**RESTRICTED STOCK AGREEMENT**
     THISRESTRICTED STOCK AGREEMENT is made as of this ___ day of ___, 20___, between TheAllied Defense Group, Inc., a Delaware corporation(“Company”), and                      (the“Employee”).
     WHEREAS, the continued participation of the Employee is considered by the Company to beimportant for the Company’s continued growth; and
     WHEREAS, in order to give the Employee an incentive to continue in the employ of the Companyand to participate in the affairs of the Company, the Compensation Committee of the Board ofDirectors of the Company (“Committee”) has determined that the Employee shall be granted shares ofthe Company’s $0.10 par value Common Stock (“Stock”), subject to the restrictions stated below, inaccordance 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 herebygrants to the Employee ___ shares of Stock.
2.  Vesting Schedule.
Provided that the Employee has remained in the continuous employ of the Company through thevesting dates set forth below, the following number of shares of Stock shall vest on suchdates:                        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 corporationof the Company shall be considered employment by the Company.
3.  Restrictions.
 (a)  The Stock granted hereunder may not be sold, pledged or otherwise transferreduntil the Stock becomes vested in accordance with Section 2. The period of timebetween the date hereof and the date Stock becomes vested is referred to herein as the“Restriction Period.”
 

 

 (b)  Except for employment terminations arising from ___, if the Employee’semployment with the Company is terminated at any time prior to the lapse of aRestriction Period, all unvested shares of Stock granted hereunder shall be forfeitedby the Employee, and ownership transferred back to the Company. In the event of anemployment termination arising from ___, all unvested shares of Stock grantedhereunder shall immediately vest.
4. Legend.
Any certificates representing Stock subject to the provisions of this Agreement shall haveendorsed thereon the following legend:
“The shares represented by this certificate are subject to anagreement between the Corporation and the registered holder, a copyof 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 toand deposited with the Secretary of the Company as Escrow Agent in this transaction. TheStock may also be held in a restricted book entry account in the name of the Employee. Suchcertificates or such book entry shares are to be held by the Escrow Agent until terminationof 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 requiredwithholding taxes in accordance with Section 7 below, unless alternative procedures for thepayment 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 withrespect 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 cashdividends paid to or made with respect to the Stock.
7. Taxes.
 (a)  The Employee shall be liable for any and all taxes, including withholdingtaxes, arising out of this grant or the vesting of Stock hereunder. The Employee shallsurrender a sufficient number of whole shares of Stock as necessary to cover allapplicable required withholding taxes and required social security contributions at thetime the restrictions on the Stock lapse, unless alternative procedures for suchpayment are established. The Employee will receive a cash refund for any fraction of asurrendered share of Stock not necessary for required withholding taxes and requiredsocial insurance contributions. To the extent that any surrender of Stock oralternative procedure for such payment is insufficient, the
 

 

    Employee authorizes the Company to deduct tax at source, to deduct all applicablerequired withholding taxes and social security contributions from the Employee’scompensation. The Employee agrees to pay any amounts that cannot be satisfied fromwages or other cash compensation, to the extent permitted by law.  (b)  Regardless of any action the Company takes with respect to any or all incometax, social insurance, payroll tax, payment on account or other tax-related withholding(“Tax-Related Items”), the Employee acknowledges and agrees that the ultimate liabilityfor all Tax-Related Items legally due by him is and remains the Employee’sresponsibility and that the Company (i) make no representations nor undertakingsregarding the treatment of any Tax-Related Items in connection with any aspect of thisgrant of Stock, including the grant, vesting or release, the subsequent sale of Stockand receipt of any dividends; and (ii) does not commit to structure the terms or anyaspect of this grant of Stock to reduce or eliminate the Employee’s liability forTax-Related Items.
8.   Plan Information.
The Employee agrees to receive copies of the Plan, the Plan prospectus and other Planinformation from the Company’s web site, including copies of any annual report, proxy andForm 10-K. The Employee acknowledges that copies of the Plan, Company’s Plan prospectus,Plan information and stockholder information are available upon written or telephonicrequest to the Company Secretary.
9.     Acknowledgement and Waiver.
By accepting this grant of Stock, the Employee acknowledges and agrees that: (i) the Planhas been established voluntarily by the Company, it is discretionary in nature and may bemodified, amended, suspended or terminated by the Company at any time unless otherwiseprovided in the Plan; (ii) the grant of Stock is voluntary and occasional and does notcreate any contractual or other right to receive future grants of Stock, or benefits in lieuof Stock, even if Stock has been granted repeatedly in the past; (iii) all decisions withrespect to future grants, if any, will be at the sole discretion of the Company; (iv) theEmployee’s participation in the Plan shall not create a right to further employment with theCompany and shall not interfere with the ability of the Company to terminate the Employee’semployment relationship at any time with or without cause; and (v) the Employee isparticipating voluntarily in the Plan.
10.  Miscellaneous.
 (a)  The Company shall not be required (i) to transfer on its books any shares ofStock of the Company which shall have been sold or transferred in violation of any ofthe provisions set forth in this Agreement, or (ii) to treat as owner of such Stock orto accord the right to vote as such owner or to pay dividends to any transferee to whomsuch Stock shall have been so transferred.
 

 

 (b)  The parties agree to execute such further instruments and to take such actionas 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 shallbe deemed effectively given upon delivery to the Employee at his address then on filewith the Company.  (d)  The Plan is incorporated herein by reference. The Plan and this Agreementconstitute the entire agreement of the parties with respect to the subject matterhereof and supersede in their entirety all prior undertakings and agreements of theCompany and the Employee with respect to the subject matter hereof, and may not bemodified adversely to the Employee’s interest except by means of a writing signed bythe Company and the Employee. This Agreement is governed by the laws of the State ofDelaware.  (e)  If the Employee has received this or any other document related to the Plantranslated into a language other than English and if the translated version isdifferent than the English version, the English version will control.  (f)  The provisions of this Agreement are severable and if any one or moreprovisions are determined to be illegal or otherwise unenforceable, in whole or inpart, the remaining provisions shall nevertheless be binding and enforceable.         THE ALLIED DEFENSE GROUP, INC.          By: