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                                                                   Exhibit 10.16

                                HAWK CORPORATION

                       ANNUAL INCENTIVE COMPENSATION PLAN

1.   PURPOSE

         The Hawk Corporation Annual Incentive Compensation Plan (the "Plan") is
designed to attract, retain, and reward highly-qualified executives who are
important to the Company's success and to provide incentives relating directly
to the financial performance and long-term growth of the Company.

2.   DEFINITIONS

     (a)      BONUS - The cash incentive awarded to an Executive Officer or Key
              Employee pursuant to terms and conditions of the Plan.

     (b)      BOARD - The Board of Directors of Hawk Corporation.

     (c)      CHANGE IN CONTROL - The acquisition by any person or entity,
              directly, indirectly, or beneficially, acting alone or in concert,
              of more than twenty-five percent (25%) of the Class A Common Stock
              of Hawk Corporation at any time outstanding.

     (d)      CODE - The Internal Revenue Code of 1986, as amended.

     (e)      COMMITTEE - The Compensation Committee of the Board, or such other
              committee of the board that is designated by the Board to
              administer the Plan, in compliance with requirements of Section
              162(m) of the Code.

     (f)      COMPANY - Hawk Corporation and any other corporation in which Hawk
              Corporation controls, directly or indirectly fifty percent (50%)
              or more of the combined voting power of all classes of voting
              securities.

     (g)      EXECUTIVE - An Executive Officer or Key Employee of the Company.

     (h)      EXECUTIVE OFFICER - Any officer of the Company subject to the
              reporting requirements of Section 16 of the Securities Exchange
              Act of 1934 ("Exchange Act").

     (i)      KEY EMPLOYEE - Any employee of the Company as may be designated by
              the Committee.


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     (j)      PLAN - Hawk Corporation Annual Incentive Compensation Plan.

3.   ELIGIBILITY

     Only Executives are eligible for participation in the Plan.

4.   ADMINISTRATION

     The awards under the Plan shall be based on the profits of the Company as
determined by 5% of the Company's earnings before interest, depreciation, taxes
and amortization (EBITDA). Of this amount, 1.75% of EBITDA shall then be awarded
to each of Norman C. Harbert and Ronald E. Weinberg, the Company's Co-Chief
Executive Officers. In determining the Company's EBITDA, new acquisitions will
be eliminated from the calculation in the year of the acquisition and earnings
of acquired companies with earnouts will be disregarded.

     The Committee shall administer the Plan and shall have full power and
authority to construe, interpret, and administer the Plan necessary to comply
with the requirements of Section 162(m) of the Code. The Committee's decisions
shall be final, conclusive, and binding upon all persons.

     The Committee shall certify in writing prior to commencement of payment of
the bonus that the performance goal or goals under which the bonus is to be paid
has or have been achieved. The Committee in its sole discretion has the
authority to reduce the amount of a bonus otherwise payable to Messrs. Harbert
and Weinberg based on the following subjective factors: internal growth, new
product development, economic value added and earnings per share. No similar
factors are applied to other Executives. At the beginning of each fiscal year
consistent with the requirements of Section 162(m), the Committee shall: (i)
determine the Company's EBITDA; (ii) determine the Executive Officers and Key
Employees eligible to participate in the Plan for the fiscal year; (iii)
determine each Executive's bonus based on the Company's EBITDA for the fiscal
year; and (iv) determine the frequency at which each bonus will be paid when
attained.

     In the event of a Change in Control, any bonuses earned but not yet paid
under the Plan shall be immediately payable. If the Executive ceases to be
employed by the Company, any unpaid bonuses shall be paid in accordance with the
Executive's termination agreement, and as otherwise determined by the Committee.
Unpaid bonuses may also be canceled at the discretion of the Committee.

     The Committee may amend, modify, suspend, or terminate the Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. The Committee will seek shareholder approval or
any amendment determined to require shareholder approval or advisable under the
regulations of the Internal Revenue Service or other applicable law or
regulation.


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5.   NONASSIGNABILITY

     No Bonus or other benefit under the Plan shall be assignable or
transferable by the participant during the participant's lifetime.

6.   NO RIGHT TO CONTINUED EMPLOYMENT

     Nothing in the Plan shall confer upon any employee any right to continue in
the employ of the Company or shall interfere with or restrict in any way the
right of the Company to discharge an employee at any time for any reason
whatsoever, with or without good cause.

7.   TERMINATION

     The Committee may terminate or suspend at any time.


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