Exhibit 10.16 

EMPLOYMENT AGREEMENT 

    
This Employment Agreement (“Agreement”) is between Williams Controls,
Inc. ("Employer") and Gary Hafner (“Employee”). 

    
1. Position and Duties. Employee hereby agrees to continue working for Employer as
Vice President of Manufacturing. Employee’s duties include all those duties
usually associated with this position, as well as any other duties reasonably
assigned to Employee by Employer. The Employee agrees to devote his best efforts
and full business time to his work for Employer and to comply with Employer's
scheduling, policies, rules and regulations. 

    
2. Base Compensation. Employer shall pay Employee a base salary of $122,000 per
year (“Base Salary”) for all work performed under this Agreement. Employee is an
exempt employee for purposes of federal and state wage and hour laws and is
therefore not entitled to overtime pay. Employer may adjust Employee’s Base
Compensation without formally amending this Agreement in writing. 

    
3. Bonus Compensation. Employee will continue to participate in Employer’s annual
bonus program at the same level as similarly situated employees. Employer
reserves the right to modify or eliminate the bonus program in its sole
discretion.

    
4. Benefits. Employee is entitled to such employee benefits generally available to
similarly situated employees of Employer to the extent and on the same terms
generally available to similarly situated employees of Employer.

    
5. Term. Employee is employed by Employer “at-will,” meaning either Employer or
Employee may terminate Employee’s employment at any time, for any or no reason.
If Employee’s employment is terminated for Cause or due to death, or if Employee
resigns without Good Reason, Employee will be paid compensation and benefits
through his last day of employment and no further compensation or benefits will
be due Employee, except for statutory benefits, such as COBRA coverage, or
previously earned but unpaid benefits, such as an account balance in a qualified
retirement plan, or benefits under the Employer’s short or long term disability
programs or life insurance benefits, if applicable. If Employee is terminated
without Cause or due to Disability or if Employee resigns with Good Reason, and
provided Employee first executes a Release of Claims in a form satisfactory to
Employer, Employee shall receive compensation and benefits through his last day
of work plus severance benefits of (a) severance pay equal to six (6) month’s
Base Salary paid at the highest rate of Base Salary (pro-rated) Employee earned
at any time during his employment with Employer) less deductions and
withholdings required by law or authorized by Employee, paid in equal
installments over six (6) months on the Employer’s regular paydays, and (b) if
Employee elects COBRA coverage, Employer-paid COBRA for the six (6) months for
which Employee receives severance pay; except that in the event of termination
due to Disability, Employee’s severance pay will be reduced by the amount
Employee receives from any short or long-term disability plans, social security
disability and/or unemployment compensation. If Employee provides less than
thirty (30) days’ notice of his resignation for any reason, he will not receive
any severance benefits to which he might otherwise have been entitled.


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          For
purposes of this Agreement, “Cause” means: (a) Employee’s continued refusal or
failure to perform the duties assigned to him ten (10) days after receiving
notice from the Employer of such refusal or failure to perform; (b) chemical or
alcohol dependency which interferes with Executive’s performance of his
employment duties; (c) any act of disloyalty or breach of responsibilities to
the Employer by the Executive, such as theft, breach of the Confidentiality
Agreements executed on January 26, 2000 and May 9, 2006, or other unauthorized
disclosure or use of confidential information for other than the Employer’s
interest, or competing with the Employer while employed by the Employer; (d)
conduct which causes harm or may reasonably be expected to cause harm to the
Employer’s reputation, such as arrest or indictment for, conviction of or a plea
of guilty or nolo contendre to a felony or a conviction of a misdemeanor
involving theft or resulting in incarceration for more than one week; (e) sexual
harassment or discrimination by Employee; and (f) violation of state or federal
securities laws, rules or regulations relating to the Employer’s
stock.

          For purposes of this Agreement, “Good
Reason” means: (a) relocation of Employee’s place of work to more than fifty
(50) miles from Tigard, Oregon, if Employee does not consent to relocating; (b)
a material reduction Employee’s compensation or benefits, unless agreed to by
Employee; or (c) a material reduction in Employee’s duties, responsibilities or
authority. If Employee intends to resign for Good Reason, he must notify the
Employer in writing of his intention to resign and the specific circumstances he
believes constitutes Good Reason at least ninety (90) days before the effective
date of his resignation. If the Employer cures the circumstances giving rise to
Good Reason before the end of the ninety (90) days, Employee may not resign with
Good Reason.

          For purposes of this Agreement,
“Disability” means a termination of employment due to Employee’s inability to
perform one or more of the essential functions of his position, with or without
reasonable accommodation, for a period of more than ninety (90) consecutive
days, as a result of a physical or mental condition as determined in good faith
by the Employer and consistent with the Employer’s rights and obligations under
applicable law.

     6. Noncompetition, Nonsolicitation and Nondisparagement. Employee agrees that during the period he is receiving the
severance benefits described in Paragraph 5 (a) he will not compete with the
Employer for himself or on behalf of another as an employee, owner, consultant
or in any other capacity, in any geographic area in which the Employer conducts
business, and (b) he will not solicit any customer, supplier, contractor, vendor
or employee of Employer to change its relationship with Employer. Employee
further agrees that he will not disparage Employer or its related entities, or
any of their officers, directors, shareholders, members or employees at any time
during or after his employment with Employer. The Employer’s obligation to pay
severance benefits to Employee terminates on the first day Employee violates any
of his obligations under this paragraph and Employee must return to Employer any
severance benefits paid to him by the Employer on or after the first day
Employee violates any of his obligations under this paragraph.

     7. Governing Law and Dispute Resolution.
This Agreement shall be governed by the laws of the State of Oregon. Any action
to enforce, interpret or construe this Agreement or otherwise arising from the
employment relationship between Employer and Employee must be brought in the
Circuit Court of Oregon or U.S. District Court for the District of Oregon.


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     8. Scope of Agreement. Except for
Employer policies, procedures and plans referenced in this Agreement or as
otherwise provided herein, this Agreement supersedes all prior verbal and
written agreements between the parties concerning the terms and conditions of
Employee’s employment, termination and post-termination rights and benefits,
except to the extent any prior agreements protect the Employer’s intellectual
property, trade secrets, proprietary or confidential information and/or
restrictions on Employee’s post-employment activities (non-compete) such as the
Confidentiality Agreements executed by Employee on January 26, 2000 and May 9,
2006. 

IT IS SO AGREED: 

	WILLIAMS CONTROLS, INC.		GARY
      HAFNER 	 
	 	     	 	 
	 		
	By: 	 	 	 
		 		
	Title: 	 	 	 
			 	
	Date: 	 	 	Date: 	 	 



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