**Exhibit 10.20**
**DIRECTOR’S STOCK OPTION AGREEMENT**
     THIS DIRECTOR’S STOCK OPTION AGREEMENT (this “Agreement”) is made as of                   , by and between The Allied Defense Group, Inc., a Delawarecorporation (“Allied”), and                    , a non-employee member of Allied’s Boardof Directors (the “Director”).
**WITNESSETH:**
     WHEREAS, the Director is now a member of Allied’s Board of Directors andAllied desires to have the Director remain in its service and desires toencourage stock ownership by the Director and to increase the Director’sproprietary interest in Allied’s success; and as an inducement thereto hasdetermined to grant to the Director the option herein provided for, pursuant toAllied’s 2001 Equity Incentive Plan, as amended (the “Plan”), to the end thatthe Director may thereby be assisted in obtaining an interest, or an increasedinterest, as the case may be, in the stock ownership of Allied;
     NOW, THEREFORE, in consideration of the covenants and agreements hereincontained, the parties hereto hereby agree as follows:
     1. Grant.  Pursuant to a resolution adopted by the Board ofDirectors of Allied, Allied hereby grants to the Director an option (the“Option”) to purchase                     shares of the Common Stock, $0.10 par value pershare, of Allied (the “Common Stock”) at $                    per share.
     2. Term.  The Option is exercisable in whole or in part from time totime during the period beginning on the date hereof through 4:00 p.m. (Vienna,Virginia, United States, time) on                    , except as provided in Paragraph 6hereof.
     3. Method of Exercise of Option.  This Option may be exercised bywritten notice directed to the Treasurer of Allied, at Allied’s principal placeof business, specifying the number of shares of Common Stock with respect towhich the Option is being exercised. The notice must be accompanied by paymentof the full purchase price in cash or other consideration acceptable to theBoard of Directors as permitted by the Plan. Except as provided in Paragraph 6hereof, the Director may exercise the Option only if, at the time such Optionis exercised, the Director is a member of the Board of Directors of, and hascontinuously since the grant of the Option, been a member of the Board ofDirectors of, Allied.
     4. Requirements of Law.  Allied shall not be required to sell orissue any shares under the Option if the issuance of such shares shallconstitute a violation of any provisions of any law or regulation of anygovernmental authority.
     5. Transferability and Sale.  The Option may not be transferred orassigned in any manner by the Director, except to his heirs or devisees, andshall be exercisable during his lifetime only by the Director. Upon anyattempt to transfer the Option or to assign, pledge, hypothecate or otherwisedispose of the Option or of any rights granted hereunder,contrary to the provisions hereof, or upon the levy or any attachment orsimilar process upon the Option or such rights, the Option and such rightsshall immediately become null and void.
 

 

     6. Termination of Service and Death.
          (a) If the Director ceases to be a member of the Board of Directors ofAllied for any reason other than (i) his death or disability; or (ii) hisdischarge for dishonesty or commission of a crime, the Director may withinthree (3) months thereafter exercise the Option as of the date the Directorceases to be a director. All unexercised Options, or portions thereof, shallterminate, be forfeited, and shall lapse upon the expiration of said three (3)month period or immediately after the Director ceases to be a director ofAllied for any of the reasons set forth in (ii) above.
          (b) If the Director dies while he is a member of the Board of Directors ofAllied or ceases to be a director as a result of disability, the Option may beexercised by the disabled Director, or by the person or persons to whom hisrights under the Option shall pass by will or by the applicable laws of descentand distribution; provided, however, that no such Option may be exercisedafter one hundred and eighty (180) days from the Director’s date of death orthe date the Director ceases to be a director as a result of disability,whichever is applicable. Upon expiration of said period, the Option, to theextent unexercised, shall terminate, be forfeited and shall lapse.
     7. No Rights as Stockholder.  The Director shall have no rights as astockholder with respect to shares covered by the Option until the date ofissuance of a stock certificate for such shares; no adjustment for dividends,or otherwise, except as provided in Paragraph 8, shall be made if the recorddate therefor is prior to the date of exercise of such Option.
     8. Changes in Allied’s Capital Structure.  The existence of theOption shall not affect in any way the right or power of Allied or itsstockholders to make or authorize any or all adjustments, recapitalizations,reorganizations or other changes in Allied’s capital structure, or any mergeror consolidation of Allied, or any issue of bonds, debentures, preferred orprior preference stock ahead of or affecting the Common Stock or the rightsthereof, or the dissolution or liquidation of Allied, or any sale or transferof all or any part of its assets or business, or any other corporate act orproceeding, whether of a similar character or otherwise. In the event that theoutstanding shares of Common Stock are changed into or exchanged for adifferent number or kind of shares or other securities of Allied or of anothercorporation, by reason of reorganization, merger, consolidation,recapitalization, reclassification, stock split-up, combination of shares, ordividend payable in corporate shares, appropriate adjustment shall be made bythe Board of Directors, in its sole discretion, in the number and kind ofshares of Common Stock as to which this Option, or any portion of this Optionthen unexercised, shall be exercisable, to the end that the Director’sproportionate interest shall be maintained as before the occurrence of suchevent.
     9. Status of Option.  It is understood and agreed that the Option isa non-statutory option for U.S. Federal income tax purposes.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on theday and year first above written.
2

 
         THE ALLIED DEFENSE GROUP, INC.        By:         
     I hereby accept the foregoing Option and agree to all the terms andconditions set forth in the foregoing Agreement.    
Allied/Directors/Director’s Stock Option Agreement (Director Form)
3