<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
Hawk Corporation
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Hawk Corporation
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[Hawk Corporation Letterhead]
March 30, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Hawk Corporation, on Monday, May 10, 1999, starting at 10:00 A.M. local time
at 200 Public Square, Great Lakes Room, Cleveland, Ohio 44114.
As more fully described in the attached Notice of Annual Meeting and the
accompanying Proxy Statement, the principal business to be addressed at the
meeting is the election of directors and ratification of the appointment of
Ernst & Young LLP as independent accountants for the current year. In addition,
the Company's management will report on the Company's results and will be
available to respond to stockholders' questions.
Your vote is important to the Company. Whether or not you plan to attend
the Annual Meeting, please return the enclosed Proxy as soon as possible to
ensure your representation at the meeting. You may choose to vote in person at
the Annual Meeting even if you have returned a Proxy.
On behalf of the Directors and management of Hawk Corporation, we would
like to thank you for your support and confidence in the Company and look
forward to seeing you at the meeting.
Sincerely,
/s/ Norman C. Harbert /s/ Ronald E. Weinberg
NORMAN C. HARBERT RONALD E. WEINBERG
Chairman of the Board, Chief Executive Chairman -- Executive Committee
Officer and President
<PAGE> 3
HAWK CORPORATION
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1999
TO THE STOCKHOLDERS OF HAWK CORPORATION:
The Annual Meeting of the Stockholders of Hawk Corporation, a Delaware
corporation (the "Company"), will be held on Monday, May 10, 1999 at 200 Public
Square, Great Lakes Room, Cleveland, Ohio 44114, beginning at 10:00 A.M. local
time for the following purposes:
1. To elect the directors to serve for a one year term until the next
annual meeting or until their successors are duly elected and qualified
(Proposal 1);
2. To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the fiscal year ending December 31,
1999 (Proposal 2); and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on March 17, 1999 are
entitled to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to insure your representation at the meeting, please sign and return
the enclosed proxy card as promptly as possible in the postage prepaid envelope
enclosed for your convenience. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy card.
By Order of the Board of Directors,
/s/ Byron S. Krantz
BYRON S. KRANTZ
Secretary
<PAGE> 4
HAWK CORPORATION
----------
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Hawk Corporation (the "Company" or "Hawk")
to be used at the 1999 Annual Meeting of Stockholders of the Company to be held
on Monday, May 10, 1999, and any postponements or adjournments of the meeting
(the "Annual Meeting").
This Proxy Statement and the accompanying Chairman and Executive Committee
Chairman's Letter, Notice and Proxy Card, together with the Company's annual
report to stockholders for the fiscal year ended December 31,1998, are being
sent to stockholders beginning on or about March 30, 1999.
QUESTIONS AND ANSWERS
- --------------------------------------------------------------------------------
Q: WHEN AND WHERE IS THE ANNUAL MEETING?
A: Hawk's 1999 Annual Meeting of Stockholders will be held on Monday, May
10, 1999 at 10:00 a.m. local time at 200 Public Square, Great Lakes
Room, Cleveland, Ohio 44114.
- --------------------------------------------------------------------------------
Q: WHAT ARE STOCKHOLDERS VOTING ON?
A: - Re-election of two directors (Paul R. Bishop and Dan T. Moore, III)
- Ratification of the appointment of Ernst & Young LLP as Hawk's
independent accountants.
If a proposal other than the two listed above is presented at the
Annual Meeting, your signed proxy card gives authority to Byron S.
Krantz and Marc C. Krantz to vote on such matters.
- --------------------------------------------------------------------------------
Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on March 17, 1999 (the "Record
Date") are entitled to vote at the Annual Meeting. Each share of Class
A Common Stock is entitled to one vote.
- --------------------------------------------------------------------------------
Q: HOW DO STOCKHOLDERS VOTE?
A: Sign and date each proxy card you receive and return it in the prepaid
envelope. If you do not mark any selections, your proxy card will be
voted in favor of the two proposals. You have the right to revoke your
proxy any time before the meeting by 1) notifying Hawk's Corporate
Secretary, 2) voting in person or 3) returning a later-dated proxy. If
you return your signed proxy card, but do not indicate your voting
preferences, Byron S. Krantz and Marc C. Krantz will vote FOR the two
proposals on your behalf.
- --------------------------------------------------------------------------------
<PAGE> 5
- --------------------------------------------------------------------------------
Q: WHO WILL COUNT THE VOTE?
A: Representatives of Continental Stock Transfer and Trust Co., Hawk's
transfer agent, will tabulate the votes. Thomas A. Gilbride, Vice
President -- Finance, and Joseph J. Levanduski, Corporate Controller,
will act as inspectors of election.
- --------------------------------------------------------------------------------
Q: WHAT SHARES ARE INCLUDED ON THE PROXY CARD AND WHAT DOES IT MEAN IF A
STOCKHOLDER GETS MORE THAN ONE PROXY CARD?
A: The number of shares printed on your proxy card(s) represents all your
shares. Receipt of more than one proxy card means that your shares are
registered differently and are in more than one account. Sign and
return all proxy cards to ensure that all your shares are voted. If you
have shares credited to your 401(k) savings plan account held in
custody by the trustee, CG Trust Company, you will receive a separate
proxy card for those shares. The shares in your 401(k) savings plan
will be voted in accordance with your instructions, if indicated. If
your proxy card relating to the shares in your 401(k) account is
signed, but does not indicate your voting preferences, Hawk has been
advised by the plan administrator and the plan trustee that your shares
will be voted in favor of each of the proposals.
- --------------------------------------------------------------------------------
Q: WHAT CONSTITUTES A QUORUM?
A: As of the Record Date, 8,693,900 shares of Hawk's Class A Common Stock
were outstanding. A majority of the outstanding shares, present or
represented by proxy, constitutes a quorum for the transaction of
adopting proposals at the Annual Meeting. If you submit a properly
executed proxy card, then you will be considered part of the quorum. If
you are present or represented by a proxy at the Annual Meeting and you
abstain, your abstention will have the same effect as a vote against
such proposal. "Broker non-votes" will not be part of the voting power
present, but will be counted to determine whether or not a quorum is
present. A "broker non-vote" occurs when a broker holding stock in
"street name" indicates on the proxy that it does not have
discretionary authority to vote on a particular matter.
- --------------------------------------------------------------------------------
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: All stockholders as of the Record Date can attend.
- --------------------------------------------------------------------------------
Q: WHAT PERCENTAGE OF STOCK DO THE DIRECTORS AND OFFICERS OWN?
A: Together, they own approximately 37.9% of Hawk's Class A Common Stock
as of the Record Date. (See page 18 for more details.)
- --------------------------------------------------------------------------------
2
<PAGE> 6
- --------------------------------------------------------------------------------
Q: WHO ARE THE LARGEST PRINCIPAL STOCKHOLDERS?
A: - Norman C. Harbert, Hawk's Chairman of the Board, Chief Executive
Officer and President, beneficially owns 1,192,175 shares of Class A
Common Stock, or 13.7%, as of the Record Date.
- Ronald E. Weinberg, Hawk's Chairman of the Executive Committee and
Treasurer, beneficially owns 1,143,998 shares of Class A Common Stock,
or 13.2%, as of the Record Date.
- --------------------------------------------------------------------------------
Q: WHEN IS A STOCKHOLDER PROPOSAL DUE FOR THE NEXT ANNUAL MEETING?
A: In order to be considered for inclusion in next year's proxy statement,
stockholder proposals must be submitted in writing by March 10, 2000 to
Byron S. Krantz, Secretary, Hawk Corporation, 200 Public Square, Suite
30-5000, Cleveland, Ohio 44114, and must be in accordance with the
requirements of Hawk's Amended and Restated By-laws and the provisions
of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as
amended. (See page 20 for more details.)
- --------------------------------------------------------------------------------
Q: HOW DOES A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF HAWK?
A: Any stockholder may recommend any person as a nominee for director of
Hawk by writing to the Chairman of the Nominating Committee, c/o Hawk
Corporation, 200 Public Square, Suite 30-5000, Cleveland, Ohio 44114.
Recommendations for next year's annual meeting must be received by
March 10, 2000 and must be in accordance with the requirements of
Hawk's Amended and Restated By-laws. (See page 21 for more details.)
- --------------------------------------------------------------------------------
Q: WHO PAYS FOR THE SOLICITATION EXPENSES?
A: The expense of soliciting proxies, including the cost of preparing,
printing and mailing the proxy materials, will be paid by Hawk. In
addition to solicitation of proxies by mail, solicitation may be made
personally, by telephone and by facsimile, and Hawk may pay persons
holding shares for others their expenses for sending proxy materials to
their principals. No solicitation will be made other than by directors,
officers and employees of Hawk.
- --------------------------------------------------------------------------------
3
<PAGE> 7
PROPOSALS TO BE VOTED UPON
PROPOSAL ONE: RE-ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected to hold office
until the next annual meeting of stockholders and until their respective
successors are elected and qualified. The holders of the Hawk's Class A Common
Stock are entitled to elect two directors. The terms of Hawk's Series D
Preferred Stock provide the holders of the Series D Preferred Stock the right to
elect a majority, or, based on the current size of the Board of Directors, four,
of the directors to be elected at the Annual Meeting. The holders of the Series
D Preferred Stock are Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz,
the Harbert Family Limited Partnership, the Weinberg Family Limited Partnership
and the Krantz Family Limited Partnership. The holders of the Series D Preferred
Stock are parties to an agreement governing the voting and disposition of all
shares of voting stock (which includes both the Class A Common Stock and Series
D Preferred Stock) of Hawk of which they are the legal or beneficial owners. For
a more detailed description, you should read the section entitled "Stockholders'
Agreement" on page 19.
The holders of the Series D Preferred Stock have determined to elect
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz and William J. O'Neill,
Jr. at the Annual Meeting.
Nominees for re-election this year by the holders of Hawk's Class A
Common Stock are Paul R. Bishop and Dan T. Moore, III. Each has consented to
serve until the next annual meeting and until their successors are duly elected
and qualified. (See pages 6 and 7 for more information.)
If any director to be elected by the holders of Hawk's Class A Common
Stock is unable to stand for re-election, the Board may, by resolution, provide
for a lesser number of directors or designate a substitute. In the latter event,
shares represented by proxies may be voted for a substitute director.
Hawk needs the affirmative vote of the holders of a plurality of the
shares of Class A Common Stock present in person or represented by proxy at the
Annual Meeting to elect directors. Abstentions and votes withheld for directors
will have the same effect as votes against.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MESSRS. BISHOP AND MOORE.
4
<PAGE> 8
PROPOSAL TWO:
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
Ernst & Young LLP ("E&Y") has been Hawk's independent public accountant
since 1995. The Audit Committee and the Board believe that E&Y's long-term
knowledge of Hawk is invaluable. Partners and employees of the firm engaged in
audits are periodically changed, providing Hawk with new expertise and
experience. Representatives of E&Y have direct access to members of the Audit
Committee and regularly attend their meetings. Representatives of E&Y will
attend the Annual Meeting to answer appropriate questions and make a statement
if they desire.
In 1998, the Audit Committee reviewed all services provided by E&Y to
ensure that they were within the scope previously approved by the Committee.
Although Hawk's Amended and Restated By-laws do not require the
selection of independent accountants to be submitted to stockholders for
approval, this selection is being presented to stockholders for ratification or
rejection at the Annual Meeting. Hawk needs the affirmative vote of the majority
of shares present in person or by proxy and entitled to vote at the meeting in
order to ratify E&Y as independent accountants for the fiscal year ending
December 31, 1999. If the resolution is rejected, or if Ernst & Young LLP
declines to act or becomes incapable of action, or if its employment is
discontinued, the Board will appoint other independent accountants whose
continued employment after the next annual meeting of stockholders will be
subject to ratification by stockholders.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS HAWK'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1999.
5
<PAGE> 9
BOARD OF DIRECTORS
Certain information about the nominees to be elected by the holders of
Hawk's Class A Common Stock and the directors to be elected by the holders of
Hawk's Series D Preferred Stock is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- -------------------------------------------------------------------------------------------------------------------
DIRECTORS TO BE ELECTED BY CLASS A COMMON STOCKHOLDERS
<S> <C> <C>
Paul R. Bishop 55 Director 1993
Dan T. Moore, III 59 Director 1989
DIRECTORS TO BE ELECTED BY PREFERRED STOCKHOLDERS*
Norman C. Harbert 65 Chairman of the Board, Chief Executive Officer 1989
and President
Ronald E. Weinberg 57 Chairman-- Executive Committee, Treasurer 1989
and Director
Byron S. Krantz 63 Secretary and Director 1989
William J. O'Neill, Jr. 65 Director 1989
</TABLE>
- ------------------
* Under the terms of the Company's Series D Preferred Stock, the holders
of the Series D Preferred Stock have the right to elect a majority of
the directors as long as the Series is outstanding. The holders of the
Series D Preferred Stock have indicated to the Company that at the
Annual Meeting they have determined to elect Messrs. Harbert, Weinberg,
Krantz and O'Neill. Messrs. Harbert, Weinberg, Krantz and O'Neill will
hold office until their successors have been duly elected by the
holders of the Series D Preferred Stock and qualified.
Norman C. Harbert has served as the Chairman of the Board, Chief
Executive Officer, President, and a Director of the Company since March 1989.
Mr. Harbert has over 40 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 $250,000. Mr. Harbert is a director of Second
Bancorp Inc., a bank holding company.
Ronald E. Weinberg has served as Chairman of the Executive Committee of
the Board of Directors since May 1998, and Treasurer and a Director since March
1989. Prior to his appointment as Chairman of the Executive Committee, Mr.
Weinberg served as Vice-Chairman of the Board of the Company since March 1989.
Mr. Weinberg has over 28 years of experience in the ownership and management of
operating companies, including businesses in manufacturing, publishing and
retailing. Since December 1997, Mr. Weinberg has been the Chairman of the Board
and Chief Executive Officer of New Channel Communications Corp., a company
specializing in direct marketing and the providing of computer software
solutions.
6
<PAGE> 10
Paul R. Bishop has served as a Director since May 1993. Mr. Bishop has
served as Chairman, President and Chief Executive Officer of H-P Products, Inc.,
a manufacturer of central vacuum systems and fabricated tubing and fittings,
since 1977.
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 and owner of Dan T. Moore Company, Inc. since 1969; and the
principal owner and Chairman of Flow Polymers since 1985, Soundwich, Inc. since
1988, Advanced Ceramics Corporation since 1993, and Perfect Impression, Inc.
since 1994, all of which are manufacturing companies. He has been a director of
Invacare Corporation, a manufacturer of health care equipment, since 1979, and a
director of USEC Inc., a global energy company, since 1998. Mr. Moore is also a
Trustee of the Cleveland Clinic Foundation and is Chairman of Cleveland Clinic
Home Care.
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.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met five times in 1998. During 1998, all members
of the Board of Directors, except Mr. Moore, participated in at least 75% of all
Board and applicable Committee meetings. Mr. Moore participated in 60% of all
Board meetings.
The Executive Committee, which consists of Messrs. Harbert, Weinberg
and Krantz, was established in May 1998. During the intervals between meetings
of the Board of Directors, the Executive Committee advises and aids the officers
of the Company in all matters concerning its interests and the management of its
business, and generally performs any duties that are directed by the Board from
time to time. The Executive Committee possesses and may exercise all the powers
of the Board while the Board is not in session, except the power to (1) elect
any director or to elect or remove any member of the Executive Committee, (2)
change the number of members of the Executive Committee, (3) declare any
dividend or authorize any distribution on any shares of capital stock, or (4)
amend the bylaws. The Executive Committee met once in 1998.
The Audit Committee consists of Messrs. Bishop and O'Neill. The purpose
of the Audit Committee is to review the accounting and reporting principles,
policies and practices followed by the Company, the adequacy of the Company's
internal, financial and operating controls, and the performance of Hawk's
independent public accountants. The Audit Committee met twice in 1998.
The Compensation Committee is composed of Messrs. Krantz and Bishop,
and its purpose is to determine the compensation of Messrs. Harbert and Weinberg
and to review and make recommendations regarding the compensation for the
remaining executive officers of the Company. The Compensation Committee also
administers the Company's 1997 Stock Option Plan (the "Option
7
<PAGE> 11
Plan"). The Board of Directors reviews and votes upon all compensation
determinations and option grants recommended by the Compensation Committee. The
Compensation Committee met twice in 1998.
The Nominating Committee, composed of Messrs. Harbert, Weinberg and
Moore, is responsible for making recommendations to the Board of Directors on
candidates for election to the Board. The Nominating Committee reviews nominees
recommended to it by stockholders in writing and sent to the Secretary of the
Company. A written recommendation must be delivered to the Company in a timely
fashion as described below in "Stockholder Proposals and Director Nominations."
The Nominating Committee did not meet in 1998.
DIRECTOR COMPENSATION
The Company pays each director who is neither an employee of, or legal
counsel to, the Company, nor affiliated with one of the Company's principal
stockholders, an annual fee of $10,000 that is payable $5,000 in cash and $5,000
in shares of Class A Common Stock. In addition, the Company will pay 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 reimburses all directors for expenses incurred in connection
with their services as directors. No additional consideration is paid to the
directors for committee participation. The Company's Option Plan also provides
for the grant to each non-employee director of an option to purchase 5,000
shares of Class A Common Stock on the date of his or her initial election to the
Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's Class A Common Stock, to file
with the Securities and Exchange Commission ("SEC"), and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of the
Class A Common Stock. Officers, directors and greater than 10% stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of copies of reports furnished to the
Company or written representations that no reports were required, the Company
believes that all Section 16(a) filing requirements were met in 1998.
8
<PAGE> 12
EXECUTIVE OFFICERS
Set forth below are the names, ages, positions and certain other
information concerning the current executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Norman C. Harbert(1)................................ 65 Chairman of the Board, Chief Executive
Officer, President and Director
Ronald E. Weinberg(1)............................... 57 Chairman -- Executive Committee,
Treasurer and Director
Jeffrey H. Berlin................................... 36 Executive Vice President
Douglas D. Wilson................................... 55 Executive Vice President, President --
Friction Products Co. and President --
S.K. Wellman Corp.
Thomas A. Gilbride.................................. 45 Vice President-- Finance
Joseph J. Levanduski................................ 36 Corporate Controller
</TABLE>
- ----------
(1) Biographical information for Messrs. Harbert and Weinberg can be found
under "Board of Directors."
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
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.
Douglas D. Wilson has served as the President of Friction Products Co.,
a wholly-owned subsidiary of the Company ("FPC") since January 1992, the
President of S.K. Wellman Corp., a wholly-owned subsidiary of the Company
("SKW") since June 1995 and an Executive Vice President of the Company since
September 1996. From November 1990 to December 1991, he was the Executive Vice
President of FPC. 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.
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 functions.
Joseph J. Levanduski has served as Corporate Controller of the Company
since April 1997. From August 1995 until April 1997, he was Controller of FPC,
and from March 1996 until April 1997, he was also Group Controller coordinating
the accounting functions of both FPC and SKW. Mr. Levanduski was Controller of
Plasti-Kote Company, Inc., a manufacturer of aerosol spray paints, from 1988 to
1995, and Assistant Controller of Plasti-Kote from 1986 to 1988.
9
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company to
the Company's Chairman of the Board, Chief Executive Officer and President and
the four other most highly compensated executive officers (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------------------ -------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ------------ ----------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS* PAYOUTS **
- --------------------------- -------- ----------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Norman C. Harbert 1998 $ 444,000 $ 644,000 10,000 8,300(1) $ 34,100(2)
Chairman of the Board, 1997 400,000 499,000 -- -- 28,000(2)
Chief Executive Officer 1996 377,000 410,000 -- -- 33,600(2)
and President
Ronald E. Weinberg 1998 327,000 644,000 10,000 -- 13,100(3)
Chairman -- Executive 1997 303,000 499,000 -- -- 3,800
Committee and Treasurer 1996 266,000 410,000 -- -- 9,500
Jeffrey H. Berlin 1998 197,000 164,000 20,000 -- 6,400
Executive Vice President 1997 164,000 134,000 -- -- 3,800
1996 137,000 100,000 -- -- 9,500
Douglas D. Wilson 1998 209,000 188,000 20,000 6,400
Executive Vice President, 1997 204,000 174,000 -- -- 3,800
President -- FPC and 1996 166,000 120,000 -- -- 9,500
President -- SKW --
Jess F. Helsel 1998 165,000 130,000(4) 10,000 -- 14,400(5)
Former President-- 1997 150,000 281,000(4) -- -- 12,300(5)
Helsel, Inc. 1996 150,000 912,000(4) -- -- 12,300(5)
</TABLE>
- ------------------
* Options to purchase Class A Common Stock at an exercise price of $18.70 per
share for Messrs. Harbert and Weinberg and $17.00 per share for all others and
each vesting 20% per year over five years.
** Unless otherwise described, represents amounts contributed by FPC to FPC's
profit sharing plan on behalf of such Named Executive Officer.
(1) Represents benefits paid to Mr. Harbert under the FPC tax-qualified
non-contributory, defined benefit pension plan beginning in November 1998 when
Mr. Harbert reached the age of 65.
(2) Represents $23,700, $24,200 and $24,100 and in premiums paid by the Company
in 1998, 1997 and 1996, respectively, for term life policies of which Mr.
Harbert is the insured and his wife is the beneficiary; $6,400, $3,800 and
$9,500 and contributed in 1998, 1997 and 1996, respectively, by FPC to FPC's
profit sharing plan on behalf of Mr. Harbert; and $4,000, paid on behalf of Mr.
Harbert for a life insurance policy pursuant to his Split Dollar Agreement (as
described in "Employment Agreements" below).
(3) Represents $6,400 contributed in 1998 by FPC to FPC's profit sharing plan on
behalf of Mr. Weinberg and $6,700, paid on behalf of Mr. Weinberg for a life
insurance policy pursuant to his Split Dollar Agreement (as described in
"Employment Agreements" below).
10
<PAGE> 14
(4) Upon the Company's acquisition of Helsel, Inc., the Company entered into an
Employment Agreement with Mr. Helsel. His bonus was determined in accordance
with an earnings formula set forth in that employment agreement. As of January
1, 1999, Mr. Helsel retired as President of Helsel, Inc. and serves the Company
as a consultant.
(5) Includes $3,200 for 1998 and $1,800 for 1997 and 1996 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
$11,200 for 1998 and $10,500 for 1997 and 1996 contributed by Helsel to Helsel's
profit sharing plan on behalf of Mr. Helsel.
OPTION GRANTS IN 1998
The following table summarizes information concerning options granted
during the Company's fiscal year ended December 31, 1998 to each of the Named
Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SHARES OF PERCENT OF ANNUAL RATES OF STOCK
COMMON TOTAL OPTIONS PRICE APPRECIATION
STOCK GRANTED TO EXERCISE FOR OPTION TERM
UNDERLYING EMPLOYEES IN PRICE PER -------------------------
NAME OPTIONS * FISCAL 1998 SHARE EXPIRATION DATE 5% 10%
- --------------------- ----------- ------------- --------- ------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Norman C. Harbert 10,000 2.9% $18.70 May 15, 2003 $ 51,600 $ 114,100
Ronald E. Weinberg 10,000 2.9% $18.70 May 15, 2003 51,600 114,100
Jeffrey H. Berlin 20,000 5.9% $17.00 May 15, 2008 213,800 541,800
Douglas D. Wilson 20,000 5.9% $17.00 May 15, 2008 213,800 541,800
Jess F. Helsel 10,000 2.9% $17.00 May 15, 2008 106,900 270,900
</TABLE>
* Options granted May 12, 1998 and vesting 20% per year over five years
beginning on the first anniversary of the date of grant.
OPTION VALUES AT YEAR-END 1998
The following table summarizes information with respect to the number
of unexercised options held by the Named Executive Officers as of December 31,
1998. The exercise price of the options did not exceed the last sale price of
the Class A Common Stock on December 31, 1998. No Named Executive Officer
exercised any options in 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED
OPTIONS AT DECEMBER 31, 1998
----------------------------------
NAME EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------- -----------------
<S> <C> <C>
Norman C. Harbert -0- 10,000
Ronald E. Weinberg -0- 10,000
Jeffrey H. Berlin -0- 20,000
Douglas D. Wilson -0- 20,000
Jess F. Helsel -0- 10,000
</TABLE>
11
<PAGE> 15
BENEFIT PLANS
FPC sponsors a tax-qualified non-contributory, defined benefit pension
plan covering substantially all of its 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: 1996 -- $150,000;
1997 -- $160,000; and 1998 -- $160,000. 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 -- $49,200; Mr.
Weinberg -- $90,000; Mr. Wilson -- $90,000; and Mr. Berlin -- $90,000.
FPC maintains a tax-qualified profit sharing plan, including features
under Section 401(k) of the Internal Revenue Code of 1986, as amended (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.
Helsel, Inc., a wholly-owned subsidiary of the Company ("Helsel"),
maintains a tax-qualified savings and investment plan, including features under
Section 401(k) of the Code, which covers substantially all of its employees. The
plan generally provides for voluntary employee pre-tax contributions ranging
from 1% to 15%, a 50% matching contribution by Helsel (up to a maximum of 2% of
an employee's compensation), and a discretionary Helsel contribution.
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.
EMPLOYMENT AGREEMENTS
Pursuant to Employment Agreements, each dated as of November 1, 1996,
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 Chairman --
Executive Committee and Treasurer, through December 2004. Each of Mr. Harbert
and Mr. Weinberg receives an annual bonus based on the incentive compensation
determined by the Compensation Committee. The base salary may be adjusted by the
Compensation Committee of the Board. If either Mr. Harbert or Mr. Weinberg
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 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. 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. Under the terms of Mr. Weinberg's employment
agreement, he is not required to devote all of his time and
12
<PAGE> 16
effort to the business of the Company, and in recent periods, he has devoted
approximately 75% of his time and effort to the business of the Company.
In January 1998, the Company entered into a split dollar life insurance
agreement with each of Mr. Harbert and Mr. Weinberg (the "Split Dollar
Agreements") pursuant to which the Company purchased life insurance policies on
the lives of Mr. Harbert and Mr. Weinberg in the face amounts of $1.0 million
and $3.8 million, respectively. Under the terms of the Split Dollar Agreements,
the Company will pay the annual premiums of the insurance policies in the amount
of $46,163 for Mr. Harbert's policy and $58,586 for Mr. Weinberg's policy, and
the Company will be reimbursed for such payments from the policy proceeds in an
amount equal to the greater of the cash value of the policies or the total
amount of premiums paid during the term of the policies. The remaining proceeds
of each policy will be paid to beneficiaries designated by the insured. The
Split Dollar Agreements will terminate upon the occurrence of any of the
following events: (1) total cessation of the Company's business; (2) the
bankruptcy, receivership or dissolution of the Company; or (3) the termination
of the insured's employment by the Company (other than for reason of his death
or mental or physical disability). Upon the termination of a Split Dollar
Agreement, the insured will have the right to purchase the policy covered
thereby for an amount equal to the greater of the cash value of the policy or
the total amount of premiums paid during the term of the policy.
An existing Wage Continuation Agreement between the Company and Mr.
Harbert was amended and restated in connection with the Company's entry into the
Split Dollar Agreement with Mr. Harbert. The Wage Continuation Agreement, as
amended and restated, provides that if Mr. Harbert dies during the term of his
employment agreement or dies while he is no longer in the active employ of the
Company solely because of a mental or physical disability, the Company will pay
his spouse a monthly wage continuation payment until her death in an amount
equal to $12,500 per month (on an after-tax basis) less a monthly annuity (on an
after-tax basis) to be purchased for the spouse of Mr. Harbert with Mr.
Harbert's share of the proceeds of the split dollar insurance policy on Mr.
Harbert's life. An existing Wage Continuation Agreement between the Company and
Mr. Weinberg was terminated in connection with the Company's entry into the
Split Dollar Agreement with Mr. Weinberg.
Upon the acquisition of Helsel by a group led by Mr. Harbert and Mr.
Weinberg, Jess F. Helsel entered into an Employment Agreement and 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. The
agreements were amended again in March 1998 to extend the term of the employment
agreement through December 31, 1998 with an annual base salary of $160,000 and
to delay the commencement of the term of the consulting agreement until January
1, 1999. Mr. Helsel received an annual base salary of $150,000 in 1996 and 1997
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. 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. If Mr. Helsel dies or becomes disabled
13
<PAGE> 17
during the term of the consulting agreement, the Company will pay the balance of
the installments required by the agreement for the remainder of the 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. Mr. Helsel became a consultant to Helsel on January
1, 1999.
The Company has no other employment agreements with any of its
executive officers.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors determines the
compensation for Mr. Harbert, the Chairman of the Board, Chief Executive Officer
and President, and Mr. Weinberg, the Chairman -- Executive Committee, and
reviews and makes recommendations regarding the compensation for the remaining
executive officers of the Company. The Committee also administers the Company's
Option Plan, recommending, in consultation with executive management, grants of
options and the terms of the grants for employees of Hawk and its subsidiaries.
The Committee submits its proposals and recommendations for executive officer
compensation and stock option grants to the full Board of Directors for
approval.
The Committee is composed of two non-employee directors, Paul R. Bishop
and Byron S. Krantz.
COMPENSATION PHILOSOPHY
The Compensation Committee subscribes to a total compensation program
composed of three elements: base salary, annual incentives and long term
incentives. In formulating and implementing compensation policy and structure
and making bonus recommendations, the Committee has followed the philosophy that
a substantial portion of the compensation should be related to the Company's
financial performance. Accordingly, the compensation program has been structured
to include annual incentive compensation based upon earnings before interest,
taxes depreciation and amortization ("EBITDA") of the Company. The Committee
believes that the performance-based incentive program has been crucial in
attracting high caliber executives necessary for the successful conduct of the
Company's business. In addition, the Committee believes that the program has
become an important part of the culture of the Company, and should continue as
the foundation for executive officer incentives. While continuing to use EBITDA
as the basis for annual incentive compensation, the Committee has also approved
the introduction of additional individual performance standards for managers.
A goal of the Committee is maintaining total compensation on a basis
consistent with similar companies that achieve similar substantial EBITDA
margins, as well as other strategic and performance characteristics. The
Committee, as it deems appropriate, utilizes independent national consulting
services and reviews executive compensation of similar companies to determine
appropriate levels of compensation. The Committee selects the companies for
comparison based on
14
<PAGE> 18
numerous factors, such as the industries in which they operate, their EBITDA
margins, their size and complexity and the availability of compensation
information.
BASE SALARY
In the early part of each year, the Compensation Committee reviews the
salary of Mr. Harbert and Mr. Weinberg, and determines the base salary for these
officers, and reviews the recommendations of Messrs. Harbert and Weinberg
regarding the compensation for the remaining executive officers. The Committee,
in determining the appropriate base salaries of the executive officers,
generally considers the historic base salary, the growth of the earnings of the
Company, the total compensation package, individual performance and other
relevant factors. The Committee has not found it practicable, nor has it
attempted, to assign relative weights to specific factors used in determining
base salary levels for individual officers. As the Committee believes is typical
for most corporations, payment of base salary is not conditioned upon the
achievement of any specific, pre-determined performance targets.
The base salaries for 1999 of Mr. Harbert and Mr. Weinberg will be
unchanged from 1998. The Committee believes that the salaries are appropriate at
this time and that increases in total compensation, if any, for 1999 should
arise by virtue of the annual incentive compensation.
ANNUAL INCENTIVE COMPENSATION
The Company has, since its formation, provided a significant portion of
total compensation for its executive officer group, including Mr. Harbert and
Mr. Weinberg, from incentive compensation based on the success of the Company.
Total annual incentive compensation for the executive officers is based on
approximately 5% of EBITDA. The Compensation Committee awarded approximately 35%
of the available incentive compensation funds to each of Mr. Harbert and
Weinberg in 1998.
While the Compensation Committee believes that EBITDA should continue
as the basis for annual incentive compensation for executive officers, the
Committee has also approved the introduction of additional individual
performance standards for managers. To the extent applicable to any executive
officer, the standards may include the Company's historical and recent financial
performance in the principal area of responsibility of the officer (including
such measures as sales, gross margins, net income and customer count) and the
individual's progress toward specified non-financial goals within his area of
responsibility. The Committee is presently working with management to define
meaningful individual performance standards as an adjunct to annual incentive
compensation based on group performance.
LONG-TERM INCENTIVES
The Company has adopted the Option Plan which allows for the issuance
of incentive and non-statutory stock options. The Compensation Committee, in
consultation with executive management, is charged with designating those
persons to whom options are to be granted and determining the terms of the
option. In granting options, the Compensation Committee takes into
15
<PAGE> 19
consideration the past performance and anticipated future contribution of the
potential option recipient, the recruiting and retention of management talent
and other relevant considerations.
One of the objectives of the Option Plan is to align the interests of
the Company's stockholders with recipients of the option grants. All grants of
options since the public offering by the Company have been made with an exercise
price equal to the closing price on the day before the grant, and the options
vest ratably over a five year period. The Committee believes that this procedure
ties the compensation value of these stock options directly to the long term
performance of the Company as measured by its future return to the stockholders.
1998 CHAIRMEN COMPENSATION
The base salary and annual incentive compensation earned in 1998 by Mr.
Harbert and Mr. Weinberg were determined as described above in this report and
reflect the greater success of the Company in 1998, including increased
revenues, EBITDA and net income and the achievement of certain strategic
initiatives. Mr. Harbert's and Mr. Weinberg's base salaries and annual incentive
compensation each increased approximately 21% from 1997 to 1998. These increases
compare to a 14.5% increase in revenues, a 36.1% increase in EBITDA and a 213.8%
increase in net income, all in the same 1997 to 1998 period.
The stock options granted to Mr. Harbert and Mr. Weinberg in 1998
reflect the Committee's view of the importance of aligning the interests of the
Company's stockholders with the recipients of the option grants. The options
granted to Mr. Harbert and Mr. Weinberg in 1998 represent collectively 5.8% of
the options awarded by the Company in 1998. The Committee believes that the
grant of stock options to Mr. Harbert and Mr. Weinberg, along with their already
significant stock holdings in the Company, further serves to align their
financial interests with those of the other stockholders.
COMPENSATION COMMITTEE
PAUL R. BISHOP
BYRON S. KRANTZ
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Byron S. Krantz serves as Secretary of the Company without compensation
and is a partner in the law firm of Kohrman Jackson & Krantz P.L.L., which
provides legal services to the Company.
16
<PAGE> 20
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 17, 1999, information
regarding the beneficial ownership of the Company's Class A Common Stock and
Series D Preferred Stock, by (1) each stockholder known by the Company to be the
beneficial owner of more than five percent of such stock, (2) each director, (3)
the Named Executive Officers, and (4) all directors and executive officers of
the Company as a group. The information contained in this table does not include
317,200 shares of Class A Common Stock issuable under the Option Plan under
options that are outstanding, but not presently exercisable or held by persons
other than those listed in the table.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------------------------------------------------
CLASS A COMMON SERIES D PREFERRED
-----------------------------------------------------------------
RIGHT TO
NAMES AND ADDRESS(2) SHARES ACQUIRE(3) PERCENTAGE SHARES PERCENTAGE
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Norman C. Harbert(4)(5) 1,190,175 2,000 13.7% 689 45%
Ronald E. Weinberg(4)(6) 1,141,998 2,000 13.2% 689 45%
Byron S. Krantz(4)(7) 271,972 1,000 3.1% 152 10%
The Prudential Insurance Company of America(8) 758,300 -- 8.7% -- --
751 Broad Street
Newark, New Jersey 07102
Wellington Management Company, LLP(9) 710,000 -- 8.2% -- --
75 State Street
Boston, Massachusetts 02109
Robert Fleming Inc.(10) 511,110 -- 5.9% -- --
320 Park Avenue, 11th Floor
New York, New York 10022
Dalton, Greiner, Hartman, Maher & Co.(11) 481,800 -- 5.5% -- --
1100 Fifth Avenue South, Suite 301
Naples, Florida 34102
William J. O'Neill, Jr.(12) 282,151 1,000 3.3% -- --
Jeffrey H. Berlin 260,742 4,000 3.0% -- --
Douglas D. Wilson 56,838 4,000 * -- --
Dan T. Moore, III 10,860 1,000 * -- --
Paul R. Bishop 6,254 1,000 * -- --
Jess F. Helsel 5,604 2,000 * -- --
All directors and executive officers 3,277,834 23,000 37.9% 1,530 100%
as a group (11) individuals
</TABLE>
- ------------------
* Less than 1%
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole investment and voting power over the shares of capital
stock owned.
(footnotes continued on the following page)
17
<PAGE> 21
(2) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o Hawk Corporation, 200 Public Square, Suite 30-5000,
Cleveland, Ohio 44114.
(3) Shares of Class A Common Stock the directors and executive officers have
the right to acquire through stock options that are or will become
exercisable within 60 days.
(4) Each of these stockholders is a party to an agreement governing the voting
and disposition of all shares of voting stock of which such stockholders
are the legal or beneficial owners. Each such stockholder disclaims
beneficial ownership of the shares of voting stock owned by the other such
stockholders. See "Stockholders' Agreement."
(5) Includes 75,000 shares of Class A Common Stock held by The Harbert
Foundation, an Ohio nonprofit corporation of which Mr. Harbert is one of
the trustees; 1,032,561 shares of Class A Common Stock held by the Harbert
Family Limited Partnership, an Ohio limited partnership, of which Mr.
Harbert is the managing general partner; and 15,000 shares of Class A
Common Stock held by a defined benefit plan for the benefit of Mr. Harbert.
Also includes 150 shares of Series D Preferred Stock held by the Harbert
Family Limited Partnership.
(6) Includes 1,078,153 shares of Class A Common Stock held by the Weinberg
Family Limited Partnership, an Ohio limited partnership, of which Mr.
Weinberg is the managing general partner. Also includes 150 shares of
Series D Preferred Stock held by the Weinberg Family Limited Partnership.
(7) Includes 243,876 shares of Class A Common Stock held by the Krantz Family
Limited Partnership, an Ohio limited partnership, of which Mr. Krantz is
the managing general partner. Also includes 33 shares of Series D Preferred
Stock held by the Krantz Family Limited Partnership.
(8) Based solely on information in the Schedule 13G filed with the Securities
and Exchange Commission on February 2, 1999. Includes 557,900 shares over
which Prudential shares voting and dispositive power.
(9) Based solely on information in the Schedule 13G filed with the Securities
and Exchange Commission on February 9, 1999. Includes 320,000 shares over
which Wellington shares voting power and 710,000 shares over which
Wellington shares dispositive power.
(10) Based solely on information in the Schedule 13G filed with the Securities
and Exchange Commission on February 5, 1999. Includes 511,100 shares over
which Robert Fleming shares voting and dispositive power.
(11) Based solely on information in the Schedule 13G filed with the Securities
and Exchange Commission on January 27, 1999. Includes 453,300 shares over
which Dalton has sole voting power.
(12) Includes 275,897 shares held by Clanco Partners I, an Ohio general
partnership of which Mr. O'Neill is managing partner.
STOCKHOLDERS' 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 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 and
Krantz or their respective affiliates sells more than 50% of the Class A Common
Stock beneficially owned by such individual on May 12, 1998, 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 Messrs. Harbert, Weinberg or Krantz 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.
18
<PAGE> 22
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Class A Common Stock with the cumulative total return of the Russell 2000 Index
and the S&P Industry Group Index -- Manufacturing (Diversified). Cumulative
total return for each of the periods shown in the Performance Graph is
calculated from the last sale price of the Company's Class A Common Stock at the
end of the period and assumes an initial investment of $100 on May 12, 1998, the
day the Company commenced trading of its Class A Common Stock, and the
reinvestment of any dividends.
[GRAPH]
<TABLE>
<CAPTION>
5/12/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C>
HAWK CORPORATION 100.00 103.71 56.65 49.29
S&P INDUSTRY GROUP 100.00 96.15 80.06 98.96
RUSSELL 2000 INDEX 100.00 94.81 75.71 87.83
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Preferred Stock Redemption. Concurrently with the closing of the Company's
initial public offering on May 15, 1998, the Company (1) redeemed all of the
outstanding shares of Series A Preferred Stock, $0.01 par value per share, for
approximately $1.4 million, 351 of the 702 outstanding shares of Series B
Preferred Stock, $0.01 par value per share, for approximately $356,000, and
seven of the 1,189 outstanding shares of Series C Preferred Stock, $0.01 par
value per share, for approximately $7,000, which represented their liquidation
value plus accrued and unpaid dividends (the "Preferred Stock Redemption"), and
(2) exchanged the remaining outstanding shares of Series B and Series C
Preferred Stock for an equal number of Series D Preferred Stock.
Certain of the shares of Series A, Series B and Series C Preferred Stock
redeemed in the Preferred Stock Redemption were owned by directors and executive
officers of the Company as follows: (1) the Series A Preferred Stock owned
Clanco Partners I, of which William J. O'Neill, Jr. is the managing partner,
Clanco Family Limited Partnership ("Clanco FLP"), of which Mr. O'Neill is a
director of its general partner, and the Dorothy K. O'Neill Revocable Trust, of
which Mr. O'Neill is also a co-trustee; (2) the Series B Preferred Stock owned
by Clanco FLP, Jeffrey H. Berlin, Douglas D. Wilson and Thomas A. Gilbride; and
(3) the Series C Preferred Stock owned by Clanco Partners I, Mr. Wilson and Dan
T. Moore, III, and certain fractional shares owned by Messrs. Harbert, Weinberg
and Krantz and their respective affiliates. The Series A Preferred Stock
19
<PAGE> 23
redemption proceeds were distributed to the holders of the Series A Preferred
Stock, including approximately: $1.0 million to Clanco Partners I; $290,000 to
Clanco FLP; and $100,000 to the Dorothy K. O'Neill Revocable Trust. The Series B
Preferred Stock redemption proceeds were distributed to certain holders of the
Series B Preferred Stock, including approximately $320,000 to Clanco FLP.
Following the Preferred Stock Redemption, the Company exchanged all shares
of the Series B and Series C Preferred Stock of which each of Messrs. Harbert,
Weinberg and Krantz and their respective affiliates 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 purchased certain shares
of Series C Preferred Stock from other stockholders so that, following the
exchange, he owned the same amount of shares of Series D Preferred Stock as Mr.
Harbert. Messrs. Harbert, Weinberg and Krantz and their respective affiliates
own all of the outstanding shares of Series D Preferred Stock. The redeemed and
exchanged shares of Series A, Series B and Series C Preferred Stock were
canceled and permanently retired. Therefore, no shares of Series A, Series B or
Series C Preferred Stock remain authorized or outstanding.
Partial June 1995 Note Repayment. Certain stockholders of the Company
issued notes to the Company to repay certain indebtedness incurred by them with
respect to the acquisition of Helsel (the "June 1995 Notes") as follows: by Mr.
Harbert in the original principal amount of approximately $802,000; and by Mr.
Weinberg in the original principal amount of approximately $802,000. 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. In May 1998, each of Messrs. Harbert and Weinberg repaid $302,000 of
their June 1995 Notes. The remaining outstanding principal amount of the June
1995 Note for each of Messrs. Harbert and Weinberg is $500,000.
Other. The Company is a party to an expense sharing arrangement under
which the Company shares the 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 53% of the overhead costs of the headquarters,
including rent, utilities and copying, telephone and other expenses. The
aggregate amount of the payments by the Company for the shared headquarters was
$354,000 in 1998.
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 1998 of $572,000 for services in connection with a variety of matters,
including the initial public offering and the acquisition of Clearfield Powdered
Metals, Inc.
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.
20
<PAGE> 24
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
A stockholder intending to present a proposal to be included in the
Company's Proxy Statement for the Company's 2000 Annual Meeting of Stockholders
must deliver a proposal, in accordance with the requirements of the Company's
Amended and Restated By-laws and Rule 14a-8 under the Exchange Act, to the
Secretary of the Company at the Company's principal executive office no earlier
than February 10, 2000 and no later than March 10, 2000. A stockholder's notice
to the Secretary must set forth as to each matter the stockholder proposes to
bring before the meeting (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (2) the name and record address of the stockholder proposing such
business, (3) the class and number of shares of Common Stock that are
beneficially owned by the stockholder, and (4) any material interest of the
stockholder in such business.
A stockholder desiring to nominate a director for election at the
Company's 2000 Annual Meeting of Stockholders must deliver a notice, in
accordance with the requirements of the Company's Amended and Restated By-laws,
to the Secretary of the Company at the Company's principal executive office no
earlier than February 10, 2000 and no later than March 10, 2000. Such notice
must include (1) 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 Company
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 14a under the Exchange Act; and (2) 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
Company beneficially owned by the stockholder. The Company may require any
proposed nominee to furnish additional information reasonably required by the
Company to determine the eligibility of the proposed nominee to serve as a
director of the Company.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters to
be submitted to the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the accompanying
Proxy to vote the shares they represent as the Board of Directors may recommend.
You are urged to sign and return your Proxy promptly to make certain your
shares will be voted at the Annual Meeting. For your convenience, a return
envelope is enclosed requiring no additional postage if mailed in the United
States.
By Order of the Board of Directors,
/s/ Byron S. Krantz
BYRON S. KRANTZ
Secretary
March 30, 1999
21
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[FRONT]
PROXY HAWK CORPORATION PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 10, 1999
200 PUBLIC SQUARE, GREAT LAKES ROOM, CLEVELAND, OHIO 44114
10:00 A.M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Byron S. Krantz and Marc C. Krantz, or either
one of them acting singly with full power of substitution, the proxy or proxies
of the undersigned to attend the Annual Meeting of the Stockholders of Hawk
Corporation to be held on May 10, 1999, at 200 Public Square, Great Lakes Room,
Cleveland, Ohio 44114, beginning at 10:00 a.m. local time, and any adjournments,
and to vote all shares of stock that the undersigned would be entitled to vote
if personally present in the manner indicated below and on the reverse side, and
on any other matters properly brought before the Meeting or any adjournments
thereof, all as set forth in the March 30, 1999 Proxy Statement. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting, Proxy Statement and
Annual Report of Hawk Corporation.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR "FOR ALL NOMINEES"
AND FOR PROPOSAL 2.
1. Election of Paul R. Bishop and Dan T. Moore, III as directors.
FOR ALL NOMINEES [ ] (unless struck out above) WITHHOLD FROM ALL NOMINEES [ ]
(Authority to vote for any nominee may be withheld by lining through or
otherwise striking out the name of such nominee.)
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE,
SIGN AND RETURN PROMPTLY.
[BACK]
2. Ratification of appointment of independent accountants.
FOR / / AGAINST / / ABSTAIN / /
(Signature should be exactly as name or names
appear on this proxy. If stock is held
jointly each holder should sign. If signature
is by attorney, executor, administrator,
trustee or guardian, please give full title.)
Dated:_________________________________, 1999
---------------------------------------------
Signature
---------------------------------------------
Signature if held jointly
I plan to attend the meeting: Yes / / No / /
THIS PROXY WILL BE VOTED FOR THE NOMINEES AND THE ABOVE MATTER UNLESS OTHERWISE
INDICATED, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY
BROUGHT BEFORE THE MEETING.
