Document:

EX-10.1

AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT

AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of June 19,
2007, by and among The Allied Defense Group, Inc., a Delaware corporation with its corporate
headquarters located at 8000 Towers Crescent Drive, Suite 260, Vienna, Virginia 22182 (the
"Company”), and the investors listed on the Schedule of Buyers attached hereto (individually, a
"Buyer” and collectively, the “Buyers”).

WHEREAS:

A. The Company and the Buyers entered into that certain Securities Purchase Agreement, dated
as of March 9, 2006 (the “Original Closing Date”) (as amended from time to time in accordance with
its terms, the “Original Securities Purchase Agreement”), whereby the Company, among other things,
issued (i) that aggregate principal amount of senior subordinated convertible notes (the “Original
Notes”), set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and (ii)
warrants (the “Warrants”), to acquire up to that number of additional shares of the Company’s
common stock, par value $0.10 per share (the "Common Stock”) set forth opposite such Buyer’s name
in column (9) of the Schedule of Buyers (as exercised, collectively, the “Warrant Shares”).

B. The Company has authorized a new series of senior secured convertible notes of the Company,
in substantially the form attached hereto as Exhibit A-2, which shall be convertible into
Common Stock in accordance with the terms of such Notes.

C. Each Buyer and the Company wishes to exchange in the Initial Closing (as defined in Section
1(a)(i) below), upon the terms and conditions stated in this Agreement, that aggregate principal
amount of Original Notes set forth opposite such Buyer’s name in column (3) on the Schedule of
Buyers (which aggregate amount for all Buyers is $30,000,000) for (i) that aggregate principal
amount of Notes, in substantially the form attached hereto as Exhibit A-2 (collectively,
the “Amended Notes”), as set forth opposite such Buyer’s name in column (4) on the Schedule of
Buyers (which aggregate amount for all Buyers shall be the sum of (x) $27,132,192 and (y) the
product of (I) the number of calendar days during the period commencing on the date hereof and
ending on the Initial Closing Date and (II) $10,273.97) (the Common Stock received upon such
conversion, collectively, the “Amended Conversion Shares”), (ii) that aggregate number of shares
(the “144 Common Shares”) of the Common Stock, set forth opposite such Buyer’s name in column (7)
on the Schedule of Buyers attached hereto (which aggregate amount for all Buyers shall be 613,142)
and (iii) that aggregate number of shares (the “Other Common Shares”, and together with the 144
Common Shares, the “Common Shares”) of the Common Stock, set forth opposite such Buyer’s name in
column (8) on the Schedule of Buyers attached hereto (which aggregate amount for all Buyers shall
be 674,858).

D. The issuance of the Amended Notes and Common Shares pursuant to this Agreement in exchange
for the surrender (and cancellation) of the Original Notes is being made in reliance upon the
exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended
(the “1933 Act”).

E. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, in the Initial Closing (as defined in Section 1(a)(i) below),
that aggregate principal amount of Notes, in substantially the form attached hereto as Exhibit
A-2 (collectively, the “Initial Notes”), set forth opposite such Buyer’s name in column (5) on
the Schedule of Buyers (which aggregate amount for all Buyers shall be the sum of (x) $5,000,000
and (y) the Legal Counsel Fee Amount) (as converted, collectively, the “Initial Conversion
Shares”).

F. Subject to the terms and conditions set forth in this Agreement, upon the satisfaction of
certain conditions, the Buyers shall have the right to purchase or may be required to purchase in
an Additional Closing (as defined in Section 1(a)(ii) below), that aggregate principal amount of
Notes, in substantially the form attached hereto as Exhibit A-2 (collectively, the
"Additional Notes” and, together with the Amended Notes and Initial Notes, the “Notes”), set forth
opposite such Buyer’s name in column (6) on the Schedule of Buyers (which aggregate amount for all
Buyers shall be $10,000,000) (as converted, collectively, the “Additional Conversion Shares” and,
collectively with the Amended Conversion Shares and Initial Conversion Shares, the “Conversion
Shares”).

G. 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”).

H. The issuance of the Initial Notes and Additional Notes pursuant to this Agreement is being
made in reliance upon the exemption from registration afforded by Section 4(2) of the 1933 Act and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.

I. On or prior to the Initial Closing Date, unless the Company directs otherwise in a written
notice to the Buyers (an “Escrow Waiver Event”), the parties hereto and Wilmington Trust Company, a
financial institution chartered under the laws of the State of Delaware, as escrow agent (the
"Escrow Agent”) are executing and delivering an escrow agreement, in the form attached hereto as
Exhibit K (the “Escrow Agreement”), pursuant to which the Buyers have agreed to deposit
with the Escrow Agent such amount set forth opposite such Buyer’s name in column (12) on the
Schedule of Buyers (which aggregate amount for all Buyers shall be $5,000,000) (the “Escrow
Amount”), which shall be held in escrow by the Escrow Agent in accordance with the terms and
conditions of the Escrow Agreement and, subject to the satisfaction of certain conditions, applied
as payment in part of the Additional Purchase Price (as defined below) in the Additional Closing.

J. On the Initial Closing Date, the parties hereto are executing and delivering an Amended and
Restated Registration Rights Agreement, substantially in the form attached hereto as Exhibit
C (as amended or modified from time to time in accordance with its terms, the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights
with respect to the Conversion Shares, the Warrant Shares under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws. The Registration Rights
Agreement amends and restates the terms and conditions of that certain Registration Rights
Agreement, by and among the Company and the Buyers, dated as of the Original Closing Date.

K. The Notes, the Conversion Shares, the Common Shares, the Interest Shares, the Warrants and
the Warrant Shares, collectively, are referred to herein as the “Securities”.

L. The Notes will rank senior to all outstanding and future indebtedness of the Company,
subject to Permitted Senior Indebtedness (as defined in the Notes), and will be secured by a first
priority, perfected security interest in all of the assets of the Company and the stock and assets
of each of the Company’s United States subsidiaries and 65% of the stock of ARC Europe, S.A. and
Allied Research Corporation Limited, as evidenced by (i) a security agreement, in the form attached
hereto as Exhibit H (as amended or modified from time to time in accordance with its terms,
the “ Security Agreement”), (ii) a pledge agreement, in the form attached hereto as Exhibit
I (as amended or modified from time to time in accordance with its terms, the “ Pledge
Agreement”), and (iii) the guarantees of certain subsidiaries of the Company in the form attached
hereto as Exhibit J (as amended or modified from time to time in accordance with its terms,
the “Guarantees” and together with the Pledge Agreement, the Security Agreement, and any ancillary
documents related thereto, collectively the “Security Documents”).

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

	 	1.	 	EXCHANGE OF ORIGINAL NOTES FOR AMENDED NOTES AND COMMON SHARES; PURCHASE
AND SALE OF ADDITIONAL NOTES.

(a) Issuance of Notes and Common Shares.

(i) Cancellation of Original Notes; Issuance of Amended Notes, Initial Notes and Common
Shares. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6(a)
and 7(a) below, on the Initial Closing Date (as defined below), (I) (i) the Company shall issue,
sell and deliver to each applicable Buyer, and each such Buyer severally, but not jointly, agrees
to accept and purchase, (x) a principal amount of Amended Notes as is set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers and (y) that aggregate number of Common Shares
as is set forth opposite such Buyer’s name in column (7) on the Schedule of Buyers, and (ii) each
Buyer shall surrender to the Company at the Initial Closing (as defined below) contemplated by this
Agreement, the Original Note issued to such Buyer and (II) the Company shall issue and sell to, and
each such Buyer severally, but not jointly, agrees to purchase from the Company on the Initial
Closing Date, such principal amount of Initial Notes as is set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers (collectively, the “Initial Closing”).

(ii) Additional Notes. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 1(c), 6(b) and 7(b) below, the Company shall issue and sell to each Buyer
required to participate in such Additional Closing pursuant to Section 1(c) below, and each such
Buyer severally, but not jointly, agrees to purchase from the Company on such Additional Closing
Date (as defined below), a principal amount of Additional Notes as is set forth opposite such
Buyer’s name in column (6) on the Schedule of Buyers (each, an “Additional Closing”).

(iii) Closing. The Initial Closing and the Additional Closings are each referred to
in this Agreement as a “Closing”. Each Closing shall occur on the applicable Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

(iv) Purchase Price. The Amended Notes and Common Shares shall be issued to each
Buyer in exchange for the Original Notes and without the payment of any additional consideration.
The purchase price for each Buyer of the Initial Notes to be purchased by each such Buyer at the
Initial Closing shall be the amount set forth opposite such Buyer’s name in column (10) of the
Schedule of Buyers (collectively, the “Initial Purchase Price”). The purchase price for each Buyer
of the Additional Notes to be purchased by each such Buyer at the Additional Closing shall be the
amount set forth opposite such Buyer’s name in column (11) of the Schedule of Buyers (collectively,
the “Additional Purchase Price”, and together with the Initial Purchase Price, the “Purchase
Price”).

(v) Escrow Agreement. Subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6(a) and 7(a) below, on the Initial Closing Date (as defined below), unless an
Escrow Waiver Event has occurred prior to the Initial Closing Date, each Buyer shall deposit its
Escrow Amount with the Escrow Agent. The parties hereto agree that if the Additional Closing does
not occur prior to the thirtieth (30th) calendar day after the Initial Closing Date (the “Escrow
Termination Date”) and an Escrow Waiver Event has not occurred prior to the Initial Closing Date,
such parties shall jointly instruct the Escrow Agent to return the Escrow Amount to the Buyers. On
the Additional Closing Date, if any, unless an Escrow Waiver Event has occurred prior to the
Initial Closing Date, such parties shall jointly instruct the Escrow Agent to release the Escrow
Amount to the Company.

(b) Initial Closing Date. The date and time of the Initial Closing (the “Initial
Closing Date”) shall be 10:00 a.m., New York City Time, on the date hereof after notification of
satisfaction (or waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) below (or such later date as is mutually agreed to by the Company and each Buyer).

(c) Additional Closing Date.

(i) The date and time of the Additional Closings (the “Additional Closing Date,” and together
with the Initial Closing Date, each a “Closing Date” and collectively, the “Closing Dates”) shall
be 10:00 a.m., New York City Time, on the date specified in the applicable Additional Closing
Notice (as defined below), subject to satisfaction (or waiver) of the conditions to each Additional
Closing set forth in Sections 6(b) and 7(b) and the conditions contained in this Section 1(c) (or
such later date as is mutually agreed to by the Company and the applicable Buyer).

(ii) Subject to the requirements of Sections 6(b) and 7(b) and the conditions contained in
this Section 1(c), following (x) the delivery of a certificate of the Company in the form attached
hereto as Exhibit L (the “MECAR Certificate”), certifying that the MECAR Contract (I) has
been duly executed and delivered by the parties thereto (the date of the execution thereof, the
"MECAR Execution Date”) and (II) is a validly binding and enforceable agreement of the parties
thereto and (y) the public announcement of the execution of the MECAR Contract (as defined in the
MECAR Certificate) and the filing of the MECAR Certificate as an exhibit to a filing by the Company
with the SEC, at any time prior to the Escrow Termination Date, the Company shall have the right to
require each Buyer to purchase, at one Closing, the principal amount of Additional Notes as is set
forth opposite such Buyer’s name in column (6) on the Schedule of Buyers (as provided by the
Company, a “Additional Closing Notice”); provided, that if the Company elects to deliver a
Additional Closing Notice to any Buyer, it must deliver an identical Additional Closing Notice to
all Buyers. Any Additional Closing Notice delivered by the Company shall be irrevocable.
Notwithstanding anything herein to the contrary, at any time on or after the MECAR Execution Date,
upon the Company’s receipt of one or more written notices by the holders of a majority of the Notes
then outstanding, in the aggregate, electing to cause the Additional Closing to occur, the Company
shall within one (1) Business Day thereafter deliver Additional Closing Notices to the Buyers.
Each Additional Closing Notice shall contain a proposed Additional Closing Date that shall be at
least five (5) Business Days but not more than ten (10) Business Days following the date of
delivery of such Additional Closing Notice to the Buyers. Each Additional Closing Notice shall set
forth (i) the principal amount of Additional Notes to be purchased by each Buyer at the Additional
Closing and (ii) the proposed Additional Closing Date. As used herein, “Business Day” means any
day other than Saturday, Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

(d) Form of Payment. On the Initial Closing Date, (i) each Buyer shall deliver, or
cause to be delivered, for cancellation, the Original Note of such Buyer to the Company for the
Amended Notes (in such principal amounts as such Buyer has agreed, and in the manner the Buyer may
reasonably request, in accordance with Section 1 of this Agreement) and Common Shares (in such
amounts as such Buyer has agreed, and in the manner the Buyer may reasonably request, in accordance
with Section 1 of this Agreement) to by issued and sold to such Buyer at the Initial Closing and
(ii) each Buyer shall pay the Initial Purchase Price (less, in the case of Kings Road Investments
Ltd. and Castlerigg Master Investments Ltd., the amounts withheld pursuant to Section 4(g) below)
to the Company for the Initial Notes to be issued and sold to such Buyer at the Initial Closing by
wire transfer of immediately available funds for such Initial Purchase Price in accordance with the
Company’s written wire instructions. The parties acknowledge that the amount to be paid by the
Buyers to the Company, in the aggregate, on the Initial Closing Date from the Initial Purchase
Price (net of the amounts deducted to pay the Legal Counsel Fee Amount pursuant to Section 4(g)
below) shall equal $5,000,000. On the Additional Closing Date, each Buyer shall pay the Additional
Purchase Price (less (x) the Escrow Amount if the Escrow Waiver Event has not occurred prior to the
Initial Closing Date and (y) in the case of Kings Road Investments Ltd. and Castlerigg Master
Investments Ltd., the amounts withheld pursuant to Section 4(g)) to the Company for the Additional
Notes to be issued and sold to such Buyer at the Additional Closing by wire transfer of immediately
available funds for such Additional Purchase Price (less the Escrow Amount) in accordance with the
Company’s written wire instructions. At each Closing, the Company shall deliver to each Buyer the
Notes (in the principal amounts as such Buyer is entitled, in such manner as the Buyer may
reasonably request) and, as applicable, the Common Shares (in such amounts as such Buyer is
entitled, in such manner as the Buyer may reasonably request) which such Buyer is then purchasing
duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

(e) Holding Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of the Amended Notes and the Common Shares may be tacked onto the holding period of
the Original Notes, and the Company agrees not to take a position contrary to this Section 1(e),
including, without limitation, with respect to the application of the terms and conditions set
forth in Section 2(g) below. The Company acknowledges that the 144 Common Shares shall be issued
to each Buyer without any restrictive legend on the Initial Closing Date in reliance upon the
exemption from registration provided by Section 3(a)(9) of the 1933 Act and Rule 144.

(f) Mutual Releases.

(i) For purposes of this Agreement, “Existing Claims” shall mean any and all claims,
liabilities, rights and causes of action, whether known or unknown, relating to the purported
events of default set forth in any Event of Default Notice (as defined in the Original Notes)
delivered to the Company prior to the Initial Closing Date and any other potential claims arising
under, based on or related to any fact, matter, act or omission, cause, transaction, occurrence or
thing arising under or related to any of the Transaction Documents (as defined in the Original
Securities Purchase Agreement) or any of the transactions contemplated thereby. In consideration
of the release set forth in Section 1(f)(ii) and the transactions contemplated by this Agreement,
effective as of the Initial Closing, each Buyer, only on behalf of itself and, to the extent
permitted by law, its current and former heirs, executors, administrators, devisees, trustees,
partners, directors, officers, shareholders, employees, consultants, representatives, predecessors,
principals, agents, parents, associates, affiliates, subsidiaries, attorneys, accountants,
successors, successors-in-interest and assignees (collectively, the “Buyer Releasing Persons”),
hereby waives and releases, to the fullest extent permitted by law, any and all claims, rights and
causes of action relating to the Existing Claims that any of the Buyer Releasing Persons had,
currently has or may have, that are directly or indirectly related to, based upon, arise out of, or
arise in connection with any fact, matter, act or omission, cause, transaction, occurrence or thing
occurring up to the date of this release, including, without limitation, any Existing Claims
arising out of any of the Transaction Documents (as defined pursuant to the Original Securities
Purchase Agreement), against (w) the Company, (x) any of the Company’s current or former parents,
affiliates, subsidiaries, predecessors, assigns, attorneys or counsel, accountants, auditors,
advisors, employees, consultants or representatives, (y) any of the Company’s or such other
persons’ or entities’ current or former officers, directors, employees, agents, principals, and
signatories or, (z) in the case of any person or entity described in clauses (x) or (y) above
(other than the Company or any of its Subsidiaries), such other persons’ or entities’ current or
former officers, directors, members, partners, shareholders, employees, agents, principals, Buyers,
signatories, advisors, consultants, spouses, heirs, estates, executors, attorneys, auditors and
associates and members of their immediate families (collectively, the “Company Released Persons”).
For the avoidance of doubt, claims that relate to events or circumstances occurring, or actions
taken or failed to be taken, after the date of this release are not waived or released hereby. Any
claims, rights or causes of action other than the Existing Claims are not waived or released hereby
either.

(ii) In further consideration of each Buyer entering into this Agreement, effective as of the
date of this Agreement, the Company on behalf of itself and, to the extent permitted by law, its
current and former administrators, devisees, trustees, partners, directors, officers, shareholders,
employees, consultants, representatives, predecessors, principals, agents, parents, associates,
affiliates, subsidiaries, attorneys, accountants, successors, successors-in-interest and assignees
(collectively, the “Company Releasing Persons”), hereby waives and releases, to the fullest extent
permitted by law, any and all claims, rights and causes of action relating to the Existing Claims
that any of the Company Releasing Persons had, currently has or may have, that are directly or
indirectly related to, based upon, arise out of, or arise in connection with any fact, matter, act
or omission, cause, transaction, occurrence or thing occurring up to the date of this release,
including, without limitation, any Existing Claims arising out of any of the Transaction Documents
(as defined pursuant to the Original Securities Purchase Agreement), against (x) each Buyer, (y)
each Buyer’s current or former parents, affiliates, subsidiaries, predecessors, assigns, attorneys
or counsel, accountants, auditors, advisors, employees, consultants or representatives, members,
partners, shareholders, affiliates, subsidiaries, predecessors or assigns, (z) any of such Buyer’s
or such other persons’ or entities’ current or former officers, directors, members, partners,
shareholders, employees, agents, principals, Buyers, signatories, advisors, consultants, spouses,
heirs, estates, executors, attorneys, auditors and associates and members of their immediate
families (collectively, the “Buyer Released Persons”). For the avoidance of doubt, claims that
relate to events or circumstances occurring, or actions taken or failed to be taken, after the date
of this release are not waived or released hereby. Any claims, rights or causes of action other
than the Existing Claims are not waived or released hereby either.

(iii) Promptly after the consummation of the Initial Closing, and in any event no later than
ten (10) Business Days thereafter, Kings Road Investments Ltd. shall dismiss with prejudice the
suit filed against the Company in the United States District Court for the Southern District of New
York.

	 	2.	 	BUYER’S REPRESENTATIONS AND WARRANTIES.

Each Buyer represents and warrants, with respect to only itself, that:

(a) No Public Sale or Distribution. Such Buyer is acquiring (or has acquired, as
applicable) the Notes, the Common Shares and the Warrants and upon conversion of the Notes and
exercise of the Warrants (other than pursuant to a Cashless Exercise (as defined in the Warrants))
will acquire the Conversion Shares issuable upon conversion of the Notes, the Interest Shares
issuable pursuant to the terms of the Notes and the Warrant Shares issuable upon exercise of the
Warrants for investment purposes, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act. Such Buyer is acquiring the
Securities hereunder in the ordinary course of its business. Such Buyer does not presently have
any agreement or understanding, directly or indirectly, with any Person to distribute any of the
Securities.

(b) Buyer Status. Such Buyer is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D. Such Buyer is not a registered broker-dealer under Section 15 of the
Securities Exchange Act of 1934, as amended (the “1934 Act”).

(c) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

(d) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company and have
received what the Buyer believes to be satisfactory answers to any such inquiries. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.

(e) No Governmental Review. Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.

(f) Transfer or Resale. Such Buyer understands that, except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws and consequently such Buyer may have to bear the risk of
owning the Securities for an indefinite period (ii) such Buyer agrees that if it decides to offer,
sell or otherwise transfer any of the Notes, Conversion Shares, Other Common Shares, Warrants or
Warrant Shares, such Notes, Conversion Shares, Other Common Shares, Warrants and Warrant Shares may
be offered, sold or otherwise transferred only: (A) pursuant to an effective registration
statement under the 1933 Act; (B) to the Company; (C) (1) in accordance with the exemption from
registration under the 1933 Act provided by Rule 144 or Rule 144A thereunder, if available, and in
compliance with any applicable state securities laws or (2) in a transaction that does not require
registration under the 1933 Act or applicable state securities laws, and the seller has provided
the Company with an opinion of counsel reasonably acceptable to the Company, prior to such offer,
sale or transfer, that such Securities may be so offered, sold or transferred in a transaction that
does not require registration under the 1933 Act or applicable state securities laws.

(g) Legends. Such Buyer understands that the certificates or other instruments
representing the Notes, the Other Common Shares and the Warrants and, until such time as the resale
of the Conversion Shares, the Other Common Shares, the Interest Shares and the Warrant Shares have
been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares, the Interest Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE]
[EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED(THE “1933
ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OR ASSIGNED, UNLESS (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR
(B) PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. NOTHING IN THE PRECEDING
WILL PROHIBIT THE PLEDGE OF THE SECURITIES IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such
legend to the holder of the Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) such Securities are registered for resale under the 1933 Act, or (ii)
following a sale or transfer of such Securities pursuant to Rule 144 (assuming the transferor is
not an affiliate of the Company), (iii) while such Securities are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of the 1933 Act
(including judicial interpretations and pronouncements issued by the Staff of the SEC).

If the Company shall fail for any reason or for no reason to issue to the holder of the Securities
within three (3) Trading Days (as defined in the Notes) after the occurrence of, and notice of, any
of (i) through (iv) above, a certificate without such legend to the holder or to issue such
Securities to such holder by electronic delivery at the applicable balance account at DTC, and if
on or after such Trading Day the holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the holder of such Securities that
the holder anticipated receiving without legend from the Company (a “Buy-In"), then the Company
shall, within three (3) Business Days after such three (3) Trading Day period, and at the holder’s
request and in the holder’s discretion, either (i) pay cash to the holder in an amount equal to the
holder’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased (the “Buy-In Price"), at which point the Company’s obligation to deliver such
unlegended Securities shall terminate, or (ii) promptly honor its obligation to deliver to the
holder such unlegended Securities as provided above and pay cash to the holder in an amount equal
to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common
Stock, times (B) the Weighted Average Price (as defined in the Notes) of the Common Stock on the
date of exercise.

(h) Validity; Enforcement. This Agreement, the Escrow Agreement, the Registration
Rights Agreement and the Security Documents to which it is a party have been duly and validly
authorized, executed and delivered on behalf of such Buyer and constitute the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in accordance with their
respective terms, except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and
remedies.

(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement, the Escrow Agreement, the Registration Rights Agreement and the Security Documents to
which it is a party and the consummation by such Buyer of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of such Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree applicable to such
Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its obligations hereunder.

(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

(k) Certain Trading Activities. Neither the Buyer nor any of its affiliates has
directly or indirectly, and no Person acting on behalf of the Buyer or its affiliates has directly
or indirectly, engaged in any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities) since May 1, 2007, provided,
however, that, with respect to LB I Group, the foregoing representation is made solely by, and
shall apply solely to, the Global Trading Strategies group of Lehman Brothers Inc. and not made by,
or applicable to, any other persons, affiliates or affiliated or associated business units of
Lehman Brothers Holdings Inc. “Short Sales” include, without limitation, all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the 1934 Act and all types of direct and
indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps and
similar arrangements (including on a total return basis), and sales and other transactions through
non-US broker dealers or foreign regulated brokers. The Buyer covenants that neither it, its
affiliates, nor any Person acting on its or its affiliates’ behalf will engage in any transactions
in the securities of the Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed. Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the availability of, or securing of,
available shares to borrow in order to effect Short Sales or similar transactions in the future.

(l) General Solicitation. Such Buyer is not purchasing the Securities as a result of
any advertisement, article, notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar.

(m) No Known Event of Default. Buyer has no actual knowledge of any Default or Event
of Default (as defined in the Notes), after giving effect to the terms of this Agreement, that has
occurred and is continuing as of the time immediately following the Initial Closing Date.

	 	3.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers as follows:

(a) Organization and Qualification. The Company and its “Subsidiaries” (which for
purposes of this Agreement means any “Significant Subsidiary” as such term is defined in Rule 1-02
of Regulation S-X of the 1933 Act) are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have the requisite power
and authorization to own their properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and
is in good standing in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a Material Adverse Effect. As used in
this Agreement, “Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document (as defined in Section 3(b)
below), (ii) a material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a
whole, or (iii) an adverse impairment to the Company’s ability to perform on a timely basis its
obligations under any Transaction Document. The Company has no Subsidiaries except as set forth on
Schedule 3(a).

(b) Authorization; Enforcement; Validity. The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement, the Notes, the
Registration Rights Agreement, the Security Documents, the Escrow Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), the Warrants and each of the other
agreements entered into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the “Transaction Documents”) and to issue the Securities in
accordance with the terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Notes, the Common Shares and
the Warrants, the reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion or redemption of the Notes, the reservation for issuance and the issuance of the
Interest Shares issuable pursuant to the terms of the Notes and the reservation for issuance and
issuance of Warrant Shares issuable upon exercise of the Warrants have been duly authorized by the
Company’s Board of Directors and, other than (i) the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration Rights Agreement,
(ii) the filing of a Form D with respect to the Notes and the Warrants as required under Regulation
D, (iii) such filings as are required by the Principal Market (as defined below), which will be
made prior to each Closing, (iv) such filings required under applicable securities or “Blue Sky”
laws of the states of the United States and (v) the Stockholder Approval as contemplated in Section
4(q) (all of the foregoing, the “Required Approvals”), no further filing, consent, or authorization
is required by the Company or of its Board of Directors or its stockholders to enter into the
Transaction Documents and consummate the transactions contemplated by the Transaction Documents,
including, without limitation, the issuance of the Notes, the Common Shares and the Warrants, the
reservation for issuance and the issuance of the Conversion Shares issuable upon conversion or
redemption of the Notes, the reservation for issuance and the issuance of the Interest Shares
issuable pursuant to the terms of the Notes and the reservation for issuance and issuance of
Warrant Shares issuable upon exercise of the Warrants. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies. Any of the Transaction Documents dated after the date hereof, upon execution
and delivery, will have been duly executed and, when delivered by the Company, will constitute the
legal, valid and binding obligations of the Company, enforceable, subject to the Required Approvals
against the Company in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

(c) Issuance of Securities. The issuance of the Notes, the Common Shares and the
Warrants are (or were, as applicable) duly authorized and are free from all taxes, liens and
charges with respect to the issue thereof and, upon the Company’s receipt of the applicable
consideration therefor, the Common Shares are fully paid and nonassessable. As of the Initial
Closing, the Company shall have reserved from its duly authorized capital stock not less than the
sum of 120% of the maximum number of shares of Common Stock (A) issuable upon conversion of the
Notes issuable at such Closing and issued at any prior Closing (assuming for purposes hereof, that
the Notes are convertible at the initial Conversion Price and without taking into account any
limitations on the conversion of the Notes set forth in the Notes and assuming such conversion
occurred at such Closing), (B) issuable as Interest Shares pursuant to the terms of the Notes and
(C) issuable upon exercise of the Warrants (without taking into account any limitations on the
exercise of the Warrants set forth in the Warrants and assuming such exercise occurred at such
Closing). Upon issuance or conversion and payment of all consideration then due from the holder in
respect thereof in accordance with the terms thereof, in accordance with the Notes or exercise in
accordance with the Warrants, as the case may be, the Conversion Shares, the Interest Shares and
the Warrant Shares, respectively, will be validly issued, fully paid and nonassessable and free
from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof,
with the holders being entitled to all rights accorded to a holder of Common Stock. Based in part
upon the accuracy of the representations and warranties of the Buyers’ set forth in Article 2, the
offer and issuance by the Company of the Notes, Warrants, the Interest Shares, the Common Shares,
the Conversion Shares and the Warrant Shares (when issued) are exempt from registration under the
1933 Act.

(d) No Conflicts. Subject to the Required Approvals, the execution, delivery and
performance of the Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the issuance of the
Notes, the Common Shares and the Warrants and reservation for issuance and issuance of the
Conversion Shares, the Interest Shares and the Warrant Shares) will not (i) result in a violation
of the Articles of Incorporation, any capital stock of the Company or any of its Subsidiaries, the
bylaws or any of the organizational documents of the Company or any of its Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations and the rules and
regulations of the American Stock Exchange (the “Principal Market”)) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries
is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

(e) Consents. Other than the Required Approvals, neither the Company nor any of its
Subsidiaries is required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or self-regulatory agency or
any other Person in order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations (which the Company is
required to obtain pursuant to the preceding sentence) have been obtained or effected, or will have
been obtained or effected, on or prior to the Initial Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances that might prevent the Company from
obtaining or effecting any of the registration, application or filings pursuant to the preceding
sentence. Except as described in Schedule 3(e), the Company is not in violation of the
listing requirements of the Principal Market and has no knowledge of any facts that would
reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of arm’s length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby and thereby and that no Buyer
is (i) an officer or director of the Company, (ii) to the Company’s knowledge, an “affiliate” of
the Company or any of its Subsidiaries (as defined in Rule 144 under the 1933 Act) or (iii) to the
knowledge of the Company, a “beneficial owner” of more than 10% of the shares of Common Stock (as
defined for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or
in any similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further
represents to each Buyer that the Company’s decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its representatives.

(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than
for Persons engaged by any Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby.

(h) No Integrated Offering. None of the Company, its Subsidiaries, any of their
affiliates, or any Person acting on their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under circumstances that would
require registration of any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under the rules and
regulations of the Principal Market such that the representation set forth in the last sentence of
either Section 3(c) or Section 3(d)(iii) would not be accurate. None of the Company, its
Subsidiaries, their affiliates or any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration under the 1933 Act of any of
the Securities to be issued by the Company at such Closing prior to such issuance or cause the
offering of the Securities to be integrated with other offerings.

(i) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion or redemption of the Notes and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion or redemption of the
Notes in accordance with this Agreement and the Notes and its obligation to issue the Warrant
Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, in each
case, absolute and unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

(j) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws
of the jurisdiction of its incorporation which is or would become applicable to any Buyer as a
result of the transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the Securities. Except as set
forth on Schedule 3(j), the Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or a change in
control of the Company.

(k) SEC Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). The Company has delivered to the Buyers or their
respective representatives true, correct and complete copies of the SEC Documents not available on
the EDGAR system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements therein, in the light of
the circumstance under which they are or were made, not misleading. The provisions of this Section
3(k) are qualified in their entirety by the disclosure set forth on Schedule 3(k).

(l) Absence of Certain Changes. Since the time the Company’s most recently filed
audited financial statements contained in a Form 10-K were filed, there has been no material
adverse change and no material adverse development in the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the Company and the
Subsidiaries (excluding News/Sports Microwave Rental, Inc., Titan Systems, Inc., SeaSpace
Corporation, MECAR USA, Inc., and Global Microwave Systems, Inc.), taken as a whole. Since the
time the Company’s most recently filed audited financial statements contained in a Form 10-K were
filed, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, in excess of $200,000 outside of the ordinary
course of business or (iii) capital expenditures, in the aggregate, have not exceeded $3,200,000.
The Company has no knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to
do so. The Company and its Subsidiaries, on a consolidated basis, are not as of the date hereof
(following the closing of the Transaction Documents), and after giving effect to the transactions
contemplated hereby to occur at the applicable Closing, will not be Insolvent (as defined below).
For purposes of this Section 3(l), “Insolvent” means, with respect to the Company and its
Subsidiaries on a consolidated basis (the “Corporate Group”), (i) the present fair saleable value
of the Corporate Group’s assets is less than the amount required to pay the Corporate Group’s total
Indebtedness (as defined in Section 3(s)), (ii) the Corporate Group is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured, (iii) the Corporate Group intends to incur or believes that it will incur debts that
would be beyond its ability to pay as such debts mature or (iv) the Corporate Group has
unreasonably small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.

(m) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial condition, that
would be required to be disclosed by the Company under applicable securities laws on a registration
statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its
Common Stock and which has not been publicly announced.

(n) Conduct of Business; Regulatory Permits. Neither the Company nor its Subsidiaries
is in violation of any term of or in default under its Articles of Incorporation or Bylaws or their
organizational charter or certificate of incorporation or bylaws, respectively. Neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any law,
statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, and neither
the Company nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations that would not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth in
Schedule 3(n), the Company is not in violation of any of the rules, regulations or
requirements of the Principal Market and has no knowledge of any facts or circumstances that would
reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future. During the two (2) years prior to the date hereof, (i) the Common Stock have
been designated for quotation on the Principal Market, (ii) trading in the Common Stock has not
been suspended by the SEC or the Principal Market and (iii) except as set forth in Schedule
3(n), the Company has received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension or delisting of the Common Stock from the Principal Market. The
Company and its Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct their respective businesses, except where
the failure to possess such certificates, authorizations or permits would not have, individually or
in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

(o) Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor
any director, officer, agent, employee or other Person acting on behalf of the Company or any of
its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its
Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.

(p) Sarbanes-Oxley Act. The Company is in material compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof,
and any and all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.

(q) Transactions With Affiliates. Except as set forth in the SEC Documents filed at
least ten days prior to the date hereof and other than the grant of stock options disclosed on
Schedule 3(q), none of the officers, directors or employees of the Company or any of its
Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any such officer, director or employee or, to the knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director, trustee or partner.

(r) Equity Capitalization. As of the date hereof, the authorized capital stock of the
Company consists of (i) 30,000,000 shares of Common Stock, of which as of the date hereof,
6,473,635 are issued and outstanding, 980,836 shares are reserved for issuance pursuant to the
Company’s stock option and purchase plans and 70,000 shares are reserved for issuance pursuant to
securities (other than the Original Notes, the Notes and the Warrants) exercisable or exchangeable
for, or convertible into, shares of Common Stock and (ii) 1,000,000 shares of undesignated
preferred stock, no par value, of which as of the date hereof none of which is issued and
outstanding or reserved for issuance. All of such outstanding shares have been, or upon issuance
will be, validly issued and are fully paid and nonassessable. Except as disclosed in Schedule
3(r): (i) none of the Company’s capital stock is subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable
for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock
of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or instruments evidencing
Indebtedness (as defined in Section 3(s)) of the Company or any of its Subsidiaries or by which the
Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate, filed in
connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (vi)
there are no outstanding securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (viii) the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but
not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the
Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate,
do not or would not reasonably be expected to have a Material Adverse Effect. The Company has made
available to the Buyer true, correct and complete copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”),
and the Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the
terms of all securities convertible into, or exercisable or exchangeable for, shares of Common
Stock and the material rights of the holders thereof in respect thereto.

(s) Indebtedness and Other Contracts. Except as disclosed in Schedule 3(s),
neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined
below), (ii) is a party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or instrument would
reasonably be expected to result in a Material Adverse Effect, (iii) is in violation of any term of
or in default under any contract, agreement or instrument relating to any Indebtedness, except
where such violations and defaults would not result, individually or in the aggregate, in a
Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to
any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. Schedule 3(s) provides a description of the
material terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price of property or
services, including (without limitation) “capital leases” in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case with respect to any
property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to
in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability will be protected (in
whole or in part) against loss with respect thereto; and (z) “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 agency thereof.

(t) Absence of Litigation. Except as set forth in Schedule 3(t), there is no
action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common
Stock or any of the Company’s Subsidiaries or any of the Company’s or its Subsidiaries’ officers or
directors in their capacities as such, which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

(u) Insurance. The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary, during the prior two years,
has been refused any insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not materially exceed market costs
for similar businesses to the Company.

(v) Employee Relations. (i) Except as set forth in Schedule 3(v), neither
the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or
employs any member of a union. Except as set forth in Schedule 3(v), the Company and its
Subsidiaries believe that their relations with their employees are good. Except as set forth in
Schedule 3(v), no executive officer of the Company or any of its Subsidiaries (as defined in Rule
501(f) of the 1933 Act) has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with
the Company or any such Subsidiary. No executive officer of the Company or any of its
Subsidiaries, is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries
to any liability with respect to any of the foregoing matters.

(ii) The Company and its Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

(w) Title. The Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.

(x) Intellectual Property Rights. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights, original works of
authorship, inventions, trade secrets, licenses, approvals, governmental authorizations and other
intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted. None of the Company’s or its Subsidiaries’ Intellectual Property
Rights have expired, terminated or have been abandoned, or are expected to expire, terminate or be
abandoned, within three years from the date of this Agreement. The Company does not have any
knowledge of any infringement by the Company or any of its Subsidiaries of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened against the Company or any of its Subsidiaries regarding
its Intellectual Property Rights. Neither the Company nor any of its Subsidiaries is aware of any
facts or circumstances which might give rise to any of the foregoing infringements or claims,
actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights.

(y) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all Environmental Laws (as hereinafter defined), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply
would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.
The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or
approved thereunder.

(z) Subsidiary Rights. Except as set forth in Schedule 3(z), the Company or
one of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.

(aa) Tax Status. Except as set forth in Schedule 3(aa), the Company and each
of its Subsidiaries (i) has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being contested in
good faith and (iii) has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any such claim.

(bb) Internal Accounting and Disclosure Controls. Except as set forth in Schedule
3(bb), the Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. The Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits under the 1934 Act
is recorded, processed, summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures designed in to ensure that
information required to be disclosed by the Company in the reports that it files or submits under
the 1934 Act is accumulated and communicated to the Company’s management, including its principal
executive officer or officers and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure.

(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse Effect.

(dd) Ranking of Notes. Except as set forth in Schedule 3(dd) or as otherwise
permitted in the Transaction Documents, no Indebtedness of the Company is senior to or ranks pari
passu with the Notes in right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise.

(ee) Transfer Taxes. On the applicable Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in connection with the
sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been,
fully paid or provided for by the Company, and all laws imposing such taxes will be or will have
been complied with.

(ff) Acknowledgement Regarding Buyers’ Trading Activity. Except as set forth in the
Transaction Documents, it is understood and acknowledged by the Company (i) that following the
public disclosure of the transactions contemplated by the Transaction Documents in accordance with
the terms hereof, none of the Buyers have been asked to agree, nor has any Buyer agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any specified
term; (ii) that any Buyer, and counter parties in “derivative” transactions to which any such Buyer
is a party, directly or indirectly, which were established prior to their learning of the
transactions contemplated by the Transaction Documents, presently may have a “short” position in
the Common Stock, and (iii) that each Buyer shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that following the public disclosure of the transactions contemplated
by the Transaction Documents in accordance with the terms hereof, one or more Buyers may engage in
hedging and/or trading activities at various times during the period that the Securities are
outstanding and (b) such hedging and/or trading activities, if any, can reduce the value of the
existing stockholders’ equity interest in the Company both at and after the time the hedging and/or
trading activities are being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement, the Notes, the Warrants or
any of the documents executed in connection herewith.

(gg) Form S-1 Eligibility. The Company is currently eligible to register the
Conversion Shares, the Interest Shares and the Warrant Shares for resale by the Buyers using Form
S-1 promulgated under the 1933 Act.

(hh) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person
any compensation for soliciting another to purchase any other securities of the Company.

(ii) Investment Company Status. The Company is not, and upon consummation of the sale
of the Securities will not be, an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as amended.

(jj) U.S. Real Property Holding Corporation. The Company is not, nor has ever been, a
U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company shall so certify upon Buyer’s request.

(kk) Disclosure. The Company confirms that neither it nor any other Person acting on
its behalf has provided any of the Buyers or their agents or counsel with any information that
constitutes or would reasonably be expected to constitute material, nonpublic information, except
to the extent that the knowledge of the transactions contemplated by the Transaction Documents may
constitute such information. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in the Securities. All disclosures
provided to the Buyers regarding the Company and its Subsidiaries, their business and the
transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on
behalf of the Company are true and correct and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. Each press release
issued by the Company or its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or financial conditions,
which, under applicable law, rule or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed.

(ll) No Event of Default. The Company represents and warrants that after giving
effect to the terms of this Agreement, no Default or Event of Default (as defined in the Notes)
shall have occurred and be continuing as of the time immediately following the applicable Closing
Date.

	 	4.	 	COVENANTS.

(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this Agreement.

(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before each Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Buyers at each Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to the Buyers on or
prior to each Closing Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or “Blue Sky” laws of the states of
the United States following each Closing Date.

(c) Reporting Status. Except as set forth in Schedule 4(c), until the date on
which the Buyers shall have sold all the Conversion Shares, the Common Shares, the Interest Shares
and Warrant Shares and none of the Notes or Warrants is outstanding (the “Reporting Period”), the
Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act,
and the Company shall continue to timely file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would otherwise no longer require such filings.

(d) Use of Proceeds. The Company and its subsidiaries will use the proceeds from the
sale of the Securities for (A) professional fees and costs and restructuring fees and costs, and
(B) working capital purposes (including payment of accounts payable), and except as set forth
herein and in Schedule 4(d), not for the (i) repayment of any other outstanding
Indebtedness of the Company or any of its Subsidiaries or (ii) redemption or repurchase of any of
its equity securities.

(e) Financial Information. The Company agrees to send the following to each Investor
(as defined in the Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same
day as the release thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, which are attached to a Current Report on Form 8-K, and (iii) copies of any
notices and other information made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the stockholders. As used herein
“Business Day” means any other day other than a Saturday, Sunday, or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

(f) Listing. The Company shall as promptly as permitted by the Principal Market
secure the listing of all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance) and shall maintain
such listing of all Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall use its best efforts to maintain the authorization of the
Common Stock for quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market; provided, however, that the
Company makes no covenant regarding the trading price of the Common Stock. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this Section 4(f).

(g) Fees. Subject to Section 8 below, at each Closing, the Company shall pay (i) an
expense allowance to Kings Road Investments Ltd. (a Buyer) or its designee(s) to cover the
reasonable fees and expenses reasonably incurred by Kings Road Investments Ltd. or any
professionals engaged by Kings Road Investments Ltd. in relation to due diligence, investment
documentation and enforcement of the Transaction Documents and the Transaction Documents (as
defined in the Original Securities Purchase Agreement) (less any other expense amounts previously
paid to Schulte Roth & Zabel LLP) (the “SRZ Legal Counsel Fee Amount”), which amount may be
withheld by such Buyer from its Purchase Price at each Closing; provided, however that any fees and
expenses with respect to any litigation including in the SRZ Legal Counsel Fee Amount shall not
exceed $150,000 in the aggregate and (ii) an expense allowance to Castlerigg Master Investments
Ltd. (a Buyer) or its designee(s) to cover the reasonable fees and expenses reasonably incurred by
Castlerigg Master Investments Ltd. or any professionals engaged by Castlerigg Master Investments
Ltd. in relation to due diligence, investment documentation and enforcement of the Transaction
Documents and the Transaction Documents (as defined in the Original Securities Purchase Agreement)
(less any other expense amounts previously paid to McDermott Will & Emery LLP) (the “MWE Legal
Counsel Fee Amount”, and together with the SRZ Legal Counsel Fee Amount, the “Legal Counsel Fee
Amount”), which amount may be withheld by such Buyer from its Purchase Price at each Closing;
provided, however that any fees and expenses with respect to any litigation including in the MWE
Legal Counsel Fee Amount shall not exceed $50,000 in the aggregate. The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) (collectively, “Possible Placement Fees”)
relating to or arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim
relating to any such Possible Placement Fees. Except as otherwise set forth in the Transaction
Documents, each party to this Agreement shall bear its own expenses in connection with the sale of
the Securities to the Buyers.

(h) Pledge of Securities. The Company acknowledges and agrees that the Securities may
be pledged by an Investor (as defined in the Registration Rights Agreement) in connection with a
bona fide margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and no Investor effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document. The Company hereby agrees to execute and
deliver such documentation as a pledgee of the Securities may reasonably request in connection with
a pledge of the Securities to such pledgee by an Investor. No legal opinion of legal counsel to
the pledgee, secured party or pledgor shall be required in connection with the pledge, but such
legal opinion may be required in connection with a subsequent transfer following default by the
Investor transferee of the pledge.

(i) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York time, on the first Business Day following the date on which this Agreement is fully
executed and delivered by the Company and all of the Buyers, the Company shall issue a press
release reasonably acceptable to the Buyers disclosing all material terms of the transactions
contemplated hereby. On or before 8:30 a.m., New York time, on the second Business Day following
the date on which this Agreement is fully executed and delivered by the Company and all of the
Buyers, the Company shall file a Current Report on Form 8-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required by the 1934 Act and
attaching the material Transaction Documents (including, without limitation, this Agreement (and
all schedules to this Agreement), the form of each of the Notes, the forms of Security Documents,
the form of Escrow Agreement and the Registration Rights Agreement) as exhibits to such filing
(including all attachments, the “Initial 8-K Filing”). On or before 8:30 a.m., New York City Time,
on the second Trading Day following the MECAR Execution Date, the Company shall file a Current
Report on Form 8-K with the SEC describing the transactions contemplated by the MECAR Contract and
attaching the MECAR Certificate (the “MECAR 8-K Filing”). On or before 8:30 a.m., New York City
Time, on the first Trading Day following the Additional Closing Date, the Company shall file a
Current Report on Form 8-K with the SEC describing the transaction consummated on such date (the
"Additional 8-K Filing,” and together with the Initial 8-K Filing and the MECAR 8-K Filing, the
"8-K Filings”). From and after the Initial 8-K Filing with the SEC, no Buyer shall be in
possession of any material, nonpublic information received from the Company or any of its
Subsidiaries or any of its respective officers, directors, employees or agents, that is not
disclosed in the Initial 8-K Filing. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees and agents, not
to, provide any Buyer with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the Initial 8-K Filing with the SEC without the express written consent
of such Buyer. If a Buyer reasonably believes that the Company or its agents have distributed to
it any such material, nonpublic information regarding the Company or any of its Subsidiaries, it
shall provide the Company with written notice thereof. The Company shall, within five (5) Trading
Days of receipt of such notice, make public disclosure of such material, nonpublic information. In
the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of
its or their respective officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise, of such material,
nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees or agents. No Buyer shall have any liability to
the Company, its Subsidiaries, or any of its or their respective officers, directors, employees,
stockholders or agents for any such disclosure. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such transactions (i) in substantial conformity with the
Initial 8-K Filing and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be consulted by the Company
in connection with any such press release or other public disclosure prior to its release).
Without the prior written consent of any applicable Buyer, neither the Company nor any of its
Subsidiaries shall disclose the name of any Buyer in any filing, announcement or press release,
unless such disclosure is required by law, regulation or the Principal Market (and in such case,
the Company shall have consulted with such Buyer in connection with any such press release or other
public disclosure prior to its release).

(j) Restriction on Redemption and Dividends; Additional Registration Statements. So
long as any Notes or Warrants are outstanding, the Company shall not, directly or indirectly,
redeem, repurchase or otherwise acquire for value or declare or pay any dividend or distribution
on, the Common Stock without the prior express written consent of the holders of Notes representing
not less than a majority of the aggregate principal amount of the then outstanding Notes. Until
the Effective Date (as defined in the Registration Rights Agreement), the Company shall not file a
registration statement under the 1933 Act relating to securities that are not the Securities (other
than on Form S-8).

(k) Other Notes; Variable Securities; Dilutive Issuances. (i) So long as any Notes
remain outstanding, the Company will not issue any Notes (other than to the Buyers as contemplated
hereby) and the Company shall not issue any other securities that would cause a breach or default
under the Notes. For so long as any Notes or Warrants remain outstanding, the Company shall not,
in any manner, issue or sell any rights, warrants or options to subscribe for or purchase Common
Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at
a price which varies or may vary with the market price of the Common Stock, including by way of one
or more reset(s) to any fixed price unless the conversion, exchange or exercise price of any such
security cannot be less than the then applicable Conversion Price (as defined in the Notes) with
respect to the Common Stock into which any Note is convertible or the then applicable Exercise
Price (as defined in the Warrants) with respect to the Common Stock into which any Warrant is
exercisable. For so long as any Notes or Warrants remain outstanding, the Company shall not, in
any manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if the effect of
such Dilutive Issuance is to cause the Company to be required to issue upon conversion of any Note
or exercise of any Warrant any shares of Common Stock in excess of that number of shares of Common
Stock which the Company may issue upon conversion of the Notes and exercise of the Warrants without
breaching the Company’s obligations under the rules or regulations of any Eligible Market (as
defined in the Notes). As of any date, unless either (i) the Stockholder Approval has been
obtained prior to such date and the Equity Conditions (as defined in the Notes) are satisfied as of
such date or (ii) no Notes or Warrants remain outstanding, the Company shall not, in any manner,
enter into or affect any Dilutive Issuance if the effect of such Dilutive Issuance would, but for
the application of the Conversion Floor Price (as defined in the Notes) or the Exercise Floor Price
(as defined in the Warrant), as applicable, cause either (i) the Conversion Price (as defined in
the Notes) to be reduced below the Conversion Floor Price or (ii) the Exercise Price (as defined in
the Warrant) to be reduced below the Exercise Floor Price.

(ii) None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on
their behalf shall, directly or indirectly, make any offers or sales of any security or solicit any
offers to buy any security, under circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of the Principal Market
such that the representation set forth in the last sentence of either Section 3(c) or Section
3(d)(iii) would not be accurate as if such representations were made as of such time.

(l) Corporate Existence. So long as any Notes are outstanding, the Company shall not
be party to any Fundamental Transaction (as defined in the Notes) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set forth in the Notes
and the Warrants.

(m) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, after the Initial Closing Date,
120% of the maximum number of shares of Common Stock (i) issuable upon conversion or redemption of
the Notes issuable at such Closing and issued at any prior Closing (assuming for purposes hereof,
that the Notes are convertible at the initial Conversion Price and without taking into account any
limitations on the conversion of the Notes set forth in the Notes and assuming such conversion
occurred at such Closing), (ii) issuable as Interest Shares pursuant to the terms of the Notes and
(iii) issuable upon exercise of the Warrants (without taking into account any limitations on the
exercise of the Warrants set forth in the Warrants and assuming such exercise occurred at such
Closing) and (iii) any capital stock of the Company issued or issuable with respect to the
Conversion Shares, the Interest Shares, the Common Shares, the Notes, the Warrant Shares or the
Warrants.

(n) Conduct of Business. The business of the Company and its Subsidiaries shall not
be conducted in violation of any law, ordinance or regulation of any governmental entity, except
where such violations would not result, either individually or in the aggregate, in a Material
Adverse Effect.

(o) Additional Issuances of Securities.

(i) For purposes of this Section 4(o), the following definitions shall apply.

(1) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.

(2) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.

(3) “Common Share Equivalents” means, collectively, Options and Convertible Securities.

(4) “Subsequent Placement” means any offer, sale, grant, disposition or announcement by
the Company, directly or indirectly, to offer, sell or grant or any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or its Subsidiaries’ equity or equity equivalent securities,
including, without limitation, any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Share Equivalents.

(ii) As long as any applicable Buyer holds no less than 25% of the original principal amount
of the Notes issued to such Buyer at the Closings, from the date hereof until the later of (x) the
fifteen month anniversary of the date hereof and (y) the Stockholder Approval Date (as defined
below), the Company will not, directly or indirectly, effect any Subsequent Placement unless the
Company shall have first complied with this Section 4(o)(ii).

(1) The Company shall deliver to each such Buyer by facsimile a written notice
(the "Offer Notice”) of any proposed or intended issuance or sale or exchange (the "Offer”)
of the securities being offered (the “Offered Securities”) in a Subsequent Placement within
one Business Day of the determination of the terms of such Subsequent Placement, which Offer
Notice shall (w) identify and describe the Offered Securities, (x) describe the price and
other final terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify the persons
or entities (if known) to which or with which the Offered Securities are to be offered,
issued, sold or exchanged and (z) offer to issue and sell to or exchange with such Buyers
(which offer being non-transferable to any successor to such Buyer) a pro rata portion of at
least thirty percent (30%) of the Offered Securities allocated among such Buyers (a) based
on such Buyer’s pro rata portion of the aggregate principal amount of Notes purchased
hereunder (the “Basic Amount”), and (b) with respect to each Buyer that elects to purchase
its Basic Amount, any additional portion of the Offered Securities attributable to the Basic
Amounts of other Buyers as such Buyer shall indicate it will purchase or acquire should the
other Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

(2) To accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the second (2nd) full Business Day after such
Buyer’s receipt of the Offer Notice (for purposes of this Section 4(a)(iii)(2),
notwithstanding the provisions of Section 9(f), receipt of the Offer Notice shall not be
deemed to have occurred until the Buyer shall have physically received such Offer Notice and
until such Offer Notice contains the final terms of the Offer) (the “Offer Period”), setting
forth the portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if
any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”). If
the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic
Amounts, then each Buyer who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts subscribed for,
the Undersubscription Amount it has subscribed for; provided, however, that
if the Undersubscription Amounts subscribed for exceed the difference between the total of
all the Basic Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Buyer who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as the Basic Amount
of such Buyer bears to the total Basic Amounts of all Buyers that have subscribed for
Undersubscription Amounts, subject to rounding by the Company to the extent it deems
reasonably necessary.

(3) The Company shall have ten (10) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered Securities as
to which a Notice of Acceptance has not been given by the Buyers (the “Refused Securities”),
but only to the offerees described in the Offer Notice (if so described therein) and only
upon terms and conditions (including, without limitation, unit prices and interest rates)
that are not more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice.

(4) In the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section 4(o)(ii)(3) above),
then each Buyer may, at its sole option and in its sole discretion, reduce the number or
amount of the Offered Securities specified in its Notice of Acceptance to an amount that
shall be not less than the number or amount of the Offered Securities that such Buyer
elected to purchase pursuant to Section 4(o)(ii)(2) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued or sold to
Buyers pursuant to Section 4(o)(ii)(3) above prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered Securities. In the event
that any Buyer so elects to reduce the number or amount of Offered Securities specified in
its Notice of Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have again been
offered to the Buyers in accordance with Section 4(o)(ii)(1) above.

(5) Upon the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the Buyers shall acquire from the Company, and the Company shall issue
to the Buyers, the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(o)(ii)(3) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Buyers of any
Offered Securities is subject in all cases to (i) the preparation, execution and delivery by
the Company and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective counsel,
(ii) the Buyers’ satisfaction, in their sole discretion, with the final terms and/or
conditions that differ from those contained in the Offer Notice, and (iii) the Buyers’
reasonable satisfaction with the identity of the other persons or entities to which the
Offered Securities will be sold.

(6) Any Offered Securities not acquired by the Buyers or other persons in accordance
with this Section 4(o)(ii) may not be issued, sold or exchanged until they are again offered
to the Buyers under the procedures specified in this Agreement.

(iii) The restrictions contained in subsection (ii) of this Section 4(o) shall not apply in
connection with the issuance of any Excluded Securities (as defined in the Notes).

(p) Holding Period. For the purposes of Rule 144, the Company acknowledges that under
current regulations, the holding period of the Conversion Shares may be tacked onto the holding
period of the Notes (unless the holder thereof is an affiliate of the Company) and the Company
agrees not to take a position contrary to this Section 4(p).

(q) Stockholder Approval. The Company shall provide each stockholder entitled to vote
at a special or annual meeting of stockholders of the Company (the “Stockholder Meeting”), which
initially shall be promptly called and held not later than March 3, 2008 (the “Stockholder Meeting
Deadline”), a proxy statement, substantially in the form which has been previously reviewed by the
Buyers and a counsel of their choice at the expense of the Company, soliciting each such
stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions (the
"Resolutions”) providing for the Company’s issuance of all of the Securities as described in the
Transaction Documents in accordance with applicable law and the rules and regulations of the
Principal Market (such affirmative approval being referred to herein as the “Stockholder Approval”
and the date such approval is obtained (the “Stockholder Approval Date”)), and the Company shall
use its reasonable best efforts to solicit its stockholders’ approval of the Resolutions and to
cause the Board to recommend to the stockholders that they approve the Resolutions. If, despite
the Company’s best efforts the Stockholder Approval is not obtained on or prior to the Stockholder
Meeting Deadline, the Company shall solicit the Stockholder Approval at each subsequent special or
annual meeting of stockholders of the Company until such Stockholder Approval is obtained.

(r) Collateral Agent. Each Buyer hereby (a) appoints Portside Growth & Opportunity
Fund, as the collateral agent hereunder and under the other Security Documents (in such capacity,
the “Collateral Agent”), and (b) authorizes the Collateral Agent (and its officers, directors,
employees and agents) to take such action on such Buyer’s behalf in accordance with the terms
hereof and thereof. The Collateral Agent shall not have, by reason hereof or any of the other
Security Documents, a fiduciary relationship in respect of any Buyer. Neither the Collateral Agent
nor any of its officers, directors, employees and agents shall have any liability to any Buyer for
any action taken or omitted to be taken in connection hereof or any other Security Document except
to the extent caused by its own gross negligence or willful misconduct, and each Buyer agrees to
defend, protect, indemnify and hold harmless the Collateral Agent and all of its officers,
directors, employees and agents (collectively, the “Indemnitees”) from and against any losses,
damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses
(including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such
Indemnitee, whether direct, indirect or consequential, arising from or in connection with the
performance by such Indemnitee of the duties and obligations of Collateral Agent pursuant hereto or
any of the Security Documents. The Collateral Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of the holders of at
least two-thirds in principal amount of the Notes then outstanding, and such instructions shall be
binding upon all holders of Notes; provided, however, that the Collateral Agent
shall not be required to take any action which, in the reasonable opinion of the Agent, exposes the
Agent to liability or which is contrary to this Agreement or any other Transaction Document or
applicable law. The Collateral Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the proper Person, and
with respect to all matters pertaining to this Agreement or any of the other Transaction Documents
and its duties hereunder or thereunder, upon advice of counsel selected by it.

(s) Successor Collateral Agent.

(i) The Collateral Agent may resign from the performance of all its functions and duties
hereunder and under the other Transaction Documents at any time by giving at least thirty (30)
Business Days’ prior written notice to the Company and each holder of Notes. Such resignation
shall take effect upon the acceptance by a successor Collateral Agent of appointment pursuant to
clauses (ii) and (iii) below or as otherwise provided below.

(ii) Upon any such notice of resignation, the holders of at least two-thirds in principal
amount of the Notes then outstanding shall appoint a successor collateral agent. Upon the
acceptance of any appointment as collateral agent hereunder by a successor agent, such successor
collateral agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the collateral agent, and the Collateral Agent shall be discharged from
its duties and obligations under this Agreement and the other Transaction Documents. After the
Collateral Agent’s resignation hereunder as the collateral agent, the provisions of this Section
4(s) shall inure to its benefit as to any actions taken or omitted to be taken by it while it was
the Collateral Agent under this Agreement and the other Transaction Documents.

(iii) If a successor collateral agent shall not have been so appointed within said thirty (30)
Business Day period, the Collateral Agent shall then appoint a successor collateral agent who shall
serve as the collateral agent until such time, if any, as the holders of at least two-thirds in
principal amount of the Notes then outstanding appoint a successor collateral agent as provided
above.

	 	5.	 	REGISTER; TRANSFER AGENT INSTRUCTIONS.

(a) Register. The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to each holder of Securities),
a register for the Notes and the Warrants in which the Company shall record the name and address of
the Person in whose name the Notes and the Warrants have been issued (including the name and
address of each transferee), the principal amount of Notes held by such Person, the number of
Conversion Shares issuable upon conversion of the Notes and the number of Warrant Shares issuable
upon exercise of the Warrants held by such Person. The Company shall keep the register open and
available at all times during business hours for inspection of any Buyer or its legal
representatives upon reasonable notice.

(b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent, and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of
each Buyer or its respective nominee(s), for the Common Shares, the Conversion Shares, the Interest
Shares and the Warrant Shares issued upon conversion of the Notes or as Interest Shares under the
Notes or exercise of the Warrants in such amounts as specified from time to time by each Buyer to
the Company upon conversion of the Notes or exercise of the Warrants in the form of Exhibit
D-1 and Exhibit D-2 attached hereto (collectively, the “Irrevocable Transfer Agent
Instructions”), bearing the restrictive legend as and when specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to give effect to
Section 2(g) hereof, will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(f), the Company shall permit
the transfer and the Company shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event
that such sale, assignment or transfer involves Common Shares, Conversion Shares, Interest Shares
or Warrant Shares sold, assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend to the extent otherwise permitted by
this Agreement, including Section 2(g). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or other security
being required.

	 	6.	 	CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a) The obligation of the Company hereunder to exchange the Original Notes for the Amended
Notes and Common Shares and to issue and sell the Initial Notes to each Buyer at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s sole benefit and may be
waived by the Company at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

(i) Such Buyer and each other Buyers shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.

(ii) Such Buyer and each other Buyer shall have delivered to the Company the Initial Purchase
Price (less, in the case of Kings Road Investments Ltd. and Castlerigg Master Investments Ltd., the
amounts withheld pursuant to Section 4(g) above) for the Initial Notes being purchased by such
Buyer at the Initial Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company, which wire transfers, in the aggregate shall total
$5,000,000.

(iii) The representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Initial Closing Date as though made at
that time (except for representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied or complied with by
such Buyer at or prior to the Initial Closing Date.

(iv) No litigation, status, rule regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated, or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits the consummation of the transactions contemplated by the
Transaction Documents.

(b) The obligation of the Company hereunder to issue and sell the Additional Notes to each
Buyer at the Additional Closing is subject to the satisfaction, at or before the Additional Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:

(i) Such Buyer and each other Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.

(ii) Such Buyer and each other Buyer shall have delivered to the Company the Additional
Purchase Price (less (x) the Escrow Amount if the Escrow Waiver Event has not occurred prior to the
Initial Closing Date and (y) in the case of Kings Road Investments Ltd., the amounts withheld
pursuant to Section 4(g)) for the Additional Notes being purchased by such Buyer at the Additional
Closing by wire transfer of immediately available funds pursuant to the wire instructions provided
by the Company.

(iii) The representations and warranties of such Buyer shall be true and correct in all
material respects as of the date when made and as of the Additional Closing Date as though made at
that time (except for representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied or complied with by
such Buyer at or prior to the Additional Closing Date.

(iv) No litigation, status, rule regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated, or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits the consummation of the transactions contemplated by the
Transaction Documents.

	 	7.	 	CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

(a) The obligation of each Buyer hereunder to exchange the Original Notes for the Amended
Notes and Common Shares and to purchase the Initial Notes at the Initial Closing is subject to the
satisfaction, at or before the Initial Closing Date, of each of the following conditions, provided
that these conditions are for each Buyer’s sole benefit and may be waived by such Buyer at any time
in its sole discretion by providing the Company with prior written notice thereof:

(i) The Company shall have duly executed and delivered to such Buyer: (A) (x) the Amended
Notes (in such principal amounts as such Buyer has agreed, and in the manner the Buyer may
reasonably request, in accordance with Section 1 of this Agreement) to be received by such Buyer at
the Initial Closing pursuant to this Agreement, (y) the Initial Notes (in such principal amounts as
such Buyer has agreed, and in the manner the Buyer may reasonably request, in accordance with
Section 1 of this Agreement) and (z) the Other Common Shares (in such amounts as such Buyer shall
request in accordance with Section 1 of this Agreement) being purchased by such Buyer at the
Initial Closing pursuant to this Agreement and (B) each of the other Transaction Documents.

(ii) The Company shall have delivered an irrevocable instruction letter to the Transfer Agent
directing the Transfer Agent, in conjunction with the broker or agent (of each of the Buyers each a
"Buyer Broker”), concurrently with the Initial Closing, to effect the deposit of the 144 Common
Shares (in such amounts as such Buyer shall request) to be received by each Buyer at the Initial
Closing pursuant to this Agreement to the account of each Buyer Broker at DTC through a
Deposit/Withdrawal at Custodian with respect to such Common Shares.

(iii) Such Buyer shall have received the opinion of Baxter, Baker, Sidle, Conn & Jones, the
Company’s outside counsel, dated as of the Initial Closing Date, in substantially the form of
Exhibit E-1 attached hereto.

(iv) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D-1 attached hereto, which instructions shall have
been delivered to and acknowledged in writing by the Company’s transfer agent.

(v) The Company shall have delivered to such Buyer a certificate evidencing the formation and
good standing of the Company and each of its domestic Subsidiaries in each such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Initial Closing Date.

(vi) The Company shall have delivered to such Buyer a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company, as applicable, conducts business, as
of a date within 10 days of the Initial Closing Date.

(vii) The Company shall have delivered to such Buyer a certified copy of the Certificate of
Incorporation of the Company as certified by the Secretary of State of Delaware within ten (10)
days of the Initial Closing Date.

(viii) The Company shall have delivered to such Buyer a certificate, executed by the Secretary
of the Company dated as of the Initial Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Articles of Incorporation, as in effect at the Initial Closing and (iii) the
Bylaws, as in effect at the Initial Closing, in the form attached hereto as Exhibit F.

(ix) The representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date. Such Buyer shall have received a certificate,
executed by an executive officer of the Company, dated as of the Initial Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the
form attached hereto as Exhibit G.

(x) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding as of a date within five days of the
Initial Closing Date.

(xi) The Common Stock (i) shall be designated for quotation or listed on the Principal Market
and (ii) shall not have been suspended, as of the Initial Closing Date, by the SEC or the Principal
Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market
have been threatened, as of the Initial Closing Date, either (A) in writing by the SEC or the
Principal Market or (B) by falling below the minimum listing maintenance requirements of the
Principal Market.

(xii) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities.

(xiii) Within five (5) Business Days prior to the Closing, the Company shall have delivered or
caused to be delivered to each Buyer (i) true copies of UCC search results, listing all effective
financing statements which name as debtor the Company or any of its domestic Subsidiaries filed in
the prior five years to perfect an interest in any assets thereof, together with copies of such
financing statements, none of which, except as otherwise agreed in writing by the Buyers, shall
cover any of the Collateral (as defined in the Security Documents) and the results of searches for
any tax lien and judgment lien filed against such Person or its property, which results, except as
otherwise agreed to in writing by the Buyers shall not show any such Liens (as defined in the
Security Documents); and (ii) a perfection certificate, duly completed and executed by the Company
and each of its Subsidiaries, in form and substance satisfactory to the Buyers.

(xiv) The Company shall have delivered to such Buyer duly executed voting agreements of Pirate
Capital LLC and Wynnefield Capital, Inc. (the “Stockholders”), in the form attached hereto as
Exhibit M (the “Voting Agreements”), whereby the Stockholders shall agree to vote in favor
of the Resolutions.

(xv) No litigation, status, rule regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated, or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits the consummation of the transactions contemplated by the
Transaction Documents.

(xvi) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

(b) The obligation of each Buyer hereunder to purchase the Additional Notes at the Additional
Closing is subject to the satisfaction, at or before the Additional Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company with prior written
notice thereof:

(i) The Company shall have duly executed and delivered to such Buyer: (A) the Additional
Notes (in such principal amounts as such Buyer has agreed, and in the manner the Buyer may
reasonably request, in accordance with Section 1 of this Agreement) being purchased by such Buyer
at the Additional Closing pursuant to this Agreement and (B) each of the other Transaction
Documents.

(ii) Such Buyer shall have received the opinion of Baxter, Baker, Sidle, Conn & Jones, the
Company’s outside counsel, dated as of the Additional Closing Date, in substantially the form of
Exhibit E-2 attached hereto.

(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D-2 attached hereto, which instructions shall have
been delivered to and acknowledged in writing by the Company’s transfer agent.

(iv) The Company shall have delivered to such Buyer a certificate evidencing the formation and
good standing of the Company and each of its domestic Subsidiaries in each such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Additional Closing Date.

(v) The Company shall have delivered to such Buyer a certificate evidencing the Company’s
qualification as a foreign corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company, as applicable, conducts business, as
of a date within 10 days of the Additional Closing Date.

(vi) The Company shall have delivered to such Buyer a certified copy of the Certificate of
Incorporation of the Company as certified by the Secretary of State of Delaware within ten (10)
days of the Additional Closing Date.

(vii) The Company shall have delivered to such Buyer a certificate, executed by the Secretary
of the Company dated as of the Additional Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Articles of Incorporation, as in effect at the Additional Closing and (iii) the
Bylaws, as in effect at the Additional Closing, in the form attached hereto as Exhibit F.

(viii) The representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Additional Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Additional Closing Date, to
the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in
the form attached hereto as Exhibit G.

(ix) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding as of a date within five days of the
Additional Closing Date.

(x) The Common Stock (i) shall be designated for quotation or listed on the Principal Market
and (ii) shall not have been suspended, as of the Additional Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Additional Closing Date, either (A) in writing by
the SEC or the Principal Market or (B) by falling below the minimum listing maintenance
requirements of the Principal Market.

(xi) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities.

(xii) No litigation, status, rule regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated, or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that prohibits the consummation of the transactions contemplated by the
Transaction Documents.

(xiii) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.

	 	8.	 	TERMINATION.

In the event that the Initial Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company’s or such Buyer’s failure to
satisfy the conditions set forth in Sections 6(a) and 7(a) above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of business on such date
without liability of any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 8 due to the failure of the Company to satisfy any
of the conditions to Initial Closing set forth in Section 7(a), the Company shall remain obligated
to reimburse the non-breaching Buyers for the expenses described in Section 4(g) above. In the
event of termination of this Agreement pursuant to this Section 8, this Agreement shall be null and
void and all parties shall retain all rights, remedies, claims, and obligations as if this
Agreement had never been executed, except as provided otherwise in this Paragraph 8.

	 	9.	 	MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.

(c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.

(e) Entire Agreement; Amendments. This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters discussed herein and
therein, and this Agreement, the other Transaction Documents and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer
makes any representation, warranty, covenant or undertaking with respect to such matters. No
provision of this Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least a majority of the aggregate principal amount of Notes issued
and issuable hereunder, and any amendment to this Agreement made in conformity with the provisions
of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable. No
provision hereof may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the applicable Securities then outstanding. No consideration shall
be offered or paid to any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is offered to all of the
parties to the Transaction Documents, holders of Notes or holders of the Warrants, as the case may
be. The Company has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that,
except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other
obligation to provide any financing to the Company or otherwise.

(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under 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 (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

	 	 	 
	If to the Company:

	 	

	The Allied Defense Group, Inc.

	8000 Towers Crescent Drive

Suite 260

Vienna, Virginia 22182

Telephone:

Facsimile:

	 	

(703) 847-5268

	Attention:

	 	

With a copy (for informational purposes only) to:

Baxter, Baker, Sidle, Conn & Jones

Sun Trust Building

Suite 2100

120 E. Baltimore Street

Baltimore, Maryland 21202

Tel: (410) 230-8122

Fax: (410) 230-3801

Attention: James E. Baker, Jr., Esq.

If to the Transfer Agent:

Mellon Investor Services, LLC

85 Challenger Road

Ridgefield, New Jersey 07660

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,

	 	 	 	 	 
	with a copy (for informational purposes only) to:

	Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Telephone:
	 	 	(212) 756-2000	 
	Facsimile:
	 	 	(212) 593-5955	 
	Attention:
	 	Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Notes or the Warrants. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of at least a majority of the aggregate
principal amount of Notes issued and issuable hereunder, including by way of a Fundamental
Transaction (unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants). A Buyer may assign some or all
of its rights hereunder without the consent of the Company in which event such assignee shall be
deemed to be a Buyer hereunder with respect to such assigned rights.

(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3 and the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closings. Each Buyer
shall be responsible only for its own representations, warranties, agreements and covenants
hereunder.

(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

(k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (including, without limitation,
those retained in connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
inaccuracy in any representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, (iii) any disclosure made by such Buyer pursuant to Section 4(i), or (iv) the
status of such Buyer or holder of the Securities as an investor in the Company pursuant to the
transactions contemplated by the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k) shall be the same as
those set forth in Section 6 of the Registration Rights Agreement.

(l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

(m) Remedies. Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.

(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.

(o) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, federal or state, foreign law, common law or
equitable cause of action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not occurred.

(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents and the
Company acknowledges that the Buyers are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction contemplated hereby
with the advice of its own counsel and advisors. Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this
Agreement or out of any other Transaction Documents, and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

1

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Amended and Restated Securities Purchase Agreement to be duly executed as of the date first
written above.

	 
	COMPANY:

	THE ALLIED DEFENSE GROUP, INC.

By:

	 

	Name:

	Title:

2

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Amended and Restated Securities Purchase Agreement to be duly executed as of the date first
written above.

	 
	BUYERS:

	KINGS ROAD INVESTMENTS LTD.

By:

	 

	Name:

	Title:

3

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Amended and Restated Securities Purchase Agreement to be duly executed as of the date first
written above.

	 
	BUYERS:

	PORTSIDE GROWTH & OPPORTUNITY FUND

By:

	 

	Name:

	Title:

4

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Amended and Restated Securities Purchase Agreement to be duly executed as of the date first
written above.

	 
	BUYERS:

	CASTLERIGG MASTER INVESTMENTS LTD.

By:

	 

	Name:

	Title:

5

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Amended and Restated Securities Purchase Agreement to be duly executed as of the date first
written above.

	 
	BUYERS:

	LB I GROUP INC.

By:

	 

	Name:

	Title:

6

SCHEDULE OF BUYERS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)	 	(9)	 	(10)	 	(11)	 	(12)	 	(13)
	 	 	 	 	 	 	Aggregate Principal	 	Aggregate Principal	 	Aggregate Principal	 	Aggregate Principal	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Address and	 	Amount of Original	 	Amount of Amended	 	Amount of Initial	 	Amount of	 	Number of 144	 	Number of Other	 	Number of	Warrant	Initial	Additional	 	 	 	 	Legal Representative's
	Buyer
	 	Facsimile Number	 	Notes	 	Notes	 	Notes	 	Additional Notes	 	Common Shares	 	Common Shares	 	Shares†	 	Purchase Price	 	Purchase Price	 	Escrow Amount	 	Address and Facsimile Number
	 
	 	c/o Polygon Investment Partners	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	LP	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	399 Park Avenue, 22nd Floor	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Schulte Roth & Zabel LLP
	 
	 	New York, NY 10022	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	919 Third Avenue
	 
	 	Attention:  Erik M.W. Caspersen	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	New York, New York  10022
	 
	 	and Brandon L. Jones	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Attention:  Eleazer Klein,
	 
	 	Facsimile:  (212) 359-7303	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Esq.
	Kings Road
	 	Telephone:  (212) 359-7300	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Facsimile:  (212) 593-5955
	Investments Ltd.
	 	Residence:  Cayman Islands	 	$	12,500,000	 	 	$	11,305.080	**	 	$	2,083,333	*	 	$	4,166,667	 	 	 	153,286	 	 	 	383,381	 	 	 	141,985	 	 	$	2,083,333	*	 	$	4,166,667	 	 	$	2,083,333	 	 	Telephone:  (212) 756-2376
	 
	 	c/o Ramius Capital Group, L.L.C.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	666 Third Avenue, 26th Floor	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	New York, New York  10017	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Attention:  Jeffrey Smith	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Owen Littman	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Facsimile:  (212) 845-7999	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	(212) 845-7995	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Telephone: (212) 845-7955	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Portside Growth &
	 	 	(212) 201-4841	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Opportunity Fund
	 	Residence:  Cayman Islands	 	$	7,500,000	 	 	$	6,783,048	**	 	$	1,250,000	*	 	$	2,500,000	 	 	 	153,286	 	 	 	168,715	 	 	 	86,991	 	 	$	1,250,000	*	 	$	2,500,000	 	 	$	1,250,000	 	 		N/A	
	 
	 	c/o Sandell Asset Management	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	40 West 57th St
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	26th Floor	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	McDermott Will & Emery LLP

	 
	 	New York, NY 10019
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	340 Madison Avenue

	 
	 	Attention: Cem Hacioglu /
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	New York, New York 10173-1922

	 
	 	Matthew Pliskin
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Attention:  Stephen Older,

	Castlerigg
	 	Telephone: 212-603-5700	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Esq.
	Master Investments
	 	Fax:  212-603-5710	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Facsimile:  (212) 547-5444
	Ltd.
	 	Residence: British Virgin Islands	 	$	6,000,000	 	 	$	5,426,438	**	 	$	1,000,000	*	 	$	2,000,000	 	 	 	153,286	 	 	 	104,315	 	 	 	69,593	 	 	$	1,000,000	*	 	$	2,000,000	 	 	$	1,000,000	 	 	Telephone:  (212) 547-5649
	 
	 	c/o Lehman Brothers Inc.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	399 Park Ave	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	NY, NY 10022	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Attention: Will Yelsits	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LB I Group Inc.
	 	Eric Salzman	 	$	4,000,000	 	 	$	3,617,626	**	 	$	666,667	*	 	$	1,333,333	 	 	 	153,286	 	 	 	18,448	 	 	 	46,395	 	 	$	666,667	*	 	$	1,333,333	 	 	$	666,667	 	 		N/A	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL
	 	 	 	 	 	$	30,000,000	 	 	$	27,132,192	**	 	$	5,000,000	*	 	$	10,000,000	 	 	 	613,142	 	 	 	674,858	 	 	 	347,963	 	 	$	5,000,000	*	 	$	10,000,000	 	 	$	5,000,000	 	 	 	 	 

* Legal Counsel Fee Amount as of Initial Closing Date (pro rata to each Buyer) to be added.

	**	 	The product of (I) the number of calendar days during the period commencing on the date
hereof and ending on the Initial Closing Date and (II) $10,273.97 per calendar day (pro rata
to each Buyer) to be added.

† Reflects antidilution adjustments to Warrants as of the date immediately following the Initial
Closing Date

7

EXHIBITS

	 	 	 
	Exhibit A-1

Exhibit A-2

Exhibit B

Exhibit C

Exhibit D-1

Exhibit D-2

Exhibit E-1

Exhibit E-2

Exhibit F

Exhibit G

Exhibit H

Exhibit I

Exhibit J

Exhibit K

Exhibit L

Exhibit M

	 	Form of Original Notes

Form of Notes

Form of Warrants

Form of Amended and Restated Registration Rights Agreement

Irrevocable Transfer Agent Instructions re: Initial Closing

Irrevocable Transfer Agent Instructions re: Additional Closing

Form of Counsel Opinion re: Initial Closing

Form of Counsel Opinion re: Additional Closing

Form of Secretary’s Certificate

Form of Officer’s Certificate

Form of Security Agreement

Form of Pledge Agreement

Form of Guarantee

Form of Escrow Agreement

MECAR Certificate

Form of Voting Agreement

SCHEDULES

	 	 	 
	Schedule 3(a)

Schedule 3(d)

Schedule 3(j)

Schedule 3(k)

Schedule 3(n)

Schedule 3(q)

Schedule 3(r)

Schedule 3(s)

Schedule 3(t)

Schedule 3(v)

Schedule 3(z)

Schedule 3(aa)

Schedule 3(bb)

Schedule 3(dd)

Schedule 4(c)

	 	Subsidiaries

No Conflicts

Application of Takeover Protections; Rights Agreement

SEC Documents; Financial Statements

Conduct of Business; Regulatory Permits

Transactions with Affiliates

Equity Capitalization

Indebtedness and Other Contracts

Absence of Litigation

Employee Relations

Subsidiary Rights

Tax Status

Internal Accounting and Disclosure Controls

Ranking of Notes

Reporting Status

8

Schedule 3(e)

Consents

	 	•	 	On March 23, 2007, the staff of the Division of Enforcement of the SEC informed the
Company that the staff is conducting an inquiry to determine whether there have been any
violations of the federal securities laws and requested that the Company voluntarily
produce information relating to the Company’s Form 8-K filed with the SEC on February 9,
2007, which reported certain errors in the Company’s financial statements for the three and
nine month periods ended September 30, 2006.

	 	•	 	On May 23, 2007, the Company received a letter from the Principal Market stating that
the Company may not be in compliance with the Principal Market’s listing requirements as a
result of the Company’s sustained losses and/or financial condition. On June 1, 2007, the
Company received a follow up letter from the Principal Market stating that, based on the
information furnished by the Company on May 30, 2007, the Principal Market had rescinded
its previous letter dated May 23, 2007.

9

Schedule 3(j)

Application of Takeover Protections; Rights Agreement

The Board of Directors of the Company adopted a Rights Agreement in 2001 and amended the
agreement in June 2006 and again in November 2006. The Rights Agreement provides each stockholder
of record a dividend distribution of one “right” for each outstanding share of common stock.
Rights become exercisable the earlier of ten days following: (1) a public announcement that an
acquiring person has purchased or has the right to acquire 25% or more of the Company’s common
stock, or (2) the commencement of a tender offer which would result in an offeror beneficially
owning 25% or more of the outstanding common stock. All rights held by an acquiring person or
offeror expire on the announced acquisition date and all rights expire at the close of business on
May 31, 2011.

Each right under the Rights Agreement entitles a stockholder to acquire at a purchase price
of $50, one-hundredth of a share of preferred stock which carries voting and dividend rights
similar to one share of common stock. Alternatively, a right holder may elect to purchase for $50
an equivalent number of common shares (or in certain circumstances, cash, property or other
securities of the Company) at a price per share equal to one-half of the average market price for
a specified period. In lieu of the purchase price, a right holder may elect to acquire one-half
of the common shares available under the second option. The purchase price and the preferred
share fractional amount are subject to adjustment for certain events as described in the Rights
Agreement.

Rights also entitle the holder to receive a specified number of shares of an acquiring
company’s common stock in the event that the Company is not the surviving corporation in a merger
or if 50% or more of the Company’s assets are sold or transferred.

At the discretion of a majority of the Board of Directors of the Company and within a
specified time period, the Company may redeem all of the rights at a price of $.01 per right. The
Board may also amend any provision of the Agreement prior to exercise of the rights. The Rights
Agreement will not be triggered by the transactions contemplated by the Transaction Documents.

10

Schedule 3(k)

SEC Documents; Financial Statements

In the Company’s 10-K for the fiscal year ended December 31, 2006, filed on March 23, 2007,
the Company summarized in Management’s Report on Internal Controls over Financial Reporting
(Item 9A) and reported by the auditors in the Report of Independent Registered Public Accounting
Firm, that the Company had two material weaknesses outstanding in its internal control over
financial reporting. One weakness was that Mecar did not have proper maintenance of an appropriate
contract cost accounting ledger, and the other weakness related to the Company’s financial
reporting processes. While the Company has taken actions to remediate these weaknesses, the
Company has not completed its testing and determined whether these weaknesses have been remediated
as of the date hereof. Therefore, these material weaknesses may continue to exist. In addition to
the material weaknesses reported by the Company, the Company’s internal control testing identified
two significant deficiencies in internal controls that exist at the Company that were not required
to be disclosed pursuant to the terms of the Sarbanes-Oxley Act of 2002. These deficiencies relate
to general IT controls and a lack of segregation of duties. These deficiencies, if combined, could
create a material weakness in the Company’s internal controls.

11

Schedule 3(n)

Conduct of Business; Regulatory Permits

During the two (2) years prior to the date hereof, the Company has had communications from and
with the SEC or Principal Market regarding the suspension or delisting of the Common Stock from the
Principal Market with respect to the following:

	 	•	 	In the period April through September 2006, the Company had numerous communications with
the Principal Market regarding a potential delisting as a result of the Company’s failure
to file timely SEC filings regarding the Company’s financial results.

	 	•	 	On May 23, 2007, the Company received a letter from the Principal Market stating that
the Company may not be in compliance with the Principal Market’s listing requirements as a
result of the Company’s sustained losses and/or financial condition. On June 1, 2007, the
Company received a follow-up letter from the Principal Market stating that, based on the
information furnished by the Company on May 30, 2007, the Principal Market had rescinded
its previous letter dated May 23, 2007. However, the Company may receive similar letters
from the Principal Market in the future.

	 	•	 	On March 23, 2007, the staff of the Division of Enforcement of the SEC informed the
Company that the staff is conducting an inquiry to determine whether there have been any
violations of the federal securities laws and requested that the Company voluntarily
produce information relating to the Company’s Form 8-K filed with the SEC on February 9,
2007, which reported certain errors in the Company’s financial statements for the three and
nine month periods ended September 30, 2006.

12

Schedule 3(q)

Transactions with Affiliates

The Company’s subsidiary, News/Sports Microwave Rental, Inc., has loaned $100,000 to the
subsidiary’s current president as evidenced by a note dated March 1, 2004. The note accrues
interest at 5% per annum and is forgivable based on the president achieving certain performance
goals at News/Sports Microwave Rental, Inc. The principal and unpaid interest on the note is due
March 1, 2009.

13

Schedule 3(r)

Equity Capitalization

The Company has the following agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act:

	 	•	 	Those shares of Common Stock of the Company referenced in Schedules 2(c)(i) and 2(c)(ii)
of the Registration Rights Agreement

	 	•	 	41,793 shares of the Company’s Common Stock that are issuable upon the conversion of
warrants issued to Cowen and Company, LLC associated with the Original Securities Purchase
Agreement

	 	•	 	28,000 shares of the Company’s Common Stock that are issuable upon the conversion of
warrants issued to Patriot Capital Funding, Inc. in 2004 and 2005.

14

Schedule 3(s)

Indebtedness and Other Contracts

The material terms of the Company’s Indebtedness and disclosures related to any contract,
agreement or instrument the violation of which or default under which, by the other party(ies) to
such contract, agreement or instrument would reasonably be expected to result in a Material Adverse
Effect or is in violation of any term of or in default under any contract, agreement, or instrument
relating to any Indebtedness, except where such violation and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect or is a party to any contract,
agreement, or instrument relating to any Indebtedness, the performance of which, in the judgment of
the Company’s officers, has or is expected to have a Material Adverse Effect, have been provided in
the Company’s Form 10-K filed with the SEC for December 31, 2006, including but not limited to, the
notes to the financial statements provided in the Form 10-K, as listed:

	 	•	 	Note K – Bank Credit Facility

	 	•	 	Note L – Accrued Losses on Contracts, Deferred Compensation, and Warranty Reserves

	 	•	 	Note M – Long Term Debt

	 	•	 	Note P – Contingencies and Commitments

	 	•	 	Note Q – Fair Value of Financial Instruments

	 	•	 	Note R – Derivative Financial Instruments

	 	•	 	Note U – Income Taxes

	 	•	 	Note Y – Off Balance Sheet Transaction

The following are obligations for which financing statements or other security documents have
been filed to secure payment of the obligations:

	 	 	 	 	 	 	 	 	 
	Entity	 	Party/ Description	 	Approximate Amount
	Mecar USA, Inc.
	 	Wachovia Bank / Performance Bond	 	$	48,672	 
	Mecar USA, Inc.
	 	Bankcorp South	 	$	31,250	 
	News/Sports Microwave Rental, Inc.
	 	TCF Equipment Finance / Equipment Lease	 	$	81,683	 

See also the Indebtedness enumerated in Schedule 3(d)(d)

15

Schedule 3(t)

Absence of Litigation

On March 23, 2007, the staff of the Division of Enforcement of the SEC informed the Company
that the staff is conducting an inquiry to determine whether there have been any violations of the
federal securities laws and requested that the Company voluntarily produce information relating to
the Company’s Form 8-K filed with the SEC on February 9, 2007, which reported certain errors in the
Company’s financial statements for the three and nine month periods ended September 30, 2006. The
Company believes, at this time, that the inquiry remains open.

On April 24, 2007, Kings Road Investments Ltd. filed a Complaint against the Company in the
United States District Court for the Southern District of New York (Civil Action No. 07-CV-03262),
requesting money damages of not less than $16,664,854 plus interest, costs and attorneys’ fees.

Suit has been filed in Belgium against one of the members of the VSK Group for alleged breach
of contract, seeking damages of less than $150,000.

A former employee filed suit in Belgium against the Company and Mecar S.A. for unpaid
severance and other amounts totaling less than $400,000.

16

Schedule 3(v)

Employee Relations

Mecar USA, Inc.’s (“Mecar”) hourly workers are represented by a labor union. The relations
with the labor union are explained by the Company in the Company’s Form 10-K filed with the SEC for
the period ended December 31, 2006 under Item 1. Business.

17

Schedule 3(z)

Subsidiary Rights

Mecar S.A.’s current credit facility arrangement prohibits Mecar S.A. from making dividends.

18

Schedule 3(aa)

Tax Status

As explained in the Company’s Form 10-K for the period ending December 31, 2006, Mecar S.A.
is currently under examination by Belgian taxing authorities. The audit covers the 2004 tax year
and relates to undocumented management fees, the calculation of inventory reserves and the
calculation of interest expense related to a timing difference on the recognition of
unrealized/realized currency exchange gains and losses. The audit is not expected to be completed
until the third quarter of 2007. Based on discussions with the tax inspector, the Company
believes that the appropriate supporting documentation for the calculation of inventory reserves
has been provided and no adjustment will be required. However, management believes that it will
be required to pay tax on the unrealized/realized foreign currency gain in 2004, which will be
offset by a deduction in 2005 when the company recorded the gain in its statutory books.
Accordingly, as of December 31, 2006, the Company recorded a liability of $3,194,000 for the tax
on the foreign currency gains.

19

Schedule 3(bb)

Internal Accounting and Disclosure Controls

In the Company’s 10-K for the fiscal year ended December 31, 2006, filed on March 23, 2007,
the Company summarized in Management’s Report on Internal Controls over Financial Reporting
(Item 9A) and reported by the auditors in the Report of Independent Registered Public Accounting
Firm, that the Company had two material weaknesses outstanding in its internal control over
financial reporting. One weakness was that Mecar did not have proper maintenance of an appropriate
contract cost accounting ledger, and the other weakness related to the Company’s financial
reporting processes. While the Company has taken actions to remediate these weaknesses, the
Company has not completed its testing and determined whether these weaknesses have been remediated
as of the date hereof. Therefore, these material weaknesses may continue to exist. In addition to
the material weaknesses reported by the Company, the Company’s internal control testing identified
two significant deficiencies in internal controls that exist at the Company that were not required
to be disclosed pursuant to the terms of the Sarbanes-Oxley Act of 2002. These deficiencies relate
to general IT controls and a lack of segregation of duties. These deficiencies, if combined, could
create a material weakness in the Company’s internal controls.

20

Schedule 3(dd)

Ranking of Notes

Each of the following debts is senior to, or ranks pari passu with, the Notes:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Description	 	Borrower	 	Amount	 	Agreement	 	(Lender)	 	31-May-07
	2003 Van
	 	News/Sports Microwave  Rental, Inc.	 	$	26,732.00	 	 	 	07/01/03	 	 	GMAC	 	$	6,237.81	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Forklift
	 	News/Sports Microwave  Rental, Inc.	 	$	197,402.57	 	 	 	09/01/05	 	 	One Source/ TCF Eqpt Finance	 	$	87,268.07	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	Crown Credit Company/ Crown	 	 	 	 
	Forklift
	 	SeaSpace Corporation	 	$	18,390.00	 	 	 	08/01/05	 	 	Equipment Company	 	$	10,266.23	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Intellectual Property
	 	SeaSpace Corporation	 	$	250,000.00	 	 	 	08/01/05	 	 	LJT & Associates	 	$	250,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GMS Purchase
	 	The Allied Defense Group, Inc.	 	$	6,700,000.00	 	 	 	11/01/05	 	 	Sam Nasiri	 	$	5,862,500.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Telephone System
	 	The Allied Defense Group, Inc.	 	$	10,072.61	 	 	 	04/01/04	 	 	Inter-Tel Leasing, Inc.	 	$	4,755.85	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dell Computer
	 	The Allied Defense Group, Inc.	 	$	2,766.15	 	 	 	02/16/06	 	 	Dell Financial Services	 	$	1,370.63	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dell Computer (5)
	 	The Allied Defense Group, Inc.	 	$	10,751.58	 	 	 	04/14/06	 	 	Dell Financial Services	 	$	4,718.68	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dell Desktops (3)
	 	The Allied Defense Group, Inc.	 	$	3,549.54	 	 	 	04/19/06	 	 	Dell Financial Services	 	$	3,414.18	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dell Computer (3)
	 	The Allied Defense Group, Inc.	 	$	6,570.96	 	 	 	08/30/06	 	 	Dell Financial Services	 	$	6,320.38	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Dell Computer
	 	The Allied Defense Group, Inc.	 	$	1,499.93	 	 	 	04/01/07	 	 	Dell Financial Services	 	$	1,378.25	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CMS Purchase
	 	VSK Electronics N.V.	 	$	400,000.00	 	 	 	08/01/04	 	 	 	 	 	 	$	100,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Vigitec Mortgage
	 	VIGITEC, S.A.	 	 	433,813.67             €	 	 	 	03/25/99	 	 	CBC Bank	 	 	103,073.00 €	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Phone Lease
	 	VSK Electronics N.V.	 	 	43,948.00             €	 	 	 	03/29/02	 	 	Siemens	 	 	16,536.00 €	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Scientific Research
Loan
	 	VSK Electronics N.V.	 	 	107,283.00             €	 	 	 	1984???	 	 	Gvt Export Agency	 	 	107,283.00 €	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

21

Schedule 4(c)

Reporting Status

For the 10-Q required for the period ending June 30, 2007, based on the Initial Closing Date
of this transaction and the bifurcation and valuation services that will be required in order to
properly reflect this transaction in the financial statements, the Company may file its Form 10-Q
after the SEC date required for the filing of that Form. In view of potential transactions,
including this transaction, for the 10-Q required for the period ending September 30, 2007, the
Company may file its Form 10-Q after the SEC date required for the filing of that form.

22

Schedule 4(d)

Use of Proceeds

Senior Permitted Indebtedness, including the Company’s Note obligations to Sam Nasiri.

Payments required for capital leases.

23EX-10.2

[FORM OF [FOR AMENDED NOTES: AMENDED AND RESTATED] SENIOR SECURED CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD OR TRANSFERRED OR ASSIGNED UNLESS (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO
THE COMPANY. NOTHING IN THE PRECEDING SHALL PROHIBIT THE PLEDGE OF THE SECURITIES IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS
3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE
HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

The Allied Defense Group, Inc.

[FOR AMENDED NOTES: Amended and Restated] Senior Secured Convertible Note

	 	 	 
	[FOR AMENDED NOTES:: Original

Issuance Date: March 9, 2006]

Exchanged for New Note with

Issuance Date: [     ],

2007]

[FOR INITIAL NOTES:

	 	

	Issuance Date: [     ], 2007]

	 	Original Principal Amount: U.S. $[     ]1

FOR VALUE RECEIVED, The Allied Defense Group, Inc., a Delaware corporation (the “Company”),
hereby promises to pay to [PORTSIDE GROWTH & OPPORTUNITY FUND][OTHER BUYERS] or registered assigns
(“Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the
terms hereof pursuant to redemption, conversion or otherwise, and including any Capitalized
Interest (as defined in Section 2 below) thereon, the “Principal”) when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (including, any amounts of Additional Interest required
to be paid pursuant to Section 2(d), “Interest”) on any outstanding Principal at a rate per annum
equal to the Interest Rate (as defined below), from June [     ], 2007, the date set out above as the
Issuance Date, (the “Issuance Date”) until the same becomes due and payable, whether upon an
Interest Date (as defined below), the Maturity Date, acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). [FOR AMENDED NOTES: This Amended and
Restated Senior Secured Convertible Note (including all Senior Secured Convertible Notes issued in
exchange, transfer or replacement hereof, this “Note”) amends, supplements, modifies and completely
restates and supersedes the Senior Subordinated Convertible Note, dated March 9, 2006 (the
"Existing Note”), issued by the Company to the Holder in the Original Principal Amount of $[     ],
but shall not, except as specifically amended hereby or as set forth in the Securities Purchase
Agreement, constitute a release, satisfaction or novation of any of the obligations under any other
Transaction Document (as defined in the Securities Purchase Agreement). This Note is one of an
issue of Amended and Restated Senior Secured Convertible Notes issued pursuant to the Securities
Purchase Agreement by and between each of the Buyers (as defined in the Securities Purchase
Agreement) and the Company (collectively, the “Notes” and such other Amended and Restated Senior
Secured Convertible Notes, the “Other Notes”).] [FOR INITIAL NOTES: This Senior Secured
Convertible Note (including all Senior Secured Convertible Notes issued in exchange, transfer or
replacement hereof, this “Note”) is one of an issue of Senior Secured Convertible Notes issued
pursuant to the Securities Purchase Agreement on the Closing Date (collectively, the “Notes” and
such other Senior Secured Convertible Notes, the “Other Notes”).] Certain capitalized terms used
herein are defined in Section 30.

(1) MATURITY. On the Maturity Date, the Holder shall surrender this Note to the
Company and the Company shall pay to the Holder an amount in cash representing all outstanding
Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if any. The “Maturity
Date” shall be [     ], 2010, as may be extended at the option of the Holder (i) in the event
that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and
be continuing or any event shall have occurred and be continuing which with the passage of time and
the failure to cure would result in an Event of Default and (ii) through the date that is ten days
after the consummation of a Change of Control in the event that a Change of Control is publicly
announced or a Change of Control Notice (as defined in Section 5) is delivered prior to the
Maturity Date.

(2) INTEREST. (a) Interest on this Note shall commence accruing on the Issuance Date
and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable
in arrears on the last day of each Calendar Quarter during the period beginning on the Issuance
Date and ending on, and including, the Maturity Date (each, an “Interest Date”) with the first
Interest Date being September 30, 2007. Interest shall be payable on each Interest Date, to the
record holder of this Note on the applicable Interest Date, in shares of Common Stock (as defined
below) (“Interest Shares”) so long as there has been no Equity Conditions Failure; provided
however, that the Company may, at its option following notice to the Holder, pay Interest on any
Interest Date in cash (“Cash Interest”) or in a combination of Cash Interest and Interest Shares;
provided, further, however, that Company may capitalize any such Interest accruing through [     
     ],2 2007 on and as of each applicable Interest Date by adding it to the then
outstanding Principal of this Note (the “Capitalized Interest”). The Company shall deliver a
written notice (each, an “Interest Election Notice”) to each holder of the Notes on or prior to the
Interest Notice Due Date (the date such notice is delivered to all of the holders, the “Interest
Notice Date”) which notice (1) (A) either (x) confirms that Interest to be paid on such Interest
Date shall be paid entirely in Interest Shares or (y) elects to pay Interest as Cash Interest or a
combination of Cash Interest and Interest Shares and specifies the amount of Interest that shall be
paid as Cash Interest and the amount of Interest, if any, that shall be paid in Interest Shares and
(B) certifies that there has been no Equity Conditions Failure, (2) in the event the Company has
elected to pay Interest on an Interest Date as Capitalized Interest, states the Company’s election
to capitalize such Interest and (3) states the aggregate amount of Interest to be paid to the
Holder on the applicable Interest Date; provided, however, that with respect to the Interest Dates
on March 30, 2008 and June 30, 2008, the Company shall be permitted to pay Interest in Interest
Shares regardless of whether the Equity Conditions set forth in clauses (i) and (vii) of the
definition thereof are satisfied (and only so long as there is no Equity Conditions Failure with
respect to any other clauses in the definition of Equity Conditions) at the Adjusted Interest
Conversion Price. If any portion of Interest for a particular Interest Date shall be paid in
Interest Shares, then the Company shall pay to the Holder, in accordance with Section 2(b), a
number of shares of Common Stock equal to (x) the amount of Interest payable on the applicable
Interest Date in Interest Shares divided by (y) the Interest Conversion Price or the Adjusted
Interest Conversion Price, as applicable. Interest to be paid on an Interest Date in Interest
Shares shall be paid in a number of fully paid and nonassessable shares of Common Stock (rounded to
the nearest whole share). Except as provided above with respect to the Interest Dates on March 30,
2008 and June 30, 2008, if the Equity Conditions are not satisfied as of the Interest Notice Date,
the Interest Notice shall indicate that unless the Holder waives the Equity Conditions, the
Interest shall be paid in cash. If the Equity Conditions were satisfied as of the Interest Notice
Date but the Equity Conditions are no longer satisfied at any time prior to the Interest Date, the
Company shall provide the Holder a subsequent notice to that effect indicating that unless the
Holder waives the Equity Conditions prior to the Interest Date, the Interest shall be paid in cash
on the Interest Date. In the event of a dispute as to the amount of Interest to be paid on any
Interest Date, including without limitation, any dispute relating to the Cash Interest payable or
the number of Interest Shares issuable to the Holder in connection with such Interest Date, the
Company shall pay to the Holder the amount of Interest (whether in the form of Cash Interest or
Interest Shares) not in dispute and resolve such dispute in accordance with Section 24.

(b) When any Interest Shares are to be paid on an Interest Date, the Company shall (i) (A)
provided that the Company’s transfer agent (the “Transfer Agent”) is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate
number of Interest Shares to which the Holder shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent Commission system, or (B) if the
foregoing shall not apply, issue and deliver on the applicable Interest Date, to the address set
forth in the register maintained by the Company for such purpose pursuant to the Securities
Purchase Agreement or to such address as specified by the Holder in writing to the Company at least
two (2) Business Days prior to the applicable Interest Date, a certificate, registered in the name
of the Holder or its designee, for the number of Interest Shares to which the Holder shall be
entitled and (ii) with respect to each Interest Date, pay to the Holder, in cash by wire transfer
of immediately available funds, the amount of any Cash Interest.

(c) Prior to the payment of Interest on an Interest Date, Interest on this Note shall accrue
at the Interest Rate and be payable in cash upon any conversion in accordance with Section 3(c)(i).
Upon the occurrence and during the continuance of an Event of Default, the Interest Rate shall be
increased to twelve and one-half percent (12.5%). In the event that such Event of Default is
subsequently cured, the adjustment referred to in the preceding sentence shall cease to be
effective as of the date of such cure; provided that the Interest as calculated at such increased
rate during the continuance of such Event of Default shall continue to apply to the extent relating
to the days after the occurrence of such Event of Default through and including the date of cure of
such Event of Default. The Company shall pay any and all taxes that may be payable with respect to
the issuance and delivery of Interest Shares; provided that the Company shall not be
required to pay any tax that may be payable in respect of the issuance and delivery of any Interest
Shares to any Person other than the Holder or with respect to any income tax due by the Holder with
respect to such Interest Shares.

(d) Upon the occurrence of any Dilutive Issuance (as defined in Section 7(a)) prior to the
second (2nd) anniversary of the Issuance Date, the Company shall pay to the Holder, as
additional interest (the “Additional Interest”), an amount equal to the product of (i) the Interest
Pro Rata Amount multiplied by (ii) five percent (5.0%) of the gross proceeds received by the
Company from such Dilutive Issuance. Such amounts of Additional Interest shall be paid in cash to
the Holder on the date the Company receives such proceeds in connection with such Dilutive Issuance
and the date of any such payment shall be considered an “Interest Date” hereunder.

(3) CONVERSION OF NOTES. This Note shall be convertible into shares of common stock
of the Company, $0.10 par value per share (the “Common Stock”), on the terms and conditions set
forth in this Section 3.

(a) Conversion Right. Subject to the provisions of Section 3(d), at any time or times
on or after the Issuance Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below).
The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall
round such fraction of a share of Common Stock up to the nearest whole share. The Company shall
pay any and all taxes that may be payable with respect to the initial issuance and delivery of
Common Stock upon conversion of any Conversion Amount; provided that the Company shall not
be required to pay any tax that may be payable in respect of the issuance and delivery of any
shares of Common Stock upon conversion to any Person other than the Holder or with respect to any
income tax due by the Holder with respect to such shares of Common Stock.

(b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of
any Conversion Amount pursuant to Section 3(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “Conversion Rate”).

(i) “Conversion Amount” means the portion of the Principal to be converted, redeemed or
otherwise with respect to which this determination is being made.

(ii) “Conversion Price” means, as of any Conversion Date (as defined below) or other
date of determination, $[     ]3, subject to adjustment as provided herein.

(c) Mechanics of Conversion.

(i) Optional Conversion. To convert any Conversion Amount into shares of
Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile
(or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date,
a copy of an executed notice of conversion in the form attached hereto as Exhibit I
(the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iv), surrender
this Note to a nationally recognized overnight delivery service for delivery to the Company
(or an indemnification undertaking with respect to this Note in the case of its loss, theft
or destruction). On or before the second (2nd) Trading Day following the date of
receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of
receipt of such Conversion Notice to the Holder and the Transfer Agent. On or before the
third (3rd ) Trading Day following the date of receipt of a Conversion Notice
(the “Share Delivery Date”), the Company shall (1) (X) provided that the Transfer Agent is
participating in the Fast Automated Securities Transfer Program of the DTC credit such
aggregate number of shares of Common Stock to which the Holder shall be entitled to the
Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program, issue and deliver to the address as specified in the
Conversion Notice, a certificate, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be entitled, (2) pay to the
Holder in cash an amount equal to the accrued and unpaid Interest on the Conversion Amount
up to and including the Conversion Date and (3) for any conversions prior to the third
(3rd) anniversary of the Issuance Date, pay any applicable Make-Whole Amount in
accordance with Section 3(c)(ii). If this Note is physically surrendered for conversion as
required by Section 3(c)(iv) and the outstanding Principal of this Note is greater than the
Principal portion of the Conversion Amount being converted, then the Company shall as soon
as practicable and in no event later than three Business Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in accordance with Section
19(d)) representing the outstanding Principal not converted. The Person or Persons entitled
to receive the shares of Common Stock issuable upon a conversion of this Note shall be
treated for all purposes as the record holder or holders of such shares of Common Stock on
the Conversion Date.

(ii) Make-Whole Amount. If prior to the third (3rd) anniversary of
the Issuance Date, the Holder converts all or any portion of this Note pursuant to Section
3(c)(i) or the Company converts all or any portion of this Note pursuant to Section 9(a),
then upon such conversion or redemption, the Holder shall receive the Make-Whole Amount;
provided, however, that in the event that the Closing Sale Price of the Common Stock exceeds
140% of the initial Conversion Price (as adjusted for any stock split, combination,
reclassification or similar transaction) for each of twenty (20) Trading Days out of the
thirty (30) consecutive Trading Day period ended on the Trading Day immediately prior to the
Conversion Date, then the Holder shall not be entitled to receive the Make-Whole Amount.
The Company shall pay any Make-Whole Amount in cash.

(iii) Company’s Failure to Timely Convert. If the Company shall fail to issue
a certificate to the Holder or credit the Holder’s balance account with DTC, as applicable,
for the number of shares of Common Stock to which the Holder is entitled upon conversion of
any Conversion Amount on or prior to the date which is five (5) Trading Days after the
Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages to the
Holder for each Trading Day of such Conversion Failure in an amount equal to 1.0% of the
product of (I) the sum of the number of shares of Common Stock not issued to the Holder on
or prior to the Share Delivery Date and to which the Holder is entitled, and (II) the
Closing Sale Price of the Common Stock on the Share Delivery Date and (B) the Holder, upon
written notice to the Company, may void its Conversion Notice with respect to, and retain or
have returned, as the case may be, any portion of this Note that has not been converted
pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice
shall not affect the Company’s obligations to make any payments which have accrued prior to
the date of such notice pursuant to this Section 3(c)(iii) or otherwise. In addition to the
foregoing, if within three (3) Trading Days after the Company’s receipt of the facsimile
copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the
Holder or credit the Holder’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon such holder’s conversion of any Conversion
Amount, and if on or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder anticipated receiving from the
Company (a “Buy-In"), then the Company shall, within three (3) Trading Days after the
Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In
Price"), at which point the Company’s obligation to deliver such certificate (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common Stock, times (B) the Closing Bid Price on the Conversion
Date.

(iv) Registration; Book-Entry. The Company shall maintain a register (the
“Register”) for the recordation of the names and addresses of the holders of each Note and
the principal amount of the Notes held by such holders (the “Registered Notes”). The
entries in the Register shall be conclusive and binding for all purposes absent manifest
error. The Company and the holders of the Notes shall treat each Person whose name is
recorded in the Register as the owner of a Note for all purposes, including, without
limitation, the right to receive payments of principal and interest hereunder,
notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register. Upon its
receipt of a request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue one or more
new Registered Notes in the same aggregate principal amount as the principal amount of the
surrendered Registered Note to the designated assignee or transferee pursuant to Section 19.
Notwithstanding anything to the contrary set forth herein, upon conversion of any portion
of this Note in accordance with the terms hereof, the Holder shall not be required to
physically surrender this Note to the Company unless (A) the full Conversion Amount
represented by this Note is being converted or (B) the Holder has provided the Company with
prior written notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender. The Holder and the Company shall maintain
records showing the Principal converted and the dates of such conversions or shall use such
other method, reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon conversion.

(v) Pro Rata Conversion; Disputes. In the event that the Company receives a
Conversion Notice from more than one holder of Notes for the same Conversion Date and the
Company can convert some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall convert from each holder of Notes
electing to have Notes converted on such date a pro rata amount of such holder’s portion of
its Notes submitted for conversion based on the principal amount of Notes submitted for
conversion on such date by such holder relative to the aggregate principal amount of all
Notes submitted for conversion on such date. In the event of a dispute as to the number of
            shares of Common Stock issuable to the Holder in connection with a conversion of this Note,
the Company shall issue to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with Section 24.

(d) Limitations on Conversions.

(i) Beneficial Ownership. The Company shall not effect any conversion of this
Note, and the Holder of this Note shall not have the right to convert any portion of this
Note pursuant to Section 3(a), to the extent that after giving effect to such conversion,
the Holder (together with the Holder’s affiliates) would beneficially own in excess of 4.99%
(the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately
after giving effect to such conversion. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of this Note with respect to
which the determination of such sentence is being made, but shall exclude the number of
            shares of Common Stock which would be issuable upon (A) conversion of the remaining,
nonconverted portion of this Note beneficially owned by the Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any Other Notes or warrants)
subject to a limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 3(d)(i), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Section 3(d)(i), in determining the number of outstanding
            shares of Common Stock, the Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company’s most recent Form 10-KSB, Form 10-K, Form 10-QSB,
Form 10-Q or Form 8-K, as the case may be (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. For any reason at any time, upon the written
request of the Holder, the Company shall within two (2) Business Days confirm in writing to
the Holder the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Note, by the Holder or
its affiliates since the date as of which such number of outstanding shares of Common Stock
was reported. By written notice to the Company, the Holder may from time to time increase
or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified
in such notice; provided that (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the Company, and (ii)
any such increase or decrease will apply only to the Holder and not to any other holder of
Notes.

(ii) Principal Market Regulation. The Company shall not be obligated to issue
any shares of Common Stock upon conversion of this Note, and the Holder of this Note shall
not have the right to receive upon conversion of this Note any shares of Common Stock, if
the issuance of such shares of Common Stock would exceed the aggregate number of shares of
Common Stock which the Company may issue upon conversion or exercise, as applicable, of the
Notes and Warrants without breaching the Company’s obligations under the rules or
regulations of the Principal Market (the number of shares which may be issued without
violating such rules and regulations, the “Exchange Cap”), except that such limitation shall
not apply in the event that the Company (A) obtains the approval of its stockholders as
required by the applicable rules of the Principal Market for issuances of Common Stock in
excess of such amount or (B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be reasonably satisfactory to the
Required Holders. Unless and until such approval or written opinion is obtained, no
purchaser of the Notes pursuant to the Securities Purchase Agreement (the “Purchasers”)
shall be issued in the aggregate, upon conversion or exercise, as applicable, of Notes or
Warrants, shares of Common Stock in an amount greater than the product of the Exchange Cap
multiplied by a fraction, the numerator of which is the principal amount of Notes issued to
such Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes issued to the Purchasers
pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each
Purchaser, the “Exchange Cap Allocation”). In the event that any Purchaser shall sell or
otherwise transfer any of such Purchaser’s Notes, the transferee shall be allocated a pro
rata portion of such Purchaser’s Exchange Cap Allocation, and the restrictions of the prior
sentence shall apply to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any holder of Notes shall
convert all of such holder’s Notes into a number of shares of Common Stock which, in the
aggregate, is less than such holder’s Exchange Cap Allocation, then the difference between
such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually
issued to such holder shall be allocated to the respective Exchange Cap Allocations of the
remaining holders of Notes on a pro rata basis in proportion to the aggregate principal
amount of the Notes then held by each such holder.

(4) RIGHTS UPON EVENT OF DEFAULT.

(a) Event of Default. Each of the following events shall constitute an “Event of
Default”:

(i) the failure of the applicable Registration Statement required to be filed pursuant
to the Registration Rights Agreement to be declared effective by the SEC on or prior to the
date that is sixty (60) days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or, while the applicable Registration Statement is required
to be maintained effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to any holder of the
Notes for sale of all of such holder’s Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive
days or for more than an aggregate of thirty (30) days in any 365-day period (other than
days during an Allowable Grace Period (as defined in the Registration Rights Agreement));

(ii) the suspension from trading or failure of the Common Stock to be listed on an
Eligible Market for a period of five (5) consecutive Trading Days or for more than an
aggregate of ten (10) Trading Days in any 365-day period;

(iii) the Company’s (A) failure to cure a Conversion Failure by delivery of the
required number of shares of Common Stock within ten (10) Business Days after the applicable
Conversion Date or (B) written notice to any holder of the Notes, including by way of public
announcement or through any of its agents, at any time, of its intention not to comply with
a request for conversion of any Notes into shares of Common Stock that is tendered in
accordance with the provisions of the Notes;

(iv) at any time following the tenth (10th) consecutive Business Day that
the Holder’s Authorized Share Allocation is less than the number of shares of Common Stock
that the Holder would be entitled to receive upon a conversion of the full Conversion Amount
of this Note (without regard to any limitations on conversion set forth in Section 3(d) or
otherwise);

(v) the Company’s failure to pay to the Holder any amount of Principal (including,
without limitation, the Company’s failure to pay any redemption or make-whole payments),
Interest, Late Charges or other amounts when and as due under this Note or any other
Transaction Document (as defined in the Securities Purchase Agreement) or any other
agreement, document, certificate or other instrument delivered in connection with the
transactions contemplated hereby and thereby to which the Holder is a party, except, in the
case of a failure to pay Interest and Late Charges when and as due, in which case only if
such failure continues for a period of at least five (5) Business Days;

(vi) except as provided otherwise in Schedule 4(a)(vi), the occurrence of any default
under, redemption of or acceleration prior to maturity of any Indebtedness of the Company,
Mecar or any Subsidiary in the VSK Group which, individually or in the aggregate, exceeds
$250,000 (as defined in Section 3(a) of the Securities Purchase Agreement), other than with
respect to any Other Notes and Permitted Deferred Indebtedness;

(vii) the Company, Mecar or any Subsidiary in the VSK Group, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief
of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to
the entry of an order for relief against it in an involuntary case, (C) consents to the
appointment of a receiver, trustee, assignee, liquidator or similar official (a
“Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits
in writing that it is generally unable to pay its debts as they become due;

(viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company, Mecar or any Subsidiary in the VSK Group in
an involuntary case, (B) appoints a Custodian of the Company, Mecar or any Subsidiary in the
VSK Group or (C) orders the liquidation of the Company, Mecar or any Subsidiary in the VSK
Group;

(ix) a final judgment or judgments for the payment of money aggregating in excess of
$100,000, other than with respect to Permitted Deferred Indebtedness, are rendered against
the Company, Mecar or any Subsidiary in the VSK Group and which judgments are not, within
sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit worthy party
shall not be included in calculating the $100,000 amount set forth above so long as the
Company provides the Holder a written statement from such insurer or indemnity provider
(which written statement shall be reasonably satisfactory to the Holder) to the effect that
such judgment is covered by insurance or an indemnity and the Company will receive the
proceeds of such insurance or indemnity within thirty (30) days of the issuance of such
judgment;

(x) the Company breaches any representation, warranty, covenant (including without
limitation the Company’s agreement to file with the SEC timely reports and other documents)
or other material term or condition of any Transaction Document, except, in the case of a
breach of a covenant which is curable, only if such breach continues for a period of at
least ten (10) consecutive Business Days;

(xi) any breach or failure in any respect to comply with Section 15 of this Note; or

(xii) [FOR AMENDED NOTES: any Event of Default (as defined in the Other Notes or the
Initial Notes, as applicable) occurs with respect to any Other Notes or any Initial Notes]
[FOR INITIAL NOTES: any Event of Default (as defined in the Other Notes or the Amended
Notes, as applicable) occurs with respect to any Other Notes or any Amended Notes].

(b) Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note or any Other Note, the Company shall within two (2) Business Days deliver written notice
thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder. At any
time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder
becoming aware of an Event of Default, the Holder may require the Company to redeem (an “Event of
Default Redemption”) all or any portion of this Note by delivering written notice thereof (the
"Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice
shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this
Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the
Company at a price equal to the sum of (i) any accrued and unpaid Interest on the Conversion Amount
to be redeemed and any accrued and unpaid Late Charges on such Conversion Amount and Interest and
(ii) the greater of (A) the product of (1) the Conversion Amount to be redeemed and (2) the
Redemption Premium and (B) the product of (1) the Conversion Rate with respect to such Conversion
Amount in effect at such time as the Holder delivers an Event of Default Redemption Notice and (2)
the Closing Sale Price of the Common Stock on the date immediately preceding such Event of Default
(the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made
in accordance with the provisions of Section 12. To the extent redemptions required by this
Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the
Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The parties
hereto agree that in the event of the Company’s redemption of any portion of the Note under this
Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Holder. Accordingly, any Redemption Premium due
under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

(a) Assumption. The Company shall not enter into or be party to a Fundamental
Transaction (other than a Change of Control or Sale Event) unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Note and the other Transaction
Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in
form and substance satisfactory to the Required Holders and approved by the Required Holders prior
to such Fundamental Transaction, including agreements to deliver to each holder of Notes in
exchange for such Notes a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Notes, including, without limitation, having a
principal amount and interest rate equal to the principal amounts and the interest rates of the
Notes held by such holder, having similar conversion rights as the Notes and having similar ranking
to the Notes and (ii) the Successor Entity (including its Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental Transaction, the provisions of
this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company under
this Note with the same effect as if such Successor Entity had been named as the Company herein.
Upon consummation of such Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this Note at any time
after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or
other securities, cash, assets or other property) issuable upon the conversion of the Notes prior
to such Fundamental Transaction, such shares of publicly traded common stock (or their equivalent)
of the Successor Entity, as adjusted in accordance with the provisions of this Note. The
provisions of this Section shall apply similarly and equally to such successive Fundamental
Transactions and shall be applied without regard to any limitations on the conversion of this Note.

(b) Redemption Right. In connection with any Change of Control, the Company shall
redeem (a “Change of Control Redemption”) all of the Conversion Amount then remaining under this
Note in cash at a price equal to the sum of (i) [FOR AMENDED NOTES: 100% of the Conversion Amount]
[FOR INITIAL NOTES: 115% of the Conversion Amount] and (ii) the amount of any accrued and unpaid
Interest on such Conversion Amount through the date of such redemption payment (the “Change of
Control Redemption Price”). No sooner than fifteen (15) days nor later than ten (10) days prior to
the consummation of a Change of Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via confirmed facsimile and overnight
courier to all, but not less than all, of the holders of Notes (a “Change of Control Redemption
Notice” and the date such notice is delivered to all the holders is referred to as the “Change of
Control Redemption Notice Date”). The Change of Control Redemption Notice shall be irrevocable.
The Change of Control Redemption Notice shall (A) describe such Change of Control and (B) state the
Change of Control Redemption Date (as defined below). Redemptions required by this Section 5 shall
be made in accordance with the provisions of Section 12 and shall have priority to payments to
shareholders in connection with a Change of Control. To the extent redemptions required by this
Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the
Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 5, until the Change of Control Redemption Price (together
with any interest thereon) is paid in full, the Conversion Amount submitted for redemption under
this Section 5(c) may be converted, in whole or in part, by the Holder into shares of Common Stock,
or in the event the Conversion Date is after the consummation of the Change of Control, shares of
publicly traded common stock (or their equivalent) of the Successor Entity pursuant to Section 3.
The parties hereto agree that in the event of the Company’s redemption of any portion of the Note
under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because
of the parties’ inability to predict future interest rates and the uncertainty of the availability
of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption
premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

(6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

(a) Purchase Rights. If at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without taking into account any limitations
or restrictions on the convertibility of this Note) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.

(b) Other Corporate Events. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock
receivable upon such conversion, such securities or other assets to which the Holder would have
been entitled with respect to such shares of Common Stock had such shares of Common Stock been held
by the Holder upon the consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of
Common Stock otherwise receivable upon such conversion, such securities or other assets received by
the holders of shares of Common Stock in connection with the consummation of such Corporate Event
in such amounts as the Holder would have been entitled to receive had this Note initially been
issued with conversion rights for the form of such consideration (as opposed to shares of Common
Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. The
provisions of this Section shall apply similarly and equally to successive Corporate Events and
shall be applied without regard to any limitations on the conversion or redemption of this Note.

(7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on
or after the Subscription Date, the Company issues or sells, or in accordance with this Section
7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued or sold by the Company in connection with any Excluded
Security) for a consideration per share less than a price (the “Applicable Price”) equal to the
Conversion Price in effect immediately prior to such issue or sale (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal the product of (A) the Conversion Price in effect immediately
prior to such Dilutive Issuance and (B) the quotient determined by dividing (1) the sum of (I) the
product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive
Issuance and the number of shares of Common Stock Deemed Outstanding immediately prior to such
Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive
Issuance, by (2) the product derived by multiplying (I) the Conversion Price in effect immediately
prior to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed Outstanding
immediately after such Dilutive Issuance. For purposes of determining the adjusted Conversion
Price under this Section 7(a), the following shall be applicable:

(i) Issuance of Options. If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 7(a)(i), the “lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option or upon
conversion or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option” shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of Common Stock upon
granting or sale of the Option, upon exercise of the Option and upon conversion or exchange
or exercise of any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issuance of such share of
Common Stock or of such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange or exercise of such
Convertible Securities.

(ii) Issuance of Convertible Securities. If the Company in any manner issues
or sells any Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon such conversion or exchange or exercise thereof is less than
the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii),
the “lowest price per share for which one share of Common Stock is issuable upon such
conversion or exchange or exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any one share
of Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No further adjustment of
the Conversion Price shall be made upon the actual issuance of such share of Common Stock
upon conversion or exchange or exercise of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any Options for which
adjustment of the Conversion Price had been or are to be made pursuant to other provisions
of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason
of such issue or sale.

(iii) Change in Option Price or Rate of Conversion. If the purchase price
provided for in any Options, the additional consideration, if any, payable upon the issue,
conversion, exchange or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or exercisable for Common Stock
changes at any time, the Conversion Price in effect at the time of such change shall be
adjusted to the Conversion Price which would have been in effect at such time had such
Options or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Subscription Date are changed in the
manner described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then in effect.

(iv) Calculation of Consideration Received. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to such Options
by the parties thereto, the Options will be deemed to have been issued for a consideration
of $.01. If any Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received therefor will be
deemed to be the net amount received by the Company therefor. If any Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than cash, the amount
of the consideration as determined in good faith by the Board of Directors other than cash
received by the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration received by
the Company will be the Closing Sale Price of such securities on the date of receipt. If
any Common Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined in good faith by the
Board of Directors.

(v) Record Date. If the Company takes a record of the holders of Common Stock
for the purpose of entitling them (A) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date will be deemed to be
the date of the issue or sale of the Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

(vi) Floor Price. Until such time as the Company receives the Stockholder
Approval, no adjustment pursuant to Section 7(a) shall cause the Conversion Price to be less
than $[     ]4, as adjusted for any stock dividend, stock split, stock
combination, reclassification or similar transaction (the “Conversion Floor Price”).

(b) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock.
If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common
Stock into a greater number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination will be proportionately increased.

(c) Other Events. If any event occurs of the type contemplated by the provisions of
this Section 7 but not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note; provided that no such
adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 7.

(8) HOLDER’S REDEMPTIONS.

(a) Holder Optional Redemption. On [     ], 200[_]5(the “Holder
Optional Redemption Date”), the Holder shall have the right, in its sole discretion, to require
that the Company redeem (each, a “Holder Optional Redemption”) up to all of the Conversion Amount
of this Note plus any accrued and unpaid Interest with respect to such Principal and Interest and
any accrued and unpaid Late Charges, if any, with respect to such Principal and Interest (the
"Available Holder Optional Redemption Amount”) by delivering written notice thereof (a “Holder
Optional Redemption Notice”) to the Company not less than seventy-five (75) days prior to such
Holder Optional Redemption Date. The Holder Optional Redemption Notice shall indicate the amount
of the Available Holder Optional Redemption Amount the Holder is electing to have redeemed (the
"Holder Optional Redemption Amount”). The portion of this Note subject to redemption pursuant to
this Section 8(a) shall be redeemed by the Company in cash on the Holder Optional Redemption Date
at a price equal to the Holder Optional Redemption Amount being redeemed (the “Holder Optional
Redemption Price”). Redemptions required by this Section 8(a) shall be made in accordance with the
provisions of Section 12. Notwithstanding anything to the contrary in this Section 8(a), but
subject to Section 3(d), until the Holder receives the Holder Optional Redemption Price, (a) the
Holder Optional Redemption Amount may be converted, in whole or in part, by the Holder into Common
Stock pursuant to Section 3, and any such conversion shall reduce the Holder Optional Redemption
Amount in the manner set forth by the Holder in the applicable Conversion Notice and (b) the Holder
shall have the right to void the Holder Optional Redemption Notice delivered to the Company
hereunder at any time prior to the Holder Optional Redemption Date in the event that the Company
has publicly announced a material change after the date of delivery of the Holder Optional
Redemption Notice and prior to the Holder Optional Redemption Date. The Company may incur
Permitted Pari Passu Indebtedness and use the proceeds of such Indebtedness to pay the Holder
Optional Redemption Amount.

(b) Asset Sale Redemption. No earlier than fifteen (15) days prior to nor later than
ten (10) days following the consummation of any Asset Sale, the Company shall deliver written
notice thereof via facsimile and overnight courier (an “Asset Sale Notice”) to the Holder. At any
time prior to the later of (i) ten (10) days following the consummation of any Asset Sale and (ii)
ten (10) days following receipt of the Asset Sale Notice, the Holder may require the Company to
redeem (an “Asset Sale Redemption”), with the Net Asset Sale Proceeds of such Asset Sale, the
applicable Asset Sale Redemption Amount by delivering written notice thereof (the “Asset Sale
Redemption Notice”) to the Company. The Asset Sale Redemption Notice shall state (i) the date the
Company is required to pay to the Holder the Asset Sale Redemption Price (as defined below), which
date shall be no earlier than two (2) Business Days following the date of delivery of such Asset
Sale Redemption Notice and (ii) the allocation of such Asset Sale Redemption Amount between this
Note and [FOR THE AMENDED NOTES: any Initial Notes] [FOR THE INITIAL NOTES: any Amended Notes] held
by the Holder. Each portion of this Note subject to redemption pursuant to this Section 8(b) shall
be redeemed by the Company at a price equal to 100% of the applicable Asset Sale Redemption Amount
together with accrued and unpaid Interest with respect to such Conversion Amount and accrued and
unpaid Late Charges, if any, with respect to such amount (the “Asset Sale Redemption Price”).
Redemptions required by this Section 8(b) shall be made in accordance with the provisions of
Section 12.

(9) MANDATORY CONVERSIONS AND REDEMPTIONS.

(a) Mandatory Conversion.

(i) General. If at any time, and from time to time, from and after the second
(2nd) anniversary of the Issuance Date (the “Mandatory Conversion Eligibility Date”),
(i) the average Closing Sale Price of the Common Stock for any twenty (20) Trading Days out of any
thirty (30) consecutive Trading Day period exceeds 175% of the Conversion Price then in effect
following the Mandatory Conversion Eligibility Date (the “Mandatory Conversion Measuring Period”)
and (ii) there has been no Equity Conditions Failure, the Company shall have the right to require
the Holder to convert up to the Conversion Amount of this Note together with the amount of any
accrued and unpaid Interest with respect to such Conversion Amount and accrued and unpaid Late
Charges, if any, thereon (the “Mandatory Conversion Amount”) as designated in the Mandatory
Conversion Notice (as defined below) into fully paid, validly issued and nonassessable shares of
Common Stock in accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory
Conversion Date (as defined below) (a “Mandatory Conversion”). The Company may exercise its right
to require conversion under this Section 9(a) by delivering within not more than two (2) Trading
Days following the end of such Mandatory Conversion Measuring Period a written notice thereof by
facsimile and overnight courier to all, but not less than all, of the holders of Notes and the
Transfer Agent (the “Mandatory Conversion Notice” and the date all of the holders received such
notice by facsimile is referred to as the “Mandatory Conversion Notice Date”) and each Mandatory
Conversion Notice shall be irrevocable. The Mandatory Conversion Notice shall (1) state the date
on which the Mandatory Conversion shall occur (the “Mandatory Conversion Date”) which date shall
not be less than five (5) Trading Days nor more than thirty (30) Trading Days after the Mandatory
Conversion Notice Date, (2) state the aggregate Conversion Amount of the Notes which the Company
has elected to be subject to Mandatory Conversion from all of the holders of the Notes pursuant to
this Section 9 (and analogous provisions under the Other Notes) on the Mandatory Conversion Date,
(3) state the number of shares of Common Stock to be issued to such Holder on the Mandatory
Conversion Date, (4) the Make-Whole Amount to be paid to the Holder in cash on the Mandatory
Conversion Date and (5) certify that there has been no Equity Conditions Failure. The Company may
not effect more than one (1) Mandatory Conversion during any consecutive thirty (30) Trading Day
period.

(ii) Pro Rata Conversion Requirement. If the Company elects to cause a conversion of
any Conversion Amount of this Note pursuant to Section 9(a), then it must simultaneously take the
same action in the same proportion with respect to the Other Notes. If the Company elects a
Mandatory Conversion of this Note pursuant to Section 9(a) (or similar provisions under the Other
Notes) with respect to less than all of the Conversion Amounts of the Notes then outstanding, then
the Company shall require conversion of a Conversion Amount from each of the holders of the Notes
equal to the product of (i) the aggregate Conversion Amount of Notes which the Company has elected
to cause to be converted pursuant to Section 9(a) and analogous provisions of the Other Notes,
multiplied by (ii) the fraction, the numerator of which is the sum of the aggregate Original
Principal Amount of the Notes purchased by such holder of outstanding Notes and the denominator of
which is the sum of the aggregate Original Principal Amount of the Notes purchased by all holders
holding outstanding Notes (such fraction with respect to each holder is referred to as its
"Conversion Allocation Percentage,” and such amount with respect to each holder is referred to as
its “Pro Rata Conversion Amount”); provided, however, that in the event that any holder’s Pro Rata
Conversion Amount exceeds the outstanding Principal amount of such holder’s Note, then such excess
Pro Rata Conversion Amount shall be allocated amongst the remaining holders of Notes in accordance
with the foregoing formula. In the event that the initial holder of any Notes shall sell or
otherwise transfer any of such holder’s Notes, the transferee shall be allocated a pro rata portion
of such holder’s Conversion Allocation Percentage and the Pro Rata Conversion Amount.

(b) Mandatory Redemption upon a Sale Event. Upon the consummation of a Sale Event,
the Company shall redeem (a “Company Mandatory Redemption”) all of the Conversion Amount then
remaining under this Note (the “Company Mandatory Redemption Amount”) in cash at a price equal to
the sum of (i) [FOR AMENDED NOTES: 100% of the Conversion Amount] [FOR INITIAL NOTES: 115% of the
Conversion Amount] and (ii) the amount of any accrued and unpaid Interest on such Conversion Amount
through the date of such redemption payment (the “Company Mandatory Redemption Price”). The
Company shall deliver written notice of a Mandatory Redemption by confirmed facsimile and overnight
courier to all, but not less than all, of the holders of Notes (the “Company Mandatory Redemption
Notice” and the date such notice is delivered to all the holders is referred to as the “Company
Mandatory Redemption Notice Date”). The Company Mandatory Redemption Notice shall be irrevocable.
The Company Mandatory Redemption Notice shall (A) state that a Sale Event has occurred and (B)
state the date on which the Company Mandatory Redemption shall occur (the “Company Mandatory
Redemption Date”) which date shall be not less than five (5) Business Days after the Company
Mandatory Redemption Notice Date. Notwithstanding anything to the contrary in this Section 9(b),
until the Company Mandatory Redemption Price is paid in full, the Company Mandatory Redemption
Amount may be converted, in whole or in part, by the holders of Notes into shares of Common Stock
pursuant to Section 3. All Conversion Amounts converted by the Holder after the Company Mandatory
Redemption Notice Date shall reduce the Conversion Amount of this Note required to be redeemed on
the Company Mandatory Redemption Date. Redemptions made pursuant to this Section 9(b) shall be
made in accordance with Section 12.

(10) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all of the provisions
of this Note and take all action as may be required to protect the rights of the Holder of this
Note.

(11) RESERVATION OF AUTHORIZED SHARES.

(a) Reservation. The Company initially shall reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock for each of the Notes equal to 120% of the
Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date.
So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes, 120% of the number of shares of Common Stock as shall from
time to time be necessary to effect the conversion of all of the Notes then outstanding; provided
that at no time shall the number of shares of Common Stock so reserved be less than the number of
shares required to be reserved of the previous sentence (without regard to any limitations on
conversions) (the “Required Reserve Amount”). The initial number of shares of Common Stock
reserved for conversions of the Notes and each increase in the number of shares so reserved shall
be allocated pro rata among the holders of the Notes based on the principal amount of the Notes
held by each holder at the Closing (as defined in the Securities Purchase Agreement) or increase in
the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the
event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee
shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any Notes shall be allocated
to the remaining holders of Notes, pro rata based on the principal amount of the Notes then held by
such holders.

(b) Insufficient Authorized Shares. If at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at
least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the
Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in
the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its
shareholders’ approval of such increase in authorized shares of Common Stock and to cause its board
of directors to recommend to the shareholders that they approve such proposal.

(12) HOLDER’S REDEMPTIONS.

(a) Mechanics. The Company shall deliver the applicable Event of Default Redemption
Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event
of Default Redemption Notice. The Company shall deliver the applicable Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change of Control if the
Change of Control Redemption Notice Date is prior to the consummation of such Change of Control and
within five (5) Business Days after the Change of Control Redemption Notice Date otherwise (such
date, the “Change of Control Redemption Date”). The Company shall deliver the applicable Asset
Sale Redemption Price to the Holder on the applicable Asset Sale Redemption Date. The Company
shall deliver the Company Mandatory Redemption Amount on the Company Mandatory Redemption Date. In
the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall
promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section
19(d)) representing the outstanding Principal which has not been redeemed. In the event that the
Company does not pay the applicable Redemption Price to the Holder within the time period required,
at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder
shall have the option, in lieu of redemption, to require the Company to promptly return to the
Holder all or any portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any Late Charges thereon)
has not been paid. Upon the Company’s receipt of such notice, (x) the Redemption Notice shall be
null and void with respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 19(d)) to the Holder representing such
Conversion Amount and (z) the Conversion Price of this Note or such new Notes shall be adjusted to
the lesser of (A) the Conversion Price as in effect on the date on which the Redemption Notice is
voided and (B) the lowest Closing Bid Price during the period beginning on and including the date
on which the Redemption Notice is delivered by or to the Company (as applicable) and ending on and
including the date on which the Redemption Notice is voided. The Holder’s delivery of a notice
voiding a Redemption Notice and exercise of its rights following such notice shall not affect the
Company’s obligations to make any payments of Late Charges which have accrued prior to the date of
such notice with respect to the Conversion Amount subject to such notice.

(b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or
Section 8 (each, an “Other Redemption Notice”), the Company shall immediately, but no later than
one (1) Business Day of its receipt thereof), forward to the Holder by facsimile a copy of such
notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices,
during the seven (7) Business Day period beginning on and including the date which is three (3)
Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and
including the date which is three Business Days after the Company’s receipt of the Holder’s
Redemption Notice and the Company is unable to redeem all principal, interest and other amounts
designated in such Redemption Notice and such Other Redemption Notices received during such seven
(7) Business Day period, then the Company shall redeem a pro rata amount from each holder of the
Notes (including the Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during
such seven (7) Business Day period.

(13) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until all of the Notes have been
converted, redeemed or otherwise satisfied in accordance with their terms, the Company shall not,
directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on
its capital stock without the prior express written consent of the Required Holders.

(14) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law, including but not limited to the Delaware General Corporation Law,
and as expressly provided in this Note.

(15) COVENANTS.

(a) Rank. All payments due under this Note (a) shall rank pari passu with all Other
Notes and the Permitted Pari Passu Indebtedness and (b) shall be senior to all other Indebtedness
of the Company and any of its Subsidiaries (other than any Foreign Subsidiary (as defined in the
Security Documents)), other than Permitted Senior Indebtedness.

(b) Indebtedness. So long as this Note is outstanding, the Company shall not, and the
Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.

(c) Existence of Liens. So long as this Note is outstanding, the Company shall not,
and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or
suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by the Company or any of
its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

(d) Restricted Payments. The Company shall not, and the Company shall not permit any
of its Subsidiaries to, directly or indirectly, redeem, defease, repurchase, repay or make any
payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by
way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness (other than Permitted Deferred Indebtedness and Permitted Restricted
Payments), whether by way of payment in respect of principal of (or premium, if any) or interest
on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving
effect to such payment, an event constituting, or that with the passage of time and without being
cured would constitute, an Event of Default has occurred and is continuing.

(e) EBITDA Tests. So long as this Note is outstanding, the Company shall maintain the
following covenants (the “EBITDA Tests”) for each Fiscal Quarter of the Company after the Issuance
Date (the periods set forth in the covenants below, the “EBITDA Test Periods”):

(i) For the Fiscal Quarter ended September 30, 2007, (A) Consolidated EBITDA shall not be less
than negative Three Million Five Hundred Thousand Dollars (-$3,500,000), and (B) Cash Balance shall
not be less than Two Million Dollars ($2,000,000);

(ii) For the three (3)-month period ended December 31, 2007, the quotient of (x) Consolidated
Net Debt at December 31, 2007, divided by (y) the product of (I) Consolidated EBITDA for the three
(3)-month period ended December 31, 2007 multiplied by (II) four (4), shall not be more than 6.0;

(iii) For the six (6) month period ended March 31, 2008, (I) the quotient of (x) Consolidated
Net Debt at March 31, 2008, divided by (y) Consolidated EBITDA for the six (6)-month period ended
March 31, 2008 multiplied by (II) two (2) shall not be more than 5.0;

(iv) For the nine (9) month period ended June 30, 2008, (I) the quotient of (x) Consolidated
Net Debt at June 30, 2008, divided by (y) the product of (I) Consolidated EBITDA for the nine (9)
month period ended June 30, 2008 multiplied by (II) the quotient of (A) four (4) divided by (B)
three (3) shall not be more than 4.5; and

(v) For the trailing twelve (12) month period ended September 30, 2008 and each subsequent
trailing twelve (12) month period ended as of such Fiscal Quarter, the quotient of (x) Consolidated
Net Debt at the last day of such period divided by (y) Consolidated EBITDA for such period ended
shall not be more than 4.5.

(f) Announcement of Operating Results. Commencing with the Fiscal Quarter ended
September 30, 2007, the Company shall release its operating results (the “Operating Results”) for
the first three Fiscal Quarters of each Fiscal Year no later than the forty-fifth (45th)
day after the end of each such Fiscal Quarter and for each Fiscal Year no later than the ninetieth
(90th) day after the end of each such Fiscal Year and such release shall include the
amount of the Consolidated EBITDA, Consolidated Net Debt and Consolidated Net Interest Expense and
Consolidated Net Income for any applicable EBITDA Test Periods and whether such EBITDA Tests have
been met (the “Operating Release”). Concurrently with the Operating Release, the Company shall
also provide to the holders of Notes a written certification as to the calculations of any
applicable EBITDA Tests and whether such EBITDA Tests have been met for the applicable EBITDA Test
Periods. To the extent the foregoing written certification or calculations contain material
non-public information, the Company shall also make publicly available (as part of a Quarterly
Report on Form 10-Q or on a Current Report on Form 8-K, or otherwise) such material non-public
information. In addition, if the Company has failed to meet the EBITDA Tests set forth in Section
15(e) above, the Company shall also make publicly available (as part of a Quarterly Report on Form
10-Q or on a Current Report on Form 8-K, or otherwise) the Operating Results and the fact that the
holders have a right to require an Event of Default Redemption of the Notes.

(g) Sale Event. The Company shall not, directly or indirectly, consummate any Sale
Event unless, following the consummation of such Sale Event, the amount equal to the sum of (i) the
aggregate Net Asset Sale Proceeds from any Asset Sales relating to the sale of Mecar and/or any
Specified VSK Entity and (ii) the proceeds to be received upon consummation of such Sale Event,
exceeds the sum of (A) the aggregate outstanding principal amount of the Notes and [FOR AMENDED
NOTES: the Initial Notes] [FOR INITIAL NOTES: the Amended Notes], (B) any accrued and unpaid
interest thereon and Late Charges, if any, thereon and (C) the premium, if any, to be paid to the
holder of the Notes and [FOR AMENDED NOTES: the Initial Notes] [FOR INITIAL NOTES: the Amended
Notes] pursuant to Section 9(b) hereof and analogous provisions of such [FOR AMENDED NOTES: Initial
Notes] [FOR INITIAL NOTES: Amended Notes].

(16) RIGHTS UPON DISTRIBUTION OF ASSETS. Subject to the provisions of Section 4(j) of
the Securities Purchase Agreement, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution of cash, shares or
other securities, property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Note, then, in each such case any Conversion Price in effect immediately
prior to the close of business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Conversion Price by a fraction of
which (i) the numerator shall be the Closing Bid Price of the Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (ii) the
denominator shall be the Closing Bid Price of the Common Stock on the Trading Day immediately
preceding such record date.

(17) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. No term of this Note may be
amended or modified unless pursuant to a writing signed by the Company and the Required Holders;
provided, however, that any amendment or modification that pursuant to the terms of
the Transaction Documents adversely and disproportionately affects any holder of Notes that holds
at least $1 million in principal amount of Notes (and not because of the nature or situation of
such holder of Notes) shall require the prior written consent of such holder. The affirmative vote
at a meeting duly called for such purpose or the written consent without a meeting of the Required
Holders shall be required for any change or amendment to this Note or the Other Notes.

(18) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder
without the consent of the Company, subject only to the provisions of Section 2(f) of the
Securities Purchase Agreement; provided, however, that no such sale, assignment or transfer of this
Note shall be in a denomination less than the lesser of (a) $500,000 and (b) the remaining
outstanding Principal of this Note, the accrued and unpaid Interest with respect to such Principal
and the accrued and unpaid Late Charges with respect to such Principal and Interest.

(19) REISSUANCE OF THIS NOTE.

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note
to the Company, whereupon the Company will, subject to the satisfaction of the transfer provisions
of the Securities Purchase Agreement, forthwith issue and deliver upon the order of the Holder a
new Note (in accordance with Section 19(d)), registered in the name of the registered transferee or
assignee, representing the outstanding Principal being transferred by the Holder and, if less then
the entire outstanding Principal is being transferred, a new Note (in accordance with Section
19(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and
any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) and this Section 19(a), following conversion or redemption of any portion of
this Note, the outstanding Principal represented by this Note may be less than the Principal stated
on the face of this Note.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note,
and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon surrender and cancellation of
this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with
Section 19(d)) representing the outstanding Principal.

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon
the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes
(in accordance with Section 19(d) and in principal amounts of at least $100,000) representing in
the aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii)
shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or
in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal
designated by the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining outstanding under
this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as
indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.

(20) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Note shall be cumulative and in addition to all other remedies
available under this Note and any of the other Transaction Documents at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to
comply with the terms of this Note. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the amounts to be received
by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of showing economic loss
and without any bond or other security being required.

(21) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed
in the hands of an attorney for collection or enforcement or is collected or enforced through any
legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization,
receivership of the Company or other proceedings affecting Company creditors’ rights and involving
a claim under this Note, then the Company shall pay the costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

(22) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers and shall not be construed against any person as the drafter hereof.
The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.

(23) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

(24) DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Closing Bid Price, the Closing Sale Price or the Weighted Average Price or the arithmetic
calculation of Interest or Late Charges, the Conversion Rate or any Redemption Price, the Company
or the Holder, as applicable, shall submit the disputed determinations or arithmetic calculations
via facsimile within two (2) Business Days of receipt, or deemed receipt, of the Interest Election
Notice, Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the
case may be, to the Holder or the Company, as the case may be. If the Holder and the Company are
unable to agree upon such determination or calculation within two (2) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder or the Company, as
applicable, then the Company shall, within two (2) Business Days submit via facsimile (i) the
disputed determination of the Closing Bid Price, the Closing Sale Price or the Weighted Average
Price to an independent, reputable investment bank selected by the Company and approved by the
Holder or (ii) the disputed arithmetic calculation of Interest or Late Charges, the Conversion Rate
or any Redemption Price to the Company’s independent, outside accountant. The Company, at the
Company’s expense, shall cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company and the Holder of the results no
later than five (5) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

(25) NOTICES; PAYMENTS.

(a) Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with Section 9(f) of the
Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of
all actions taken pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at
least twenty (20) days prior to the date on which the Company closes its books or takes a record
(A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction with such notice being
provided to the Holder.

(b) Payments. Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier service to such
Person at such address as previously provided to the Company in writing (which address, in the case
of each of the Purchasers, shall initially be as set forth on the Schedule of Buyers attached to
the Securities Purchase Agreement); provided that the Holder may elect to receive a payment of cash
via wire transfer of immediately available funds by providing the Company with prior written notice
setting out such request and the Holder’s wire transfer instructions. Whenever any amount
expressed to be due by the terms of this Note is due on any day which is not a Business Day and, in
the case of any Interest Date which is not the date on which this Note is paid in full, the same
shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal
or other amounts due under the Transaction Documents, other than Interest, which is not paid when
due shall result in a late charge being incurred and payable by the Company in an amount equal to
interest on such amount at the rate of twelve and one-half percent (12.5%) per annum from the date
such amount was due until the same is paid in full (“Late Charge”). In the event of a dispute as
to the amount of Late Charges to be paid on any date, the Company shall pay to the Holder the
amount of Late Charges not in dispute and resolve such dispute in accordance with Section 24.

(c) Currency. For the purpose of converting any amount hereunder from or into United
States Dollars, the conversion shall be made at the exchange rate between United States Dollars and
such other currency as reported in the New York edition of The Wall Street Journal prevailing on
the Business Day immediately preceding the date of determination.

(26) CANCELLATION. After all Principal, accrued Interest and other amounts at any
time owed on this Note have been paid in full, this Note shall automatically be deemed canceled,
shall be surrendered to the Company for cancellation and shall not be reissued.

(27) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

(28) GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be construed and
enforced in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough
of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the address it set forth in
the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. In the event that any provision of this
Note is invalid or unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Company in any other jurisdiction to
collect on the Company’s obligations to the Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court ruling in favor of the
Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

(29) SECURITY. This Note and the Other Notes are secured to the extent and in the
manner set forth in the Security Documents (as defined in the Securities Purchase Agreement).

(30) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have
the following meanings:

(a) "Adjusted Interest Conversion Price” means, with respect to any applicable Interest Date
in accordance with Section 2, that price which shall be the lower of (i) the applicable Conversion
Price and (ii) the price computed as 80% of the arithmetic average of the Weighted Average Price of
the Common Stock on each of the ten (10) consecutive Trading Days ending on the Trading Day
immediately preceding such applicable Interest Date (each, an “Interest Measuring Period”). All
such determinations to be appropriately adjusted for any stock split, stock dividend, stock
combination or other similar transaction that proportionately decreases or increases the Common
Stock during the applicable Interest Measuring Period.

(b) [FOR INITIAL NOTES: "Amended Notes” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all notes issued in exchange therefor or
replacement thereof.]

(c) "Approved Stock Plan” means any employee benefit plan or long term stock incentive plan
which has been approved by the Board of Directors of the Company, pursuant to which the Company’s
securities may be issued to any employee, consultant, officer or director for services provided to
the Company.

(d) "Asset Sale” means a sale, lease or sub-lease (as lessor or sublessor), sale and
leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property
with, any non-affiliated Person, in an arm’s length transaction or a series of such transactions,
of all or any part of the Company’s or any of its Subsidiaries’ businesses, assets or properties of
any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or
hereafter acquired, including the sale or issuance of Capital Stock of any of the Company’s
Subsidiaries, with a fair market value of (i) in the case of one Asset Sale or a series of related
Asset Sale transactions, $250,000 or (ii) in the case of a series of unrelated successive Asset
Sale transactions, an aggregate value of $1,000,000, other than (A) inventory (or other assets)
sold or leased in the ordinary course of business of the Company or the sale or disposition of
obsolete, worn out or surplus property or (B) a Sale Event.

(e) "Asset Sale Redemption Amount” means, with respect to any Asset Sale, the product of (i)
the Holder Pro Rata Amount and (ii) (A) 85% of the Net Asset Sale Proceeds for such Asset Sale or,
(B) in the case of any Asset Sales described in clause (ii) of the definition thereof, 85% of the
aggregate Net Asset Sale Proceeds for such Asset Sales.

(f) "Bloomberg” means Bloomberg Financial Markets.

(g) "Business Day” means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain closed.

(h) "Calendar Quarter” means each of: the period beginning on and including January 1 and
ending on and including March 31; the period beginning on and including April 1 and ending on and
including June 30; the period beginning on and including July 1 and ending on and including
September 30; and the period beginning on and including October 1 and ending on and including
December 31.

(i) "Capital Stock” means: (i) in the case of a corporation, corporate stock; (ii) in the case
of an association or business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock; (iii) in the case of a partnership or
limited liability company, partnership interests (whether general or limited) or membership
interests; and (iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the issuing Person,
but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether
or not such debt securities include any right of participation with Capital Stock.

(j) "Cash Balance” means, at any date, an amount equal to the aggregate amount of cash and
cash equivalents (not including restricted cash) and short term investments reported on the
Company’s balance sheet as at such date.

(k) "Change of Control” means any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which holders of the Company’s voting
power immediately prior to such reorganization, recapitalization or reclassification continue after
such reorganization, recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other than a corporation)
of such entity or entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

(l) "Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the
last closing bid price and last closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or last trade price, respectively, of such security prior
to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last closing bid price or
last trade price, respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not
apply, the last closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Sale Price, as the case may be, of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 24. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar transaction during the applicable
calculation period.

(m) "Closing Date” shall have the meaning set forth in the Securities Purchase Agreement,
which date is the date the Company issued Notes pursuant to the terms of the Securities Purchase
Agreement.

(n) "Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the Options or
Convertible Securities are actually exercisable at such time, but excluding any Common Stock owned
or held by or for the account of the Company or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.

(o) "Consolidated Total Debt” means, as at any date of determination: (A) the aggregate stated
balance sheet amount of all Indebtedness (excluding the aggregate outstanding face amount of the
Performance Bonds) of the Company and its Subsidiaries, determined on a combined consolidated basis
in accordance with GAAP, plus or minus (B) any adjustment required to include the Amended Notes at
their face amount rather than fair value that is used for GAAP purposes.

(p) "Consolidated EBITDA” means, with respect to any Person for any period, the Consolidated
Net Income of such Person and its Subsidiaries plus without duplication, the sum of the following
amounts of such Person and its Subsidiaries for such period plus, to the extent deducted in
determining Consolidated Net Income of such Person for such period: (i) Consolidated Net Interest
Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, and (v)
any non-cash impact of foreign currency transactions, and non-cash impact of hedge or non-hedge
derivative accounting adjustments.

(q) "Consolidated Net Debt” means, as to any date of determination the sum of: (A) the
aggregate stated balance sheet amount of all Indebtedness of the Company and its Subsidiaries,
determined on a combined consolidated basis in accordance with GAAP, plus or minus (B) any
adjustment required to include the Amended Notes at their face amount rather than fair value that
is used for GAAP purposes, minus (C) the aggregate stated balance sheet amount of cash and cash
equivalents of the Company and its Subsidiaries determined on a combined consolidated basis in
accordance with GAAP. In no event shall Indebtedness include the aggregate outstanding face
amounts of Performance Bonds, nor shall cash amounts include any restricted cash balances
maintained for the benefit of issuers of Performance Bonds.

(r) "Consolidated Net Income” means, with respect to any Person for any period, the net
income(loss) of such Person and its Subsidiaries for such period, determined on a consolidated
basis and in accordance with GAAP, but excluding from the determination of Consolidated Net Income
(without duplication) (i) any extraordinary or non-recurring gains or losses or gains or losses
from dispositions of assets (including transaction and professional fees and expenses paid from
proceeds), (ii) non-cash restructuring charges that do not result in future cash obligations, (iii)
other income or expenses associated with fair value accounting for debt, warrants or other
securities, (iv) non-cash expenses associated with compensation expense associated with FAS123(r)
that do not result in future cash obligations, (v) any tax refunds, use of net operating losses to
offset taxes or other net tax benefits and (vi) other noncash charges that do not result in future
cash obligations.

(s) "Consolidated Net Interest Expense” mean, with respect to any Person for any period, gross
interest expense of such Person and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP (including, without limitation, interest expense paid to affiliates
of such Person), less (i) the sum of (A) interest income for such period and (B) gains for such
period on hedging agreements (to the extent not included in interest income above and to the extent
not deducted in the calculation of gross interest expense), plus (ii) the sum of (A) losses for
such period on hedging agreements (to the extent not included in gross interest expense) and (B)
the upfront cost or fees for such period associated with hedging agreements (to the extent not
included in gross interest expense), in each case, determined on a consolidated basis in accordance
with GAAP.

(t) "Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such liability
that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto.

(u) "Convertible Securities” means any stock or securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for Common Stock.

(v) "Effective Date” has the meaning set forth in the Registration Rights Agreement.

(w) "Eligible Market” means , the Principal Market, The New York Stock Exchange, Inc., The
NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market.

(x) "Equity Conditions” means that each of the following conditions is satisfied: (i) on each
day during the period beginning six (6) months prior to the applicable date of determination and
ending on and including the applicable date of determination (the “Equity Conditions Measuring
Period”), either (x) the Registration Statement filed pursuant to the Registration Rights Agreement
shall be effective and available for the resale of all remaining Registrable Securities in
accordance with the terms of the Registration Rights Agreement, no Cutback Shares (as defined in
the Registration Rights Agreement) remain or exist unless such shares are eligible for sale without
restriction pursuant to Rule 144(k) and any applicable state securities laws and there shall not be
in effect any Grace Periods (as defined in the Registration Rights Agreement) or (y) all shares of
Common Stock issuable upon conversion of the Notes (including, without limitation, any shares of
Common Stock issuable as Interest Shares) and exercise of the Warrants shall be eligible for sale
without restriction and without the need for registration under any applicable federal or state
securities laws; (ii) on each day during the Equity Conditions Measuring Period, the Common Stock
is designated for quotation on the Principal Market and shall not have been suspended from trading
on such exchange or market (other than suspensions of not more than two days and occurring prior to
the applicable date of determination due to business announcements by the Company) nor shall
delisting or suspension by such exchange or market been threatened or pending either (A) in writing
by such exchange or market or (B) by falling below the minimum listing maintenance requirements of
such exchange or market; (iii) during the one (1) year period ending on and including the date
immediately preceding the applicable date of determination, the Company shall have delivered
Conversion Shares upon conversion of the Notes and shares of Common Stock upon exercise of the
Warrants to the holders on a timely basis as set forth in Section 3(c)(i) hereof (and analogous
provisions under the Other Notes) and Section 1(a) of the Warrants; (iv) any applicable shares of
Common Stock to be issued in connection with the event requiring determination may be issued in
full without violating Section 3(d) hereof and the rules or regulations of the Principal Market;
(v) during the Equity Conditions Measuring Period, the Company shall not have failed to timely make
any payments within five (5) Business Days of when such payment is due pursuant to any Transaction
Document; (vi) during the Equity Conditions Measuring Period, there shall not have occurred either
(A) the public announcement of a pending, proposed or intended Fundamental Transaction which has
not been abandoned, terminated or consummated or (B) an Event of Default or an event that with the
passage of time or giving of notice would constitute an Event of Default; (vii) the Company shall
have no knowledge of any fact that would cause (x) the Registration Statements required pursuant to
the Registration Rights Agreement not to be effective and available for the resale of all remaining
Registrable Securities in accordance with the terms of the Registration Rights Agreement or (y) any
shares of Common Stock issuable upon conversion of the Notes (including, without limitation, any
shares of Common Stock issuable as Interest Shares) and shares of Common Stock issuable upon
exercise of the Warrants not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws; (viii) the Company otherwise shall have been in material
compliance with and shall not have materially breached any provision, covenant, representation or
warranty of any Transaction Document; and (ix) the Stockholder Approval shall have been obtained.

(y) "Equity Conditions Failure” means that (i) on any day during the period commencing ten
(10) Trading Days prior to the applicable Interest Notice Date through the applicable Interest Date
or (ii) on any day during the period commencing ten (10) Trading Days prior to the applicable
Mandatory Conversion Notice Date through the applicable Mandatory Conversion Date, the Equity
Conditions have not been satisfied (or waived in writing by the Holder).

(z) "Excluded Securities” means any Common Stock issued or issuable: (i) in connection with
any Approved Stock Plan; (ii) upon conversion, adjustment or redemption of the Notes, or the
exercise of the Warrants; (iii) in connection with the payment of any Interest Shares on the Notes;
(iv)pursuant to a bona fide firm commitment underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the Company in excess of $35,000,000
(other than an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of
1933, as amended, and “equity lines”); (v) in connection with any strategic acquisition or
strategic transaction, whether through an acquisition of shares or a merger of any business, assets
or technologies, the primary purpose of which is not to raise equity capital in an amount not to
exceed, in the aggregate twenty percent (20%) of the outstanding shares of Common Stock in any
twelve (12) month period; (vi) upon conversion, exercise or exchange of any Options or Convertible
Securities which are outstanding on the day immediately preceding the Subscription Date, provided
that the conversion price, exercise price or any other economic terms of such Options or
Convertible Securities are not amended, modified or changed on or after the Subscription Date; and
(vii) in connection with any stock split, stock dividend, recapitalization or similar transaction
by the Company for which adjustment is made pursuant to Section 7(b).

(aa) "Fiscal Quarter” means each of the fiscal quarters adopted by the Company for the
financial reporting purposes that correspond to the Company’s Fiscal Year, or such other fiscal
quarter adopted by the Company for financial reporting purposes in accordance with GAAP.

(bb) "Fiscal Year” means the Company’s fiscal year that ends on December 31, or such other
fiscal year adopted by the Company for the financial reporting purposes in accordance with GAAP.

(cc) "Fundamental Transaction” means (A) that the Company shall, directly or indirectly, in
one or more related transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person or Persons to make a purchase, tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Voting Stock (not
including any shares of Voting Stock held by the Person or Persons making or party to, or
associated or affiliated with the Person or Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than the 50% of either the
outstanding shares of Voting Stock (not including any shares of Voting Stock held by the other
Person or other Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock purchase agreement or other business combination), (v) reorganize,
recapitalize or reclassify its Common Stock or (B) that any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate Voting Stock of the Company. Notwithstanding anything herein to the contrary,
no Asset Sale shall be considered a Fundamental Transaction hereunder.

(dd) "GAAP” means United States generally accepted accounting principles, consistently
applied.

(ee) "Holder Pro Rata Amount” means, for any date of determination, a fraction (i) the
numerator of which is the sum of (A) the outstanding Principal amount of this Note on such date and
(B) the outstanding principal amount of [FOR AMENDED NOTES: any Initial Notes] [FOR INITIAL NOTES:
any Amended Notes] held by Holder on such date and (ii) the denominator of which is the
Consolidated Total Debt as of such date.

(ff) "Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in accordance with generally
accepted accounting principles (other than trade payables entered into in the ordinary course of
business), (iii) all reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (v) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (vi) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (vii) all indebtedness
referred to in clauses (i) through (vi) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien,
pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (viii) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to
in clauses (i) through (vii) above.

(gg) [FOR AMENDED NOTES: "Initial Notes” has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all notes issued in exchange therefor or
replacement thereof.]

(hh) "Interest Conversion Price” means, with respect to any Interest Date that price which
shall be the lower of (i) the applicable Conversion Price and (ii) the price computed as 90% of the
arithmetic average of the Weighted Average Price of the Common Stock on each of the ten (10)
consecutive Trading Days ending on the Trading Day immediately preceding the applicable Interest
Date (each, an “Interest Measuring Period”). All such determinations to be appropriately adjusted
for any stock split, stock dividend, stock combination or other similar transaction that
proportionately decreases or increases the Common Stock during the applicable Interest Measuring
Period.

(ii) "Interest Notice Due Date” means the twelfth (12th) Trading Day prior to the
applicable Interest Date.

(jj) "Interest Pro Rata Amount” means a fraction (i) the numerator of which is the Original
Principal Amount of this Note and (ii) the denominator of which is the aggregate original principal
amount of all Notes issued to the purchasers pursuant to the Securities Purchase Agreement on the
Closing Date.

(kk) "Interest Rate” means, eight and ninety-five one-hundredths percent (8.95%) per annum,
subject to adjustment as set forth herein.

(ll) "Make-Whole Amount” means, as to any Conversion Amount being converted pursuant to
Section 3(c)(ii) or Section 9(a), an amount equal to the sum of (i) any accrued and unpaid Interest
on such Conversion Amount and (ii) any remaining Interest that, but for the applicable conversion
or redemption would have been due on such Conversion Amount through the third (3rd)
anniversary of the Issuance Date. For purposes of this definition, Interest shall be computed on
the basis of a 360-day year. By way of illustration, assuming the initial Interest Rate is in
effect and assuming conversion or redemption occurs on the initial Issuance Date on a Principal
amount equal to $1,000, the Make-Whole Amount shall equal $268.50 ($1,000 x (1080/360 x 8.95%)).

(mm) "Mecar” means Mecar S.A.

(nn) "Mecar Facility” means the Mecar Credit Facility as described in the Company’s Form 10-K
filed with SEC for the fiscal year ended December 31, 2006 in Note K to the financial statements.
This credit agreement is a demand facility. This credit agreement may be amended, restated,
renewed, refinanced or extended from time to time and/or new lenders may be added from time to
time, including without limitation Sogepa, provided that the principal amount is not increased,
except as provided by the limits on Permitted Senior Indebtedness.

(oo) "Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to: (A)
the sum of cash payments and cash equivalents received by the Company or any of its Subsidiaries,
from such Asset Sale (including any cash or cash equivalents received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so
received), minus (B) any reasonable direct out-of-pocket actual and estimated professional
fees and other costs or expenses incurred in connection with such Asset Sale, including (1) income
or gains taxes paid or payable by the seller as a result of any gain recognized in connection with
such Asset Sale during the tax period the sale occurs (after taking into account any available tax
credits or deductions and any tax-sharing arrangements) and (2) payment of the outstanding
principal amount of, premium or penalty, if any, and interest on (x) any Indebtedness that is
secured by a Lien on the stock or assets in question or (y) in the case of a sale of a Subsidiary,
any Indebtedness owed by such Subsidiary, which, in the case of each of clause (x) and (y), is
required to be repaid under the terms thereof as a result of such Asset Sale.

(pp) "Options” means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.

(qq) "Parent Entity” of a Person means an entity that, directly or indirectly, controls the
applicable Person and whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent
Entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

(rr) "Performance Bonds” means a bond, guarantee or standby letter of credit issued by a bank
or lending institution to guarantee the performance of the Company or one of its Subsidiaries or to
guarantee the advance payment of funds by the other party in a contract or other transaction with
the Company and/or one of its other Subsidiaries. Performance Bonds include guarantees issued with
and without secured deposits..

(ss) "Permitted Deferred Indebtedness” means (A) the Note dated November 1, 2005 payable to
Sam Nasiri in the original principal amount of $6,700,000, the balance of which was $5,862,500 as
of May 31, 2007, (B) the Note dated September 1, 2005, in the original principal amount of
$197,402.57 payable to One Source/TCF Equipment Finance with a balance of $87,268.07 as of May 31,
2007, (C) suit filed in Belgium against one of the members of the VSK Group for an alleged breach
of contract, seeking damages of less than $150,000, and (D) the suit filed in Belgium against the
Company and Mecar S.A. for unpaid severance and other amounts totaling less than $400,000.

(tt) "Permitted Indebtedness” means (A) Permitted Senior Indebtedness, (B) Indebtedness
evidenced by this Note, the Other Notes [FOR AMENDED NOTES: and the Initial Notes] [FOR INITIAL
NOTES: and the Amended Notes], (C) other unsecured Indebtedness incurred by the Company and/or any
of its Subsidiaries that is made expressly subordinate in right of payment to the Indebtedness
evidenced by this Note, as reflected in a written agreement acceptable to the Holder and approved
by the Holder in writing, and which Indebtedness does not provide at any time for (1) the payment,
prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (2) total
interest and fees at a rate in excess of the Interest Rate hereunder, (D) Indebtedness secured by
Permitted Liens, (E) Indebtedness to trade creditors incurred in the ordinary course of business,
(F) amendments, extensions, refinancings and renewals of any items of Permitted Indebtedness,
provided that the principal amount is not increased or the terms modified to impose more burdensome
terms upon the Company or its Subsidiary, as the case may be, (G) a Promissory Note, dated as of
November 1, 2005, issued to Sam Nasiri in the aggregate principal amount of $6,700,000.00 with a
current principal amount outstanding of approximately $5,862,500.00, (H) certain earn out payments
based on the performance of Global Microwave Systems, Inc., payable to Sam Nasiri and not to exceed
$4,000,000.00 in the aggregate, (I) Permitted Pari Passu Indebtedness, (J) the loan dated August 1,
2004 in the original principal amount of $400,000, to VSK Electronics N.V., the balance of which
was $100,000 as of May 31, 2007, (K) the indebtedness of SeaSpace Corporation to LJT & Associates
in the amount of $250,000 as of May 31, 2007, and (L) the indebtedness of News Sports Microwave
Rental, Inc. to One Source/TCF Equipment Finance dated September 1, 2005 in the original amount of
$197,402.57, the balance of which was $87,268.07 as of May 31, 2007.

(uu) "Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or delinquent, (iii)
any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other
similar liens, arising in the ordinary course of business with respect to a liability that is not
yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv)
Liens securing the Company’s obligations under the Notes, (v) Liens (A) upon or in any equipment
(as defined in the Security Agreement) acquired or held by the Company or any of its Subsidiaries
to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time
of its acquisition, provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment, (vi) Liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in
clauses (i) and (v) above, provided that any extension, renewal or replacement Lien shall be
limited to the property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or refinanced does not increase, (vii) Liens securing the
obligations under Permitted Senior Indebtedness; (viii) leases or subleases and licenses and
sublicenses granted to others in the ordinary course of the Company’s business, not interfering in
any material respect with the business of the Company and its Subsidiaries taken as a whole, (ix)
Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of
custom duties in connection with the importation of goods (x) Liens arising from judgments, decrees
or attachments in circumstances not constituting an Event of Default under Section 4(a)(ix) and
(xi) Liens securing the Company’s obligations under the Permitted Pari Passu Indebtedness.

(vv) "Permitted Pari Passu Indebtedness” means the principal of (and premium, if any),
interest on, and all fees and other amounts (including, without limitation, any reasonable
out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and
disbursements), collateral protection expenses and other reimbursement or indemnity obligations
relating thereto) payable by the Company under or in connection with any secured Indebtedness the
proceeds of which are used solely to pay to the Holder and the holders of the Other Notes any
Holder Optional Redemption Price required the terms of the Notes; provided,
however, that the aggregate amount of such Permitted Pari Passu Indebtedness does not at
any time exceed 105% of the aggregate Conversion Amount of all Notes required to be redeemed by the
Company pursuant to Section 8 of this Note and analogous provisions of the Other Notes.

(ww) "Permitted Restricted Payments” means payments made pursuant to the terms of the
Permitted Indebtedness described in clauses (J), (K) and (L) of the definition thereof.

(xx) "Permitted Senior Indebtedness” means (i) the Mecar Facility, (ii) the Indebtedness set
forth in Schedule 30(xx) hereto and (iii) the principal of (and premium, if any), interest on, and
all fees and other amounts (including, without limitation, any reasonable out-of-pocket costs,
enforcement expenses (including reasonable out-of-pocket legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating thereto) payable by
Company and/or its Subsidiaries under or in connection with any credit facility to be entered into
by the Company and/or its Subsidiaries with one or more financial institutions (together with any
amendments, restatements, renewals, refundings, refinancings or other extensions thereof);
provided, however, that no Indebtedness pursuant to clause (iii) hereof shall be
permitted unless (A) [the Company and/or Mecar shall have executed an agreement for, and publicly
disclosed the terms of such agreement on a Current Report on Form 8-K or otherwise, orders for the
delivery of product for a minimum aggregate value of €110,000,000, which agreement provides for (1)
such products to be [delivered] in two (2) tranches and (2) the products to be delivered in the
first (1st) tranche shall have a value of €60,000,000 and shall be delivered no later than one (1)
year from the initial execution of such agreement and (B) the aggregate outstanding amount of such
Indebtedness permitted pursuant to clause (iii) (taking into account the maximum amounts which may
be advanced under the loan documents evidencing such Permitted Senior Indebtedness) does not at any
time exceed €10,000,000].

(yy) "Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof.

(zz) "Principal Market” means the American Stock Exchange.

(aaa) “Redemption Notices” means, collectively, the Event of Default Redemption Notices,
Change of Control Redemption Notices, the Holder Optional Redemption Notice, the Asset Sale
Redemption Notice and the Company Mandatory Redemption Notice and, each of the foregoing,
individually, a Redemption Notice.

(bbb) “Redemption Premium” means (i) in the case of the Events of Default described in Section
4(a)(i) — (iii), (v), (vi) and (ix), 125%, (ii) in the case of the Events of Default described in
Section 4(a)(iv), (x) and (xi), 120%, (iii) in the case of the Events of Default described in
Section 4(a)(vii) — (viii), 100% and (iv) in the case of an Event of Default described in Section
4(a)(xii), the corresponding premium for such Event of Default as set forth in [FOR AMENDED NOTES:
the Other Notes or any Initial Notes, as applicable] [FOR INITIAL NOTES: the Other Notes or any
Amended Notes, as applicable].

(ccc) "Redemption Prices” means, collectively, the Event of Default Redemption Price, Change
of Control Redemption Price, the Asset Sale Redemption Price, the Holder Optional Redemption Price
and the Company Mandatory Redemption Price and, each of the foregoing, individually, a Redemption
Price.

(ddd) “Registration Rights Agreement” means that certain amended and restated registration
rights agreement dated as of [     ], 2007 by and among the Company and the holders of the Notes
relating to, among other things, the registration of the resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants, as such agreement may be amended, modified or
supplemented,.

(eee) “Required Holders” means the holders of Notes representing at least a majority of the
aggregate principal amount of the Notes then outstanding.

(fff) “Sale Event” means a sale, assignment, conveyance, transfer or other disposition to, or
any exchange of property with, any Person, in one transaction or a series of transactions, of (i)
all or substantially all of the assets of any of the following: (x) VSK Electronics N.V., (y) Télé
Technique Générale S.A., or (z) Intelligent Data Capturing Systems N.V. (collectively the
"Specified VSK Entities”) and Mecar or (ii) a majority of the Voting Stock, directly or indirectly,
of Mecar and any of the Specified VSK Entities or (iii) any transaction or series of transactions,
whereafter Mecar and any of the Specified VSK Entities shall cease to be, directly or indirectly,
wholly-owned subsidiaries of the Company; provided, however, that in the event only one of Mecar or
any of Specified VSK Entities is a party to any such transaction or series of transactions, such
transaction or series shall be deemed an Asset Sale and subject to the Asset Sale Redemption terms
and conditions set forth in Section 8(b) above; provided, further, that if after such transaction
Mecar or any of the Specified VSK Entities that had previously not been part of such transaction is
assigned, conveyed, transferred or otherwise disposed of in accordance with the provisions of
clauses (i), (ii) or (iii) above, then such subsequent transaction shall be considered a Sale
Event.

(ggg) “SEC” means the United States Securities and Exchange Commission.

(hhh) “Securities Purchase Agreement” means that certain amended and restated securities
purchase agreement dated as of [     ], 2007 by and among the Company and each holder of an
Existing Note, as such agreement may be amended, modified or supplemented.

(iii) [FOR AMENDED NOTES: "Subscription Date” means March 9, 2006.]

(jjj) [FOR INITIAL NOTES: "Subscription Date” means June [     ], 2007.]

(kkk) “Successor Entity” means the Person, which may be the Company, formed by, resulting from
or surviving any Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded entity whose common
stock or equivalent equity security is quoted or listed for trading on an Eligible Market,
Successor Entity shall mean such Person’s Parent Entity.

(lll) “Trading Day” means any day on which the shares of Common Stock are traded on the
Principal Market, or, if the Principal Market is not the principal trading market for the Common
Stock, then on the principal securities exchange or securities market on which the shares of Common
Stock are then traded; provided that “Trading Day” shall not include any day on which the shares of
Common Stock are scheduled to trade on any such exchange or market for less than 4.5 hours or any
day that the shares of Common Stock are suspended from trading during the final hour of trading on
such exchange or market (or if such exchange or market does not designate in advance the closing
time of trading on any such exchange or market, then during the hour ending at 4:00:00 p.m., New
York time).

(mmm) “Voting Stock” of a Person means capital stock of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect, or the general power
to appoint, at least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or classes shall have
or might have voting power by reason of the happening of any contingency).

(nnn) “VSK Group” means, collectively, VSK Electronics N.V., Télé Technique Générale S.A.,
Intelligent Data Capturing Systems (IDCS), N.V. and VIGITEC S.A., for so long as it is owned,
directly or indirectly, by the Company.

(ooo) “Warrants” has the meaning ascribed to such term in the Securities Purchase Agreement,
and shall include all warrants issued in exchange therefor or replacement thereof.

(ppp) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period beginning
at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the
Principal Market publicly announces is the official close of trading) as reported by Bloomberg
through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or
such other time as such market publicly announces is the official open of trading), and ending at
4:00:00 p.m., New York time (or such other time as such market publicly announces is the official
close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Weighted Average Price cannot be calculated for such security on such particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Required Holders. If the Company and the
Required Holders are unable to agree upon the fair market value of such security, then such dispute
shall be resolved pursuant to Section 24. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.

(31) DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information relating to the Company
or its Subsidiaries, the Company shall within two (2) Business Days after any such receipt or
delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains material, nonpublic
information, relating to the Company or its Subsidiaries, the Company shall indicate to the Holder
contemporaneously with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries.

[Signature Page Follows]

1

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance
Date set out above.

	 
	THE ALLIED DEFENSE GROUP, INC.

	By:

	Name:

	Title:

2

Schedule 4(a)(vi)

It shall not be a default under Section 4(a)(vi) of the Note if the lenders under the Mecar
Facility demand payment of the amounts due under the Mecar Facility as of February 2008.

3

1

Schedule 30(xx)

Permitted Senior Indebtedness

	 	•	 	Mortgages for the VSK property of approximately $137,000 described in note M of the
Company’s financial statements as provided to the SEC in the Form 10-K for the fiscal
year ended December 31, 2006, and Form 10-Q for the fiscal quarter ended March 31, 2007.

	 	•	 	Capital leases for capital expenditures used in the ordinary course of business, as
described in note M of the Company’s financial statements as provided to the SEC in the
Form 10-K for the fiscal year ended December 31, 2006, and Form 10-Q for the fiscal
quarter ended March 31, 2007.

1

4

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Euro Balance	 	 
	Description	 	Initial Amount	 	Date of Agreement	 	Debt Holder (Lender)	 	31-May-07	 	Comments
	Equipment and Other Leases	 	 	 	 	 	 	 	 	 	 
	 	 	954,991.40 €	 	various	 	Fortis Lease	 	461,932.31 €	 	Detailed contracts attached
	 	 	6,155,021.59 €	 	various	 	KBC Lease	 	1,093,593.55 €	 	Detailed contracts attached
	 	 	32,833.37 €	 	2002	 	Volvo Lease	 	3,304.25 €	 	Detailed contracts attached ends
	
 
	 	 	 	 	 	 	 	 	 	in 2007
	
 
	 	 	 	 	 	 	 	1,558,830.11 €
	 	May 31, 2007 balance
	
 
	 	 	 	 	 	 	 	 
	 	

2

5

MECAR LEASE DETAILS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	N° Compte	 	N° Contrat	 	n° immo	 	description	 	TOTAL	 	1998	 	1999	 	2000	 	2001	 	2002	 	2003	 	2004	 	2005	 	2006	 	2007	 	2008	 	2009	 	2010	 	Contrôle
	253000
	 	 	35283	 	 	 	120005	 	 	Mach recyclage solvent	 	 	6,047.99	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	1,082.93	 	 	 	1,142.85	 	 	 	1,206.12	 	 	 	1,272.89	 	 	 	1,343.20	 	 	 	0.00	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing janvier 2007	 	 	-6,047.99	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-1,082.93	 	 	 	-1,142.85	 	 	 	-1,206.12	 	 	 	-1,272.89	 	 	 	-1,343.20	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	39644	 	 	 	120022	 	 	Mach de tampographie	 	 	15,349.56	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,035.97	 	 	 	2,852.03	 	 	 	3,017.43	 	 	 	3,192.38	 	 	 	3,377.48	 	 	 	874.27	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing avril 2007	 	 	-15,349.56	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-2,035.97	 	 	 	-2,852.03	 	 	 	-3,017.43	 	 	 	-3,192.38	 	 	 	-3,377.48	 	 	 	-874.27	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	36530	 	 	 	120021	 	 	Generateur	 	 	56,640.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	7,487.50	 	 	 	10,502.42	 	 	 	11,128.04	 	 	 	11,790.90	 	 	 	12,493.24	 	 	 	3,237.90	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing avril 2007	 	 	-56,640.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-7,487.50	 	 	 	-10,502.42	 	 	 	-11,128.04	 	 	 	-11,790.90	 	 	 	-12,493.24	 	 	 	-3,237.90	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	38396	 	 	 	120039	 	 	Appareil videoconference	 	 	141,501.19	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	16,568.15	 	 	 	26,092.79	 	 	 	27,660.81	 	 	 	29,323.07	 	 	 	31,085.21	 	 	 	10,771.16	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing mai 2007	 	 	-141,501.19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-16,568.15	 	 	 	-26,092.79	 	 	 	-27,660.81	 	 	 	-29,323.07	 	 	 	-31,085.21	 	 	 	-10,771.16	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40419	 	 	 	120057	 	 	Mach a flexible	 	 	2,361.60	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	208.08	 	 	 	433.67	 	 	 	458.13	 	 	 	483.96	 	 	 	511.27	 	 	 	266.49	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40420	 	 	 	120058	 	 	Cisaille motorisee	 	 	18,755.33	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	1,652.56	 	 	 	3,444.30	 	 	 	3,638.58	 	 	 	3,843.83	 	 	 	4,060.63	 	 	 	2,115.43	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40421	 	 	 	120059	 	 	Tour	 	 	10,917.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	960.76	 	 	 	2,003.20	 	 	 	2,117.25	 	 	 	2,237.78	 	 	 	2,365.19	 	 	 	1,232.82	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40180	 	 	 	120060	 	 	Tour + options + ravitailleurs	 	 	237,977.78	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	20,993.19	 	 	 	43,738.16	 	 	 	46,182.35	 	 	 	48,763.11	 	 	 	51,488.10	 	 	 	26,812.87	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40417	 	 	 	120060-1	 	 	Tour + options + ravitailleurs	 	 	2,064.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	152.45	 	 	 	379.52	 	 	 	399.50	 	 	 	420.58	 	 	 	442.75	 	 	 	269.20	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	40418	 	 	 	120060-2	 	 	Tour + options + ravitailleurs	 	 	2,064.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	152.45	 	 	 	379.52	 	 	 	399.50	 	 	 	420.58	 	 	 	442.75	 	 	 	269.20	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	39628	 	 	 	120061	 	 	Tour + options + ravitailleurs	 	 	237,977.78	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	20,993.19	 	 	 	43,738.16	 	 	 	46,182.35	 	 	 	48,763.11	 	 	 	51,488.10	 	 	 	26,812.87	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	42022	 	 	 	120062	 	 	Tour	 	 	76,800.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	4,551.07	 	 	 	14,111.59	 	 	 	14,826.19	 	 	 	15,576.96	 	 	 	16,365.74	 	 	 	11,368.45	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	29342	 	 	 	120063	 	 	Ext, modif melting & casting plant	 	 	668,731.18	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	39,676.28	 	 	 	122,983.99	 	 	 	129,147.43	 	 	 	135,619.70	 	 	 	142,416.38	 	 	 	98,887.40	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	41746	 	 	 	120064	 	 	Equipement surveillance	 	 	211,270.73	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	12,519.66	 	 	 	38,819.97	 	 	 	40,785.74	 	 	 	42,851.09	 	 	 	45,021.00	 	 	 	31,273.27	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	37361	 	 	 	120065	 	 	Syst transport	 	 	115,534.08	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	5,149.55	 	 	 	21,219.52	 	 	 	22,249.68	 	 	 	23,329.86	 	 	 	24,462.47	 	 	 	19,123.00	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	43300	 	 	 	120066	 	 	Mach à scier	 	 	34,560.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,050.48	 	 	 	6,355.82	 	 	 	6,674.37	 	 	 	7,008.82	 	 	 	7,360.09	 	 	 	5,110.42	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	41461	 	 	 	120075	 	 	Projecteur Baty	 	 	37,548.48	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	1,110.74	 	 	 	6,855.88	 	 	 	7,195.87	 	 	 	7,552.75	 	 	 	7,927.30	 	 	 	6,905.94	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	38395	 	 	 	120088	 	 	Ligne d'essorage continu	 	 	130,887.78	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	5,819.55	 	 	 	23,995.33	 	 	 	25,185.33	 	 	 	26,434.32	 	 	 	27,745.28	 	 	 	21,707.97	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	42603	 	 	 	120089	 	 	Tour a poupee mobile gital	 	 	196,800.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	5,807.05	 	 	 	35,864.50	 	 	 	37,680.62	 	 	 	39,588.70	 	 	 	41,593.44	 	 	 	36,265.69	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Centre d'usinage verticalDeckel	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	41764	 	 	 	120092	 	 	Maho	 	 	226,881.60	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	3,370.37	 	 	 	41,466.48	 	 	 	43,414.65	 	 	 	45,454.39	 	 	 	47,589.93	 	 	 	45,585.78	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	41790	 	 	 	120093	 	 	Groupe électrogène SDMO	 	 	112,038.72	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	1,664.36	 	 	 	20,476.99	 	 	 	21,439.04	 	 	 	22,446.32	 	 	 	23,500.90	 	 	 	22,511.11	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	42595	 	 	 	120094	 	 	Machine Biglia	 	 	176,640.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,624.02	 	 	 	32,283.96	 	 	 	33,800.73	 	 	 	35,388.77	 	 	 	37,051.41	 	 	 	35,491.11	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	42587	 	 	 	120095	 	 	Machine Biglia	 	 	176,640.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,624.02	 	 	 	32,283.96	 	 	 	33,800.73	 	 	 	35,388.77	 	 	 	37,051.41	 	 	 	35,491.11	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

3

6

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		44632		 		130020		 	Machine à profiler
	 		101,518.08		 		0.00		 		0.00		 		0.00		 		0.00		 		0.00		 		18,560.49		 		19,393.81		 		20,264.56		 		21,174.39		 		22,124.83		 		0.00		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	41746 bis
	 		120064		 	Equipement surveillance ajout
	 		51,219.31		 		0.00		 		0.00		 		0.00		 		0.00		 		0.00		 		9,337.94		 		10,680.80		 		11,221.55		 		11,789.72		 		8,189.30		 		0.00		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		47499		 		130025		 	Tour Biglia
	 		139,323.84		 		0.00		 		0.00		 		0.00		 		0.00		 		0.00		 		21,309.51		 		26,537.49		 		27,632.31		 		28,772.53		 		29,959.71		 		5,112.29		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		43419		 		130026		 	Chaudière Dedietricht
	 		36,933.68		 		0.00		 		0.00		 		0.00		 		0.00		 		0.00		 		6,191.55		 		7,038.15		 		7,346.80		 		7,669.05		 		8,005.39		 		682.74		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Gerbeur électrique à timon ac levée
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		47346		 		130045		 	auxiliaire
	 		9,693.12		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		1,321.85		 		1,831.58		 		1,913.81		 		1,999.74		 		2,089.53		 		536.61		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		47336		 		130046		 	Chargeur téléscopique Merlo
	 		87,475.20		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		11,928.66		 		16,528.56		 		17,270.68		 		18,046.10		 		18,856.32		 		4,844.88		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		47498		 		130066		 	Tour Biglia B470 YS 2M + options
	 		235,961.38		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		32,177.15		 		44,585.27		 		46,587.07		 		48,678.74		 		50,864.33		 		13,068.82		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		48400		 		130069		 	Tour Biglia B1200 M
	 		141,673.92		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		17,354.16		 		26,879.50		 		27,932.80		 		29,027.40		 		30,164.89		 		10,315.17		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		48401		 		130070		 	Tour Biglia B1200 M
	 		141,673.92		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		17,354.16		 		26,879.50		 		27,932.80		 		29,027.40		 		30,164.89		 		10,315.17		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		48398		 		130072		 	Tour Biglia B1200 M
	 		141,673.92		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		17,315.31		 		26,841.64		 		27,921.29		 		29,044.37		 		30,212.61		 		10,338.70		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		48399		 		130073		 	Tour Biglia B1200 M
	 		141,673.92		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		17,315.31		 		26,841.64		 		27,921.29		 		29,044.37		 		30,212.61		 		10,338.70		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		49885		 		130090		 	Tour Gildemeister GD32-6A
	 		235,200.00		 	 	 	 	 		0.00		 		0.00		 		0.00		 		0.00		 		17,625.08		 		43,686.10		 		45,715.83		 		47,839.85		 		50,062.52		 		30,270.62		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		50745		 		130095		 	Presse 15 tonnes
	 		21,816.96		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		976.01		 		4,018.03		 		4,206.80		 		4,404.44		 		4,611.38		 		3,600.30		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		49953		 		130101		 	Tour Universel Gildemeister
	 		115,377.60		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		3,417.32		 		21,086.93		 		22,121.66		 		23,207.16		 		24,345.95		 		21,198.58		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		49060		 		110102		 	Sensor for Tension and  Compression
	 		11,040.00		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		164.42		 		2,021.81		 		2,114.69		 		2,211.84		 		2,313.44		 		2,213.80		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		53337		 		130103		 	Chaudière Dedietricht
	 		36,933.68		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		550.05		 		6,763.72		 		7,074.46		 		7,399.48		 		7,739.40		 		7,406.57		 	 	 	 	 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		52653		 		140022		 	Enceinte de températureVT7120
	 		21,101.76		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		3,537.54		 		4,021.23		 		4,197.61		 		4,381.69		 		4,573.87		 		389.82		 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Workstation for bldg 67 profile
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		53338		 		140023		 	serie 4
	 		19,709.84		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		3,300.64		 		3,753.71		 		3,920.32		 		4,094.27		 		4,275.98		 		364.92		 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		41458		 		140043		 	Extension of electric ctrl press vpp
	 		52,800.00		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		7,208.10		 		9,983.30		 		10,426.35		 		10,889.03		 		11,372.26		 		2,920.96		 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		56990		 		140064		 	Tour Biglia B470 YS 2M + options
	 		260,267.52		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		27,408.88		 		48,709.44		 		50,972.52		 		53,340.77		 		55,819.05		 		24,016.86		 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		56995		 		140065		 	Tour Biglia B1200M pr lunette
	 		146,082.40		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		15,348.83		 		27,298.65		 		28,595.62		 		29,953.83		 		31,376.78		 		13,509.69		 		1.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		57001		 		140066		 	Tour Biglia B1200M pr lunette
	 		146,082.40		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		15,348.83		 		27,298.65		 		28,595.62		 		29,953.83		 		31,376.78		 		13,509.69		 		1.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		57003		 		140067		 	Tour Biglia B1200M ac lunette+options
	 		166,012.44		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		17,440.54		 		31,019.19		 		32,492.71		 		34,036.25		 		35,653.11		 		15,350.64		 		-20.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		57009		 		140068		 	Tour Biglia B1200M ac lunette+options
	 		166,012.44		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		17,440.54		 		31,019.19		 		32,492.71		 		34,036.25		 		35,653.11		 		15,350.64		 		-20.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		51577		 		140080		 	Banc Magnétoscopique Type universal
	 		32,743.53		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		2,865.18		 		5,984.85		 		6,340.96		 		6,718.24		 		7,117.97		 		3,716.27		 		-0.06	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 		54143		 		140107		 	Syst. Sécurité+adaptation accès usine
	 		83,127.89		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		4,992.05		 		15,422.27		 		16,114.69		 		16,838.20		 		17,594.22		 		12,166.46		 		0.00	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

4

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000 52868
	 	 	140119+	 	 	120            Electro	 	nic ballistic camera 40mm            291,730	 	 	.56	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	8,804.1	 	 	 	5              54,089.	 	 	 	15               56,320.	 	 	 	88               58,644.	 	 	 	69               61,064.	 	 	 	39             52,807.	 	 	 	30	 	 	 	0.00	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Install de radioscopie	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	51457001	 	 	 	140122	 	 	MV2000/320KV	 	 	299,245.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9,373.72	 	 	 	115,640.17	 	 	 	121,676.60	 	 	 	52,554.51	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing mai 2007	 	 	-299,245.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-9,373.72	 	 	 	-115,640.17	 	 	 	-121,676.60	 	 	 	-52,554.51	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	53037/1	 	 	 	150072	 	 	Tour Biglia B1200M	 	 	163,422.69	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	9,856.60	 	 	 	30,414.81	 	 	 	31,723.28	 	 	 	33,087.98	 	 	 	34,511.45	 	 	 	23,828.57	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	53037/2	 	 	 	150073	 	 	Tour Biglia B1200Y	 	 	201,405.95	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,148.08	 	 	 	37,483.83	 	 	 	39,096.37	 	 	 	40,778.29	 	 	 	42,532.60	 	 	 	29,366.78	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	253000
	 	 	53037/3	 	 	 	160010	 	 	Tour Biglia B470 YS2M	 	 	258,174.23	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	47,379.09	 	 	 	49,417.44	 	 	 	51,543.37	 	 	 	53,760.77	 	 	 	56,073.56	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	21552	 	 	 	100072	 	 	Renault	 	 	20,132.70	 	 	 	0.00	 	 	 	0.00	 	 	 	11,933.35	 	 	 	3,835.90	 	 	 	4,044.66	 	 	 	318.79	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	980359	 	 	 	98056	 	 	Volvo	 	 	21,623.60	 	 	 	4,116.74	 	 	 	5,103.98	 	 	 	5,486.53	 	 	 	5,897.83	 	 	 	1,018.52	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	310N/00011623	 	 	 	98059	 	 	Opel Vectra	 	 	22,628.51	 	 	 	1,259.37	 	 	 	5,232.64	 	 	 	5,559.38	 	 	 	5,906.51	 	 	 	4,670.61	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	31556	 	 	 	120009	 	 	BMW 735i	 	 	56,565.19	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	9,185.82	 	 	 	10,591.44	 	 	 	11,221.25	 	 	 	11,888.47	 	 	 	12,595.40	 	 	 	1,082.81	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	 	 	 	 	 	 	 	Sortie leasing février 2007	 	 	-56,565.19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-9,185.82	 	 	 	-10,591.44	 	 	 	-11,221.25	 	 	 	-11,888.47	 	 	 	-12,595.40	 	 	 	-1,082.81	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	18005520	 	 	 	120067	 	 	Volvo V70 XC AWD	 	 	32,833.37	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,681.99	 	 	 	5,237.53	 	 	 	5,660.98	 	 	 	6,118.66	 	 	 	6,613.35	 	 	 	6,520.86	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	40259	 	 	 	130059	 	 	Toyota Hilux 2500CC  D4D rouge	 	 	17,848.00	 	 	 	 	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	3,413.01	 	 	 	4,299.58	 	 	 	4,533.54	 	 	 	4,780.24	 	 	 	821.63	 	 	 	0.00	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	Sortie leasing avril 2007	 	 	-17,848.00	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-3,413.01	 	 	 	-4,299.58	 	 	 	-4,533.54	 	 	 	-4,780.24	 	 	 	-821.63	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	50540	 	 	 	130094	 	 	Camion MAN tga type 19313 FLC	 	 	61,800.00	 	 	 	 	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,764.72	 	 	 	11,381.73	 	 	 	11,916.46	 	 	 	12,476.33	 	 	 	13,062.50	 	 	 	10,198.26	 	 	 	 	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	55464	 	 	 	130094-1	 	 	Accessoires camion MAN	 	 	23,520.00	 	 	 	 	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	 	 	 	 	1,766.69	 	 	 	4,375.88	 	 	 	4,574.63	 	 	 	4,782.40	 	 	 	4,999.60	 	 	 	3,020.80	 	 	 	 	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	254000
	 	 	58740	 	 	 	150054	 	 	Ford Transit 430 L/EF	 	 	32,799.00	 	 	 	 	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	2,942.30	 	 	 	6,097.30	 	 	 	6,392.36	 	 	 	6,701.66	 	 	 	7,025.96	 	 	 	3,639.42	 	 	 	0.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Total par an	 	 	 	 	 	 	 	 	 	 	6,549,649.43	 	 	 	5,376.12	 	 	 	10,336.61	 	 	 	22,979.26	 	 	 	15,640.25	 	 	 	144,495.61	 	 	 	692,054.53	 	 	 	969,697.25	 	 	 	1,172,709.41	 	 	 	1,323,730.05	 	 	 	1,211,299.49	 	 	 	573,429.63	 	 	 	294,954.83	 	 	 	112,908.33	 	 	 	-38.06	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

7

5

EXHIBIT I

THE ALLIED DEFENSE GROUP, INC.

CONVERSION NOTICE

Reference is made to the [FOR AMENDED NOTES: Amended and Restated] Senior Secured
Convertible Note (the “Note”) issued to the undersigned by The Allied Defense Group, Inc. (the
"Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert
the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common
Stock par value $0.10 per share (the “Common Stock”), as of the date specified below.

	 
	Date of Conversion:

	Aggregate Conversion Amount to be converted:

	Please confirm the following information:

	Conversion Price:

	Number of shares of Common Stock to be issued:

	Please issue the Common Stock into which the Note is being converted in the

following name and to the following address:

	Issue to:

	Facsimile Number:

	Authorization:

	By:

	Title:

	Dated:

	Account Number:

	(if electronic book entry transfer)

	Transaction Code Number:

	(if electronic book entry transfer)

1 FOR AMENDED NOTES: Accrued and unpaid
Interest through the closing shall be added to the Original Principal Amount of
the Note.

2 Insert date that is 6 months from Issuance
Date.

3 Insert a price equal to the higher of (a)
the Closing Bid Price as of the Trading Day immediately prior to date of
signing and (b) $8.00.

4 Insert Closing Bid Price on the date of
signing of the Amended and Restated Securities Purchase Agreement.

5 Insert 18 month anniversary of the Issuance
Date.

8

MELLON INVESTOR SERVICES, LLC*

[FOR AMENDED NOTES: AMENDED AND RESTATED] SENIOR SECURED CONVERTIBLE NOTE

CONVERSION INSTRUCTIONS

The Allied Defense Group, Inc. shares are to be debited from [Reserve 2006 — Convertible Notes]

Section A: Compete this section if Certificate Issuance:

	 	 	 
	Number of Shares:

	 	

	Issue to Name and Address:

	 	

	Tax ID / SSN:

	 	

	Requires Restrictive Legend:

	 	     Yes       No
	Mailing Address:

	 	

	(if different from address

	 	

	above)

	 	

Section B: Complete this section if the shares are to be delivered to the Broker by DWAC:

	 
	Number of Shares:

	Issue to Name:

	Broker:

	Broker’s DTC Number:

	Broker Contact and Phone:

	FOR THE ALLIED DEFENSE GROUP, INC. USE ONLY

	 

	Control Number:

*or such other Transfer Agent that may succeed Mellon Investor Services, LLC

9

2

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs Mellon Investor
Services, LLC to issue the above indicated number of shares of Common Stock in accordance with the
Transfer Agent Instructions dated      , 2007 from the Company and acknowledged and agreed to by
Mellon Investor Services, LLC.

Date:     

	 	 	 	 	 
	THE ALLIED DEFENSE GROUP, INC.

	 
	By:

	Name:

	Title:

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]