Chief Operating Officer Employment Agreement

EXHIBIT 10.1


April 1, 2003

Monte Lee Pickens

3375 Kitzmiller Road

New Albany, Ohio 43054

Dear Monte:


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 Executive Vice President and Chief Operating Officer of the Company. This letter agreement clarifies and confirms the terms of your employment with the Company. 1. POSITIONS; START DATE

As Executive Vice President and Chief Operating Officer of the Company, you shall have the duties and responsibilities customarily associated with such positions and such duties as may be assigned to you by the Chief Executive Officer of the Company. You will report directly to the Chief Executive 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 May 1, 2003 (the " Start Date" ), although you will not assume the offices of Executive Vice President and Chief Operating Officer until June 1, 2003. 2. SALARY

Your salary will be $14,583.33 per month ($175,000 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 Board or its Compensation Committee and any adjustments will be effective as of the date determined by the Board or its Compensation Committee.


1

3. STOCK AWARD

As a one-time cash " signing bonus" you will be paid $30,000.00 on the Start Date. It is understood and agreed that you will use at least $10,000 of this amount to purchase shares of the Company' s common stock via the Company' s employee stock purchase plan as soon as practicable but in any event prior to December 31, 2003. 4. BONUS

In addition to your salary, commencing with respect to calendar year 2003, 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 and the Chief Executive 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 2003 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.

6. RELOCATION REIMBURSEMENT

In consideration for your agreement to relocate from Ohio to Virginia, it is further agreed that we will reimburse you for all reasonable costs incurred by you in moving your household furnishings, clothes, etc. to Virginia.

7. 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


2


Company and its shareholders over time by having employees think and act like, and therefore be, owners. To this end, and subject to Board of Directors' approval, 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, 2003 and at the rate of 8,000 shares on the first day of January of each of 2004, 2005, 2006 and 2007, 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 in ...