EMPLOYMENT AGREEMENT

WILLIAMS CONTROLS, INC.

EMPLOYMENT AGREEMENT

      THIS AGREEMENT is made as of January 10, 2003, between Williams Controls, Inc., a Delaware corporation (the “Company” ), and Dennis Bunday ( “Executive” ).

     In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. Employment . The Company shall employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in paragraph 4 hereof (the “Employment Period” ).

     2. Position and Duties .

          (a) During the Employment Period, Executive shall serve as Executive Vice President and Chief Financial Officer of the Company and shall have the normal duties, responsibilities, functions and authority of such positions, subject to the direction of the Company’s Board of Directors (the “Board” ).

          (b) During the Employment Period, Executive shall report to the Chief Executive Officer of the Company (the “ CEO” ) and shall devote his best efforts and his full business time and attention (except for permitted vacation periods, reasonable periods of illness or other incapacity and reasonable time and attention devoted to civic and charitable activities) to the business and affairs of the Company and its Subsidiaries. Executive shall perform his duties, responsibilities and functions to the Company and its Subsidiaries hereunder to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner.

          (c) For purposes of this Agreement, “ Subsidiaries” shall mean any corporation or other entity of which the securities or other ownership interests having the voting power to elect a majority of the board of directors or other governing body are, at the time of determination, owned by the Company, directly or through one or more Subsidiaries.

     3. Compensation and Benefits .

          (a) Executive shall be paid an annual salary of $150,000, payable by the Company in accordance with the Company’s customary payroll practices, but not less often than monthly (such salary is herein referred to as the “Base Salary” ). The Base Salary shall be reviewed annually by the Board following the end of each fiscal year during the Employment Period, beginning on September 30, 2003, and may be adjusted upward by such amount as the Board may determine as appropriate in light of Executive’s and the Company’s performance and other relevant market conditions.

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          (b) During the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which senior executive employees of the Company are generally eligible.

          (c) In addition to the Base Salary, the Board shall award a bonus to Executive following the end of each fiscal year during the Employment Period. The target bonus shall be equal to 33% of Base Salary based on target parameters to be set annually by the Board in its sole discretion, for such fiscal year; provided that the bonus may be adjusted upward to 50% of Base Salary if the Board, in its sole discretion, determines that extraordinary performance has been achieved for such fiscal year.

          (d) All amounts payable to Executive as compensation hereunder shall be subject to all required withholding by the Company.

     4. Term .

          (a) The Employment Period shall be for a term of four years commencing on October 1, 2002 (the “lnitial Term” ) and shall automatically be renewed on the same terms and conditions set forth herein as modified from time to time by the parties hereto for additional one-year periods beginning immediately after the initial three-year term (each, an “Extended Term” ), unless the Company or Executive gives the other party written notice of the election not to renew the Employment Period at least 90 days prior to the end of such Initial Term (or Extended Term, as appropriate); provided that (i) the Employment Period shall terminate prior to the end of such Initial Term (or Extended Term, as appropriate) immediately upon Executive’s resignation, death or mental or physical disability or incapacity, (ii) the Employment Period may be terminated by the Company at any time prior to the end of such Initial Term (or Extended Term, as appropriate) for Cause (as defined below) or without Cause and (iii) the Employment Period may be terminated by the Executive at any time for Just Reason (as defined below). Except as otherwise provided herein, any termination of the Employment Period by the Company shall be effective as specified in a written notice from the Company to Executive. Executive shall be deemed to have resigned for “Just Reason” if he resigned in order to provide almost full-time care or companionship for an expected period of more than six months to a seriously or terminally ill immediate family member, as reasonably and in good faith determined by the Board. Notwithstanding that the Initial Term commenced on October 1, 2002, the parties hereto acknowledge that Executive has been receiving an annual salary of $150,000 per annum since June 1, 2002.

          (b) In the event of death of Executive, this Agreement shall terminate on the date of death and the estate of Executive shall be entitled to receive benefits and expenses to which he is entitled under paragraph 3 here such termination.

          (c) In the event that Executive becomes disabled and unable to perform the essential functions of his job for a period of 90 days within a twelve-month period as provided in this paragraph (a “Disability” ), the Company will make efforts to reasonably accommodate Executive as required by applicable state or federal disability laws. However, the parties agree that, given Executive’s position, it would be an undue hardship to the Company if Executive is absent for more than 90 days within any twelve-month period.  

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Therefore, if as a result of incapacity due to physical or mental illness or injury, Executive shall have been absent from his full-time duties hereunder for 90 days within any twelve-month period, then 30 days after receiving written notice of such Disability, the Company may terminate Executive’s employment hereunder. Executive shall be deemed to have a Disability within the meaning of this paragraph only upon such reasonable, good faith determination by the Board regarding Executive’s Disability, after it has appointed a physician reasonably acceptable to Executive who has provided the Board with his opinion regarding Executive’s Disability. In the event this Agreement is terminated as a result of Executive’s Disability, Executive shall be entitled to receive any unpaid compensation, benefits and expenses to which he is entitled under paragraph 3 hereof for employment prior to such termination.

          (d) If the Company declines to extend the first, second, third, fourth or fifth one-year Extended Term of this Agreement for one year ( i.e. , the five one-year terms during the period commencing on October 1, 2006 and ending on September 30, 2011) pursuant to the same terms, Executive shall be entitled to continue to (i) receive his Base Salary, and (ii) participate in employee benefit programs for senior executive employees (other than bonus and incentive compensation plans), as special severance payments and benefits from the date of termination until the first-year anniversary of the effective date of such termination, if and only if Executive has executed and delivered to the Company the General Release substantially in form and substance as set forth in Exhibit A attached hereto and only so long as Executive has not breached the provisions of paragraphs 5, 6 and 7 hereof, and Executive shall not be entitled to any other salary, compensation or benefits from the Company after termination of the Employment Period (other than any other unpaid compensation, benefits and expenses to which he is entitled under paragraph 3 hereof for employment prior to such termination). The Base Salary payable pursuant to this paragraph 4(d) shall be paid in accordance with the then current payroll policies of the Company, but not less frequently than monthly. The amounts payable pursuant to this paragraph 4(d) shall be reduced by 50% of the amount of any compensation (including consulting fees) Executive receives, whether through self-employment, re-employment with another employer, or consulting arrangements, during the Severance Period (as defined below); provided, however that Executive shall have no duty or obligation to seek employment or consulting arrangements during the Severance Period. Upon request from time to time, Executive shall furnish the Company with a true and complete certificate specifying any such compensation earned or received by him during the Severance Period. For clarification purposes only, nothing in this paragraph 4(d) shall be deemed to be affect the terms of paragraph 7 hereof.

          (e) If the Company declines to extend the Initial Term of this Agreement for one year (i.e., the Company declines to extend beyond September 30, 2006) pursuant to the same terms or if the Employment Period is terminated by the Company without Cause prior to the end of the Initial Term or any Extended Term, Executive shall be entitled to continue to (i) receive his Base Salary, and (ii) participate in employee benefit programs for senior executive employees (other than bonus and incentive compensation plans), as special severance payments and benefits from the date of termination until the first-year anniversary of the effective date of such termination, if and only if Executive has executed and delivered to the Company the General Release substantially in form and substance as set forth in Exhibit A attached hereto and only so long as Executive has not breached the provisions of paragraphs 5, 6 and 7 hereof, and Executive shall not be entitled to any other salary, compensation or benefits from the Company after termination of the Employment Period (other than any other unpaid compensation, benefits and expenses to which he is entitled under paragraph 3 hereof for employment prior to such termination). The Base Salary payable pursuant to this paragraph 4(e) shall be paid in accordance with the then current payroll policies of the Company, but not less frequently than monthly. For clarification purposes only, nothing in this paragraph 4(e) shall be deemed to affect the terms of paragraph 7 hereof. 

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          (f) If the Employment Period is terminated by the Company for Cause, by Executive voluntarily, Executive declines to extend the term of this Agreement pursuant to the same terms or the Company declines to extend the term of this Agreement beyond September 30, 2011 pursuant to the same terms, Executive shall only be entitled to receive his Base Salary prorated through the date of termination (together with any other unpaid compensation, benefits and expenses to which he is entitled under paragraph 3 hereof for employment prior to such termination), and shall not be entitled to any other salary, compensation or benefits from the Company or its Subsidiaries thereafter (except as provided in paragraph 7). For all purposes of this Agreement, Executive’s resignation from his employment with Company shall be deemed not to constitute his resignation, and instead to be treated as a termination without Cause of his employment by the Company (a “Good Reason”), if such resignation occurs no more than 90 days after any of:

For clarification purposes only, Executive’s resignation from his employment with the Company during the period in which the division or plant for or in which he primarily works is in the process of being shut down shall not be a termination for Good Reason. During such circumstances, a termination for Good Reason can only occur if (x) Executive resigns after such division or plant is shut down, and (y) the Executive has completed all activities which are requested of him and which are appropriate for an executive in connection with the wind-up and subsequent start-up, if applicable, of a North American successor operation. In the event the Employment Period terminates by reason of a Good Reason, Executive shall be entitled to the payments and benefits provided in paragraph 4(d) hereof; provided, however, that if such Good Reason is pursuant to clause (iii) above, Executive shall be entitled to the payments and benefits provided in paragraph 4(e) hereof (and not paragraph 4(d)).

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          (g) In the event Executive resigns for Just Reason, this Agreement shall terminate upon the effective date of such resignation and Executive shall be entitled to receive any unpaid compensation, benefits and expenses to which he is entitled under paragraph 3 hereof for employment prior to such termination.

          (h) In the event of termination of the Employment Period, all other rights and benefits Executive (or Executive’s estate) may have under the Executive Stock Agreement (as defined below) shall be determined in accordance with the terms and conditions of such agreements. Except as otherwise expressly provided herein, all of Executive’s rights to salary, bonuses, fringe benefits and other compensation hereunder which accrue or become payable after the termination or expiration of the Employment Period shall cease upon such termination or expiration, other than those expressly required under applicable law (such as the federal law known as COBRA) or as provided in paragraph 7. The Company may offset any amounts Executive owes it or its Subsidiaries against any amounts it or its Subsidiaries owe Executive hereunder; provided, however, that the Company may not offset any claims for damages that it alleges against Executive.

          (i) For the purposes of this Agreement, “Severance Period” means any period in which Executive is receiving payments pursuant to paragraph 4(d) or 4(e) hereof.

          (j) For purposes of this Agreement, “Cause” means (i) the failure to comply in all material respects with the terms of this Agreement, the Executive Stock Agreement by and between the Company and Executive in the form attached hereto as Exhibit B (the “Executive Stock Agreement” ), or any other agreement between Executive and the Company or any of its Subsidiaries, which failure is not remedied within 30 days after the receipt of notice from the Company or any of its Subsidiaries, (ii) any intentional act of dishonesty or disloyalty by Executive that is materially injurious to the property, operations, business or reputation of the Company or any Subsidiary thereof, (iii) any indictment or conviction for a felony or conviction of a misdemeanor either involving theft or resulting in incarceration for more than one week, (iv) any material act or omission by Executive during his employment with the Company or any Subsidiary thereof involving willful malfeasance or gross negligence in the performance of his duties to the Company or any Subsidiary thereof or (v) Executive’s habitual neglect or willful and repeated failure to comply with the lawful directives of the Board (as set at a meeting of the Board in accordance with the Company’s bylaws) or the CEO, which