RESTRICTED STOCK AGREEMENT

     THIS RESTRICTED STOCK AGREEMENT is made as of this ___ day of ___, 20___,
between The Allied Defense Group, Inc., a Delaware corporation (“Company”), and
                     (the “Employee”).

     WHEREAS, the continued participation of the Employee is considered by the
Company to be important for the Company’s continued growth; and

     WHEREAS, in order to give the Employee an incentive to continue in the
employ of the Company and to participate in the affairs of the Company, the
Compensation Committee of the Board of Directors of the Company (“Committee”)
has determined that the Employee shall be granted shares of the Company’s $0.10
par value Common Stock (“Stock”), subject to the restrictions stated below, in
accordance with the terms and conditions of the 2001 Equity Incentive Plan, as
amended (“Plan”).

     THEREFORE, the parties agree as follows:

1.   Grant of Stock.

Subject to the terms and conditions of this Agreement and the Plan, the Company
hereby grants to the Employee ___ shares of Stock.

2.   Vesting Schedule.

Provided that the Employee has remained in the continuous employ of the Company
through the vesting dates set forth below, the following number of shares of
Stock shall vest on such dates:

     

                       shares vest on                     , 20___;
 
   

                       shares vest on                     , 20___;
 
   

                       shares vest on                     , 20___; and
 
   

                       shares vest on                     , 20___;

For the purposes of this Agreement, employment by the Company or any subsidiary
corporation of the Company shall be considered employment by the Company.

3.   Restrictions.

  (a)   The Stock granted hereunder may not be sold, pledged or otherwise
transferred until the Stock becomes vested in accordance with Section 2. The
period of time between the date hereof and the date Stock becomes vested is
referred to herein as the “Restriction Period.”

 

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  (b)   Except for employment terminations arising from ___, if the Employee’s
employment with the Company is terminated at any time prior to the lapse of a
Restriction Period, all unvested shares of Stock granted hereunder shall be
forfeited by the Employee, and ownership transferred back to the Company. In the
event of an employment termination arising from ___, all unvested shares of
Stock granted hereunder shall immediately vest.

4. Legend.

Any certificates representing Stock subject to the provisions of this Agreement
shall have endorsed thereon the following legend:

“The shares represented by this certificate are subject to an agreement between
the Corporation and the registered holder, a copy of which is on file at the
principal office of this Corporation.”

5.   Escrow.

Any certificate or certificates evidencing the Stock subject hereto shall be
delivered to and deposited with the Secretary of the Company as Escrow Agent in
this transaction. The Stock may also be held in a restricted book entry account
in the name of the Employee. Such certificates or such book entry shares are to
be held by the Escrow Agent until termination of the Restriction Period, when
they shall be released by said Escrow Agent; provided, however, that a portion
of such Stock shall be surrendered in payment of required withholding taxes in
accordance with Section 7 below, unless alternative procedures for the payment
of required withholding taxes are established.

6.   The Employee’s Stockholder Rights.

During the Restriction Period, the Employee shall have all the rights of a
stockholder with respect to the Stock except for the right to transfer the
Stock, as set forth in Section 3. Accordingly, the Employee shall have the right
to vote the Stock and to receive any cash dividends paid to or made with respect
to the Stock.

7. Taxes.

  (a)   The Employee shall be liable for any and all taxes, including
withholding taxes, arising out of this grant or the vesting of Stock hereunder.
The Employee shall surrender a sufficient number of whole shares of Stock as
necessary to cover all applicable required withholding taxes and required social
security contributions at the time the restrictions on the Stock lapse, unless
alternative procedures for such payment are established. The Employee will
receive a cash refund for any fraction of a surrendered share of Stock not
necessary for required withholding taxes and required social insurance
contributions. To the extent that any surrender of Stock or alternative
procedure for such payment is insufficient, the

 

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      Employee authorizes the Company to deduct tax at source, to deduct all
applicable required withholding taxes and social security contributions from the
Employee’s compensation. The Employee agrees to pay any amounts that cannot be
satisfied from wages or other cash compensation, to the extent permitted by law.
    (b)   Regardless of any action the Company takes with respect to any or all
income tax, social insurance, payroll tax, payment on account or other
tax-related withholding (“Tax-Related Items”), the Employee acknowledges and
agrees that the ultimate liability for all Tax-Related Items legally due by him
is and remains the Employee’s responsibility and that the Company (i) make no
representations nor undertakings regarding the treatment of any Tax-Related
Items in connection with any aspect of this grant of Stock, including the grant,
vesting or release, the subsequent sale of Stock and receipt of any dividends;
and (ii) does not commit to structure the terms or any aspect of this grant of
Stock to reduce or eliminate the Employee’s liability for Tax-Related Items.

8.    Plan Information.

The Employee agrees to receive copies of the Plan, the Plan prospectus and other
Plan information from the Company’s web site, including copies of any annual
report, proxy and Form 10-K. The Employee acknowledges that copies of the Plan,
Company’s Plan prospectus, Plan information and stockholder information are
available upon written or telephonic request to the Company Secretary.

9.      Acknowledgement and Waiver.

By accepting this grant of Stock, the Employee acknowledges and agrees that:
(i) the Plan has been established voluntarily by the Company, it is
discretionary in nature and may be modified, amended, suspended or terminated by
the Company at any time unless otherwise provided in the Plan; (ii) the grant of
Stock is voluntary and occasional and does not create any contractual or other
right to receive future grants of Stock, or benefits in lieu of Stock, even if
Stock has been granted repeatedly in the past; (iii) all decisions with respect
to future grants, if any, will be at the sole discretion of the Company;
(iv) the Employee’s participation in the Plan shall not create a right to
further employment with the Company and shall not interfere with the ability of
the Company to terminate the Employee’s employment relationship at any time with
or without cause; and (v) the Employee is participating voluntarily in the Plan.

10.   Miscellaneous.

  (a)   The Company shall not be required (i) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (ii) to treat
as owner of such Stock or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such Stock shall have been so transferred.

 

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  (b)   The parties agree to execute such further instruments and to take such
action as may reasonably be necessary to carry out the intent of this Agreement.
    (c)   Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon delivery to the Employee at his
address then on file with the Company.     (d)   The Plan is incorporated herein
by reference. The Plan and this Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and the Employee
with respect to the subject matter hereof, and may not be modified adversely to
the Employee’s interest except by means of a writing signed by the Company and
the Employee. This Agreement is governed by the laws of the State of Delaware.  
  (e)   If the Employee has received this or any other document related to the
Plan translated into a language other than English and if the translated version
is different than the English version, the English version will control.    
(f)   The provisions of this Agreement are severable and if any one or more
provisions are determined to be illegal or otherwise unenforceable, in whole or
in part, the remaining provisions shall nevertheless be binding and enforceable.

                  THE ALLIED DEFENSE GROUP, INC.    
 
           

  By: