Vice President For Corporate Strategic Development Employment Agreement

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.

1. POSITIONS; START DATE

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" ).

2. SALARY

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.

3. SIGNING BONUS

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.

4. BONUS

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.

5. BENEFITS

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.

6. STOCK OPTION

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 ...