**Exhibit 10.26****AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT**     **AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT**(this “**Agreement**”), dated as of June     , 2007, by and among The Allied Defense Group, Inc., a Delaware corporation, withheadquarters located at 8000 Towers Crescent Drive, Suite 260, Vienna, Virginia 22182 (the“**Company**”), and the undersigned buyers (each, a “**Buyer**”, and collectively, the “**Buyers**”).     **WHEREAS:**     A. The Company and the Investor (collectively with any other investors that may become a partyto this Agreement, the “**Investors**”) are parties to that certain Securities Purchase Agreement,dated as of March 9, 2006 (the “**Original Securities Purchase Agreement**”), pursuant to which, amongother things, the Investors purchased from the Company (i) senior subordinated convertible notes,dated March 9, 2006 (the “**Original Notes**”) and (ii) warrants (the “**Warrants**”), which areexercisable to purchase shares of the Company’s common stock, par value $0.10 per share (the“**Common Stock**”) (as exercised, collectively, the “**Warrant Shares**”).     B. In connection with the Amended and Restated Securities Purchase Agreement by and among theparties hereto, dated June 19, 2006 (the “**Securities Purchase Agreement**”), the Company has agreed,upon the terms and subject to the conditions set forth in the Securities Purchase Agreement (a) tocancel the Original Notes and to issue to the Buyers, in exchange therefor, (i) certain shares ofCommon Stock (the “**Common Shares**”) and (ii) certain senior secured convertible notes (the “**AmendedNotes**”) (as converted, the “**Amended Conversion Shares**”) and (b) to issue and sell to each Buyer (i)at the Initial Closing (as defined in the Securities Purchase Agreement), certain senior securedconvertible notes of the Company (the “**Initial Notes**”) and (ii) at the Additional Closing (asdefined in the Securities Purchase Agreement), certain senior secured convertible notes of theCompany (the “**Additional Notes**”, and together with the Amended Notes and the Initial Notes, the“**Notes**”), in each case, which Notes will, among other things, be convertible into shares of CommonStock (as converted, the “**Conversion Shares**”) in accordance with the terms of the Notes.     C. The Notes bear interest, which at the option of the Company, subject to certain conditions,may be paid in shares of Common Stock (the “**Interest Shares**”).     D. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Companyhas agreed to execute and deliver this Agreement which amends, and restates in full the terms andconditions of that certain Registration Rights Agreement, by and among the Company and theInvestors, dated as of March 9, 2006 whereby the Company agreed to provide certain registrationrights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, orany similar successor statute (collectively, the “**1933 Act**”), and applicable state securities laws.     **NOW, THEREFORE,**in consideration of the premises and the mutual covenants contained herein andother good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the Company and each of the Buyers hereby agree as follows:     1. Definitions.     Capitalized terms used herein and not otherwise defined herein shall have the respectivemeanings set forth in the Securities Purchase Agreement. As used in this Agreement, the followingterms shall have the following meanings:          a. “**Additional Effectiveness Date**” means the date the Additional Registration Statement isdeclared effective by the SEC.
 

 
          b. “**Additional Effectiveness Deadline**” means the date which is sixty (60) calendar days afterthe earlier of the Additional Filing Date and the Additional Filing Deadline or in the event thatthe Registration Statement is subject to a review by the SEC, one-hundred and twenty (120) calendardays after the earlier of the Additional Filing Date and the Additional Filing Deadline.          c. “**Additional Filing Date**” means the date on which the Additional Registration Statement isfiled with the SEC.          d. “**Additional Filing Deadline**” means if Cutback Shares are required to be included in theAdditional Registration Statement, the later of (i) the date sixty (60) days after the datesubstantially all of the Registrable Securities registered under the immediately precedingRegistration Statement are sold and (ii) the date six (6) months from the Initial Effective Date orthe last Additional Effective Date, as applicable.          e. “**Additional Registrable Securities**” means, (i) any Cutback Shares not previously includedon a Registration Statement and (ii) any share capital of the Company issued or issuable withrespect to the Notes, the Conversion Shares, the Interest Shares, the Warrants, the Warrant Shares,the Common Shares or Cutback Shares, as applicable, as a result of any stock split, stock dividend,recapitalization, exchange or similar event or otherwise, without regard to any limitations onexercises of the Notes and the Warrants.          f. “**Additional Registration Statement**” means a registration statement or registrationstatements of the Company filed under the 1933 Act covering any Additional Registrable Securities.          g. “**Additional Required Registration Amoun**t” means any Cutback Shares not previously includedon a Registration Statement, all subject to adjustment as provided in Section 2(f), without regardto any limitations on exercises of the Notes and the Warrants.          h. “**Business Day**” means any day other than Saturday, Sunday or any other day on whichcommercial banks in The City of New York are authorized or required by law to remain closed.          i. “**Cutback Shares**” means any of the Initial Required Registration Amount (without regard toclause (II) in the definition thereof) of Registrable Securities not included in all RegistrationStatements previously declared effective hereunder as a result of a limitation on the maximumnumber of shares of Common Stock of the Company permitted by the staff of the SEC to be registeredpursuant to Rule 415. For the purpose of determining the Cutback Shares, in order to determine anyapplicable Required Registration Amount, first the Warrant Shares shall be excluded on a pro ratabasis until all of the Warrant Shares have been excluded, then the Common Shares shall be excludedon a pro rata basis until all of the Common Shares have been excluded and lastly the AmendedConversion Shares shall be excluded on a pro rata basis until all of the Amended Conversion Shareshave been excluded.          j. “**Effective Date**” means the Initial Effective Date and the Additional Effective Date, asapplicable.          k. “**Effectiveness Deadline**” means the Initial Effectiveness Deadline and the AdditionalEffectiveness Deadline, as applicable.          l. “**Initial Effective Date**” means the date that the Registration Statement has been declaredeffective by the SEC.          m. “**Initial Effectiveness Deadline**” means the date which is 365 days after the Initial ClosingDate (as defined in the Securities Purchase Agreement).
 

 
          n. “**Initial Registrable Securities**” means (i) the Conversion Shares issued or issuable uponconversion of the Notes, (ii) the Interest Shares issued or issuable with respect to the Notes,(iii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iv) the Common Sharesand (v) any capital stock of the Company issued or issuable, with respect to the Notes, theConversion Shares, the Interest Shares, the Warrant Shares, the Warrants or the Common Shares as aresult of any stock split, stock dividend, recapitalization, exchange or similar event orotherwise, without regard to any limitations on exercises of the Warrants.          o. “**Initial Required Registration Amount**” means (I) 120% of the sum of (w) the number ofConversion Shares issued and issuable pursuant to the Notes as of the trading day immediatelypreceding the applicable date of determination, (x) the number of Warrant Shares issued andissuable pursuant to the Warrants as of the trading day immediately preceding the applicable dateof determination, (y) the maximum number of Interest Shares issued or issuable pursuant to theterms of the Notes as of the trading date immediately preceding the applicable date ofdetermination and (z) the number of Common Shares issued as of the trading day immediatelypreceding the applicable date of determination, excluding the 144 Common Shares (as defined in theSecurities Purchase Agreement), subject to adjustment as provided in Section 2(f), withoutregard to any limitations on conversions or redemptions of the Notes or exercises of the Warrantsor (II) such other amount as may be required by the staff of the SEC pursuant to Rule 415.          p. “**Initial Registration Statement**” means a registration statement or registration statementsof the Company filed under the 1933 Act covering the Initial Registrable Securities.          q. “**Investor**” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns itsrights under this Agreement in accordance with the requirements of the Transaction Documents andwho agrees to become bound by the provisions of this Agreement in accordance with Section 9 and anytransferee or assignee thereof to whom a transferee or assignee assigns its rights under thisAgreement in accordance with the requirements of the Transaction Documents and who agrees to becomebound by the provisions of this Agreement in accordance with Section 9.          r. “**Person**” means an individual, a limited liability company, a partnership, a joint venture,a corporation, a trust, an unincorporated organization and a government or any department or agencythereof.          s. “**register**,” “**registered**,” and “**registration**” refer to a registration effected by preparingand filing one or more Registration Statements (as defined below) in compliance with the 1933 Actand pursuant to Rule 415 and the declaration or ordering by the SEC of the effectiveness of suchRegistration Statement(s).          t. “**Registrable Securities**” means the Initial Registrable Securities and the AdditionalRegistrable Securities. As to any particular Registrable Securities, they shall cease to beRegistrable Securities when they (i) have been sold pursuant to an effective registration statementor in compliance with Rule 144 or (ii) are eligible to be sold pursuant to Rule 144(k) or anysimilar rule then in force.          u. “**Registration Statement**” means a registration statement or registration statements of theCompany filed under the 1933 Act covering the Registrable Securities.          v. “**Required Holders**” means the holders of at least a majority of the Registrable Securities.          w. “**Required Registration Amount**” means either the Initial Required Registration Amount or theAdditional Required Registration Amount, as applicable.          x. “**Rule 415**” means Rule 415 under the 1933 Act or any successor rule providing for offeringsecurities on a continuous or delayed basis.          y. “**SEC**” means the United States Securities and Exchange Commission.
 

 
     2. Registration.          a. Mandatory Registration. The Company shall prepare, and, as soon as practicableafter the Initial Closing Date but in no event later than the earlier to occur of (i) forty-five(45) days after the Company obtains the Stockholder Approval (as defined in the Securities PurchaseAgreement) and (ii) March 3, 2008, file with the SEC the Initial Registration Statement on FormS-3, if available, covering the resale of all of the Initial Registrable Securities. In the eventthat Form S-3 is unavailable to the Company for such a registration, the Company shall use suchother form as is available for such a registration on another appropriate form reasonablyacceptable to the Required Holders, subject to the requirements of Section 2(e). The InitialRegistration Statement prepared pursuant hereto shall register for resale at least that number ofshares of Common Stock equal to the Initial Required Registration Amount determined as of the datesuch Initial Registration Statement is initially filed with the SEC. The Initial RegistrationStatement shall contain (except if otherwise directed by the Required Holders or the SEC) the“Selling Stockholders” and “Plan of Distribution” sections in substantially theform attached hereto as Exhibit B. The Company shall use its best efforts to have theInitial Registration Statement declared effective by the SEC as soon as practicable, but in noevent later than the Initial Effectiveness Deadline. By 9:30 am on the Business Day following theInitial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the1933 Act the final prospectus to be used in connection with sales pursuant to such RegistrationStatement.          b. Additional Mandatory Registrations. The Company shall prepare, and, as soon aspracticable but in no event later than the Additional Filing Deadline, file with the SEC AdditionalRegistration Statements on Form S-3 covering the resale of all of the Additional RegistrableSecurities not previously registered on an Additional Registration Statement hereunder. To theextent the staff of the SEC does not permit the Additional Required Registration Amount to beregistered on an Additional Registration Statement, the Company shall file Additional RegistrationStatements successively seeking to register on each such Additional Registration Statement themaximum number of remaining Additional Registrable Securities until the Additional RequiredRegistration Amount has been registered with the SEC. In the event that Form S-3 is unavailable forsuch a registration, the Company shall use such other form as is available for such a registrationon another appropriate form reasonably acceptable to the Required Holders, subject to theprovisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto shallregister for resale at least that number of shares of Common Stock equal to the Additional RequiredRegistration Amount as of the date the Registration Statement is initially filed with the SEC. EachAdditional Registration Statement shall contain (except if otherwise directed by the RequiredHolders or the SEC) the “Selling Stockholders” and “Plan of Distribution” sectionsin substantially the form attached hereto as Exhibit B. The Company shall use its bestefforts to have each Additional Registration Statement declared effective by the SEC as soon aspracticable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. NewYork time on the date following the Additional Effective Date, the Company shall file with theSEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used inconnection with sales pursuant to such Registration Statement.          c. Allocation of Registrable Securities. The initial number of Registrable Securitiesincluded in any Registration Statement and any increase in the number of Registrable Securitiesincluded therein shall be allocated pro rata among the Investors based on the number of RegistrableSecurities held by each Investor at the time the Registration Statement covering such initialnumber of Registrable Securities or increase thereof is declared effective by the SEC. In the eventthat an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, eachtransferee shall be allocated a pro rata portion of the then remaining number of RegistrableSecurities included in such Registration Statement for such transferor. Any shares of Common Stockincluded in a Registration Statement and which remain allocated to any Person which ceases to holdany Registrable Securities covered by such Registration Statement shall be allocated to theremaining Investors, pro rata based on the number of Registrable Securities then held by suchInvestors which are covered by such Registration Statement. The Company shall not include anysecurities other than Registrable Securities (other than (i) on the Initial Registration Statement,the shares described on Schedule 2(c)(i) and (ii) on the Additional Registration Statement,the shares described on Schedule 2(c)(ii)) without the prior written
 

 
consent of the Required Holders.          d. Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have theright to select one legal counsel to review and participate in any registration pursuant to thisSection 2 (“**Legal Counsel**”), which shall be Schulte Roth & Zabel LLP or such other counsel asthereafter designated by the Required Holders. The Company and Legal Counsel shall reasonablycooperate with each other in performing the Company’s obligations under this Agreement.          e. Ineligibility for Form S-3. In the event that Form S-3 is not available for theregistration of the resale of Registrable Securities hereunder, the Company shall (i) register theresale of the Registrable Securities on another appropriate form reasonably acceptable to theRequired Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon assuch form is available, provided that the Company shall maintain the effectiveness of theRegistration Statement then in effect until such time as a Registration Statement on Form S-3covering the Registrable Securities has been declared effective by the SEC.          f. Sufficient Number of Shares Registered. In the event the number of shares availableunder a Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of theRegistrable Securities required to be covered by such Registration Statement or an Investor’sallocated portion of the Registrable Securities pursuant to Section 2(c), the Company shall amendthe applicable Registration Statement, or file a new Registration Statement (on the short formavailable therefor, if applicable), or both, so as to cover at least the Required RegistrationAmount as of the trading day immediately preceding the date of the filing of such amendment or newRegistration Statement, in each case, as soon as practicable, but in any event not later thanfifteen (15)days after the necessity therefor arises. The Company shall use its best efforts to cause suchamendment and/or new Registration Statement to become effective as soon as practicable followingthe filing thereof. For purposes of the foregoing provision, the number of shares available under aRegistration Statement shall be deemed “insufficient to cover all of the Registrable Securities” ifat any time the number of shares of Common Stock available for resale under the RegistrationStatement is less than the product determined by multiplying (i) the Required Registration Amountas of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be madewithout regard to any limitations on the conversion of the Notes or the exercise of the Warrantsand such calculation shall assume that the Notes are then convertible into shares of Common Stockat the then prevailing Conversion Rate (as defined in the Notes) and that the Warrants are thenexercisable for shares of Common Stock at the then prevailing Exercise Price (as defined in theWarrants).          g. Effect of Failure to File and Obtain and Maintain Effectiveness of RegistrationStatement. If (i) (A) the Additional Registration Statement is not filed with the SEC on orbefore the Additional Filing Deadline (a “**Filing Failure**”) or (B) a Registration Statement coveringall of the Registrable Securities required to be covered thereby and required to be filed by theCompany pursuant to this Agreement is not declared effective by the SEC on or before the respectiveEffectiveness Deadline (an “**Effectiveness Failure**”) or (ii) on any day after the Effective Datesales of all of the Registrable Securities required to be included on such Registration Statementcannot be made for any reason (other than during an Allowable Grace Period (as defined in Section3(q)) pursuant to such Registration Statement (including, without limitation, because of a failureto keep such Registration Statement effective, to disclose such information as is necessary forsales to be made pursuant to such Registration Statement or to register, subject to the graceperiods set forth in Section 3(q) a sufficient number of shares of Common Stock to enable resale of100% of the shares of Common Stock issuable upon conversion of the Notes and exercise of theWarrants without regard to limitations on conversion, redemption and exercise of such Notes andWarrants and assuming such conversion, redemption or exercise occurred on the date of the filing ofthe Registration Statement or a suspension or delisting of the Common Stock on its principaltrading exchange or market) (a “**Maintenance Failure**”) then, as partial relief for the damages toany holder by reason of any such delay in or reduction of its ability to sell the underlying sharesof Common Stock (which remedy shall not be exclusive of any other remedies available at law or inequity), the Company shall pay to each holder of Registrable Securities relating to suchRegistration Statement an amount in cash equal to one percent (1.0%) of the aggregate PurchasePrice (as such term is defined in the Securities Purchase Agreement) of such Investor’s RegistrableSecurities included in such Registration Statement on each of the following dates: (i) the day of aFiling Failure and on every thirtieth day (pro rated for periods totaling less than thirty days)after a Filing Failure until such Filing Failure is cured; (ii) the day of an Effectiveness Failureand on every thirtieth day (pro rated for periods totaling less than thirty days) after anEffectiveness Failure until such Effectiveness Failure is cured; and (iii) the initial day of aMaintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirtydays) after a Maintenance Failure until such Maintenance Failure is cured; provided,however,that in no event shall the Company be liable for more than one percent (1%) of penaltiesduring any thirty day period or for multiple events during any thirty day period. The payments towhich a holder shall be entitled pursuant to this Section 2(g) are referred to herein as“**Registration Delay Payments**.” Registration Delay Payments shall be paid on the day of the FilingFailure, Effectiveness Failure and the initial day of a Maintenance Failure, as applicable, andthereafter on the earlier of (I) the thirtieth day after the event or failure giving rise to theRegistration Delay Payments has occurred and (II) the third Business Day after the event or failuregiving rise to the Registration Delay Payments is cured. In the event the Company fails to makeRegistration Delay Payments in a timely manner, such Registration Delay Payments shall bearinterest at the rate of one percent (1.0%) per month (prorated for partial months) until paid infull. The parties agree that the Company will not be liable for Registration Delay Payments underthis Section in respect of the Warrants.
 

 
     3. Related Obligations.     At such time as the Company is obligated to file a Registration Statement with the SECpursuant to Section 2(a), 2(b), 2(e) or 2(f), and subject to any Allowable Grace Periods, theCompany will use its best efforts to effect the registration of the Registrable Securities inaccordance with the intended method of disposition thereof and, pursuant thereto, the Company shallhave the following obligations:          a. The Company shall submit to the SEC, within two (2) Business Days after the Company learnsthat no review of a particular Registration Statement will be made by the staff of the SEC or thatthe staff has no further comments on a particular Registration Statement, as the case may be, arequest for acceleration of effectiveness of such Registration Statement to a time and date notlater than 48 hours after the submission of such request. Subject to Allowable Grace Periods, theCompany shall keep each Registration Statement effective pursuant to Rule 415 at all times untilthe earlier of (i) the date as of which the Investors may sell all of the Registrable Securitiescovered by such Registration Statement pursuant to Rule 144(k) (or any successor thereto)promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of theRegistrable Securities covered by such Registration Statement (the “**Registration Period**”). TheCompany shall ensure that each Registration Statement (including any amendments or supplementsthereto and prospectuses contained therein) shall not contain any untrue statement of a materialfact or omit to state a material fact required to be stated therein, or necessary to make thestatements therein (in the case of prospectuses, in the light of the circumstances in which theywere made) not misleading.          b. The Company shall prepare and file with the SEC such amendments (including post-effectiveamendments) and supplements to a Registration Statement and the prospectus used in connection withsuch Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated underthe 1933 Act, as may be necessary to keep such Registration Statement effective at all times duringthe Registration Period, and, during such period, comply with the provisions of the 1933 Act withrespect to the disposition of all Registrable Securities of the Company covered by suchRegistrationStatement until such time as all of such Registrable Securities shall have been disposed of inaccordance with the intended methods of disposition by the seller or sellers thereof as set forthin such Registration Statement. In the case of amendments and supplements to a RegistrationStatement which are required to be filed pursuant to this Agreement (including pursuant to thisSection 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogousreport under the Securities Exchange Act of 1934, as amended (the “**1934 Act**”), the Company shallhave incorporated such report by reference into such Registration Statement, if applicable, orshall file such amendments or supplements with the SEC on the same day on which the 1934 Act reportis filed which created the requirement for the Company to amend or supplement such RegistrationStatement.
 

 
          c. The Company shall (A) permit Legal Counsel to review and comment upon (i) a RegistrationStatement at least three (3) Business Days prior to its filing with the SEC and (ii) all amendmentsand supplements to all Registration Statements (except for any periodic reports under the 1934 Act)within a reasonable number of days prior to their filing with the SEC, and (B) not file anyRegistration Statement or amendment or supplement thereto in a form to which Legal Counselreasonably objects; provided, however, that no liquidated damages under Section 2 shall be due toany Investor if Legal Counsel shall have unreasonably objected to the filing or effectiveness ofany Registration Statements such as to delay its filing or effectiveness. The Company shall notsubmit a request for acceleration of the effectiveness of a Registration Statement or any amendmentor supplement thereto without the prior approval of Legal Counsel, which consent shall not beunreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies ofany correspondence from the SEC or the staff of the SEC to the Company or its representativesrelating to any Registration Statement, (ii) promptly after the same is prepared and filed with theSEC, one copy of any Registration Statement and any amendment(s) thereto, including financialstatements and schedules, all documents incorporated therein by reference, if requested by anInvestor (if not available pursuant to Rule 424(b)), and all exhibits. The Company shall reasonablycooperate with Legal Counsel in performing the Company’s obligations pursuant to this Section 3.          d. The Company shall furnish to each Investor whose Registrable Securities are included in anyRegistration Statement, without charge, (i) if the Company shall not have filed a final prospectusin accordance with Rule 424 per Section 2(a) or 2(b), as applicable, upon the effectiveness of anyRegistration Statement, ten (10) copies of the prospectus included in such Registration Statementand all amendments and supplements thereto (or such other number of copies as such Investor mayreasonably request) and (ii) such other documents, including copies of any preliminary or finalprospectus, as such Investor may reasonably request from time to time in order to facilitate thedisposition of the Registrable Securities owned by such Investor.          e. The Company shall use its best efforts to (i) register and qualify, unless an exemptionfrom registration and qualification applies, the resale by Investors of the Registrable Securitiescovered by a Registration Statement under such other securities or“blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file inthose jurisdictions, such amendments (including post-effective amendments) and supplements to suchregistrations and qualifications as may be necessary to maintain the effectiveness thereof duringthe Registration Period, (iii) take such other actions as may be necessary to maintain suchregistrations and qualifications in effect at all times during the Registration Period, and (iv)take all other actions reasonably necessary or advisable to qualify the Registrable Securities forsale in such jurisdictions; provided, however, that the Company shall not be required in connectiontherewith or as a condition thereto to (x) qualify to do business in any jurisdiction where itwould not otherwise be required to qualify but for this Section 3(e), (y) subject itself to generaltaxation in any such jurisdiction, or (z) file a general consent to service of process in any suchjurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holdsRegistrable Securities of the receipt by the Company of any notification with respect to thesuspension of the registration or qualification of any of the Registrable Securities for sale underthe securities or “blue sky” laws of any jurisdiction in the United States or its receipt of noticeof the initiation or threatening of any proceeding for such purpose.          f. The Company shall notify Legal Counsel and each Investor in writing of the happening of anyevent, as promptly as practicable after becoming aware of such event, as a result of which theprospectus included in a Registration Statement, as then in effect, includes an untrue statement ofa material fact or omission to state a material fact required to be stated therein or necessary tomake the statements therein, in the light of the circumstances under which they were made, notmisleading (provided that in no event shall such notice contain any material, nonpublicinformation), and, subject to Section 3(q), promptly prepare a supplement or amendment to suchRegistration Statement to correct such untrue statement or omission. The Company shall alsopromptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectussupplement or post-effective amendment has been filed, and when a Registration Statement or anypost-effective amendment has become effective (notification of such effectiveness shall bedelivered to Legal Counsel and each Investor by facsimile on the same day of such effectiveness andby overnight mail) and (ii) of the Company’s reasonable determination that a post-effectiveamendment to a Registration Statement would be appropriate.
 

 
          g. The Company shall use its best efforts to prevent the issuance of any stop order or othersuspension of effectiveness of a Registration Statement, or the suspension of the qualification ofany of the Registrable Securities for sale in any jurisdiction and, if such an order or suspensionis issued, to obtain the withdrawal of such order or suspension at the earliest possible moment andto notify Legal Counsel and each Investor who holds Registrable Securities being sold of theissuance of such order and the resolution thereof or its receipt of actual notice of the initiationor threat of any proceeding for such purpose.          h. To the extent any Investor is deemed, alleged or reasonably believes may be alleged, to bean underwriter, at the reasonable request of any Investor, the Company shall furnish to suchInvestor, on the date of the effectiveness of the Registration Statement and thereafter from timeto time on such dates as an Investor mayreasonably request (i) a letter, dated such date, from the Company’s independent certifiedpublic accountants in form and substance as is customarily given by independent certified publicaccountants to underwriters in an underwritten public offering, addressed to the Investors, and(ii) an opinion, dated as of such date, of counsel representing the Company for purposes of suchRegistration Statement, in form, scope and substance as is customarily given in an underwrittenpublic offering, addressed to the Investors.          i. To the extent any Investor is deemed, alleged or reasonably believes may be alleged, to bean underwriter, the Company shall make available for inspection by (i) any Investor, (ii) LegalCounsel and (iii) one firm of accountants or other agents retained by the Investors (collectively,the “**Inspectors**”), all pertinent financial and other records, and pertinent corporate documents andproperties of the Company (collectively, the “**Records**”), as shall be reasonably deemed necessary byeach Inspector, and cause the Company’s officers, directors and employees to supply all informationwhich any Inspector may reasonably request; provided, however, that each Inspector shall agree tohold in strict confidence and shall not make any disclosure (except to an Investor) or use of anyRecord or other information which the Company determines in good faith to be confidential, and ofwhich determination the Inspectors are so notified, unless (a) the disclosure of such Records isnecessary to avoid or correct a misstatement or omission in any Registration Statement or isotherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to afinal, non-appealable subpoena or order from a court or government body of competent jurisdiction,or (c) the information in such Records has been made generally available to the public other thanby disclosure in violation of this or any other Transaction Document. Each Investor agrees that itshall, upon learning that disclosure of such Records is sought in or by a court or governmentalbody of competent jurisdiction or through other means, give prompt notice to the Company and allowthe Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtaina protective order for, the Records deemed confidential. Nothing herein (or in any otherconfidentiality agreement between the Company and any Investor) shall be deemed to limit theInvestors’ ability to sell Registrable Securities in a manner which is otherwise consistent withapplicable laws and regulations.          j. The Company shall hold in confidence and not make any disclosure of information concerningan Investor provided to the Company unless (i) disclosure of such information is necessary oradvisable to comply with federal or state securities laws, (ii) the disclosure of such informationis necessary or advisable to avoid or correct a misstatement or omission in any RegistrationStatement, (iii) the release of such information is ordered pursuant to a subpoena or other orderfrom a court or governmental body of competent jurisdiction, or (iv) such information has been madegenerally available to the public other than by disclosure in violation of this Agreement or anyother agreement (provided that in the case of clauses (i) and (ii) such Investor shall be consultedby the Company in connection with any such release or other disclosure prior to its release). TheCompany agrees that it shall, upon learning that disclosure of such information concerning anInvestor is sought in or by a court or governmental body of competent jurisdiction or through othermeans, give prompt written notice to suchInvestor and allow such Investor, at the Investor’s expense, to undertake appropriate actionto prevent disclosure of, or to obtain a protective order for, such information.
 

 
          k. The Company shall use its best efforts either to (i) cause all of the RegistrableSecurities covered by a Registration Statement to be listed on each securities exchange on whichsecurities of the same class or series issued by the Company are then listed, if any, if thelisting of such Registrable Securities is then permitted under the rules of such exchange, or (ii)secure designation and quotation of all of the Registrable Securities covered by a RegistrationStatement on either The NASDAQ Global Market or The NASDAQ Global Select Market or (iii) if,despite the Company’s best efforts to satisfy the preceding clauses (i) and (ii), the Company isunsuccessful in satisfying the preceding clauses (i) or (ii), to secure the inclusion for quotationon The NASDAQ Capital Market or the NASD’s OTC Bulletin Board for such Registrable Securities and,without limiting the generality of the foregoing, to use its best efforts to arrange for at leasttwo market makers to register with the National Association of Securities Dealers, Inc. (“**NASD**”) assuch with respect to such Registrable Securities. The Company shall pay all fees and expenses inconnection with satisfying its obligation under this Section 3(k).          l. The Company shall cooperate with the Investors who hold Registrable Securities beingoffered and, to the extent applicable, facilitate the timely preparation and delivery ofcertificates (not bearing any restrictive legend) representing the Registrable Securities to beoffered and resold pursuant to a Registration Statement and enable such certificates to be in suchdenominations or amounts, as the case may be, as the Investors may reasonably request andregistered in such names as the Investors may request.          m. If requested by an Investor, the Company shall (i) as soon as practicable incorporate in aprospectus supplement or post-effective amendment such information as an Investor reasonablyrequests to be included therein relating to the sale and distribution of Registrable Securities,including, without limitation, information with respect to the number of Registrable Securitiesbeing offered or sold, the purchase price being paid therefor and any other terms of the offeringof the Registrable Securities to be sold in such offering; (ii) as soon as practicable make allrequired filings of such prospectus supplement or post-effective amendment after being notified ofthe matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii)as soon as practicable, supplement or make amendments to any Registration Statement if reasonablyrequested by an Investor holding any Registrable Securities.          n. The Company shall use its best efforts to cause the Registrable Securities covered by aRegistration Statement to be registered with or approved by such other governmental agencies orauthorities as may be necessary to consummate the disposition of such Registrable Securities.          o. The Company shall otherwise use its best efforts to comply with all applicable rules andregulations of the SEC in connection with any registration hereunder.          p. Within two (2) Business Days after a Registration Statement which covers RegistrableSecurities is declared effective by the SEC, the Company shall deliver, and shall cause legalcounsel for the Company to deliver, to the transfer agent for such Registrable Securities (withcopies to the Investors whose Registrable Securities are included in such Registration Statement)confirmation that such Registration Statement has been declared effective by the SEC in the formattached hereto as Exhibit A.          q. Notwithstanding anything to the contrary herein, at any time after the Effective Date, theCompany may delay the disclosure of material, non-public information concerning the Company thedisclosure of which at the time is not, in the good faith opinion of the Board of Directors of theCompany (following consultation with its counsel), in the best interest of the Company (a “**GracePeriod**”); provided, that the Company shall promptly (i) notify the Investors in writing that suchdetermination has been made (provided that in each notice the Company will not disclose the contentof such material, non-public information to the Investors) and the date on which the Grace Periodwill begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends;and, provided further, that during any three hundred sixty five (365) day period such Grace Periodsshall not exceed an aggregate of twenty (20) days and the first day of any Grace Period must be atleast two (2) trading days after the last day of any prior Grace Period (each, an “**Allowable GracePeriod**”). During an Allowable Grace Period, the Investors will cease all sales under the applicableRegistration Statement until the end of such Allowable Grace Period. For purposes of determiningthe length of a Grace Period above, the Grace Period shall begin on and include the date theInvestors receive the notice referred to in clause (i) and shall end on and include the later ofthe date the Investors receive the notice referred to in clause (ii) and the date referred to insuch notice. The provisions of Section 3(g) hereof shall not be applicable during the period of anyAllowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound bythe first sentence of Section 3(f) with respect to the information giving rise thereto unless suchmaterial, non-public information is no longer applicable. Notwithstanding anything to the contrary,the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to atransferee of an Investor in accordance with the terms of the Securities Purchase Agreement inconnection with any sale of Registrable Securities with respect to which an Investor has enteredinto a contract for sale, and delivered a copy of the prospectus included as part of the applicableRegistration Statement (unless an exemption from such prospectus delivery requirement exists),prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has notyet settled.
 

 
     4. Obligations of the Investors.          a. At least five (5) Business Days prior to the first anticipated filing date of aRegistration Statement, the Company shall notify each Investor in writing of the information theCompany requires from each such Investor if such Investor elects to have any of such Investor’sRegistrable Securities included in such Registration Statement. It shall be a condition precedentto the obligations of the Company to complete the registration pursuant to this Agreement, and anytime deadlines for the Companyhereunder shall be extended for the number of days an Investor does not comply with thisSection 4, with respect to the Registrable Securities of a particular Investor that such Investorshall furnish to the Company a “Selling Stockholder Questionnaire”, in the form attachedhereto as Exhibit C, and such other information regarding itself, the RegistrableSecurities held by it and the intended method of disposition of the Registrable Securities held byit as shall be reasonably required to effect the effectiveness of the registration of suchRegistrable Securities and shall execute such documents in connection with such registration as theCompany may reasonably request.          b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees tocooperate with the Company as reasonably requested by the Company in connection with thepreparation and filing of any Registration Statement hereunder, unless such Investor has notifiedthe Company in writing of such Investor’s election to exclude all of such Investor’s RegistrableSecurities from such Registration Statement.          c. Each Investor agrees that, upon receipt of any notice from the Company of the happening ofany event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor willimmediately discontinue disposition of Registrable Securities pursuant to any RegistrationStatement(s) covering such Registrable Securities until such Investor’s receipt of the copies ofthe supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of 3(f)or receipt of notice that no supplement or amendment is required. Notwithstanding anything to thecontrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stockto a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement inconnection with any sale of Registrable Securities with respect to which an Investor has enteredinto a contract for sale prior to the Investor’s receipt of a notice from the Company of thehappening of any event of the kind described in Section 3(g) or the first sentence of 3(f) and forwhich the Investor has not yet settled.          d. Each Investor covenants and agrees that it will comply with the prospectus deliveryrequirements of the 1933 Act as applicable to it or an exemption therefrom in connection with salesof Registrable Securities pursuant to the Registration Statement.     5. Expenses of Registration.     All reasonable expenses, other than underwriting discounts and commissions, incurred inconnection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,without limitation, all registration, listing and qualifications fees, printers and accountingfees, and fees and disbursements of counsel for the Company, shall be paid by the Company. TheCompany shall also reimburse the Investors for the fees and disbursements of Legal Counsel inconnection with registration, filing or qualification pursuant to Sections 2 and 3 of thisAgreement which amount shall be limited to $15,000.
 

 
     6. Indemnification.     In the event any Registrable Securities are included in a Registration Statement under thisAgreement:          a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, holdharmless and defend each Investor, the directors, officers, members, partners, employees, agents,representatives of, and each Person, if any, who controls any Investor within the meaning of the1933 Act or the 1934 Act (each, an “**Indemnified Person**”), against any losses, claims, damages,liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paidin settlement or expenses, joint or several, (collectively, “**Claims**”) incurred in investigating,preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal takenfrom the foregoing by or before any court or governmental, administrative or other regulatoryagency, body or the SEC, whether pending or threatened, whether or not an indemnified party is ormay be a party thereto (“**Indemnified Damages**”), to which any of them may become subject insofar assuch Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) ariseout of or are based upon: (i) any untrue statement or alleged untrue statement of a material factin a Registration Statement or any post-effective amendment thereto or in any filing made inconnection with the qualification of the offering under the securities or other “blue sky” laws ofany jurisdiction in which Registrable Securities are offered (“**Blue Sky Filing**”), or the omissionor alleged omission to state a material fact required to be stated therein or necessary to make thestatements therein not misleading, (ii) any untrue statement or alleged untrue statement of amaterial fact contained in any preliminary prospectus if used prior to the effective date of suchRegistration Statement, or contained in the final prospectus (as amended or supplemented, if theCompany files any amendment thereof or supplement thereto with the SEC) or the omission or allegedomission to state therein any material fact necessary to make the statements made therein, in thelight of the circumstances under which the statements therein were made, not misleading, (iii) anyviolation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,including, without limitation, any state securities law, or any rule or regulation thereunderrelating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or(iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being,collectively, “**Violations**”). Subject to Section 6(c), the Company shall reimburse the IndemnifiedPersons, promptly as such expenses are incurred and are due and payable, for any legal fees orother reasonable expenses incurred by them in connection with investigating or defending any suchClaim. Notwithstanding anything to the contrary contained herein, the indemnification agreementcontained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising outof or based upon a Violation which occurs in reliance upon and in conformity with informationfurnished in writing to the Company by such Indemnified Person for such Indemnified Personexpressly for use in connection with the preparation of the Registration Statement or any suchamendment thereof or supplement thereto, if such prospectus was timely made available by theCompany pursuant to Section 3(d) and (ii) shall not apply to amounts paid in settlement of anyClaim if such settlement is effected without the prior written consent of the Company,which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain infull force and effect regardless of any investigation made by or on behalf of the IndemnifiedPerson and shall survive the transfer of the Registrable Securities by the Investors pursuant toSection 9.
 

 
          b. In connection with any Registration Statement in which an Investor is participating, eachsuch Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the sameextent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,each of its officers who signs the Registration Statement and each Person, if any, who controls theCompany within the meaning of the 1933 Act or the 1934 Act (each, an “**Indemnified Party**”), againstany Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based uponany Violation, in each case to the extent, and only to the extent, that such Violation occurs inreliance upon and in conformity with written information furnished to the Company by such Investorexpressly for use in connection with such Registration Statement; and, subject to Section 6(c),such Investor will reimburse any legal or other expenses reasonably incurred by an IndemnifiedParty in connection with investigating or defending any such Claim; provided, however, that theindemnity agreement contained in this Section 6(b) and the agreement with respect to contributioncontained in Section 7 shall not apply to amounts paid in settlement of any Claim if suchsettlement is effected without the prior written consent of such Investor, which consent shall notbe unreasonably withheld or delayed; provided, further, however, that the Investor shall be liableunder this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceedthe net proceeds to such Investor as a result of the sale of Registrable Securities pursuant tosuch Registration Statement. Such indemnity shall remain in full force and effect regardless of anyinvestigation made by or on behalf of such Indemnified Party and shall survive the transfer of theRegistrable Securities by the Investors pursuant to Section 9.          c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6of notice of the commencement of any action or proceeding (including any governmental action orproceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim inrespect thereof is to be made against any indemnifying party under this Section 6, deliver to theindemnifying party a written notice of the commencement thereof, and the indemnifying party shallhave the right to participate in, and, to the extent the indemnifying party so desires, jointlywith any other indemnifying party similarly noticed, to assume control of the defense thereof withcounsel mutually satisfactory to the indemnifying party and the Indemnified Person or theIndemnified Party, as the case may be; provided, however, that an Indemnified Person or IndemnifiedParty shall have the right to retain its own counsel with the fees and expenses of not more thanone counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party,if, in the reasonable opinion of counsel retained by the indemnifying party, the representation bysuch counsel of the Indemnified Person or Indemnified Party and the indemnifying party would beinappropriate due to actual or potential differing interests between such Indemnified Person orIndemnified Party andany other party represented by such counsel in such proceeding. In the case of an IndemnifiedPerson, legal counsel referred to in the immediately preceding sentence shall be selected by theInvestors holding at least a majority in interest of the Registrable Securities included in theRegistration Statement to which the Claim relates. The Indemnified Party or Indemnified Personshall cooperate fully with the indemnifying party in connection with any negotiation or defense ofany such action or Claim by the indemnifying party and shall furnish to the indemnifying party allinformation reasonably available to the Indemnified Party or Indemnified Person which relates tosuch action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Personreasonably apprised at all times as to the status of the defense or any settlement negotiationswith respect thereto. No indemnifying party shall be liable for any settlement of any action, claimor proceeding effected without its prior written consent; provided, however, thatthe indemnifying party shall not unreasonably withhold, delay or condition its consent. Noindemnifying party shall, without the prior written consent of the Indemnified Party or IndemnifiedPerson, consent to entry of any judgment or enter into any settlement or other compromise whichdoes not include as an unconditional term thereof the giving by the claimant or plaintiff to suchIndemnified Party or Indemnified Person of a release from all liability in respect to such Claim orlitigation, and such settlement shall not include any admission as to fault on the part of theIndemnified Party. Following indemnification as provided for hereunder, the indemnifying partyshall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect toall third parties, firms or corporations relating to the matter for which indemnification has beenmade. The failure to deliver written notice to the indemnifying party within a reasonable time ofthe commencement of any such action shall not relieve such indemnifying party of any liability tothe Indemnified Person or Indemnified Party under this Section 6, except to the extent that theindemnifying party is prejudiced in its ability to defend such action.
 

 
          d. The indemnification required by this Section 6 shall be made by periodic payments of theamount thereof during the course of the investigation or defense, as and when bills are received orIndemnified Damages are incurred.          e. No Person involved in the sale of Registrable Securities who is guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection withsuch sale shall be entitled to indemnification from any Person involved in such sale of RegistrableSecurities who is not guilty of fraudulent misrepresentation.          f. The indemnity agreements contained herein shall be in addition to (i) any cause of actionor similar right of the Indemnified Party or Indemnified Person against the indemnifying party orothers, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.     7. Contribution.     To the extent any indemnification by an indemnifying party is prohibited or limited by law,the indemnifying party agrees to make the maximum contribution with respect to any amounts forwhich it would otherwise be liable under Section 6 to the fullest extent permitted by law;provided, however, that: (i) no contribution shall be made under circumstances where the makerwould not have been liable for indemnification under the fault standards set forth in Section 6 ofthis Agreement, (ii) no Person involved in the sale of Registrable Securities, which Person isguilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) inconnection with such sale, shall be entitled to contribution from any Person involved in such saleof Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii)contribution by any seller of Registrable Securities shall be limited in amount to the net amountof proceeds received by such seller from the sale of such Registrable Securities pursuant to suchRegistration Statement.     8. Reports Under the 1934 Act.     With a view to making available to the Investors the benefits of Rule 144 promulgated underthe 1933 Act or any other similar rule or regulation of the SEC that may at any time permit theInvestors to sell securities of the Company to the public without registration (“**Rule 144**”), theCompany agrees, for so long as an Investor holds Notes, Warrants, Common Shares (as defined in theSecurities Purchase Agreement) or Registrable Securities, to:          a. make and keep public information available, as those terms are understood and defined inRule 144;          b. file with the SEC in a timely manner (except as noted in Schedule 4(c) of the SecuritiesPurchase Agreement) all reports and other documents required of the Company under the 1933 Act andthe 1934 Act so long as the Company remains subject to such requirements and the filing of suchreports and other documents is required for the applicable provisions of Rule 144; and          c. furnish to each Investor so long as such Investor owns Registrable Securities, promptlyupon request, (i) a written statement by the Company, if true, that it has complied with thereporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recentannual report of the Company and such other reports and documents so filed by the Company (but onlyif such reports are not publicly available on the EDGAR System) and (iii) such other information asmay be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144without registration.     9. Assignment of Registration Rights.     The rights under this Agreement shall be automatically assignable by the Investors to anytransferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investoragrees in writing with the transferee or assignee to assign such rights,and a copy of such agreement is furnished to the Company within a reasonable time after suchassignment; (ii) the Company is, within a reasonable time after such transfer or assignment,furnished with written notice of (a) the name and address of such transferee or assignee and (b)the securities with respect to which such registration rights are being transferred or assigned;(iii) immediately following such transfer or assignment the further disposition of such securitiesby the transferee or assignee is restricted under the 1933 Act or applicable state securities laws;(iv) at or before the time the Company receives the written notice contemplated by clause (ii) ofthis sentence the transferee or assignee agrees in writing with the Company to be bound by all ofthe provisions contained herein; and (v) such transfer shall have been made in accordance with theapplicable requirements of the Securities Purchase Agreement (including the furnishing by theInvestor to the Company of an opinion of counsel reasonably acceptable to the Company, prior tosuch transfer, that such Registrable Securities may be so transferred in a transaction that doesnot require registration under the 1933 Act).
 

 
     10. Amendment of Registration Rights.     Provisions of this Agreement may be amended and the observance thereof may be waived (eithergenerally or in a particular instance and either retroactively or prospectively), only with thewritten consent of the Company and the Required Holders. Any amendment or waiver effected inaccordance with this Section 10 shall be binding upon each Investor and the Company. No suchamendment shall be effective to the extent that it applies to less than all of the holders of theRegistrable Securities. No consideration shall be offered or paid to any Person to amend or consentto a waiver or modification of any provision of any of this Agreement unless the same considerationalso is offered to all of the parties to this Agreement.     11. Miscellaneous.          a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or isdeemed to own of record such Registrable Securities. If the Company receives conflictinginstructions, notices or elections from two or more Persons with respect to the same RegistrableSecurities, the Company shall act upon the basis of instructions, notice or election received fromthe such record owner of such Registrable Securities.          b. Any notices, consents, waivers or other communications required or permitted to be givenunder the terms of this Agreement must be in writing and will be deemed to have been delivered: (i)upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (providedconfirmation of transmission is mechanically or electronically generated and kept on file by thesending party); or (iii) one Business Day after deposit with a nationally recognized overnightdelivery service, in each case properly addressed to the party to receive the same. Each Investorshall provide notice in writing to the Company of any change in address, which notice shall be sentby the Company to all the other Investors. The addresses and facsimile numbers for suchcommunications shall be:
 

 
If to the Company:The Allied Defense Group, Inc.