laws of the State of
Ohio.

(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.

16. AMENDMENT AND DISCONTINUATION OF THE PLAN.

(a) Either the Board or the Committee may from time to time
amend or discontinue this Plan or any Option; provided, however, that, except to
the extent provided in Section 10, no such amendment may, without approval by
the stockholders of the Company, (i) materially increase the benefits accruing
to participants under this Plan, (ii) materially increase the number of
securities which may be issued under this Plan, or (iii) materially modify the
requirements as to eligibility for participation in this Plan; and provided
further, that, except to the extent provided in Section 9, no amendment or
suspension of this Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of such
Optionee.

(b) Notwithstanding anything herein to the contrary, the
provisions of this Plan which govern the exercise price per Share under each
such Option, when and under what circumstances such Option will be granted and
the period within which each such Option may be exercised, shall not be amended
more than once every six months (even with stockholder approval)

- 8 -

<PAGE> 9

other than to conform to changes to (i) the Code, or the rules promulgated
thereunder, (ii) the Employee Retirement Income Security Act of 1974, as
amended, or the rules promulgated thereunder, or (iii) rules promulgated by the
Securities and Exchange Commission.

17. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be
effective upon the Effective Date and shall terminate on the tenth anniversary
of the Effective Date.

- 9 -

<PAGE> 1

Exhibit 10.2

FORM OF
INCENTIVE STOCK OPTION AGREEMENT

THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is entered into as
of this _____ day of __________, _____, by and between HAWK CORPORATION, a
Delaware corporation (the "Company"), and _______________ (the "Optionee").

WHEREAS, the Company has adopted the 1997 Stock Option Plan (as amended
from time to time, the "Plan");

WHEREAS, capitalized terms used herein without definition have the
meanings assigned to them in the Plan;

WHEREAS, the Optionee is an employee Director, Officer and/or key
employee of the Company;

WHEREAS, the Company believes that it would advance the interests of
the Company and its stockholders to afford an opportunity to the Optionee to
acquire or increase the Optionee's proprietary interest in the Company through
the grant of Incentive Stock Options;

WHEREAS, the Committee has granted Incentive Stock Options to purchase
shares of Class A Common Stock, par value $0.01 per share, of the Company
("Common Stock") to the Optionee pursuant to the Plan on the terms and subject
to the conditions set forth herein; and

WHEREAS, the Optionee desires to accept said Incentive Stock Options
pursuant to the terms and subject to the conditions set forth herein;

NOW, THEREFORE, the parties agree as follows:

1. GRANT OF OPTIONS. The Company hereby grants Incentive Stock
Options to purchase up to __________ (_____) shares of Common Stock
(collectively, the "Option Shares") to the Optionee, subject to all of the terms
and conditions contained in this Agreement and the Plan. The Incentive Stock
Options are "incentive stock options" within the meaning of Section 422 of the
Code.

2. TIMING OF EXERCISE.

[(A) EXCEPT AS PROVIDED IN SECTION 2(B) OR 2(C) BELOW, THE
INCENTIVE STOCK OPTIONS SHALL BECOME EXERCISABLE IN FULL AS FOLLOWS:

(I) ON THE DATE THAT THE COMPANY ACHIEVES ANNUAL
PRIMARY EARNINGS PER SHARE OF COMMON STOCK OF $_____ AFTER TAX BUT
WITHOUT GIVING EFFECT TO ANY FAS 109 VALUATION ADJUSTMENTS; OR

<PAGE> 2

(ii) IF THE INCENTIVE STOCK OPTIONS HAVE NOT ALREADY
BECOME EXERCISABLE PURSUANT TO CLAUSE (I) ABOVE, ON __________, _____.

AT ANY TIME AFTER THE INCENTIVE STOCK OPTIONS BECOME EXERCISABLE, THE OPTIONEE
MAY EXERCISE THE INCENTIVE STOCK OPTIONS, IN WHOLE OR IN PART, UNTIL EXPIRATION
OF THE INCENTIVE STOCK OPTIONS PURSUANT SECTION 5 BELOW.]

OR:
[(a) EXCEPT AS PROVIDED IN SECTION 2(b) OR 2(c) BELOW, THE
INCENTIVE STOCK OPTIONS SHALL VEST OVER A THREE (3) YEAR PERIOD AND SHALL BECOME
EXERCISABLE FROM TIME TO TIME AS FOLLOWS: _____ (___) OPTION SHARES ON THE FIRST
ANNIVERSARY OF THIS AGREEMENT; _____ (___) ON THE SECOND ANNIVERSARY OF THIS
AGREEMENT; AND _____ (___) OPTION SHARES ON THE THIRD ANNIVERSARY OF THIS
AGREEMENT. AT ANY TIME AFTER EACH PORTION OF THE INCENTIVE STOCK OPTIONS BECOME
EXERCISABLE, THE OPTIONEE MAY EXERCISE SUCH PORTION OF THE INCENTIVE STOCK
OPTIONS, IN WHOLE OR IN PART, UNTIL EXPIRATION OF THE INCENTIVE STOCK OPTIONS
PURSUANT TO SECTION 5 BELOW.]

OR:

[(a) INSERT SUCH VESTING TERMS AS DETERMINED BY THE
COMPENSATION COMMITTEE.]

(b) Notwithstanding anything to the contrary in Section 2(a)
above, the Incentive Stock Options shall become immediately fully vested and
fully exercisable:

(i) if there occurs any transaction (which shall
include a series of transactions occurring within sixty (60) days or
occurring pursuant to a plan), that has the result that stockholders of
the Company immediately before such transaction cease to own at least
fifty-one percent (51%) of the voting stock of the Company or of any
entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;

(ii) if the stockholders of the Company approve a
plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive (unless the approved
merger, consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); or

(iii) if the stockholders of the Company approve a
plan for the sale, lease, exchange, transfer, assignment or other
disposition of all or substantially all the property and assets of the
Company (unless such plan is subsequently abandoned).

(c) In accordance with the terms of Section 422 of the Code,
the Incentive Stock Options are limited so that the aggregate fair market value
(determined at the time the Incentive Stock Options are granted) of the Option
Shares that the Optionee may purchase for the first time during any calendar
year does not exceed $100,000.

- 2 -
<PAGE> 3

3. EXERCISE PRICE. The exercise price for the Incentive Stock
Options shall be $_____ per Option Share (the "Exercise Price"), and shall be
due and payable, in cash, by certified or official bank check, by money order,
in shares of Common Stock or, in the sole discretion of the Committee, by
personal check in full or partial payment of any Option Shares. Pursuant to the
terms of the Plan, the Company may, in its sole discretion, lend money to the
Optionee, guarantee a loan to the Optionee or otherwise assist the Optionee to
obtain the cash necessary to exercise all or a portion of the Option or to pay
any tax liability of the Optionee attributable to such exercise. The Optionee
shall remit the withholding tax, if any, owed by the Optionee under Section 10
below with respect to the exercise of the Incentive Stock Options to the
Company along with the Exercise Price.

4. PROCEDURE FOR EXERCISE. In order to exercise the Incentive
Stock Options, the Optionee shall deliver to the Chairman of the Board or
Secretary of the Company or such agent as such officers may delegate in their
stead, the following: (i) the aggregate Exercise Price and any withholding tax
required under Section 10 below; (ii) a completed and executed Exercise of
Stock Option in the form attached hereto as Exhibit A; and (iii) if required,
the written representation and/or other information described in Section 6
below. The Company shall cause certificates for Option Shares purchased
hereunder to be delivered to the Optionee as soon as reasonably practicable
thereafter.

5. EXPIRATION OF OPTIONS.

(a) The unexercised portion, if any, of the Incentive Stock
Options shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:

(i) three (3) months after the date that the
Optionee's employment with the Company or any of its Subsidiaries is
terminated for any reason other than by reason of (A) "Cause," which,
solely for purposes of this Agreement, shall mean the termination of
the Optionee's employment by reason of the Optionee's willful
misconduct or negligence, (B) the mental or physical disability (within
the meaning of Section 22(e)(3) of the Code) of the Optionee as
determined by a medical doctor satisfactory to the Committee or (C)
the death of the Optionee;

(ii) immediately upon the termination of the
Optionee's employment with the Company or any of its Subsidiaries for
Cause;

(iii) one (1) year after the date that the Optionee's
employment with the Company is terminated by reason of a mental or
physical disability (within the meaning of Section 22(e)(3) of the
Code) as determined by a medical doctor satisfactory to the Committee;

(iv) (A) one (1) year after the date of termination
of the Optionee's employment with the Company by reason of death of the
Optionee, or (B) three (3) months after the date that the Optionee dies
if such death occurs during the one (1) year period specified in
Section 5(a)(iii) above; or

- 3 -
<PAGE> 4

(v) the date that is ten (10) years from the date
that the Committee grants the Incentive Stock Options to the Optionee.

6. REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE. The Optionee
represents and warrants that:

(a) The Optionee is aware that no federal or state agency has
made any finding or determination as to the fairness for public or private
investment in, nor any recommendation or endorsement of, the Option Shares.

(b) The Optionee is aware that the Shares are not registered
under the Securities Act of 1933, as amended (the "Act"), or the securities or
"blue sky" laws of any state or jurisdiction (the "Blue Sky Laws") as of the
date of this Agreement, and the Company is under no obligation to cause the
Option Shares to be registered under the Act or the Blue Sky Laws; and that in
the event that the Option Shares are not registered under the Act or the Blue
Sky Laws for any reason at a time when the Optionee desires to exercise all or
any part of the Incentive Stock Options, then, in addition to the other terms
and conditions of this Agreement, such exercise shall be conditioned upon
determination by the Committee that the Option Shares may be issued to the
Optionee without registration under the Act or the Blue Sky Laws. The Committee
may require the Optionee to deliver to the Company an agreement or undertaking
setting forth any factual information that the Committee deems necessary to
determine whether the Option Shares may be issued to the Optionee without
registration under the Act or the Blue Sky Laws, including, without limitation,
a representation and warranty that the Optionee is acquiring the Option Shares
for investment and not with a view to, or for sale in connection with, the
distribution of any the Option Shares.

(c) The Optionee is aware that the Option Shares issuable upon
exercise of the Incentive Stock Options may be subject to the terms of the
Lock-Up Agreement between the Optionee and [SCHRODER & CO. INC., DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION AND MCDONALD & COMPANY SECURITIES,
INC.]

7. NON-REGISTRATION AND LEGEND. Nothing contained in this
Agreement shall require the Company to register the Option Shares under the Act
or the Blue Sky Laws or to continue any such registration which may be in
effect on or after the date of this Agreement. If any such Option Shares are
not so registered when issued hereunder, then the certificate(s) for the Option
Shares shall bear a legend, in a form satisfactory to the Committee,
restricting the transfer of the Option Shares unless such transfer is
registered or exempt from registration under the Act or the Blue Sky Laws, and
the Option Shares shall not be transferred except in accordance with such
legend.

8. TRANSFERABILITY. The Incentive Stock Options shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution, and each Incentive Stock Option shall be exercisable during the
Optionee's lifetime only by the Optionee.

9. RIGHTS PRIOR TO EXERCISE OF OPTION. The Optionee shall not
have any rights as a stockholder with respect to any Option Shares subject to
the Incentive Stock Options prior

- 4 -
<PAGE> 5

to the date on which the Optionee is recorded as the holder of such Option
Shares on the records of the Company; provided that the foregoing shall not
diminish or affect any rights the Optionee has under the Plan.

10. TAXES. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of all
federal, state, local and other taxes required by law to be withheld with
respect to the Incentive Stock Options including, but not limited to: (i)
reducing the number of Option Shares otherwise deliverable, based upon their
fair market value on the date of exercise, to permit deduction of the amount of
any such withholding taxes from the amount otherwise payable under this
Agreement; (ii) deducting the amount of any such withholding taxes from any
other amount then or thereafter payable to the Optionee; or (iii) requiring the
Optionee, beneficiary or legal representative to pay to the Company the amount
required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations as a
condition of releasing the Option Shares.

11. GENERAL PROVISIONS.

(a) The Company shall at all time during the term of the
Incentive Stock Options reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of this Agreement
in respect of vested Option Shares, shall pay all fees and expenses necessarily
incurred by the Company in connection therewith, and shall use its best efforts
to comply with all laws and regulations that, in the reasonable opinion of
counsel for the Company, are applicable thereto.

(b) Any notice to be given hereunder by either party to the
other shall be in writing and shall be given either by personal delivery,
telecopied with confirmed receipt, or sent by certified, registered or express
mail, postage pre-paid, or sent by a national next-day delivery service, postage
pre-paid, return receipt requested, addressed to the parties at the following
addresses, or at any other address as such party may hereafter specify in
writing and shall be deemed given when so delivered personally, or telecopied,
or if mailed, two (2) days after the date of mailing, or if by national next-day
delivery service, on the date after delivery to such service as follows:

(i) if to the Company, to:

Hawk Corporation
Suite 30-5000, 200 Public Square
Cleveland, Ohio 44114
Telecopier: 216-861-4546
ATTN: Chairman of the Board

with a copy to:

- 5 -
<PAGE> 6

Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Telecopier: 216-621-6536
ATTN: Marc C. Krantz, Esq.

(ii) if to the Optionee, to:

[INSERT NAME, ADDRESS AND TELECOPIER NUMBER]

(c) The headings and other captions in this Agreement are for
convenience of reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.

(d) THE PROVISIONS OF THIS AGREEMENT RELATE SOLELY TO GRANTING
OF THE INCENTIVE STOCK OPTIONS TO THE OPTIONEE PURSUANT TO THE PLAN AS OF THE
DATE HEREOF AND DO NOT ADDRESS OR RELATE TO ANY CONDITIONS OF THE OPTIONEE'S
EMPLOYMENT WITH THE COMPANY. NOTHING IN THIS AGREEMENT OR THE PLAN SHALL CONFER
UPON THE OPTIONEE ANY RIGHT OR ENTITLEMENT WITH RESPECT TO CONTINUATION OF
EMPLOYMENT BY THE COMPANY NOR INTERFERE IN ANY WAY WITH THE RIGHT OR POWER OF
THE COMPANY TO TERMINATE THE OPTIONEE'S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT
CAUSE.

(e) No change or modification of this Agreement shall be valid
unless the same is in writing and signed by the Company and the Optionee.

(f) No waiver of any provision of this Agreement shall be
valid unless in writing and signed by the person against whom it is sought to be
enforced. The failure of any party at any time to insist upon strict performance
of any condition, promise, agreement or understanding set forth herein shall not
be construed as a waiver or relinquishment of the right to insist upon strict
performance of the same or other condition, promise, agreement or understanding
at a future time.

(g) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. Nothing in this
Agreement is intended, and it shall not be construed, to give any person or
entity other than the parties hereto any right, remedy or claim under or in
respect of this Agreement or any provisions hereof.

(h) This Agreement and all rights hereunder shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Ohio applicable to contracts made and to be performed entirely within that
State. In the event of any conflict between this Agreement and the Plan, the
provisions of the Plan shall govern.

- 6 -
<PAGE> 7

(i) This Agreement and the Plan set forth all of the
agreements, warranties and representations among the parties hereto and thereto
with respect to the Incentive Stock Options, and there are no other promises,
agreements, conditions, understandings, representations or warranties, oral or
written, express or implied, among them with respect to the Incentive Stock
Options other than as set forth herein and therein. Any and all prior agreements
with respect to the Incentive Stock Options are hereby revoked.

(j) This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has executed this
Agreement, all as of the date first written above.

HAWK CORPORATION

By:
---------------------------------------
Its:
--------------------------------------

------------------------------------------
[INSERT NAME OF THE OPTIONEE]

- 7 -
<PAGE> 8

EXHIBIT A

FORM OF EXERCISE OF INCENTIVE STOCK OPTION

Hawk Corporation
Suite 30-5000, 200 Public Square
Cleveland, Ohio 44114

Attention: Chairman of the Board

Gentlemen:

The undersigned Optionee hereby exercises all or a portion of the
Incentive Stock Options granted to him pursuant to the Incentive Stock Option
Agreement dated as of __________, _____, between Hawk Corporation (the
"Company") and the Optionee with respect to __________ shares of Class A Common
Stock, par value $0.01 per share, of the Company covered by said Incentive Stock
Options, and tenders herewith at the price of $__________ per share, of which
$__________ represents payment of the exercise price thereof and $__________
represents payment of any withholding tax due.

The registered address on the share certificate to be issued to the
Optionee should be:
________________________________________________________________________________
The Optionee's social security number is: _________________________.

Optionee:

--------------------------------------
Signature

--------------------------------------
Typed or Printed Name

--------------------------------------
Date of Exercise

<PAGE> 1

Exhibit 10.3

FORM OF
NON-STATUTORY STOCK OPTION AGREEMENT

THIS NON-STATUTORY STOCK OPTION AGREEMENT ("Agreement") is entered into
as of this _____ day of __________, _____, by and between HAWK CORPORATION, a
Delaware corporation (the "Company"), and _______________ (the "Optionee").

WHEREAS, the Company has adopted the 1997 Stock Option Plan (as amended
from time to time, the "Plan");

WHEREAS, capitalized terms used herein without definition have the
meanings assigned to them in the Plan;

WHEREAS, the Optionee is [A NON-EMPLOYEE DIRECTOR OF THE COMPANY OR
{INSERT DESCRIPTION OF OTHER TYPE OF NON-EMPLOYEE}] [AN EMPLOYEE DIRECTOR,
OFFICER AND/OR KEY EMPLOYEE OF THE COMPANY];

WHEREAS, the Committee has granted Non-Statutory Options to purchase
shares of Class A Common Stock, par value $0.01 per share, of the Company
("Common Stock") to the Optionee pursuant to the Plan on the terms and subject
to the conditions set forth herein; and

WHEREAS, the Optionee desires to accept said Non-Statutory Options
pursuant to the terms and subject to the conditions set forth herein;

NOW, THEREFORE, the parties agree as follows:

1. GRANT OF OPTIONS. The Company hereby grants Non-Statutory
Options to purchase up to __________ (_____) shares of Common Stock
(collectively, the "Option Shares") to the Optionee, subject to all of the
terms and conditions contained in this Agreement and the Plan. The
Non-Statutory Options are not "incentive stock options" within the meaning of
Section 422 of the Code.

2. TIMING OF EXERCISE.

[(a) EXCEPT AS PROVIDED IN SECTION 2(b) BELOW, THE
NON-STATUTORY STOCK OPTIONS SHALL BECOME EXERCISABLE IN FULL AS FOLLOWS:

(i) ON THE DATE THAT THE COMPANY ACHIEVES ANNUAL
PRIMARY EARNINGS PER SHARE OF COMMON STOCK OF $_____ AFTER TAX BUT
WITHOUT GIVING EFFECT TO ANY FAS 109 VALUATION ADJUSTMENTS; OR

<PAGE> 2

(ii) IF THE NON-STATUTORY STOCK OPTIONS HAVE NOT
ALREADY BECOME EXERCISABLE PURSUANT TO CLAUSE (I) ABOVE, ON __________,
_____.

AT ANY TIME AFTER THE NON-STATUTORY STOCK OPTIONS BECOME EXERCISABLE, THE
OPTIONEE MAY EXERCISE THE NON-STATUTORY STOCK OPTIONS, IN WHOLE OR IN PART,
UNTIL EXPIRATION OF THE NON- STATUTORY STOCK OPTIONS PURSUANT SECTION 5 BELOW.]

OR:
[(a) EXCEPT AS PROVIDED IN SECTION 2(B) BELOW, THE
NON-STATUTORY STOCK OPTIONS SHALL VEST OVER A THREE (3) YEAR PERIOD AND SHALL
BECOME EXERCISABLE FROM TIME TO TIME AS FOLLOWS: _____ (___) OPTION SHARES ON
THE FIRST ANNIVERSARY OF THIS AGREEMENT; _____ (___) ON THE SECOND ANNIVERSARY
OF THIS AGREEMENT; AND _____ (___) OPTION SHARES ON THE THIRD ANNIVERSARY OF
THIS AGREEMENT. AT ANY TIME AFTER EACH PORTION OF THE NON-STATUTORY STOCK
OPTIONS BECOME EXERCISABLE, THE OPTIONEE MAY EXERCISE SUCH PORTION OF THE
NON-STATUTORY STOCK OPTIONS, IN WHOLE OR IN PART, UNTIL EXPIRATION OF THE
NON-STATUTORY STOCK OPTIONS PURSUANT TO SECTION 5 BELOW.]

OR:

[(a) INSERT SUCH VESTING TERMS AS DETERMINED BY THE
COMPENSATION COMMITTEE.]

(b) Notwithstanding anything to the contrary in Section 2(a)
above, the Non-Statutory Options shall become immediately fully vested and
fully exercisable:

3. EXERCISE PRICE. The exercise price for the Non-Statutory
Options shall be $_____ per Option Share (the "Exercise Price"), and shall be
due and payable, in cash, by certified or official bank check, by money order,
in shares of Common Stock or, in the sole discretion of the Committee, by
personal check in full or partial payment of any Option Shares. Pursuant to
the terms

- 2 -
<PAGE> 3

of the Plan, the Company may, in its sole discretion, lend money to the
Optionee, guarantee a loan to the Optionee or otherwise assist the Optionee to
obtain the cash necessary to exercise all or a portion of the Option or to pay
any tax liability of the Optionee attributable to such exercise. The Optionee
shall remit the withholding tax, if any, owed by the Optionee under Section 10
below with respect to the exercise of the Non-Statutory Options to the Company
along with the Exercise Price.

4. PROCEDURE FOR EXERCISE. In order to exercise the Non-Statutory
Options, the Optionee shall deliver to the Chairman of the Board or Secretary of
the Company or such agent as such officers may delegate in their stead, the
following: (i) the aggregate Exercise Price and any withholding tax required
under Section 10 below; (ii) a completed and executed Exercise of Stock Option
in the form attached hereto as Exhibit A; and (iii) if required, the written
representation and/or other information described in Section 6 below. The
Company shall cause certificates for Option Shares purchased hereunder to be
delivered to the Optionee as soon as reasonably practicable thereafter.

5. EXPIRATION OF OPTIONS. The unexercised portion, if any, of the
Non-Statutory Options shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the following: [IF
NOT EMPLOYED BY THE COMPANY: (i) THREE (3) MONTHS AFTER THE DATE THAT THE
OPTIONEE CEASES TO BE {A DIRECTOR OF THE COMPANY} FOR ANY REASON; OR (ii) THE
DATE THAT IS TEN (10) YEARS FROM THE DATE THAT THE COMMITTEE GRANTS THE NON-
STATUTORY OPTIONS TO THE OPTIONEE.] [IF EMPLOYED BY THE COMPANY:

(i) THREE (3) MONTHS AFTER THE DATE THAT THE
OPTIONEE'S EMPLOYMENT WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS
TERMINATED FOR ANY REASON OTHER THAN BY REASON OF (A) "CAUSE," WHICH,
SOLELY FOR PURPOSES OF THIS AGREEMENT, SHALL MEAN THE TERMINATION OF
THE OPTIONEE'S EMPLOYMENT BY REASON OF THE OPTIONEE'S WILLFUL
MISCONDUCT OR NEGLIGENCE, (B) THE MENTAL OR PHYSICAL DISABILITY (WITHIN
THE MEANING OF SECTION 22(e)(3) OF THE CODE) OF THE OPTIONEE AS
DETERMINED BY A MEDICAL DOCTOR SATISFACTORY TO THE COMMITTEE OR (C)
THE DEATH OF THE OPTIONEE;

(ii) IMMEDIATELY UPON THE TERMINATION OF THE
OPTIONEE'S EMPLOYMENT WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES FOR
CAUSE;

(iii) ONE (1) YEAR AFTER THE DATE THAT THE OPTIONEE'S
EMPLOYMENT WITH THE COMPANY IS TERMINATED BY REASON OF A MENTAL OR
PHYSICAL DISABILITY (WITHIN THE MEANING OF SECTION 22(e)(3) OF THE
CODE) AS DETERMINED BY A MEDICAL DOCTOR SATISFACTORY TO THE COMMITTEE;

(iv) (A) ONE (1) YEAR AFTER THE DATE OF TERMINATION
OF THE OPTIONEE'S EMPLOYMENT WITH THE COMPANY BY REASON OF DEATH OF THE
OPTIONEE, OR (B) THREE (3) MONTHS AFTER THE DATE THAT THE OPTIONEE DIES
IF SUCH DEATH OCCURS DURING THE ONE (1) YEAR PERIOD SPECIFIED IN
SECTION 5(a)(III) ABOVE; OR

(v) THE DATE THAT IS TEN (10) YEARS FROM THE DATE
THAT THE COMMITTEE GRANTS THE NON-STATUTORY OPTIONS TO THE OPTIONEE.]

- 3 -
<PAGE> 4

6. REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE. The Optionee
represents and warrants that:

(b) The Optionee is aware that the Shares are not registered
under the Securities Act of 1933, as amended (the "Act"), or the securities or
"blue sky" laws of any state or jurisdiction (the "Blue Sky Laws") as of the
date of this Agreement, and the Company is under no obligation to cause the
Option Shares to be registered under the Act or the Blue Sky Laws; and that in
the event that the Option Shares are not registered under the Act or the Blue
Sky Laws for any reason at a time when the Optionee desires to exercise all or
any part of the Non-Statutory Options, then, in addition to the other terms and
conditions of this Agreement, such exercise shall be conditioned upon
determination by the Committee that the Option Shares may be issued to the
Optionee without registration under the Act or the Blue Sky Laws. The Committee
may require the Optionee to deliver to the Company an agreement or undertaking
setting forth any factual information that the Committee deems necessary to
determine whether the Option Shares may be issued to the Optionee without
registration under the Act or the Blue Sky Laws, including, without limitation,
a representation and warranty that the Optionee is acquiring the Option Shares
for investment and not with a view to, or for sale in connection with, the
distribution of any the Option Shares.

(c) The Optionee is aware that the Option Shares issuable upon
exercise of the Non-Qualified Options may be subject to the terms of the Lock-Up
Agreement between the Optionee and [SCHRODER & CO. INC., DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION AND MCDONALD & COMPANY SECURITIES, INC.]

8. TRANSFERABILITY. The Optionee or any beneficiary thereof
shall have the power or right to sell, exchange, pledge, transfer, assign or
otherwise encumber or dispose of the Optionee's or such beneficiary's
Non-Statutory Stock Options only as follows: (i) to the spouse or any children
or grandchildren of the Optionee or such beneficiary receiving the
Non-Statutory Stock Options; (ii) as a charitable contribution or gift to or
for the use of any person or entity described in Section 170(c) of the Code;
(iii) to any Controlled Entity; or (iv) by will or the laws of intestate
succession.

9. RIGHTS PRIOR TO EXERCISE OF OPTION. The Optionee shall not
have any rights as a stockholder with respect to any Option Shares subject to
the Non-Statutory Options prior

- 4 -
<PAGE> 5

10. TAXES. The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of all
federal, state, local and other taxes required by law to be withheld with
respect to the Non-Statutory Options including, but not limited to: (i)
reducing the number of Option Shares otherwise deliverable, based upon their
fair market value on the date of exercise, to permit deduction of the amount of
any such withholding taxes from the amount otherwise payable under this
Agreement; (ii) deducting the amount of any such withholding taxes from any
other amount then or thereafter payable to the Optionee; or (iii) requiring the
Optionee, beneficiary or legal representative to pay to the Company the amount
required to be withheld or to execute such documents as the Company deems
necessary or desirable to enable it to satisfy its withholding obligations as a
condition of releasing the Option Shares.

11. GENERAL PROVISIONS.

(a) The Company shall at all time during the term of the
Non-Statutory Options reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Agreement in
respect of vested Option Shares, shall pay all fees and expenses necessarily
incurred by the Company in connection therewith, and shall use its best efforts
to comply with all laws and regulations that, in the reasonable opinion of
counsel for the Company, are applicable thereto.

(i) if to the Company, to:

Hawk Corporation
Suite 30-5000, 200 Public Square
Cleveland, Ohio 44114
Telecopier: 216-861-4546
ATTN: Chairman of the Board

- 5 -
<PAGE> 6

with a copy to:

Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Telecopier: 216-621-6536
ATTN: Marc C. Krantz, Esq.

(ii) if to the Optionee, to:

[INSERT NAME, ADDRESS AND TELECOPIER NUMBER]

(c) The headings and other captions in this Agreement are for
convenience of reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.

IF EMPLOYED BY THE COMPANY:
[(d) THE PROVISIONS OF THIS AGREEMENT RELATE SOLELY TO
GRANTING OF THE NON-STATUTORY STOCK OPTIONS TO THE OPTIONEE PURSUANT TO THE PLAN
AS OF THE DATE HEREOF AND DO NOT ADDRESS OR RELATE TO ANY CONDITIONS OF THE
OPTIONEE'S EMPLOYMENT WITH THE COMPANY. NOTHING IN THIS AGREEMENT OR THE PLAN
SHALL CONFER UPON THE OPTIONEE ANY RIGHT OR ENTITLEMENT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT BY THE COMPANY NOR INTERFERE IN ANY WAY WITH THE
RIGHT OR POWER OF THE COMPANY TO TERMINATE THE OPTIONEE'S EMPLOYMENT AT ANY
TIME, WITH OR WITHOUT CAUSE.]

(d) No change or modification of this Agreement shall be valid
unless the same is in writing and signed by the Company and the Optionee.

(e) No waiver of any provision of this Agreement shall be
valid unless in writing and signed by the person against whom it is sought to be
enforced. The failure of any party at any time to insist upon strict performance
of any condition, promise, agreement or understanding set forth herein shall not
be construed as a waiver or relinquishment of the right to insist upon strict
performance of the same or other condition, promise, agreement or understanding
at a future time.

(f) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto. Nothing in this
Agreement is intended, and it shall not be construed, to give any person or
entity other than the parties hereto any right, remedy or claim under or in
respect of this Agreement or any provisions hereof.

(g) This Agreement and all rights hereunder shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Ohio applicable to contracts made and

- 6 -

<PAGE> 7

to be performed entirely within that State. In the event of any conflict between
this Agreement and the Plan, the provisions of the Plan shall govern.

(h) This Agreement and the Plan set forth all of the
agreements, warranties and representations among the parties hereto and thereto
with respect to the Non-Statutory Options, and there are no other promises,
agreements, conditions, understandings, representations or warranties, oral or
written, express or implied, among them with respect to the Non-Statutory
Options other than as set forth herein and therein. Any and all prior agreements
with respect to the Non-Statutory Options are hereby revoked.

(i) This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has executed this
Agreement, all as of the date first written above.

HAWK CORPORATION

By:
----------------------------------------
Its:
---------------------------------------

-------------------------------------------
[INSERT NAME OF THE OPTIONEE]

- 7 -

<PAGE> 8

EXHIBIT A

FORM OF EXERCISE OF NON-STATUTORY STOCK OPTION

Hawk Corporation
Suite 30-5000, 200 Public Square
Cleveland, Ohio 44114

Attention: Chairman of the Board

Gentlemen:

The undersigned Optionee hereby exercises all or a portion of the
Non-Statutory Options granted to him pursuant to the Non-Statutory Stock Option
Agreement dated as of __________, _____, between Hawk Corporation (the
"Company") and the Optionee with respect to __________ shares of Class A Common
Stock, par value $0.01 per share, of the Company covered by said Non-Statutory
Options, and tenders herewith at the price of $__________ per share, of which
$__________ represents payment of the exercise price thereof and $__________
represents payment of any withholding tax due.

The registered address on the share certificate to be issued to the
Optionee should be:
_______________________________________________________________________________.
The Optionee's social security number is: _________________________.

Optionee:

-------------------------------------
Signature

-------------------------------------
Typed or Printed Name

-------------------------------------
Date of Exercise

<PAGE> 1
Exhibit 10.12

[HAWK LOGO]

June __, 1997

Mr. Jess F. Helsel
aka J.F. Helsel
Box 477, RFD No. 3
Salem, Indiana 47161

RE: AGREEMENTS

Dear Jess:

This will confirm the agreements we have reached concerning the
continuing relationship between you and Helsel, Inc.

As you know, there is an existing "Employment Agreement" between you
and Helsel, Inc., a Delaware corporation ("Buyer"), which was entered into at
the time of the Buyer's acquisition of Helsel, Inc., an Indiana corporation
(the "Company"). That Employment Agreement was dated July 1, 1994. There is
also a "Consulting Agreement" of the same date between the same parties,
pursuant to which you were engaged as a consultant for a period of four years,
commencing on the date of termination of the Employment Agreement.

We have reached agreement on a number of changes. First, with respect
to the Employment Agreement, the "Employment Period" (as defined therein) will
be extended, for a period of one additional year, from July 1, 1997 through June
30, 1998. Your Base Salary for that year will be at the rate of $150,000 per
year. The Annual Bonus for this extension will be computed in the manner
described in Section 2(b) of the Employment Agreement, except that it will be an
amount equal to ten percent (10%) of the amount by which Buyer's earnings before
interest, income taxes, depreciation, and amortization for the calendar year
ending December 31, 1997 exceed $4,100,000. In addition, where the Employment
Agreement describes your position as President of Buyer and sets forth your
duties in that position, and later refers to your term as President and
otherwise refers to you as President, we have agreed that during this extension
year Buyer will search for and hire a successor President, that once that person
is hired your title and duties will change and that your primary efforts will be
to assist in the transition in whatever ways may be

200 PUBLIC SQUARE - SUITE 30-5000 - CLEVELAND, OHIO 44114-2301 -
(216) 861-3553 - FAX (216) 861-4546

<PAGE> 2

HELSEL, INC.

Mr. Jess F. Helsel
June ___, 1997
Page 2

necessary and appropriate, including introducing the new President to customers,
orienting him/her to the company, etc. You will also have continuing involvement
with Buyers acquisition projects such as the current Sinterloy transaction. In
addition, we would expect to utilize your talents in whatever ways may be
beneficial to the company during the balance of the year. Upon the appointment
of a President to succeed you, you will become Chairman of Helsel, Inc. with
continuing reporting responsibility to Hawk Corporation's Executive Vice
President. Except as set forth in this letter, each and every other term of the
Employment Agreement shall remain in full force and effect through June 30,
1998.

We have also agreed to some changes to the Consulting Agreement. First,
the "Consulting Period" (as defined therein) shall consist of a period of four
years commencing on July 1, 1998 and terminating at the close of business on
June 30, 2002. The rate of compensation shall be the same as set forth in
paragraph 4 of the Consulting Agreement, except that the first payment shall be
due with the first quarter ending September 30, 1998. Each and every other term
of the Consulting Agreement shall remain in full force and effect.

I trust that the foregoing accurately sets forth the changes to which
we have agreed. If so, please acknowledge your agreement by signing and dating
the attached copy of this letter, and then return it to me at your earliest
convenience.

Sincerely,

/s/ Jeffrey H. Berlin

Jeffrey H. Berlin

AGREED AND ACKNOWLEDGED:

/s/ Jess F. Helsel
- ------------------------------
JESS F. HELSEL

Aug. 13, 1997

<PAGE> 1

Exhibit 10.13

EMPLOYMENT AGREEMENT

TIMOTHY J. HOUGHTON

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into on this 2nd day of January, 1997, by and between HAWK CORPORATION, a
Delaware corporation (the "Company"), and TIMOTHY J. HOUGHTON, residing at 501
Stone Ridge, St. Louis, Missouri 63122 ("Houghton").

WHEREAS, Houghton is currently employed by Houghton Acquisition
Corporation, a Missouri corporation, doing business as Hutchinson Foundry
Products Company, ("HFP") as its President and is a member of its Board of
Directors;

WHEREAS, the Company and Houghton have entered into a Stock
Purchase Agreement, dated November 7, 1996 (the "Stock Purchase Agreement"),
providing for the purchase by the Company of all of the common stock and certain
Preferred Stock Notes of HFP;

WHEREAS, HFP, after the closing of the Stock Purchase Agreement,
will be a wholly-owned subsidiary of the Company and the Company will assign
this Agreement in favor of HFP;

WHEREAS, Houghton has unique talents and experiences which are
of value to HFP; and

WHEREAS, Houghton has agreed to continue in his employment with
HFP following consummation of the Stock Purchase Agreement on the terms set
forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants set forth herein, the Company and Houghton agree as follows:

1. EMPLOYMENT. The Company hereby employs Houghton, and Houghton
agrees to be employed by the Company, upon and subject to the Closing in the
position set forth in paragraph 3 below, for a period of three years commencing
on the Closing of the Stock Purchase Agreement, and terminating at the close of
business on December 31 prior to the third anniversary of the Closing. The
period during which Houghton is employed hereunder is hereinafter referred to as
the "Employment Period."

- 1 -

<PAGE> 2

2. COMPENSATION AND BENEFITS.

(a) BASE SALARY. The Company shall cause HFP to pay
Houghton a salary at the rate of $160,000 per year for each year of the
Employment Period (the "Base Salary"). The Company shall cause HFP to pay the
Base Salary to Houghton in equal installments on HFP's normal pay periods.
Houghton's Base Salary will be reviewed by the Company (without Houghton's
participation) annually, and will be subject to further increase, but not
decrease, in the Company's sole discretion.

(b) BONUS. During the Employment Period, Houghton shall
be entitled to earn an annual incentive bonus (the "Annual Bonus") based on the
growth of HFP's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") for the applicable calendar year. Within 30 days after
the Company's receipt of the year end audit or review of the Company's financial
statements for the preceding fiscal year by the independent certified public
accountant of the Company (the "Financial Statements"), but in no event later
than April 30 of each year, the Company shall cause HFP to pay Houghton a cash
incentive payment for the fiscal year provided HFP's EBITDA for such year
exceeds, by a minimum of 10%, HFP's EBITDA for its fiscal year prior to that
year. The Annual Bonus for the 1997 fiscal year shall be calculated and
determined based upon HFP's actual EBITDA for fiscal year 1996 or $2,500,000,
whichever is greater ("1996 EBITDA"). Annual Bonus shall be payable if EBITDA
for 1997 exceeds 1996 EBITDA and for years subsequent to 1997 if HFP's EBITDA
exceeds the prior year (i) by 10% but less than 11% the Annual Bonus shall be
equal to 162/3 of 50% of Base Salary, (ii) by 11% but less than 12% the Annual
Bonus shall be equal to 331/3 of 50% of Base Salary, (iii) by 12% but less than
13% the Annual Bonus shall be equal to 50% of 50% of Base Salary, (iv) by 13%
but less than 14% the Annual Bonus shall be equal to 662/3 of 50% of Base
Salary, (v) by 14% but less than 15% the Annual Bonus shall be equal to 832/3%
of 50% of Base Salary, and (vi) by 15% or more, the Annual Bonus shall be equal
to 50% of Base Salary. In addition, Houghton shall receive a cash payment equal
to 5% of the EBITDA increase greater than 15% of EBITDA for each year except
with respect to 1996 for which the increase shall be based on the 1996 EBITDA of
the Employment Period. EBITDA shall be determined by the Company's independent
accountant consistent with GAAP used for HFP's December 31, 1995 audited
financial statement and a written report thereof shall be delivered to Houghton.
HFP's interest, income taxes, depreciation, amortization and corporate charges
to support a home office for Company and other charges not directly attributed
to the operation of the business of HFP in its ordinary course shall be added to
HFP's net income (loss) and excess capital charges calculated as twelve percent
(12%) of capital expenditures of HFP in excess of One Hundred Thousand Dollars
($100,000) shall be subtracted by said accountants to determine EBITDA for the
purpose hereof. Pass through charges such as insurance, accounting, legal and
travel expenses directly attributed to the operation of the business of HFP in
its ordinary course shall not be adjusted. The Company shall make available
copies of the financial statements to Houghton. Any disputes with respect to the
amount of HFP's EBITDA for purposes of this paragraph 2(b) shall be conclusively
resolved by the Company's auditors.

- 2 -

<PAGE> 3

(c) BENEFITS. The Company will cause HFP to provide
Houghton with health insurance benefits and disability insurance at least
equivalent to those previously provided to Houghton by HFP. In addition, the
Company shall cause HFP to provide or maintain $1,000,000 term life insurance
coverage provided it is available at standard rates for the benefit of Houghton
or his designated beneficiary. Houghton shall also be entitled to participate,
subject to any applicable eligibility requirements, in any HFP benefit program
offered to executive employees by HFP, including any 401(k), retirement or
pension plan.

(d) VACATION. Houghton shall be entitled to four weeks
of paid vacation during each year of the Employment Period. Unused paid vacation
leave may not be carried over to subsequent years.

(e) BUSINESS EXPENSES. During the Employment Period,
the Company shall cause HFP to reimburse Houghton for all reasonable and
necessary business expenses incurred in the ordinary course of HFP's business by
Houghton on behalf of HFP upon Houghton's submission of a written report that
details the nature and amount of such expenses consistent with Internal Revenue
Service requirements that will permit HFP to deduct such expenses (or a
percentage thereof) on HFP's federal income tax return as other than
compensation. In addition, the Company shall cause HFP to provide a country club
allowance of $600 per month during the term of this Agreement.

(f) AUTOMOBILE. During the Employment Period, the
Company shall cause HFP to continue to provide Houghton a vehicle comparable to
his present vehicle. At such time as the vehicle is three (3) years old,
Houghton shall, in his sole discretion, replace the vehicle with a vehicle that
is comparable. All vehicle costs shall be borne by HFP.

3. POSITION, DUTIES AND AUTHORITY.

(a) POSITION AND DUTIES. Houghton shall, during the
Employment Period, serve as President of HFP, reporting and responsible to the
Chairman and/or the Vice Chairman of the Board of Directors and such other
person or persons as may be designated by the Company. As President during the
Employment Period, Houghton shall perform such duties and responsibilities as
the Company shall request from time to time with respect to the business of HFP,
including but not limited to the following: (i) managing the policy, strategy
and day-to-day operations of the business; (ii) cooperating in the
identification, hiring and promotion of key management; (iii) promptly
furnishing accurate written reports, data, analyses or information pertaining to
HFP as may be required, from time to time, as determined by the Company; (iv)
observing and complying with such standards and procedures as may, from time to
time, be established by the Company; and (iv) performing such duties or
functions as are customarily assigned to the President of a company. During the
Employment Period, Houghton shall diligently perform his duties hereunder and
devote

- 3 -

<PAGE> 4

substantially all of his working time for HFP and shall perform the services
hereunder to the best of his ability and skill and in such a manner as to
promote the best interest of the Company and HFP. As a matter of record, except
for the companies listed below which are the companies Houghton currently serves
as a Board member or trustee, Houghton shall not serve as a member or advisor to
any additional Board of Directors or Trustees without the Company's written
consent; provided, however, Houghton may serve as a member or advisor on behalf
of other non-profit companies without the Company's consent:

Steel Weld Company
Cardinal Glennon Children's Hospital

4. TERM AS PRESIDENT.

(a) TERM OF EMPLOYMENT. Houghton's term as President
shall end with the earliest to occur of:

(i) the death of Houghton;

(ii) the discharge of Houghton "For Cause"
in accordance with paragraph 4(b) below;

(iii) the discharge of Houghton because of a
"Disability" in accordance with paragraph 4(c) below;

(iv) the voluntary resignation of Houghton,
after first having given 90 days' prior written notice
to the Company;

(v) HFP's material violation of any
provision of this Agreement; or

(vi) the expiration of the original three
year term hereof.

(b) Termination for Cause. "For Cause" shall mean any
one or more of the following:

(i) Houghton's engaging in fraud,
embezzlement, misappropriation of funds or like conduct
against HFP;

(ii) Houghton's commission of any crime
constituting a felony in the jurisdiction in which
committed;

(iii) Houghton's commission of any criminal
act against or involving HFP (whether or not a felony);

- 4 -

<PAGE> 5

(iv) Houghton's material violation of any
provision of this Agreement;

(v) Houghton's violation of any federal,
state or local law, regulation or ordinance relating to
personal conduct in the workplace, such as laws,
regulations or ordinances pertaining to discrimination
or harassment;

(vi) Houghton's breach of the
representations and warranties set forth in paragraph
7; or

(vii) Houghton's breach of obligations set
forth in paragraphs (a) through (f) in paragraph 6.

(c) TERMINATION FOR DISABILITY. The Company may
terminate Houghton as President hereunder at any time because of a "Disability,"
which shall mean a physical or mental incapacity, whether partial or total, that
has prevented or will prevent Houghton from exercising the powers or performing
the duties assigned to him hereunder for a continuous period of three months or
for shorter periods aggregating 5 months during any 12 month period.

(d) PAYMENTS AND BENEFITS UPON TERMINATION. In the
event of termination as President, pursuant to (c) above because of a Disability
which prevents Houghton from rendering full-time services, the Company shall
cause HFP to continue to pay Houghton's Base Salary, Annual Bonus, and Benefits
set forth in 2(c) for the full fiscal year in which the disability occurs. All
disability insurance proceeds received by Houghton as a result of insurance
maintained by HFP shall be set off against the foregoing payment obligations. In
the event Houghton is terminated For Cause, Houghton shall be entitled only to
compensation and benefits provided in paragraph 2 relating to the period through
the date of termination For Cause, and he shall immediately return the Company's
vehicle. In the event of termination for any other reason except resignation as
Section 5 provides, the Company shall cause HFP to continue to pay Houghton's
Base Salary and benefits through the Employment Period and to pay the Annual
Bonus for the full year in which termination occurs. In addition, the Company
shall cause HFP to continue to provide and/or pay for the then existing health
care coverage to Houghton and/or his wife for the balance of the Employment
Period.

5. RESIGNATION. In the event of the voluntary resignation of
Houghton, his right to compensation and benefits as provided in paragraph 2
shall terminate, and Houghton shall remain bound by the provisions of paragraph
6.

- 5 -

<PAGE> 6

6. PROPRIETARY RIGHTS.

(a) TRADE SECRETS. Houghton acknowledges that as a
result of his employment hereunder, he will be making use of, acquiring and/or
adding to confidential information of a special and unique nature relating to
such matters as the Company's and its subsidiaries', including HFP's, trade
secrets, systems, procedures, manuals, confidential reports, formulae, designs,
application methods, parts lists, supplier lists, customer lists, price lists,
pricing and sales information, marketing strategies and other financial
information, drawings, business records, and other information which has not
been published or disseminated or otherwise become a matter of general public
knowledge ("Trade Secrets"). As an inducement to the Company to enter into this
Agreement, Houghton promises not to use or disclose, directly or indirectly, any
Trade Secrets to any person either during or after the Employment Period, except
to other employees of the Company and its subsidiaries, including HFP, as
necessary in the regular course of his employment, or except as otherwise
expressly authorized in writing by the Company.

(b) CONFIDENTIALITY. Houghton promises that all
knowledge and information that he may acquire from the Company and its
subsidiaries, including HFP, or from employees or consultants of the Company and
its subsidiaries, including HFP, regarding the Trade Secrets and other
confidential information shall for the period of time commencing as of the date
of Houghton's termination or the date Houghton receives his last payment from
HFP, whichever is later, and continuing for seven (7) years thereafter for all
purposes be regarded as strictly confidential and held in trust and solely for
the benefit and use of the Company and shall not, without the written permission
of the Company, be directly or indirectly disclosed by Houghton to any person
other than to the proper and duly authorized employees of the Company and its
subsidiaries, including HFP.

(c) DISCOVERIES OF HOUGHTON. On behalf of Houghton, his
heirs and representatives, Houghton promises to promptly communicate and fully
disclose to the Company and upon request shall, without additional compensation,
assign and execute all papers necessary to assign to the Company or its
nominees, free of encumbrance or restrictions, all inventions, ideas, designs,
discoveries and improvements which pertain or relate to the business of the
company, whether patentable or not, conceived or originated by Houghton solely
or jointly with others, at the expense of the company, or at the facilities of
the Company, or at the request of the Company, or in the course of Houghton's
employment, or based on knowledge or information obtained during the course of
Houghton's employment by the Company whether or not conceived during regular
working hours. This provision relates to any matters conceived partially or
fully during the term of this Agreement and within five years thereafter. All
such assignments shall include the patent rights in this and all foreign
countries. All such inventions, ideas, designs, discoveries and improvements
shall be the exclusive property of the Company. Houghton shall assist the
Company in obtaining patents

- 6 -

<PAGE> 7

on all such inventions, ideas, designs, discoveries and improvements deemed
patentable by the Company and shall execute all documents and do all things
necessary to obtain letters patent, vest the Company with full and exclusive
title thereto, and protect the same against infringement by others.

(d) INTELLECTUAL PROPERTY OF HOUGHTON. As a matter of
record, Houghton lists below a complete list of all inventions, ideas, design,
discoveries and improvements, patented or unpatented, which Houghton has made or
conceived prior to the commencement of Houghton's employment by the Company, it
being understood that the inventions, ideas, designs, discoveries and
improvements so listed are excluded from this Agreement: none.

(e) PROPERTY OF THE COMPANY. Houghton recognizes
further that all records, drawings, data, computer programs, samples, models and
all other tangible materials or copies or extracts thereof relating to, in
connection with or otherwise concerning the Company's operations, investigations
or business, whether or not Trade Secrets, made or received by Houghton during
his Employment Period, are and shall be the property of the Company exclusively,
and without additional consideration, Houghton promises to keep the same at all
times in the Company's custody and subject to the Company's control and to
surrender the same at the termination of his employment if not before. All
files, records, documents, drawings, specifications, equipment and information
with respect to suppliers to the Company and customers of the Company, and
similar items relating to the business of the company, whether prepared by
Houghton or otherwise coming into the Company's possession, shall remain the
exclusive property of the Company. Houghton further agrees that he will not make
or retain any copies of any of the foregoing and that he will so represent to
the Company upon termination of his employment hereunder.

(f) NON-COMPETITION. Houghton agrees that during the
Employment Period and the five years next following the termination of the
Employment Period or the date Houghton receives his last payment from HFP,
whichever is later, he will not directly or indirectly or by acting in concert
with others, whether as an owner, employee, partner, shareholder, officer,
licensor, licensee, trustee, principal, consultant, agent, individually or in
any other capacity, engage in the business of the manufacture or sale of, or
attempt to manufacture or sell, products or services similar in kind or similar
in purpose to those products or services manufactured or sold by HFP, to any
customer of HFP or to any person, firm or corporation in competition with HFP,
nor employ or attempt to employ or solicit for any employment competitive with
the Company or its subsidiaries, including HFP, any of the Company's or its
subsidiaries', including HFP's, employees.

Houghton agrees that during his employment he will
undertake no planning for or organization of any business activity competitive
with the work he performs as an employee of the Company or its subsidiaries,
including HFP, nor will he combine or conspire with other employees of the
Company or its subsidiaries, including HFP, for the purpose of organizing any
such competitive business activity.

- 7 -

<PAGE> 8

If Houghton violates this restrictive covenant and
the Company brings legal action for injunctive or other relief, the Company
shall not, as a result of the time involved in obtaining the relief, be
deprived of the benefit of the full period of the restrictive covenant.
Accordingly, the restrictive covenant shall be deemed to have the duration
specified in this paragraph 6(f), computed from the date the relief is granted,
but reduced by the time between the period when the restriction began to run
and the date of the first violation of the covenant by Houghton.

If any court shall determine that the lack of
geographical limitation of any restriction contained in this paragraph is
unenforceable, it is the intention of the parties that the restrictive covenants
set forth herein shall not thereby be permitted to be terminated but rather
shall be deemed amended to the extent required to render it valid and
enforceable. Such amendment shall apply only with respect to the operation of
this paragraph in the jurisdiction of the court that has made the adjudication.

(g) Injunctive Relief. Houghton acknowledges that
breach by Houghton of the restrictive covenants set forth in paragraph 6 of this
Agreement will irreparably injure the Company and/or HFP and the Company and/or
HFP will not have an adequate remedy at law, Houghton, therefore, consents and
agrees that for any threatened or actual violation or breach of any provisions
of paragraph 6 of this Agreement, the Company will be entitled to equitable
relief including without limitation a temporary and permanent injunction against
Houghton, without the necessity of proving actual damage or the posting of a
bond, in addition to any other legal rights and remedies that the Company may
have.

7. REPRESENTATIONS OF HOUGHTON. Houghton represents and
warrants, on behalf of himself, his immediate family and any person, firm or
corporation in which he has a substantial interest, that:

(a) They do not, and will not during the Employment
Period, have any direct or indirect ownership interest in any
entity with which HFP has a business relationship or competes
with HFP, except that the ownership of investments at no time
exceeding 1% of the issued and outstanding capital stock of a
publicly-held corporation shall not constitute a breach of this
representation and warranty; and

(b) The execution of this Agreement or his employment
by the Company, will not break any agreement or covenant entered
into by Houghton that is currently in effect.

8. ACKNOWLEDGMENTS. Houghton hereby acknowledges that: (i) he
has carefully read all of the terms of this Agreement and that such terms have
been fully explained to him; (ii) he understands the consequences of each and
every term of this Agreement; (iii) he has had sufficient time and opportunity
to consult with his own legal advisor prior to signing this Agreement and that
the Company has encouraged him to seek and he has had the benefit

- 8 -

<PAGE> 9

of legal counsel of his choice prior to signing this Agreement; (iv) he
specifically understands that by signing this Agreement he is giving up certain
rights he otherwise may have had, and that he is agreeing to limit his freedom
to engage in certain employment during and after the term of this Agreement.

9. SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, and, except as otherwise provided herein,
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

10. REMEDIES CUMULATIVE. All remedies specified herein or
otherwise available shall be cumulative and in addition to any and every other
remedy provided hereunder or now or hereafter available.

11. NOTICES. All notices and other communications hereunder
shall be sent by facsimile, registered or certified mail as follows:

If to the Company: Hawk Corporation
(a Delaware corporation)
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114-2301
Attention: Ronald E. Weinberg
Fax: (216) 861-4546

With a copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz P.L.L.
20th Floor, One Cleveland Center
Cleveland, Ohio 44114-1724
Fax: (216) 621-6536

If to Houghton: Timothy J. Houghton
501 Stone Ridge
St. Louis, Missouri 63122

With a copy to: Michael M. Sayers, Esq.
Summers, Compton, Wells & Hamburg
8909 Ladue Road
St. Louis, Missouri 63124
Fax: (314) 991-2413

- 9 -

<PAGE> 10

or to such other address as may be specified by the parties by like notice and
will b deemed when so delivered personally, or if mailed, two days after the
date of mailing.

12. ASSIGNMENT. This Agreement is a personal services contract
and it is expressly agreed that the rights and interests of Houghton and the
Company hereunder may not be sold, transferred, assigned, pledged or
hypothecated; provided, however, that the Company may, in its sole discretion,
assign this Agreement to HFP following the closing of the Stock Purchase
Agreement, pursuant to the terms of an assignment agreement substantially in the
form of Exhibit A attached hereto.

13. BINDING EFFECT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their heirs, representatives,
successors and permitted assigns.

14. GOVERNING LAW AND JURISDICTION. This Agreement is governed
by, and shall be construed and enforced in accordance with, the law (other than
the law of conflicts) of the State of Delaware. The Company may enforce any
claim arising out of or relating to this Agreement, in any federal court having
subject matter jurisdiction and located in St. Louis, Missouri or any state
court having subject matter jurisdiction and located in St. Louis County,
Missouri. Each of the parties hereto consents and agrees to the jurisdiction of
any state or federal court sitting in St. Louis County, Missouri and waives any
objection based on venue or forum non conveniens with respect to any action
instituted and agrees that any dispute concerning this Agreement shall be heard
only in the Courts described above.

15. CAPTIONS. The captions in this Agreement are included for
convenience only and shall not in any way affect the interpretation or
construction of any provision hereof.

16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and the same
agreement.

17. AMENDMENT; WAIVER. This Agreement may not be amended or
modified other than by a writing signed by each of the parties hereto. No waiver
or failure to act with respect to any breach or default hereunder shall be
deemed to be a waiver with respect to any subsequent breach or default, whether
of a similar or different nature.

18. INDEMNIFICATION.

(a) To the maximum extent permitted under the Delaware
General Corporation Law, the Company shall indemnify Houghton if he is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding,

- 10 -

<PAGE> 11

except that nothing herein contained shall be deemed to provide indemnification
in the event the Company and/or any of its subsidiaries, individually or
collectively, brings suit against Houghton.

(b) To the maximum extent permitted under the Delaware
General Corporation Law, the Company shall indemnify Houghton if he is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Company to procure a judgment in its
favor by reason of the fact that such person is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit.

19. ENTIRE AGREEMENT. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof, including a
certain employment agreement between Houghton and HFP dated January 1, 1993.

IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.

HAWK CORPORATION

By: /s/ Norman C. Harbert
----------------------------------
Its: Chairman
----------------------------------

/s/ Timothy J. Houghton
---------------------------------------
TIMOTHY J. HOUGHTON

- 11 -

<PAGE> 1

Exhibit 10.17

FORM OF
CONVERTIBLE
PROMISSORY NOTE
---------------

Series H-1
[$_____________] No. ____
Cleveland, Ohio
January 2, 1997

FOR VALUE RECEIVED, the undersigned, HAWK CORPORATION, a Delaware
corporation (the "Corporation") promises to pay to the order of
[______________________], a(n) [ individual/corporation] ( the "Holder"), the
principal amount of ______________________________ Dollars ($_______________) in
two (2) installments, each payable annually on the anniversary of the Closing of
the Stock Purchase Agreement by and among the Corporation,
__________________________, __________________________,
__________________________ and Holder, dated November 7, 1996 ("Stock Purchase
Agreement"), with the first installment of _______________________________
Dollars ($__________) due on the first anniversary of the Closing on January 2,
1998 and with the last and final installment of ______________________________
Dollars ($_________) due on January 2, 1999, and to pay interest from the date
of this Promissory Note (the "Note") on such principal amount from time to time
outstanding at the rate per annum of eight percent (8%) until maturity, or
otherwise paid in full. Interest shall be computed on a 360-day year basis on
the actual number of days elapsed and shall be paid quarterly on the first
business day of April, July, October and January in each year.

The failure by the Corporation to make any payment of such interest or
principal on this Note on or before the date any such payment is due shall NOT
constitute an event of default ("Event of Default") unless:

1. Thirty days have elapsed from the payment due date without the
Corporation's payment of the amount due; and

2. Written notice listing the overdue amount has been sent by the
Holders via facsimile to Ronald E. Weinberg ("Weinberg") at
216-861- 4546, and Byron S. Krantz ("Krantz") at 216-621-6536;
and

3. Ten days has elapsed without payment of the amount due by the
Corporation from the date the Holder's written notice has been
sent to both Weinberg and Krantz by facsimile; and

<PAGE> 2

4. If notice is provided before the end of the thirty days
provided for in Paragraph 1 above, the Event of Default shall
occur at the later of the thirty (30) days or ten (10) days
after said notice has been faxed.

In the Event of Default, the Note and all interest then due shall be
due and payable and the Holder may exercise any or all of the remedies provided
by law. If the Note is not paid at maturity, whether maturity occurs by lapse of
time or acceleration, the principal of and the unpaid interest on this Note,
thereafter until paid shall be at the per annum rate of twelve percent (12%).

In the event, but only in the event, the Corporation undertakes an
initial public offering of its Class A common stock, the Holder shall be
entitled to elect to convert an amount of the outstanding principal under this
Note to the Class A common stock of the Corporation subject to the initial
public offering; PROVIDED, HOWEVER, in no event shall the aggregate principal
amount subject to conversion pursuant to this and all Series H-1 notes exceed
the sum of Five Hundred Thousand Dollars ($500,000.00), nor shall such Holder be
entitled to convert an amount of principal in excess of its proportionate share
of the Five Hundred Thousand Dollars, as set forth in Exhibit 2.4(a) to the
Stock Purchase Agreement. The exercise price for the conversion of principal
into Class A common stock of the Corporation shall be equal to the initial
public offering price of the Corporation's Class A common stock. This option to
convert shall be effective from the date of this Note through the maturity date
of the Note; PROVIDED, HOWEVER, should the Holder desire to extend the option to
convert for an additional nine month period beyond the maturity date of this
Note, the Holder shall provide written notice, not less than thirty (30) days
before the maturity date of the Note, of its intent to extend the maturity date
of this Note to the Corporation at its principal office, which notice shall
include a waiver of the maturity date to the date to coincide with the
additional nine month option to convert period. Any exercise of the conversion
option as herein provided shall be in writing, in form and substance as set
forth on Exhibit A, attached hereto and incorporated herein by reference, and
duly executed and delivered by Holder to the Corporation at its principal
office, accompanied by payment, by certified or official bank check payable to
the order of the Corporation. Any right or option to convert a principal sum of
this Note to the Corporation's Class A common stock is expressly contingent on
the Corporation's engaging in an initial public offering and does not grant,
either express or implied, to the Holder any preemptive rights or right to
require registration of the Corporation's securities. Any amount of principal so
converted shall be deemed to have been paid in full at the earlier of the date
the securities are properly recorded in the name of the Holder or Holder's
designee in the record book of the Corporation or the date certificates are
issued and delivered to the Holder. In the event the exercise of the option to
convert results in the issuance of any fractional share of Class A common stock,
then in such event, Holder shall be entitled to cash in lieu of such fractional
share.

This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.

- 2 -

<PAGE> 3

Holder shall be entitled to reasonable attorney's fees and costs in the
event Holder is forced to pursue collection of this Note.

This Note is subject to set-off pursuant to the terms of the Stock
Purchase Agreement.

All capitalized terms not otherwise defined in this Note shall have the
meanings set forth in the Stock Purchase Agreement.

This Note may be assigned to the Corporation's wholly-owned subsidiary,
Houghton Acquisition Corporation d/b/a Hutchinson Foundry Products Company,
following the Closing of the Stock Purchase Agreement.

This Note has been duly executed and delivered for value by the duly
authorized officer(s) of the Corporation.

HAWK CORPORATION

By:
-------------------------------

Title:
----------------------------

- 3 -

<PAGE> 4

[EXHIBIT A]

FORM OF EXERCISE OF OPTION TO CONVERT
-------------------------------------

(To Be Executed By The Holder If The Holder Desires to Exercise the Option
to Convert Evidenced By And Subject to The Terms of The Foregoing Note)

To:
-----------------------------------------------------

The undersigned hereby irrevocably elects to exercise his/her/its
option to convert _______________________________ Dollars of principal amount
outstanding under and evidenced by the Promissory Note of Corporation, dated
____________________, 199__, and to purchase thereunder, _________ shares of
Class A Common Stock of the Corporation, issuable upon exercise of the option to
convert and subject to the terms and conditions of the Note and accompanied
herewith by the surrender or other applicable assignment of the Note or relevant
portion thereof, and any applicable taxes payable by the undersigned pursuant to
the exercise of the option to convert.

The undersigned requests that certificate(s) for such shares are issued
in the name of:

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

(Please Print Name and Address)

Dated: _____________, 199___ NAME OF HOLDER:

-----------------------------------
(Print)

By:
-------------------------------
Name:
Title:

<PAGE> 1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
Jurisdiction of Percent of
Parent Subsidiaries Organization Ownership
- ------ ------------ ------------ ---------

<S> <C> <C> <C>
Hawk Corporation Friction Products Co. Ohio 100%
Logan Metal Stampings, Inc. Ohio 100%
Helsel, Inc. Delaware 100%
S.K. Wellman Holdings, Inc. Delaware 100%
Hutchinson Products Corporation Delaware 100%
Sinterloy Corporation Delaware 100%

Friction Products Co. Hawk Brake, Inc. Ohio 100%

S.K. Wellman S.K. Wellman Corp. Delaware 100%
Holdings, Inc. Wellman Friction Products
U.K. Corp. Delaware 100%
S.K. Wellman S.p.A. Italy 95%

S.K. Wellman Corp. The S.K. Wellman Company
of Canada Limited Canada 100%
S.K. Wellman S.p.A. Italy 5%
</TABLE>

<PAGE> 1

Exhibit 23.2

The following is the consent we would anticipate issuing upon the completion of
the audit of the 1994 financial statements. The audits of the 1995 and 1996
financial statements have been completed.

/s/ Ernst & Young LLP

November 18, 1997

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of Hawk Corporation
dated November , 1997, in the Registration Statement (Form S-1 No. 333-XXXXX)
and related Prospectus of Hawk Corporation for the registration of 000,000
shares of its common stock.

Cleveland, Ohio
November , 1997

<PAGE> 2

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of Helco, Inc. dated July 26,
1994, in the Registration Statement (Form S-1 No. 333-XXXXX) and related
Prospectus of Hawk Corporation for the registration of 000,000 of its common
stock.

/s/ Ernst & Young LLP

Cleveland, Ohio
November 18, 1997

<PAGE> 3

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of Sinterloy, Inc. dated August
22, 1997, in the Registration Statement (Form S-1 No. 333-XXXXX) and related
Prospectus of Hawk Corporation for the registration of 000,000 shares of its
common stock.

/s/ Ernst & Young LLP

Cleveland, Ohio
November 18, 1997

<PAGE> 4

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of S.K. Wellman
Limited Inc. and Subsidiaries dated September 26, 1996, in the Registration
Statement (Form S-1 No. 333-XXXXX) and related Prospectus of Hawk Corporation
for the registration of 000,000 shares of its common stock.

/s/ Ernst & Young LLP

Cleveland, Ohio
November 18, 1997

<PAGE> 1

Exhibit 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 to be
filed on or about November 14, 1997, of our report dated February 5, 1997, on
our audit of the financial statements of Houghton Acquisition Corporation d/b/a
Hutchinson Foundry Products Company. We also consent to the reference to our
firm under the caption "Experts".

/s/ Coopers & Lybrand L.L.P.

St. Louis, Missouri
November 14, 1997