John J.
Marcello
Managing Director
MECAR, S.A.
Rue Grinfaux, 50
B-7181 Petit-Roeulx-lez-Nivelles
Belgium
On behalf of the
Board of Directors (the “Board”) of The Allied Defense
Group, Inc. (the “Company”), I am very pleased to offer
you the position of President and Chief Executive Officer of the
Company. This letter agreement clarifies and confirms the terms of
your employment with the Company.
As President and
Chief Executive Officer of the Company, you shall have the duties
and responsibilities customarily associated with such position and
such duties as may be assigned to you by the Board. 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 assume the
office of President and Chief Executive Officer on June 17,
2005 immediately following the annual shareholders meeting (the
“Start Date”).
Your salary will
be $24,583.33 per month ($295,000 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
“signing bonus”, you will be granted a restricted stock
award of 16,000 shares of Company common stock as of the Start
Date. As will be set forth in a separate stock award agreement, the
shares will vest ratably over a four (4) year period. In view
of this restriction, the certificate evidencing the shares of
Allied stock will be held in escrow by the Company pending release
as the shares vest.
In addition to
your salary, you will be eligible to earn an annual bonus of up to
50% of your base salary if you meet or exceed certain performance
standards which will be mutually determined by you and the Chairman
of the Board and approved by the Compensation Committee. The
performance standards for 2005 will be mutually determined and
approved within thirty (30) days of commencement of employment
and prior to the beginning of each subsequent calendar year. 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.
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. In addition, the Company shall
pay or reimburse you up to $4,000 annually for premiums on
additional life insurance as long as you are employed by the
Company. You shall be entitled to designate the beneficiary of the
policy.
6. TERMINATION
OF EMPLOYMENT
Your employment
may be terminated at any time by you or by the Company with or
without Cause without prior written notice. This at-will employment
relationship cannot be changed except in a writing signed by the
Chairman of the Compensation Committee. The following matters will
provide the Company with justification to terminate your employment
with “Cause”:
(a) your
conviction of any act by you of fraud or embezzlement;
(b) your
conviction of any felony involving an act of dishonesty, moral
turpitude, deceit or fraud;
(c) your
conviction of any act of dishonesty or misconduct (whether in
connection with your responsibilities as an employee of the Company
or otherwise) that either materially impairs the Company’s
business, goodwill or reputation or materially compromises your
ability to represent the Company with the public; or
(d) your
material failure to perform your lawful duties to the Company after
receiving written notice from the Board describing such failure in
reasonable detail.
7. PAYMENTS
UPON TERMINATION OF EMPLOYMENT
The payments you
will be entitled to receive from the Company upon termination of
your employment will be as follows:
2
(a) If you
terminate your employment, or if the Company terminates your
employment with or without Cause, the Company will pay you any
accrued and unpaid compensation (subject to normal withholding and
other deductions) to the effective date of termination of your
employment.
(b) In
addition, if your employment is terminated by the Company without
Cause or if you terminate your employment following (i) a
material adverse alteration or diminution in the nature or status
of
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