Exhibit 10.1
April 1, 2004
Wayne F. C. Hosking, Jr.
1825 Elgin Drive
Vienna, Virginia 22182
Dear Wayne:
On
behalf of The Allied Defense Group, Inc. (the
“Company”), I am very pleased to offer you the position
of Vice President for Corporate Strategic Development. This letter
agreement clarifies and confirms the terms of your employment with
the Company.
As
Vice President for Corporate Strategic Development, you shall have
the duties and responsibilities customarily associated with such
position and such duties as may be assigned to you by the Chief
Executive Officer or the Chief Operating Officer of the Company.
You will report directly to the Chief Operating Officer of the
Company. Your office will be at the Company’s headquarters,
located at 8000 Towers Crescent Drive, Suite 260, Vienna,
Virginia 22182. You agree not to actively engage in any other
employment, occupation or consulting activity that conflicts with
the interests of the Company. Unless we mutually agree otherwise,
you will commence employment on April 12, 2004 (the
“Start Date”).
Your salary will
be $14,166.66 per month ($170,000.00 annualized), payable monthly
in accordance with the Company’s standard payroll practice
and subject to applicable withholding taxes. Because your position
is exempt from overtime pay, your salary will compensate you for
all hours worked. Your salary will be reviewed and effective
annually by the Compensation Committee and any adjustments will be
effective as of the date determined by the Compensation
Committee.
As
a one-time cash “signing bonus” you will be paid
$20,000.00 on the Start Date. You are encouraged to use a
substantial portion of this amount to purchase shares of the
Company’s common stock via the Company’s employee stock
purchase plan.
In
addition to your salary, commencing with respect to calendar year
2004, you will be eligible to earn an annual bonus of up to 35% of
your base salary if you meet or exceed certain performance
standards which will be mutually determined by you, the Chief
Executive Officer and the Chief Operating Officer and approved by
the Compensation Committee. The
performance standards will be
mutually determined and approved prior to the beginning of each
calendar year (except the performance standards for the balance of
calendar year 2004 will be determined within thirty (30) days
of the Start Date). You will be eligible for an annual bonus for
any calendar year only if you remain employed with the Company as
of December 31 of such calendar year. The bonus will be
payable within ten (10) days of the public release by the
Company of its financial results for the relevant calendar year.
The bonus will be payable, at your election, in cash and/or shares
of Company common stock.
You
will also be entitled, during the term of your employment, to such
employee benefits as the Company may offer from time to time,
subject to applicable eligibility requirements, including but not
limited to the right to participate in the Company’s 401(k)
plan. You will be entitled to three (3) weeks paid
vacation.
As
we have discussed, our compensation structure is weighted towards
equity ownership because we believe we will create the most value
for the Company and its shareholders over time by having employees
think and act like, and therefore be, owners. To this end, and
subject to approval by the Compensation Committee, you will be
granted a five (5) year option to purchase 40,000 shares of
Company common stock, which will vest as to 8,000 shares on
December 30, 2004 and at the rate of 8,000 shares on the first
day of January of each of 2005, 2006, 2007 and 2008, provided you
remain in the employ of the Company on said dates. The options will
provide for accelerated vesting upon a Change of Control (as
defined below). The strike price will be the fair market value per
share of such stock on the last trading day immediately preceding
the Start Date. The options will be incentive stock options to the
extent permissible under the Internal Revenue Service Code and
Regulations and to the extent available under the Company’s
2001 stock plan. Your option will be documented by delivery to you
of a stock option agreement. The Committee will consider and may in
its discretion issue future option grants to you based on your
performance, the Company’s operating results and other
appropriate factors.
For
purposes hereof, the term “Change of Control”
means:
(i) the acquisition (other than by the
Company) by any person, entity or “group” within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934 (the “Exchange Act”) (excluding, for this purpose,
the Company or its subsidiaries or any employee benefit plan of the
Company or its subsidiaries which acquires beneficial ownership of
voting securities of the Company) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act),
of 50% or more of either the then outstanding shares of common
stock or the combined voting power of the Company’s then
outstanding capital stock entitled to vote generally in the
election of directors; or
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