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Exhibit 10.1
[HAWK LOGO]
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).
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(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
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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. 333-40535).
(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.
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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 700,000 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
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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
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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
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(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
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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.
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(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.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(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)
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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.
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