Document:

EX-10.3

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June      ,
2007, by and among The Allied Defense Group, Inc., a Delaware corporation, with headquarters
located at 8000 Towers Crescent Drive, Suite 260, Vienna, Virginia 22182 (the "Company”), and the
undersigned buyers (each, a “Buyer”, and collectively, the “Buyers”).

WHEREAS:

A. The Company and the Investor (collectively with any other investors that may become a party
to this Agreement, the “Investors”) are parties to that certain Securities Purchase Agreement,
dated as of March 9, 2006 (the “Original Securities Purchase Agreement”), pursuant to which, among
other things, the Investors purchased from the Company (i) senior subordinated convertible notes,
dated March 9, 2006 (the “Original Notes”) and (ii) warrants (the “Warrants”), which are
exercisable to purchase shares of the Company’s common stock, par value $0.10 per share
(the "Common Stock”) (as exercised, collectively, the “Warrant Shares”).

B. In connection with the Amended and Restated Securities Purchase Agreement by and among the
parties hereto, dated June 19, 2006 (the “Securities Purchase Agreement”), the Company has agreed,
upon the terms and subject to the conditions set forth in the Securities Purchase Agreement (a) to
cancel the Original Notes and to issue to the Buyers, in exchange therefor, (i) certain shares of
Common Stock (the “Common Shares”) and (ii) certain senior secured convertible notes (the “Amended
Notes”) (as converted, the “Amended Conversion Shares”) and (b) to issue and sell to each Buyer (i)
at the Initial Closing (as defined in the Securities Purchase Agreement), certain senior secured
convertible notes of the Company (the “Initial Notes”) and (ii) at the Additional Closing (as
defined in the Securities Purchase Agreement), certain senior secured convertible notes of the
Company (the “Additional Notes”, and together with the Amended Notes and the Initial Notes, the
"Notes”), in each case, which Notes will, among other things, be convertible into shares of Common
Stock (as converted, the “Conversion Shares”) in accordance with the terms of the Notes.

C. The Notes bear interest, which at the option of the Company, subject to certain conditions,
may be paid in shares of Common Stock (the “Interest Shares”).

D. To induce the Buyers to execute and deliver the Securities Purchase Agreement, the Company
has agreed to execute and deliver this Agreement which amends, and restates in full the terms and
conditions of that certain Registration Rights Agreement, by and among the Company and the
Investors, dated as of March 9, 2006 whereby the Company agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Buyers hereby agree as follows:

1. Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

a. "Additional Effectiveness Date” means the date the Additional Registration Statement is
declared effective by the SEC.

b. "Additional Effectiveness Deadline” means the date which is sixty (60) calendar days after
the earlier of the Additional Filing Date and the Additional Filing Deadline or in the event that
the Registration Statement is subject to a review by the SEC, one-hundred and twenty (120) calendar
days after the earlier of the Additional Filing Date and the Additional Filing Deadline.

c. "Additional Filing Date” means the date on which the Additional Registration Statement is
filed with the SEC.

d. "Additional Filing Deadline” means if Cutback Shares are required to be included in the
Additional Registration Statement, the later of (i) the date sixty (60) days after the date
substantially all of the Registrable Securities registered under the immediately preceding
Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or
the last Additional Effective Date, as applicable.

e. "Additional Registrable Securities” means, (i) any Cutback Shares not previously included
on a Registration Statement and (ii) any share capital of the Company issued or issuable with
respect to the Notes, the Conversion Shares, the Interest Shares, the Warrants, the Warrant Shares,
the Common Shares or Cutback Shares, as applicable, as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any limitations on
exercises of the Notes and the Warrants.

f. "Additional Registration Statement” means a registration statement or registration
statements of the Company filed under the 1933 Act covering any Additional Registrable Securities.

g. "Additional Required Registration Amount” means any Cutback Shares not previously included
on a Registration Statement, all subject to adjustment as provided in Section 2(f), without regard
to any limitations on exercises of the Notes and the Warrants.

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

i. "Cutback Shares” means any of the Initial Required Registration Amount (without regard to
clause (II) in the definition thereof) of Registrable Securities not included in all Registration
Statements previously declared effective hereunder as a result of a limitation on the maximum
number of shares of Common Stock of the Company permitted by the staff of the SEC to be registered
pursuant to Rule 415. For the purpose of determining the Cutback Shares, in order to determine any
applicable Required Registration Amount, first the Warrant Shares shall be excluded on a pro rata
basis until all of the Warrant Shares have been excluded, then the Common Shares shall be excluded
on a pro rata basis until all of the Common Shares have been excluded and lastly the Amended
Conversion Shares shall be excluded on a pro rata basis until all of the Amended Conversion Shares
have been excluded.

j. "Effective Date” means the Initial Effective Date and the Additional Effective Date, as
applicable.

k. "Effectiveness Deadline” means the Initial Effectiveness Deadline and the Additional
Effectiveness Deadline, as applicable.

l. "Initial Effective Date” means the date that the Registration Statement has been declared
effective by the SEC.

m. "Initial Effectiveness Deadline” means the date which is 365 days after the Initial Closing
Date (as defined in the Securities Purchase Agreement).

n. "Initial Registrable Securities” means (i) the Conversion Shares issued or issuable upon
conversion of the Notes, (ii) the Interest Shares issued or issuable with respect to the Notes,
(iii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iv) the Common Shares
and (v) any capital stock of the Company issued or issuable, with respect to the Notes, the
Conversion Shares, the Interest Shares, the Warrant Shares, the Warrants or the Common Shares as a
result of any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitations on exercises of the Warrants.

o. "Initial Required Registration Amount” means (I) 120% of the sum of (w) the number of
Conversion Shares issued and issuable pursuant to the Notes as of the trading day immediately
preceding the applicable date of determination, (x) the number of Warrant Shares issued and
issuable pursuant to the Warrants as of the trading day immediately preceding the applicable date
of determination, (y) the maximum number of Interest Shares issued or issuable pursuant to the
terms of the Notes as of the trading date immediately preceding the applicable date of
determination and (z) the number of Common Shares issued as of the trading day immediately
preceding the applicable date of determination, excluding the 144 Common Shares (as defined in the
Securities Purchase Agreement), subject to adjustment as provided in Section 2(f), without regard
to any limitations on conversions or redemptions of the Notes or exercises of the Warrants or (II)
such other amount as may be required by the staff of the SEC pursuant to Rule 415.

p. "Initial Registration Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Initial Registrable Securities.

q. "Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement in accordance with the requirements of the Transaction Documents and
who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its rights under this
Agreement in accordance with the requirements of the Transaction Documents and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9.

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

s. "register,” “registered,” and “registration” refer to a registration effected by preparing
and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act
and pursuant to Rule 415 and the declaration or ordering by the SEC of the effectiveness of such
Registration Statement(s).

t. "Registrable Securities” means the Initial Registrable Securities and the Additional
Registrable Securities. As to any particular Registrable Securities, they shall cease to be
Registrable Securities when they (i) have been sold pursuant to an effective registration statement
or in compliance with Rule 144 or (ii) are eligible to be sold pursuant to Rule 144(k) or any
similar rule then in force.

u. "Registration Statement” means a registration statement or registration statements of the
Company filed under the 1933 Act covering the Registrable Securities.

v. "Required Holders” means the holders of at least a majority of the Registrable Securities.

w. "Required Registration Amount” means either the Initial Required Registration Amount or the
Additional Required Registration Amount, as applicable.

x. "Rule 415” means Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.

y. "SEC” means the United States Securities and Exchange Commission.

2. Registration.

a. Mandatory Registration. The Company shall prepare, and, as soon as practicable
after the Initial Closing Date but in no event later than the earlier to occur of (i) forty-five
(45) days after the Company obtains the Stockholder Approval (as defined in the Securities Purchase
Agreement) and (ii) March 3, 2008, file with the SEC the Initial Registration Statement on Form
S-3, if available, covering the resale of all of the Initial Registrable Securities. In the event
that Form S-3 is unavailable to the Company for such a registration, the Company shall use such
other form as is available for such a registration on another appropriate form reasonably
acceptable to the Required Holders, subject to the requirements of Section 2(e). The Initial
Registration Statement prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the Initial Required Registration Amount determined as of the date
such Initial Registration Statement is initially filed with the SEC. The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders or the SEC) the
"Selling Stockholders” and “Plan of Distribution” sections in substantially the
form attached hereto as Exhibit B. The Company shall use its best efforts to have the
Initial Registration Statement declared effective by the SEC as soon as practicable, but in no
event later than the Initial Effectiveness Deadline. By 9:30 am on the Business Day following the
Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the
1933 Act the final prospectus to be used in connection with sales pursuant to such Registration
Statement.

b. Additional Mandatory Registrations. The Company shall prepare, and, as soon as
practicable but in no event later than the Additional Filing Deadline, file with the SEC Additional
Registration Statements on Form S-3 covering the resale of all of the Additional Registrable
Securities not previously registered on an Additional Registration Statement hereunder. To the
extent the staff of the SEC does not permit the Additional Required Registration Amount to be
registered on an Additional Registration Statement, the Company shall file Additional Registration
Statements successively seeking to register on each such Additional Registration Statement the
maximum number of remaining Additional Registrable Securities until the Additional Required
Registration Amount has been registered with the SEC. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available for such a
registration on another appropriate form reasonably acceptable to the Required Holders, subject to
the provisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto
shall register for resale at least that number of shares of Common Stock equal to the Additional
Required Registration Amount as of the date the Registration Statement is initially filed with the
SEC. Each Additional Registration Statement shall contain (except if otherwise directed by the
Required Holders or the SEC) the “Selling Stockholders” and “Plan of Distribution”
sections in substantially the form attached hereto as Exhibit B. The Company shall use its
best efforts to have each Additional Registration Statement declared effective by the SEC as soon
as practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New
York time on the date following the Additional Effective Date, the Company shall file with the SEC
in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Registration Statement.

c. Allocation of Registrable Securities. The initial number of Registrable Securities
included in any Registration Statement and any increase in the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by the SEC. In the
event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities,
each transferee shall be allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any shares of Common Stock
included in a Registration Statement and which remain allocated to any Person which ceases to hold
any Registrable Securities covered by such Registration Statement shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. The Company shall not include any
securities other than Registrable Securities (other than (i) on the Initial Registration Statement,
the shares described on Schedule 2(c)(i) and (ii) on the Additional Registration Statement,
the shares described on Schedule 2(c)(ii)) without the prior written consent of the
Required Holders.

d. Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the
right to select one legal counsel to review and participate in any registration pursuant to this
Section 2 (“Legal Counsel”), which shall be Schulte Roth & Zabel LLP or such other counsel as
thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably
cooperate with each other in performing the Company’s obligations under this Agreement.

e. Ineligibility for Form S-3. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company shall (i) register the
resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.

f. Sufficient Number of Shares Registered. In the event the number of shares
available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover
all of the Registrable Securities required to be covered by such Registration Statement or an
Investor’s allocated portion of the Registrable Securities pursuant to Section 2(c), the Company
shall amend the applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement, in each case, as soon as practicable, but in any event not
later than fifteen (15) days after the necessity therefor arises. The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing provision, the number of
shares available under a Registration Statement shall be deemed “insufficient to cover all of the
Registrable Securities” if at any time the number of shares of Common Stock available for resale
under the Registration Statement is less than the product determined by multiplying (i) the
Required Registration Amount as of such time by (ii) 0.90. The calculation set forth in the
foregoing sentence shall be made without regard to any limitations on the conversion of the Notes
or the exercise of the Warrants and such calculation shall assume that the Notes are then
convertible into shares of Common Stock at the then prevailing Conversion Rate (as defined in the
Notes) and that the Warrants are then exercisable for shares of Common Stock at the then prevailing
Exercise Price (as defined in the Warrants).

g. Effect of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement. If (i) (A) the Additional Registration Statement is not filed with the SEC on or
before the Additional Filing Deadline (a “Filing Failure”) or (B) a Registration Statement covering
all of the Registrable Securities required to be covered thereby and required to be filed by the
Company pursuant to this Agreement is not declared effective by the SEC on or before the respective
Effectiveness Deadline (an “Effectiveness Failure”) or (ii) on any day after the Effective Date
sales of all of the Registrable Securities required to be included on such Registration Statement
cannot be made for any reason (other than during an Allowable Grace Period (as defined in Section
3(q)) pursuant to such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, to disclose such information as is necessary for
sales to be made pursuant to such Registration Statement or to register, subject to the grace
periods set forth in Section 3(q) a sufficient number of shares of Common Stock to enable resale of
100% of the shares of Common Stock issuable upon conversion of the Notes and exercise of the
Warrants without regard to limitations on conversion, redemption and exercise of such Notes and
Warrants and assuming such conversion, redemption or exercise occurred on the date of the filing of
the Registration Statement or a suspension or delisting of the Common Stock on its principal
trading exchange or market) (a “Maintenance Failure”) then, as partial relief for the damages to
any holder by reason of any such delay in or reduction of its ability to sell the underlying shares
of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Registrable Securities relating to such
Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate Purchase
Price (as such term is defined in the Securities Purchase Agreement) of such Investor’s Registrable
Securities included in such Registration Statement on each of the following dates: (i) the day of
a Filing Failure and on every thirtieth day (pro rated for periods totaling less than thirty days)
after a Filing Failure until such Filing Failure is cured; (ii) the day of an Effectiveness Failure
and on every thirtieth day (pro rated for periods totaling less than thirty days) after an
Effectiveness Failure until such Effectiveness Failure is cured; and (iii) the initial day of a
Maintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirty
days) after a Maintenance Failure until such Maintenance Failure is cured; provided,
however, that in no event shall the Company be liable for more than one percent (1%) of
penalties during any thirty day period or for multiple events during any thirty day period. The
payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein
as “Registration Delay Payments.” Registration Delay Payments shall be paid on the day of the
Filing Failure, Effectiveness Failure and the initial day of a Maintenance Failure, as applicable,
and thereafter on the earlier of (I) the thirtieth day after the event or failure giving rise to
the Registration Delay Payments has occurred and (II) the third Business Day after the event or
failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to
make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one percent (1.0%) per month (prorated for partial months) until paid in
full. The parties agree that the Company will not be liable for Registration Delay Payments under
this Section in respect of the Warrants.

3. Related Obligations.

At such time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a), 2(b), 2(e) or 2(f), and subject to any Allowable Grace Periods, the
Company will use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:

a. The Company shall submit to the SEC, within two (2) Business Days after the Company learns
that no review of a particular Registration Statement will be made by the staff of the SEC or that
the staff has no further comments on a particular Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a time and date not
later than 48 hours after the submission of such request. Subject to Allowable Grace Periods, the
Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities
covered by such Registration Statement pursuant to Rule 144(k) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration Period”). The
Company shall ensure that each Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or necessary to make the
statements therein (in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading.

b. The Company shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under
the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during
the Registration Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the seller or sellers thereof
as set forth in such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or
any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the
Company shall have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend or supplement such
Registration Statement.

c. The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration
Statement at least three (3) Business Days prior to its filing with the SEC and (ii) all amendments
and supplements to all Registration Statements (except for any periodic reports under the 1934 Act)
within a reasonable number of days prior to their filing with the SEC, and (B) not file any
Registration Statement or amendment or supplement thereto in a form to which Legal Counsel
reasonably objects; provided, however, that no liquidated damages under Section 2 shall be due to
any Investor if Legal Counsel shall have unreasonably objected to the filing or effectiveness of
any Registration Statements such as to delay its filing or effectiveness. The Company shall not
submit a request for acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without charge, (i) copies of
any correspondence from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (ii) promptly after the same is prepared and filed with the
SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if requested by an
Investor (if not available pursuant to Rule 424(b)), and all exhibits. The Company shall
reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this
Section 3.

d. The Company shall furnish to each Investor whose Registrable Securities are included in any
Registration Statement, without charge, (i) if the Company shall not have filed a final prospectus
in accordance with Rule 424 per Section 2(a) or 2(b), as applicable, upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as such Investor may
reasonably request) and (ii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

e. The Company shall use its best efforts to (i) register and qualify, unless an exemption
from registration and qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky” laws of all
applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during the Registration
Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in connection therewith or
as a condition thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation
in any such jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holds
Registrable Securities of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable Securities for sale under
the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of notice
of the initiation or threatening of any proceeding for such purpose.

f. The Company shall notify Legal Counsel and each Investor in writing of the happening of any
event, as promptly as practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(q), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission. The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile on the same day of such effectiveness and
by overnight mail) and (ii) of the Company’s reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate.

g. The Company shall use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension
is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and
to notify Legal Counsel and each Investor who holds Registrable Securities being sold of the
issuance of such order and the resolution thereof or its receipt of actual notice of the initiation
or threat of any proceeding for such purpose.

h. To the extent any Investor is deemed, alleged or reasonably believes may be alleged, to be
an underwriter, at the reasonable request of any Investor, the Company shall furnish to such
Investor, on the date of the effectiveness of the Registration Statement and thereafter from time
to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the
Company for purposes of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.

i. To the extent any Investor is deemed, alleged or reasonably believes may be alleged, to be
an underwriter, the Company shall make available for inspection by (i) any Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained by the Investors (collectively,
the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by
each Inspector, and cause the Company’s officers, directors and employees to supply all information
which any Inspector may reasonably request; provided, however, that each Inspector shall agree to
hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any
Record or other information which the Company determines in good faith to be confidential, and of
which determination the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a
final, non-appealable subpoena or order from a court or government body of competent jurisdiction,
or (c) the information in such Records has been made generally available to the public other than
by disclosure in violation of this or any other Transaction Document. Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed to limit the
Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

j. The Company shall hold in confidence and not make any disclosure of information concerning
an Investor provided to the Company unless (i) disclosure of such information is necessary or
advisable to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary or advisable to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of this Agreement or any
other agreement (provided that in the case of clauses (i) and (ii) such Investor shall be consulted
by the Company in connection with any such release or other disclosure prior to its release). The
Company agrees that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at the Investor’s
expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

k. The Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii)
secure designation and quotation of all of the Registrable Securities covered by a Registration
Statement on either The NASDAQ Global Market or The NASDAQ Global Select Market or (iii) if,
despite the Company’s best efforts to satisfy the preceding clauses (i) and (ii), the Company is
unsuccessful in satisfying the preceding clauses (i) or (ii), to secure the inclusion for quotation
on The NASDAQ Capital Market or the NASD’s OTC Bulletin Board for such Registrable Securities and,
without limiting the generality of the foregoing, to use its best efforts to arrange for at least
two market makers to register with the National Association of Securities Dealers, Inc. (“NASD”) as
such with respect to such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(k).

l. The Company shall cooperate with the Investors who hold Registrable Securities being
offered and, to the extent applicable, facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable Securities to be
offered and resold pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.

m. If requested by an Investor, the Company shall (i) as soon as practicable incorporate in a
prospectus supplement or post-effective amendment such information as an Investor reasonably
requests to be included therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other terms of the offering
of the Registrable Securities to be sold in such offering; (ii) as soon as practicable make all
required filings of such prospectus supplement or post-effective amendment after being notified of
the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii)
as soon as practicable, supplement or make amendments to any Registration Statement if reasonably
requested by an Investor holding any Registrable Securities.

n. The Company shall use its best efforts to cause the Registrable Securities covered by a
Registration Statement to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such Registrable Securities.

o. The Company shall otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

p. Within two (2) Business Days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.

q. Notwithstanding anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the
Company (following consultation with its counsel), in the best interest of the Company (a “Grace
Period”); provided, that the Company shall promptly (i) notify the Investors in writing that such
determination has been made (provided that in each notice the Company will not disclose the content
of such material, non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends;
and, provided further, that during any three hundred sixty five (365) day period such Grace Periods
shall not exceed an aggregate of twenty (20) days and the first day of any Grace Period must be at
least two (2) trading days after the last day of any prior Grace Period (each, an “Allowable Grace
Period”). During an Allowable Grace Period, the Investors will cease all sales under the
applicable Registration Statement until the end of such Allowable Grace Period. For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on and include the
date the Investors receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause (ii) and the date referred
to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be
bound by the first sentence of Section 3(f) with respect to the information giving rise thereto
unless such material, non-public information is no longer applicable. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase
Agreement in connection with any sale of Registrable Securities with respect to which an Investor
has entered into a contract for sale, and delivered a copy of the prospectus included as part of
the applicable Registration Statement (unless an exemption from such prospectus delivery
requirement exists), prior to the Investor’s receipt of the notice of a Grace Period and for which
the Investor has not yet settled.

4. Obligations of the Investors.

a. At least five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify each Investor in writing of the information the
Company requires from each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement. It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to this Agreement, and any
time deadlines for the Company hereunder shall be extended for the number of days an Investor does
not comply with this Section 4, with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company a “Selling Stockholder Questionnaire”, in
the form attached hereto as Exhibit C, and such other information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the effectiveness of the
registration of such Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably request.

b. Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder, unless such Investor has notified
the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.

c. Each Investor agrees that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of 3(f)
or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock
to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an Investor has entered
into a contract for sale prior to the Investor’s receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first sentence of 3(f) and for
which the Investor has not yet settled.

d. Each Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales
of Registrable Securities pursuant to the Registration Statement.

5. Expenses of Registration.

All reasonable expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including,
without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company, shall be paid by the Company. The
Company shall also reimburse the Investors for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $15,000.

6. Indemnification.

In the event any Registrable Securities are included in a Registration Statement under this
Agreement:

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

b. In connection with any Registration Statement in which an Investor is participating, each
such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the
1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject to Section 6(c),
such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which consent shall not
be unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable
under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to
such Registration Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6
of notice of the commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such proceeding. In the case
of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding at least a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to
the indemnifying party all information reasonably available to the Indemnified Party or Indemnified
Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified
Party or Indemnified Person reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its prior written consent;
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior written consent of
the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all
liability in respect to such Claim or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend
such action.

d. The indemnification required by this Section 6 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

e. No Person involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with
such sale shall be entitled to indemnification from any Person involved in such sale of Registrable
Securities who is not guilty of fraudulent misrepresentation.

f. The indemnity agreements contained herein shall be in addition to (i) any cause of action
or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7. Contribution.

To the extent any indemnification by an indemnifying party is prohibited or limited by law,
the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (i) no contribution shall be made under circumstances where the maker
would not have been liable for indemnification under the fault standards set forth in Section 6 of
this Agreement, (ii) no Person involved in the sale of Registrable Securities, which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale, shall be entitled to contribution from any Person involved in such sale
of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii)
contribution by any seller of Registrable Securities shall be limited in amount to the net amount
of proceeds received by such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

8. Reports Under the 1934 Act.

With a view to making available to the Investors the benefits of Rule 144 promulgated under
the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration (“Rule 144”), the
Company agrees, for so long as an Investor holds Notes, Warrants, Common Shares (as defined in the
Securities Purchase Agreement) or Registrable Securities, to:

a. make and keep public information available, as those terms are understood and defined in
Rule 144;

b. file with the SEC in a timely manner (except as noted in Schedule 4(c) of the Securities
Purchase Agreement) all reports and other documents required of the Company under the 1933 Act and
the 1934 Act so long as the Company remains subject to such requirements and the filing of such
reports and other documents is required for the applicable provisions of Rule 144; and

c. furnish to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has complied with the
reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
annual report of the Company and such other reports and documents so filed by the Company (but only
if such reports are not publicly available on the EDGAR System) and (iii) such other information as
may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

9. Assignment of Registration Rights.

The rights under this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment, furnished with written
notice of (a) the name and address of such transferee or assignee and (b) the securities with
respect to which such registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities by the transferee
or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before
the time the Company receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement (including the furnishing by the Investor to the
Company of an opinion of counsel reasonably acceptable to the Company, prior to such transfer, that
such Registrable Securities may be so transferred in a transaction that does not require
registration under the 1933 Act).

10. Amendment of Registration Rights.

Provisions of this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Required Holders. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of the holders of the
Registrable Securities. 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 this Agreement unless the same
consideration also is offered to all of the parties to this Agreement.

11. Miscellaneous.

a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is
deemed to own of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or election received from
the such record owner of such Registrable Securities.

b. 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 a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. Each Investor
shall provide notice in writing to the Company of any change in address, which notice shall be sent
by the Company to all the other Investors. 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

(703) 847-5334

Attention: Chief Financial Officer

With a copy to:

Baxter, Baker, Sidle, Conn & Jones

Sun Trust Building, Suite 2100

120 E. Baltimore Street

Baltimore, Maryland 21202

Telephone: (410) 230-3800

Facsimile: (410) 230-3801

Attention: James E. Baker, Jr.

	 	 	 	If to Legal Counsel:

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.

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, 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 a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii)
above, respectively.

c. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

d. 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. 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. 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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

e. This Agreement, the other Transaction Documents (as defined in the Securities Purchase
Agreement) and the instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the instruments referenced
herein and therein supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

f. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and
be binding upon the permitted successors and assigns of each of the parties hereto.

g. The headings in this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

h. This Agreement may be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this Agreement.

i. 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.

j. All consents and other determinations required to be made by the Investors pursuant to this
Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

k. 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.

l. 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.

m. The obligations of each Buyer hereunder are several and not joint with the obligations of
any other Buyer, and no provision of this Agreement is intended to confer any obligations on any
Buyer vis-à-vis any other Buyer. Nothing contained herein, and no action taken by any Buyer
pursuant hereto, 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 herein.

* * * * * *

1

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

	 
	PORTSIDE GROWTH & OPPORTUNITY FUND

	 
	By:      

Name:  

Title:    

4

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

	 
	CASTLERIGG MASTER INVESTMENTS LTD.

	 
	By:      

Name:  

Title:    

5

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

	 
	LB I GROUP INC.

	 
	By:      

Name:  

Title:    

6

SCHEDULE OF BUYERS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Buyer's Representative's
	 	 	Buyer's Address	 	Address
	Buyer	 	and Facsimile Number	 	and Facsimile Number
	 
	 	c/o Polygon Investment Partners LP	 	 	 	 
	 
	 	399 Park Avenue, 22nd Floor
	 	 	 	 
	 
	 	New York NY 10022
	 	Schulte Roth & Zabel LLP

	 
	 	Attention: Erik M.W. Caspersen and
	 	919 Third Avenue

	 
	 	Brandon L. Jones
	 	New York, New York 10022

	 
	 	Facsimile:  (212) 359-7303
	 	Attn:  Eleazer Klein, Esq.

	Kings Road
	 	Telephone: (212) 359-7300
	 	Facsimile:  (212) 593-5955

	Investments Ltd.
	 	Residence:  Cayman Islands
	 	Telephone:  (212) 756-2000

	 
	 	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
	 		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 / Matthew Pliskin
	 	New York, New York 10173-1922

	 
	 	Telephone: 212-603-5700
	 	Attn:  Stephen Older, Esq.

	Castlerigg Master
	 	Fax:  212-603-5710
	 	Facsimile:  (212) 547-5444

	Investments Ltd.
	 	Residence: British Virgin Islands
	 	Telephone:  (212) 547-5649

	 
	 	c/o Lehman Brothers Inc.	 	 	 	 
	 
	 	399 Park Ave
	 	 	 	 
	 
	 	NY, NY 10022
	 	 	 	 
	 
	 	Attention: Will Yelsits
	 	 	 	 
	LB I Group Inc.
	 	Eric Salzman
	 		N/A	

7

SCHEDULE 2(c)(i)

Shares includable in Initial Registration Statement:

	 	 	 	 	 	 	 
	LB I Group Inc.

	 	 	41,739	 	 	Common Stock
	Halcyon/Sliska Offshore Management

LLC*

	 	

33,000
	 	

Common Stock
	Patriot Capital Funding, Inc.

	 	 	28,000	 	 	Warrants
	Cowen and Company , LLC

	 	 	41,793	 	 	Warrants

• Including any assignee of such common shareholders rights.

8

SCHEDULE 2(c)(ii)

Shares and Warrants Includible in Additional Registration Statement

	 	 	 	 	 	 	 
	Pirate Capital LLC*

	 	 	261,261	 	 	Common Stock
	Wynnefield Capital, Inc.*

	 	 	64,000	 	 	Common Stock

To the extent shares or warrants described in Schedule 2(c)(i) hereof are not included on the
Initial Registration Statement, such shares and warrants are incorporated herein by reference.

• Including any assignee of such common shareholders rights.

9

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

Mellon Investor Services, LLC

85 Challenger Road

Ridgefield, New Jersey 07660

Re: The Allied Defense Group, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to The Allied Defense Group, Inc., a Delaware corporation (the
"Company”), and have represented the Company in connection with that certain Securities Purchase
Agreement (the “Securities Purchase Agreement”) entered into by and among the Company and the
buyers named therein (collectively, the “Holders”) pursuant to which the Company issued to the
Holders senior secured convertible notes (the “Notes”) convertible into the Company’s common stock,
$0.10 par value per share (the "Common Stock”) and warrants exercisable for shares of Common Stock
(the “Warrants”). Pursuant to the Securities Purchase Agreement, the Company also has entered into
a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant to
which the Company agreed, among other things, to register the Registrable Securities (as defined in
the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion
of the Notes, the shares of Common Stock issuable as Interest Shares pursuant to the Notes, the
shares of Common Stock issuable upon exercise of the Warrants and the Common Shares, under the
Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations
under the Registration Rights Agreement, on      , 200_, the Company filed a
Registration Statement on Form S-3 (File No. 333-     ) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has
advised [us][me] by telephone that the SEC has entered an order declaring the Registration
Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the SEC and the Registrable Securities are
available for resale under the 1933 Act pursuant to the Registration Statement.

This letter shall serve as our standing confirmation to you of the Company’s instruction that
the shares of Common Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future legend-free issuance
or reissuance of shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable
Transfer Agent Instructions dated June      , 2007.

	 	 	 	 	 
	CC:

	 	[LIST NAMES OF HOLDERS]
	 	Very truly yours,

[ISSUER’S COUNSEL]

By:     

10

EXHIBIT B

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders are those issuable to the
Selling Stockholders upon conversion and/or redemption of the Notes and upon exercise of the
Warrants. For additional information regarding the issuance of those Notes and warrants, see
“Private Placement of Notes and Warrants” above. We are registering the shares of common stock in
order to permit the selling stockholders to offer the shares for resale from time to time. Except
for the ownership of the Notes and Warrants issued pursuant to the securities purchase agreement,
the selling stockholders have not had any material relationship with us within the past three
years.

The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of common stock by each of the selling stockholders. The second column
lists the number of shares of common stock beneficially owned by each selling stockholder, based on
its ownership of the Notes and Warrants, as of      , 200_, assuming conversion and/or
redemption of all convertible notes and exercise of the warrants held by the selling stockholders
on that date, without regard to any limitations on conversions, redemptions or exercise.

The third column lists the shares of common stock being offered by this prospectus by the
selling stockholders.

In accordance with the terms of a registration rights agreement among the Company and the
selling stockholders, this prospectus generally covers the resale of at least 120% of the sum of
(i) the number of shares of common stock issuable upon conversion of the Notes as of the trading
day immediately preceding the date the registration statement is initially filed with the SEC, (ii)
the maximum number of Interest Shares issuable pursuant to the terms of the Notes as of the trading
day immediately preceding the date the registration statement is initially filed with the SEC,
(iii) the number of shares of common stock issuable upon exercise of the related Warrants as of the
trading day immediately preceding the date the registration statement is initially filed with the
SEC and (iv) ) the number of Common Shares issued as of the trading day immediately preceding the
date the registration statement is initially filed with the SEC. Because the conversion price of
the Notes and the exercise price of the Warrants may be adjusted, the number of shares that will
actually be issued may be more or less than the number of shares being offered by this prospectus.
The fourth column assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.

Under the terms of the Notes and the Warrants, a selling stockholder may not convert the
convertible notes or exercise the warrants to the extent such conversion, redemption or exercise
would cause such selling stockholder, together with its affiliates, to beneficially own a number of
shares of common stock which would exceed 9.99% of our then outstanding shares of common stock
following such conversion, redemption or exercise, excluding for purposes of such determination
shares of common stock issuable upon conversion and/or redemption of the Notes which have not been
converted or redeemed and upon exercise of the Warrants that have not been exercised. The number
of shares in the second column does not reflect this limitation. The selling stockholders may sell
all, some or none of their shares in this offering. See “Plan of Distribution.”

11

12

	 	 	 	 	 	 	 
	 	 	 	 	Maximum Number of	 	 
	 	 	Number of Shares	 	Shares to be Sold	 	Number of Shares
	 	 	Owned Prior to	 	Pursuant to this	 	Owned After
	Name of Selling Stockholder	 	Offering	 	Prospectus	 	Offering
	Kings Road Investments Ltd. (1)

Portside Growth & Opportunity Fund (2)

Castlerigg Master Investments Ltd. (3)

LB I Group Inc. (4)

	 	

	 	

	 	

0

(1) Kings Road Investments Ltd. (“Kings Road”) is a wholly-owned subsidiary of
Polygon Global Opportunities Master Fund (“Master Fund”). Polygon Investment Partners LLP, Polygon
Investment Partners LP and Polygon Investment Partners HK Limited (the “Investment Managers”),
Polygon Investments Ltd. (the “Manager”), the Master Fund, Alexander Jackson, Reade Griffith and
Paddy Dear share voting and dispositive power of the securities held by Kings Road. The Investment
Managers, the Manager, Alexander Jackson, Reade Griffith and Paddy Dear disclaim beneficial
ownership of the securities held by Kings Road.

(2) Ramius Capital Group, LLC (“Ramius Capital”) is the investment adviser of Portside
Growth and Opportunity Fund (“Portside”) and consequently has voting control and investment
discretion over securities held by Portside. Ramius Capital disclaims beneficial ownership of the
shares held by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey M. Solomon
are the sole managing members of C4S& Co., LLC, the sole managing member of Ramius Capital. As a
result, Messrs. Cohen, Stark, Strauss and Solomon may be considered beneficial owners of any shares
deemed to be beneficially owned by Ramius Capital. Messrs. Cohen, Stark, Strauss and Solomon
disclaim beneficial ownership of these shares.

(3) Sandell Asset Management Corp. is the investment manager of Castlerigg Master Investment
Ltd. (“Castlerigg”) and has shared voting and dispositive power over the securities owned by
Castlerigg. Sandell Asset Management Corp. and Thomas E. Sandell, its sole shareholder, disclaim
beneficial ownership of the securities owned by Castlerigg.

(4) LB I Group Inc. is an affiliate of a broker-dealer and has represented to us that it is
not acting as an underwriter in this offering. It purchased the securities in the ordinary course
of business, and at the time of the purchase of the securities to be resold, it had no agreements
or understandings, directly or indirectly, with any person to distribute the securities.  Lehman
Brothers Inc. is the parent company of LB I Group Inc. Lehman Brothers Holdings Inc., a public
reporting company, is the parent company of Lehman Brothers Inc. The address for LB I Group Inc. is
c/o Lehman Brothers Inc., 399 Park Avenue, New York, New York 10022, Attn: Eric Salzman and Will
Yelsits.

13

PLAN OF DISTRIBUTION

We are registering the Common Shares previously issued and the shares of common stock issuable
upon conversion of the Notes, as Interest Shares pursuant to the terms of the Notes and upon
exercise of the Warrants to permit the resale of these shares of common stock by the holders of the
Notes and Warrants from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear
all fees and expenses incident to our obligation to register the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock beneficially
owned by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or
broker-dealers, the selling stockholders will be responsible for underwriting discounts or
commissions or agent’s commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,

	 	•	 	on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;

	 	•	 	in the over-the-counter market;

	 	•	 	in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

	 	•	 	through the writing of options, whether such options are listed on an options
exchange or otherwise;

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;

	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;

	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;

	 	•	 	privately negotiated transactions;

	 	•	 	short sales;

	 	•	 	sales pursuant to Rule 144;

	 	•	 	broker-dealers may agree with the selling securityholders to sell a specified number
of such shares at a stipulated price per share;

	 	•	 	a combination of any such methods of sale; and

	 	•	 	any other method permitted pursuant to applicable law.

If the selling stockholders effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of common stock for whom they may act as
agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of common stock or otherwise,
the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and deliver shares of
common stock covered by this prospectus to close out short positions and to return borrowed shares
in connection with such short sales. The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes, or warrants or shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of common stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of common stock in other circumstances
in which case the transferees, donees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares
of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and
any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of shares of common stock being
offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholders
and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.

There can be no assurance that any selling stockholder will sell any or all of the shares of
common stock registered pursuant to the shelf registration statement, of which this prospectus
forms a part.

The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in market-making
activities with respect to the shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or entity to engage in
market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the
registration rights agreement, estimated to be $[     ] in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by the selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.

Once sold under the shelf registration statement, of which this prospectus forms a part, the
shares of common stock will be freely tradable in the hands of persons other than our affiliates.

14

EXHIBIT C

SELLING STOCKHOLDER QUESTIONNAIRE

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

	1.	 	Name.

	 	(a)	 	Full Legal Name of Selling Securityholder

	 	(b)	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:

	 	(c)	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):

2. Address for Notices to Selling Securityholder:

	 
	Telephone:

	Fax:

	Contact Person:

	3.	 	Beneficial Ownership of Registrable Securities:

Type and Principal Amount of Registrable Securities beneficially owned:

	4.	 	Broker-Dealer Status:

	 	(a)	 	Are you a broker-dealer?

Yes No

	 	(b)	 	Are you an affiliate of a broker-dealer?

Yes No

	 	(c)	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?

Yes No

	5.	 	Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.

Type and Amount of Other Securities beneficially owned by the Selling
Securityholder:

	6.	 	Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.

	 	 	 	State any exceptions here:

The undersigned agrees to promptly notify the Company of any material inaccuracies or changes in
the information provided herein that may occur subsequent to the date hereof and prior to the
Effective Date for the Registration Statement.

By signing below, the undersigned consents to the disclosure of the information contained herein in
its answers to Items 1 through 6 and the inclusion of such information in the Registration
Statement and the related prospectus. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of the Registration
Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be
executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 
	Dated:

	 	Beneficial Owner:
	 	

	
 
	 	By:
	 	

	
 
	 	 	 	 
	
 
	 	 	 	Name:
	
 
	 	 	 	Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

[ ]

15Exhibit 4.1

    EXHIBIT
      4.1

     

    MEZEY
      HOWARTH RACING STABLE

     

    2007
      STOCK INCENTIVE PLAN

     

    ARTICLE
      I -- PREAMBLE

     

    1.1
      This
      2007 Stock Incentive Plan of Mezey Howarth Racing Stable is intended to secure
      for the Company and its Affiliates the benefits arising from ownership of the
      Company's Common Stock by the Employees, Officers, Directors and Consultants
      of
      the Company and its Affiliates, all of whom are and will be responsible for
      the
      Company's future growth. The Plan is designed to help attract and retain for
      the
      Company and its Affiliates personnel of superior ability for positions of
      exceptional responsibility, to reward Employees, Officers, Directors and
      Consultants for their services and to motivate such individuals through added
      incentives to further contribute to the success of the Company and its
      Affiliates. With respect to persons subject to Section 16 of the Act,
      transactions under this Plan are intended to satisfy the requirements of Rule
      16b-3 of the Act.

     

    1.2
      Awards
      under the Plan may be made to an Eligible Person in the form of (i) Incentive
      Stock Options (to Eligible Employees only); (ii) Nonqualified Stock Options;
      (iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi)
      any
      combination of the foregoing.

     

    1.3
      The
      Company's Board of Directors adopted the Plan on June 7, 2007 (the "Effective
      Date"),
      subject to approval by the shareholders of the Company to the extent necessary
      to satisfy the requirements of the Code, the Act, or other applicable federal
      or
      state law. Unless sooner terminated as provided elsewhere in this Plan, this
      Plan shall terminate upon the close of business on the day next preceding the
      tenth (10th) anniversary of the Effective Date. Award Agreements outstanding
      on
      such date shall continue to have force and effect in accordance with the
      provisions thereof.

     

    1.4
      Capitalized terms shall have the meaning provided in Article II unless otherwise
      provided in this Plan or any related Award Agreement.

     

    ARTICLE
      II -- DEFINITIONS

     

    Except
      where the context otherwise indicates, the following definitions
      apply:

     

    2.1
      "Act"
      means
      the Securities Exchange Act of 1934, as now in effect or as hereafter
      amended.

     

    2.2
      "Affiliate"
      means
      any parent corporation or subsidiary corporation of the Company, whether now
      or
      hereinafter existing, as those terms are defined in Sections 424 (e) and (f),
      respectively, of the Code.

     

    2.3
      "Award"
      means
      an award granted to a Participant in accordance with the provisions of the
      Plan,
      including, but not limited to, Stock Options, Restricted Stock, Stock Awards,
      Performance Shares, or any combination of the foregoing.

     

    2.4
      "Award
      Agreement"
      means
      the separate written agreement evidencing each Award granted to a Participant
      under the Plan. 

     

    2.5
      "Board
      of Directors"
      or
      "Board"
      means
      the Board of Directors of the Company, as constituted from time to time.

     

    2.6
      "Change
      of Control"
      means
      (a) the adoption of a plan of merger or consolidation of the Company with any
      other corporation or association as a result of which the holders of the voting
      capital stock of the Company as a group would receive less than 50% of the
      voting capital stock of the surviving or resulting corporation; (b) the approval
      by the Board of Directors of an agreement providing for the sale or transfer
      (other than as security for obligations of the Company) of substantially all
      the
      assets of the Company; or (c) in the absence of a prior expression of
      approval by
      the
      Board of Directors, the acquisition of more than 20% of the Company's voting
      capital stock by any person within the meaning of Rule 13d-3 under the Act
      (other than the Company or a person that directly or indirectly controls, is
      controlled by, or is under common control with, the Company).

     

    2.7
      "Code"
      means
      the Internal Revenue Code of 1986, as amended, and the regulations and
      interpretations promulgated thereunder.

     

    2.8
      "Committee"
      means a
      committee of two or more members of the Board appointed by the Board in
      accordance with Section 3.2 of the Plan.

     

    2.9
      "Common
      Stock"
      means
      the Company's common stock.

     

    2.10
      "Company"
      means
      Mezey Howarth Racing Stable, a Nevada corporation.

     

    2.11
      "Consultant"
      means
      any person, including an advisor engaged by the Company or an Affiliate to
      render bona fide consulting or advisory services to the Company or an Affiliate,
      other than as an Employee, Director or Non-Employee Director.

     

    2.12
      "Director"
      means a
      member of the Board of Directors of the Company.

     

    2.13
      "Disability"
      means
      the permanent and total disability of a person within the meaning of Section
      22
      (e) (3) of the Code.

     

    2.14
      "Effective
      Date"
      shall
      be the date set forth in Section 1.3 of the Plan.

     

    2.15
      "Eligible
      Employee"
      means
      an Eligible Person who is an Employee of the Company or any
      Affiliate.

     

    2.16
      "Eligible
      Person"
      means
      any Employee, Officer, Director, Non-Employee Director or Consultant of the
      Company or any Affiliate, except for instances where services are in connection
      with the offer or sale of securities in a capital-raising transaction, or they
      directly or indirectly promote or maintain a market for the Company's
      securities, subject to any other limitations as may be provided by the Code,
      the
      Act, or the Board. In making such determinations, the Board may take into
      account the nature of the services rendered by such person, his or her present
      and potential contribution to the Company's success, and such other factors
      as
      the Board in its discretion shall deem relevant.

     

    2.17
      "Employee"
      means
      an individual who is a common-law employee of the Company or an Affiliate
      including employment as an Officer. Mere service as a Director or payment of
      a
      director's fee by the Company or an Affiliate shall not be sufficient to
      constitute "employment" by the Company or an Affiliate. 

     

    2.18
      "ERISA"
      means
      the Employee Retirement Income Security Act of 1974, as now in effect or as
      hereafter amended.

     

    2.19
      "Fair
      Market Value"
      means:

     

    (a)
      for
      purposes of an Incentive Stock Option, if there is a market for the Company's
      stock, on a stock exchange or in an over-the-counter market, or otherwise,
      the
      Fair Market Value shall be the mean between the highest and lowest quoted
      selling prices on the valuation date of the Incentive Stock Option, or if there
      were no sales of the Company's Common Stock on the valuation date, the Fair
      Market Value shall be the weighted average of the means between the highest
      and
      lowest sales on the nearest date before and the nearest date after the valuation
      date. If a valuation pursuant to this paragraph is not available, the
      appropriate method described in Section 20.2031-2 of the Treasury Regulations
      adopted under the Code shall be used for the Fair Market Value, and

    

     (b)
      for
      all other purposes, the mean between the highest and lowest quoted selling
      prices of the Common Stock (if actual sales price information on such trading
      day is not available, the mean between the bona fide bid and asked prices on
      such trading day shall be used) on the trading day immediately prior to the
      date
      on which a determination is being made pursuant to this Section 2.19 (the
      "Mean
      Selling Price"),
      as
      reported by the National Association of Securities Dealers Automated Quotation
      System ("NASDAQ"),
      or if
      the Common Stock is not traded on NASDAQ, the Mean Selling Price in the
      over-the-counter market; provided, however, that if the Common Stock is listed
      on a stock exchange, the Fair Market Value shall be the Mean Selling Price
      on
      such exchange; and, provided further, that if the Common Stock is not quoted
      or
      listed by any organization, the fair value of the Common Stock, as determined
      by
      the Board, whose determination shall be conclusive, shall be used. In no event
      shall the Fair Market Value of any share of Common Stock be less than its par
      value.

     

    2.20
      "Grant
      Date"
      means,
      as to any Award, the latest of:

     

    (a)
      the
      date on which the Board authorizes the grant of the Award; or

     

    (b)
      the
      date the Participant receiving the Award becomes an Employee or a Director
      of
      the Company or its Affiliate, to the extent employment status is a condition
      of
      the grant or a requirement of the Code or the Act; or

     

    (c)
      such
      other date (later than the dates described in (a) and (b) above) as the Board
      may designate and as set forth in the Participant's Award
      Agreement.

     

    2.21
      "Immediate
      Family"
      means
      any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
      sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
      brother-in-law or sister-in-law and shall include adoptive
      relationships.

     

    2.22
      "Incentive
      Stock Option"
      means a
      Stock Option intended to qualify as an incentive stock option within the meaning
      of Section 422 of the Code and is granted under Article IV of the Plan and
      designated as an Incentive Stock Option in a Participant's Award
      Agreement.

     

    2.23
      "Non-Employee
      Director"
      shall
      have the meaning set forth in Rule 16b-3 under the Act.

     

    2.24
      "Nonqualified
      Stock Option"
      means a
      Stock Option not intended to qualify as an Incentive Stock Option and is not
      so
      designated in the Participant's Award Agreement.

     

    2.25
      "Officer"
      means a
      person who is an officer of the Company within the meaning of Section 16 of
      the
      Act.

     

    2.26
      "Option
      Period"
      means
      the period during which a Stock Option may be exercised from time to time,
      as
      established by the Board and set forth in the Award Agreement for each
      Participant who is granted a Stock Option.

     

    2.27
      "Option
      Price"
      means
      the purchase price for a share of Common Stock subject to purchase pursuant
      to a
      Stock Option, as established by the Board and set forth in the Award Agreement
      for each Participant who is granted a Stock Option.

     

    2.28
      "Outside
      Director"
      means a
      Director who either (i) is not a current employee of the Company or an
      "affiliated corporation" (within the meaning of Treasury Regulations promulgated
      under Section 162 (m) of the Code), is not a former employee of the Company
      or
      an "affiliated corporation" receiving compensation for prior services (other
      than benefits under a tax qualified pension plan), was not an officer of the
      Company or an "affiliated corporation" at any time and is not currently
      receiving direct or indirect remuneration from the Company or an "affiliated
      corporation" for services in any capacity other than as a Director or (ii)
      is
      otherwise considered an "outside director" for purposes of Section 162 (m)
      of
      the Code.

    

     

    2.29
      "Participant"
      means
      an Eligible Person to whom an Award has been granted and who has entered into
      an
      Award Agreement evidencing the Award or, if applicable, such other person who
      holds an outstanding Award.

     

    2.30
      "Performance
      Objectives"
      shall
      have the meaning set forth in Article IX of the Plan.

     

    2.31
      "Performance
      Period"
      shall
      have the meaning set forth in Article IX of the Plan.

     

    2.32
      "Performance
      Share"
      means
      an Award under Article IX of the Plan of a unit valued by reference to the
      Common Stock, the payout of which is subject to achievement of such Performance
      Objectives, measured during one or more Performance Periods, as the Board,
      in
      its sole discretion, shall establish at the time of such Award and set forth
      in
      a Participant's Award Agreement.

     

    2.33
      "Plan"
      means
      Mezey Howarth Racing Stable 2007 Stock Incentive Plan, as it may be amended
      from
      time to time.

     

    2.34
      "Reporting
      Person"
      means a
      person required to file reports under Section 16(a) of the Act.

     

    2.35
      "Restricted
      Stock"
      means
      an Award under Article VII of the Plan of shares of Common Stock that are at
      the
      time of the Award subject to restrictions or limitations as to the Participant's
      ability to sell, transfer, pledge or assign such shares, which restrictions
      or
      limitations may lapse separately or in combination at such time or times, in
      installments or otherwise, as the Board, in its sole discretion, shall determine
      at the time of such Award and set forth in a Participant's Award
      Agreement.

     

    2.36
      "Restriction
      Period"
      means
      the period commencing on the Grant Date with respect to such shares of
      Restricted Stock and ending on such date as the Board, in its sole discretion,
      shall establish and set forth in a Participant's Award Agreement.

     

    2.37
      "Retirement"
      means
      retirement as determined under procedures established by the Board or in any
      Award, as set forth in a Participant's Award Agreement.

     

    2.38
      "Rule
      16b-3"
      means
      Rule 16b-3 promulgated under the Act or any successor to Rule 16b-3, as in
      effect from time to time. Those provisions of
      the Plan
      which make express reference to Rule 16b-3, or which are required in order
      for
      certain option transactions to qualify for exemption under Rule 16b-3, shall
      apply only to a Reporting Person.

     

    2.39
      "Stock
      Award"
      means
      an Award of shares of Common Stock under Article VIII of the Plan.

     

    2.40
      "Stock
      Option"
      means
      an Award under Article IV or Article V of the Plan of an option to purchase
      Common Stock. A Stock Option may be either an Incentive Stock Option or a
      Nonqualified Stock Option.

     

    2.41
      "Ten
      Percent Stockholder"
      means
      an individual who owns (or is deemed to own pursuant to Section 424 (d) of
      the
      Code), at the time of grant, stock possessing more than ten percent (10%) of
      the
      total combined voting power of all classes of stock of the Company or any of
      its
      Affiliates.

     

    2.42
      "Termination
      of Service"
      means
      (i) in the case of an Eligible Employee, the discontinuance of employment of
      such Participant with the Company or its Subsidiaries for any reason other
      than
      a transfer to another member of the group consisting of the Company and its
      Affiliates and (ii) in the case of a Director who is not an Employee of the
      Company or any Affiliate, the date such Participant ceases to serve as a
      Director. The determination of whether a Participant has discontinued service
      shall be made by the Board in its sole discretion. In determining whether a
      Termination of Service has occurred, the Board may provide that service as
      a
      Consultant or service with a business enterprise in which the Company has a
      significant ownership interest shall be treated as employment with the
      Company.

    

      

    ARTICLE
      III - ADMINISTRATION

     

    3.1
      The Plan
      shall be administered by the Board of Directors of the Company. The Board shall
      have the exclusive right to interpret and construe the Plan, to select the
      Eligible Persons who shall receive an Award, and to act in all matters
      pertaining to the grant of an Award and the determination and interpretation
      of
      the provisions of the related Award Agreement, including, without limitation,
      the determination of the number of shares subject to Stock Options and the
      Option Period(s) and Option Price(s) thereof, the number of shares of Restricted
      Stock or shares subject to Stock Awards or Performance Shares subject to an
      Award, the vesting periods (if any) and the form, terms, conditions and duration
      of each Award, and any amendment thereof consistent with the provisions of
      the
      Plan. The Board may adopt, establish, amend and rescind such rules, regulations
      and procedures as it may deem appropriate for the proper administration of
      the
      Plan, make all other determinations which are, in the Board's judgment,
      necessary or desirable for the proper administration of the Plan, amend the
      Plan
      or a Stock Award as provided in Article XI, and terminate or suspend the Plan
      as
      provided in Article XI. All acts, determinations and decisions of the Board
      made
      or taken pursuant to the Plan or with respect to any questions arising in
      connection with the administration and interpretation of the Plan or any Award
      Agreement, including the severability of any and all of the provisions thereof,
      shall be conclusive, final and binding upon all persons.

     

    3.2
      The
      Board may, to the full extent permitted by and consistent with applicable law
      and the Company's Bylaws, and subject to Subparagraph 3.2(b) hereinbelow,
      delegate any or all of its powers with respect to the administration of the
      Plan
      to a Committee consisting of not fewer than two members of the Board each of
      whom shall qualify (at the time of appointment to the Committee and during
      all
      periods of service on the Committee) in all respects as a Non-Employee Director
      and as an Outside Director.

     

    (a)
      If
      administration is delegated to a Committee, the Committee shall have, in
      connection with the administration of the Plan, the powers theretofore possessed
      by the Board, including the power to delegate to a subcommittee any of the
      administrative powers the Committee is authorized to exercise (and references
      in
      the Plan to the Board shall thereafter be to
      the
      Committee or subcommittee), subject, however, to such resolutions, not
      consistent with the provisions of the Plan, as may be adopted from time to
      time
      by the Board.

     

    (b)
      The
      Board may abolish the Committee at any time and reassume all powers and
      authority previously delegated to the Committee.

     

    (c)
      In
      addition to, and not in limitation of, the right of any Committee so designated
      by the Board to administer this Plan to grant Awards to Eligible Persons under
      this Plan, the full Board of Directors may from time to time grant Awards to
      Eligible Persons pursuant to the terms and conditions of this Plan, subject
      to
      the requirements of the Code, Rule 16b-3 under the Act or any other applicable
      law, rule or regulation. In connection with any such grants, the Board of
      Directors shall have all of the power and authority of the Committee to
      determine the Eligible Persons to whom such Awards shall be granted and the
      other terms and conditions of such Awards.

     

    3.3
      Without
      limiting the provisions of this Article III, and subject to the provisions
      of
      Article X, the Board is authorized to take such action as it determines to
      be
      necessary or advisable, and fair and equitable to Participants and to the
      Company, with respect to an outstanding Award in the event of a Change of
      Control as described in Article X or other similar event. Such action may
      include, but shall not be limited to, establishing, amending or waiving the
      form, terms, conditions and duration of an Award and the related Award
      Agreement, so as to provide for earlier, later, extended or additional times
      for
      exercise or payments, differing methods for calculating payments, alternate
      forms and amounts of payment, an accelerated release of restrictions or other
      modifications. The Board may take such actions pursuant to this Section 3.3
      by
      adopting rules and regulations of general applicability to all Participants
      or
      to certain categories of Participants, by including, amending or waiving terms
      and conditions in an Award and the related Award Agreement, or by taking action
      with respect to individual Participants from time to time.

    

    3.4
      Subject
      to the provisions of Section 3.9, the maximum aggregate number of shares of
      Common Stock which may be issued pursuant to Awards under the Plan shall be
      Two
      Hundred and Fifty Million (250,000,000) shares. Such shares of Common Stock
      shall be made available from authorized and unissued shares of the
      Company.

     

    (a)
      For
      all purposes under the Plan, each Performance Share awarded shall be counted
      as
      one share of Common Stock subject to an Award.

     

    (b)
      If,
      for any reason, any shares of Common Stock (including shares of Common Stock
      subject to Performance Shares) that have been awarded or are subject to issuance
      or purchase pursuant to Awards outstanding under the Plan are not delivered
      or
      purchased, or are reacquired by the Company, for any reason, including but
      not
      limited to a forfeiture of Restricted Stock or failure to earn Performance
      Shares or the termination, expiration or cancellation of a Stock Option, or
      any
      other termination of an Award without payment being made in the form of shares
      of Common Stock (whether or not Restricted Stock), such shares of Common Stock
      shall not be charged against the aggregate number of shares of Common Stock
      available for Award under the Plan and shall again be available for Awards
      under
      the Plan. In no event, however, may Common Stock that is surrendered or withheld
      to pay the exercise price of a Stock Option or to satisfy tax withholding
      requirements be available for future grants under the Plan.

     

    (c)
      The
      foregoing subsections (a) and (b) of this Section 3.4 shall be subject to any
      limitations provided by the Code or by Rule 16b-3 under the Act or by any other
      applicable law, rule or regulation.

     

    3.5
      Each
      Award granted under the Plan shall be evidenced by a written Award Agreement,
      which shall be subject to and shall incorporate (by reference
      or
      otherwise) the applicable terms and conditions of the Plan and shall include
      any
      other terms and conditions (not inconsistent with the Plan) required by the
      Board.

     

    3.6
      The
      Company shall not be required to issue or deliver any certificates for shares
      of
      Common Stock under the Plan prior to:

     

    (a)
      any
      required approval of the Plan by the shareholders of the Company;
      and

     

    (b)
      the
      completion of any registration or qualification of such shares of Common Stock
      under any federal or state law, or any ruling or regulation of any governmental
      body that the Company shall, in its sole discretion, determine to be necessary
      or advisable.

     

    3.7
      The
      Board may require any Participant acquiring shares of Common Stock pursuant
      to
      any Award under the Plan to represent to and agree with the Company in writing
      that such person is acquiring the shares of Common Stock for investment purposes
      and without a view to resale or distribution thereof. Shares of Common Stock
      issued and delivered under the Plan shall also be subject to such stop-transfer
      orders and other restrictions as the Board may deem advisable under the rules,
      regulations and other requirements of the Securities and Exchange Commission,
      any stock exchange upon which the Common Stock is then listed and any applicable
      federal or state laws, and the Board may cause a legend or legends to be placed
      on the certificate or certificates representing any such shares to make
      appropriate reference to any such restrictions. In making such determination,
      the Board may rely upon an opinion of counsel for the Company.

     

    3.8
      Except
      as otherwise expressly provided in the Plan or in an Award Agreement with
      respect to an Award, no Participant shall have any right as a shareholder of
      the
      Company with respect to any shares of Common Stock subject to such Participant's
      Award except to the extent that, and until, one or more certificates
      representing such shares of Common Stock shall have been delivered to the
      Participant. No shares shall be required to be issued, and no certificates
      shall
      be required to be delivered, under the Plan unless and until all of the terms
      and conditions applicable to such Award shall have, in the sole discretion
      of
      the Board, been satisfied in full and any restrictions shall have lapsed in
      full, and unless and until all of the requirements of law and of all regulatory
      bodies having jurisdiction over the offer and sale, or issuance and delivery,
      of
      the shares shall have been fully complied with.

     

    3.9
      The
      total amount of shares with respect to which Awards may be granted under the
      Plan and rights of outstanding Awards (both as to the number of shares subject
      to the outstanding Awards and the Option Price(s) or other purchase price(s)
      of
      such shares, as applicable) shall be appropriately adjusted for any increase
      or
      decrease in the number of outstanding shares of Common Stock of the Company
      resulting from payment of a stock dividend on the Common Stock, a stock split
      or
      subdivision or combination of shares of the Common Stock, or a reorganization
      or
      reclassification of the Common Stock, or any other change in the structure
      of
      shares of the Common Stock. The foregoing adjustments and the manner of
      application of the foregoing provisions shall be determined by the Board in
      its
      sole discretion. Any such adjustment may provide for the elimination of any
      fractional shares which might otherwise become subject to an Award. All
      adjustments made as the result of the foregoing in respect of each Incentive
      Stock Option shall be made so that such Incentive Stock Option shall continue
      to
      be an Incentive Stock Option, as defined in Section 422 of the
      Code.

     

    3.10
      No
      director or person acting pursuant to authority delegated by the Board shall
      be
      liable for any action or determination under the Plan made in good faith. The
      members of the Board shall be entitled to indemnification by the Company in
      the
      manner and to the extent set forth in the Company's Articles of Incorporation,
      as amended, Bylaws or as otherwise provided from time to time regarding
      indemnification of Directors. 

     

    3.11
      The
      Board shall be authorized to make adjustments in any performance based criteria
      or in the other terms and conditions of outstanding Awards in recognition of
      unusual or nonrecurring events affecting the Company (or any Affiliate, if
      applicable) or its financial statements or changes in applicable laws,
      regulations or accounting principles. The Board may correct any defect, supply
      any omission or reconcile any inconsistency in the Plan or any Award Agreement
      in the manner and to the extent it shall deem necessary or desirable to reflect
      any such adjustment. In the event the Company (or any Affiliate, if applicable)
      shall assume outstanding employee benefit awards or the right or obligation
      to
      make future such awards in connection with the acquisition of another
      corporation or business entity, the Board may, in its sole discretion, make
      such
      adjustments in the terms of outstanding Awards under the Plan as it shall deem
      appropriate.

     

    3.12
      Subject
      to the express provisions of the Plan, the Board shall have full power and
      authority to determine whether, to what extent and under what circumstances
      any
      outstanding Award shall be terminated, canceled, forfeited or suspended.
      Notwithstanding the foregoing or any other provision of the Plan or an Award
      Agreement, all Awards to any Participant that are subject to any restriction
      or
      have not been earned or exercised in full by the Participant shall be terminated
      and canceled if the Participant is terminated for cause, as determined by the
      Board in its sole discretion.

     

    ARTICLE
      IV -- INCENTIVE STOCK OPTIONS

     

    4.1
      The
      Board
      may, in its sole discretion, from time to time on or after the Effective Date
      grant Incentive Stock Options to Eligible Employees, subject to the provisions
      of this Article IV and Articles III and VI and subject to the following
      conditions:

     

    (a)
      Incentive Stock Options shall be granted only to Eligible Employees, each of
      whom may be granted one or more of such Incentive Stock Options at such time
      or
      times determined by the Board.

     

    (b)
      The
      Option Price per share of Common Stock for an Incentive Stock Option shall
      be
      set in the Award Agreement, but shall not be less than (i) one hundred percent
      (100%) of the Fair Market Value of the Common Stock at the Grant Date, or (ii)
      in the case of an Incentive Stock Option granted to a Ten Percent Stockholder,
      one hundred ten percent (110%) of the Fair Market Value of the Common Stock
      at
      the Grant Date.

     

    (c)
      An
      Incentive Stock Option may be exercised in full or in part from time to time
      within ten (10) years from the Grant Date, or such shorter period as may be
      specified by the Board as the Option Period and set forth in the Award
      Agreement; provided, however, that, in the case of an Incentive Stock Option
      granted to a Ten Percent Stockholder, such period shall not exceed five (5)
      years from the Grant Date; and further, provided that, in any event, the
      Incentive Stock Option shall lapse and cease to be exercisable upon a
      Termination of Service or within such period following a Termination of Service
      as shall have been determined by the Board and set forth in the related Award
      Agreement; and provided, further, that such period shall not exceed the period
      of time ending on the date three (3) months following a Termination of Service,
      unless employment shall have terminated:

     

    (i)
      as a
      result of Disability, in which event such period shall not exceed the period
      of
      time ending on the date twelve (12) months following a Termination of Service;
      or

     

    (ii)
      as a
      result of death, or if death shall have occurred
      following a Termination of Service (other than as a result of Disability) and
      during the period that the Incentive Stock Option was still exercisable, in
      which event such period may not exceed the period of time ending on the earlier
      of the date twelve (12) months after the date of death;

     

    (iii)
      and
      provided, further, that such period following a Termination of Service or death
      shall in no event extend beyond the original Option Period of the Incentive
      Stock Option.

     

    (d)
      The
      aggregate Fair Market Value of the shares of Common Stock with respect to which
      any Incentive Stock Options (whether under this Plan or any other plan
      established by the Company) are first exercisable during any calendar year
      by
      any Eligible Employee shall not exceed One Hundred Thousand Dollars
      ($100,000.00), determined based on the Fair Market Value(s) of such shares
      as of
      their respective Grant Dates; provided, however, that to the extent permitted
      under Section 422 of the Code, if the aggregate Fair Market Values of the shares
      of Common Stock with respect to which Stock Options intended to be Incentive
      Stock Options are first exercisable by any Eligible Employee during any calendar
      year (whether such Stock Options are granted under this Plan or any other plan
      established by the Company) exceed one hundred thousand dollars ($100,000.00),
      the Stock Options or portions thereof which exceed such limit (according to
      the
      order in which they were granted) shall be treated as Nonqualified Stock
      Options.

     

    (e)
      No
      Incentive Stock Options may be granted more than ten (10) years from the
      Effective Date.

     

    (f)
      The
      Award Agreement for each Incentive Stock Option shall provide that the
      Participant shall notify the Company if such Participant sells or otherwise
      transfers any shares of Common Stock acquired upon exercise of the Incentive
      Stock Option within two (2) years of the Grant Date of such Incentive Stock
      Option or within one (1) year of the date such shares were acquired upon the
      exercise of such Incentive Stock Option.

     

    4.2
      Subject
      to the limitations of Section 3.4, the maximum aggregate number of shares of
      Common Stock subject to Incentive Stock Option Awards shall be the maximum
      aggregate number of shares available for Awards under the Plan.

     

    4.3
      The
      Board may provide for any other terms and conditions which it determines should
      be imposed for an Incentive Stock Option to qualify under Section 422 of the
      Code, as well as any other terms and conditions not inconsistent with this
      Article IV or Articles III or VI, as determined in its sole discretion and
      set
      forth in the Award Agreement for such Incentive Stock Option.

     

    4.4
      Each
      provision of this Article IV and of each Incentive Stock Option granted
      hereunder shall be construed in accordance with the provisions of Section 422
      of
      the Code, and any provision hereof that cannot be so construed shall be
      disregarded.

     
      

    ARTICLE
      V -- NONQUALIFIED STOCK OPTIONS

    

    5.1
      The
      Board may, in its sole discretion, from time to time on or after the Effective
      Date grant Nonqualified Stock Options to Eligible Persons, subject to the
      provisions of this Article V and Articles III and VI and subject to the
      following conditions:

     

    (a)
      Nonqualified Stock Options may be granted to any Eligible Person,
      each of
      whom may be granted one or more of such Nonqualified Stock Options, at such
      time
      or times determined by the Board.

     

    (b)
      The
      Option Price per share of Common Stock for a Nonqualified Stock Option shall
      be
      set in the Award Agreement and may be less than one hundred percent (100%)
      of
      the Fair Market Value of the Common Stock at the Grant Date; provided, however,
      that the exercise price of each Nonqualified Stock Option granted under the
      Plan
      shall in no event be less than the par value per share of the Company's Common
      Stock.

     

    (c)
      A
      Nonqualified Stock Option may be exercised in full or in part from time to
      time
      within the Option Period specified by the Board and set forth in the Award
      Agreement; provided, however, that, in any event, the Nonqualified Stock Option
      shall lapse and cease to be exercisable upon a Termination of Service or within
      such period following a Termination of Service as shall have been determined
      by
      the Board and set forth in the related Award Agreement.

     

    5.2
      The
      Board may provide for any other terms and conditions for a Nonqualified Stock
      Option not inconsistent with this Article V or Articles III or VI, as determined
      in its sole discretion and set forth in the Award Agreement for such
      Nonqualified Stock Option.

     

    ARTICLE
      VI -- INCIDENTS OF STOCK OPTIONS

     

    6.1
      Each
      Stock Option shall be granted subject to such terms and conditions, if any,
      not
      inconsistent with this Plan, as shall be determined by the Board and set forth
      in the related Award Agreement, including any provisions as to continued
      employment as consideration for the grant or exercise of such Stock Option
      and
      any provisions which may be advisable to comply with applicable laws,
      regulations or rulings of any governmental authority.

     

    6.2
      Except
      as hereinafter described, a Stock Option shall not be transferable by the
      Participant other than by will or by the laws of descent and distribution,
      and
      shall be exercisable during the lifetime of the Participant only by the
      Participant or the Participant's guardian or legal representative. In the event
      of the death of a Participant, any unexercised Stock Options may be exercised
      to
      the extent otherwise provided herein or in such Participant's Award Agreement
      by
      the executor or personal representative of such Participant's estate or by
      any
      person who acquired the right to exercise such Stock Options by bequest under
      the Participant's will or by inheritance. The Board, in its sole discretion,
      may
      at any time permit a Participant to transfer a Nonqualified Stock Option for
      no
      consideration to or for the benefit of one or more members of the Participant's
      Immediate Family (including, without limitation, to a trust for the benefit
      of
      the Participant and/or one or more members of such Participant's Immediate
      Family or a corporation, partnership or limited liability company established
      and controlled by the Participant and/or one or more members of such
      Participant's Immediate Family), subject to such limits as the Board may
      establish. The transferee of such Nonqualified Stock Option shall remain subject
      to all terms and conditions applicable to such Nonqualified Stock Option prior
      to such transfer. The foregoing right to transfer the Nonqualified Stock Option,
      if granted by the Board shall apply to the right to consent to amendments to
      the
      Award Agreement.

     

    6.3
      Shares
      of Common Stock purchased upon exercise of a Stock Option shall be paid for
      in
      such amounts, at such times and upon such terms as shall be determined by the
      Board, subject to limitations set forth in the Stock Option Award Agreement.
      The
      Board may, in its sole discretion, permit the exercise of a Stock Option by
      payment in cash or by tendering shares of Common Stock (either by actual
      delivery of such shares or by attestation), or any combination thereof, as
      determined by the Board. In the sole discretion of the Board,
      payment
      in shares of Common Stock also may be made with shares received upon the
      exercise or partial exercise of the Stock Option, whether or not involving
      a
      series of exercises or partial exercises and whether or not share certificates
      for such shares surrendered have been delivered to the Participant. The Board
      also may, in its sole discretion, permit the payment of the exercise price
      of a
      Stock Option by the voluntary surrender of all or a portion of the Stock Option.
      Shares of Common Stock previously held by the Participant and surrendered in
      payment of the Option Price of a Stock Option shall be valued for such purpose
      at the Fair Market Value thereof on the date the Stock Option is
      exercised.

     

    6.4
      The
      holder of a Stock Option shall have no rights as a shareholder with respect
      to
      any shares covered by the Stock Option (including, without limitation, any
      voting rights, the right to inspect or receive the Company's balance sheets
      or
      financial statements or any rights to receive dividends or non-cash
      distributions with respect to such shares) until such time as the holder has
      exercised the Stock Option and then only with respect to the number of shares
      which are the subject of the exercise. No adjustment shall be made for dividends
      or other rights for which the record date is prior to the date such stock
      certificate is issued.

     

    6.5
      The
      Board may permit the voluntary surrender of all or a portion of any Stock Option
      granted under the Plan to be conditioned upon the granting to the Participant
      of
      a new Stock Option for the same or a different number of shares of Common Stock
      as the Stock Option surrendered, or may require such voluntary surrender as
      a
      condition precedent to a grant of a new Stock Option to such Participant.
      Subject to the provisions of the Plan, such new Stock Option shall be
      exercisable at such Option Price, during such Option Period and on such other
      terms and conditions as are specified by the Board at the time the new Stock
      Option is granted. Upon surrender, the Stock Options surrendered shall be
      canceled and the shares of Common Stock previously subject to them shall be
      available for the grant of other Stock Options.

     

    6.6
      The
      Board may at any time offer to purchase a Participant's outstanding Stock Option
      for a payment equal to the value of such Stock Option payable in cash, shares
      of
      Common Stock or Restricted Stock or other property upon surrender of the
      Participant's Stock Option, based on such terms and conditions as the Board
      shall establish and communicate to the Participant at the time that such offer
      is made.

     

    6.7
      The
      Board shall have the discretion, exercisable either at the time the Award is
      granted or at the time the Participant discontinues employment, to establish
      as
      a provision applicable to the exercise of one or more Stock Options that, during
      a limited period of exercisability following a Termination of Service, the
      Stock
      Option may be exercised not only with respect to the number of shares of Common
      Stock for which it is exercisable at the time of the Termination of Service
      but
      also with respect to one or more subsequent installments for which the Stock
      Option would have become exercisable had the Termination of Service not
      occurred.

     

    ARTICLE
      VII -- RESTRICTED STOCK

     

    7.1
      The
      Board may, in its sole discretion, from time to time on or after the Effective
      Date award shares of Restricted Stock to Eligible Persons as a reward for past
      service and an incentive for the performance of future services that will
      contribute materially to the successful operation of the Company an its
      Affiliates, subject to the terms and conditions set forth in this Article.

     

    7.2
      The
      Board shall determine the terms and conditions of any Award of Restricted Stock,
      which shall be set forth in the related Award Agreement, including without
      limitation:

     

    (a)
      the
      purchase price, if any, to be paid for such Restricted Stock, which may be
      zero,
      subject to such minimum consideration as may be required by applicable
      law;

     

    (b)
      the
      duration of the Restriction Period or Restriction Periods with respect to such
      Restricted Stock and whether any events may accelerate or delay the end of
      such
      Restriction Period(s);

     

    (c)
      the
      circumstances upon which the restrictions or limitations shall lapse, and
      whether such restrictions or limitations shall lapse as to all shares of
      Restricted Stock at the end of the Restriction Period or as to a portion of
      the
      shares of Restricted Stock in installments during the Restriction Period by
      means of one or more vesting schedules;

    

     (d)
      whether such Restricted Stock is subject to repurchase by the Company or to
      a
      right of first refusal at a predetermined price or if the Restricted Stock
      may
      be forfeited entirely under certain conditions;

     

    (e)
      whether any performance goals may apply to a Restriction Period to shorten
      or
      lengthen such period; and

     

    (f)
      whether dividends and other distributions with respect to such Restricted Stock
      are to be paid currently to the Participant or withheld by the Company for
      the
      account of the Participant.

     

    7.3
      Awards
      of Restricted Stock must be accepted within a period of thirty (30) days after
      the Grant Date (or such shorter or longer period as the Board may specify at
      such time) by executing an Award Agreement with respect to such Restricted
      Stock
      and tendering the purchase price, if any. A prospective recipient of an Award
      of
      Restricted Stock shall not have any rights with respect to such Award, unless
      such recipient has executed an Award Agreement with respect to such Restricted
      Stock, has delivered a fully executed copy thereof to the Board and has
      otherwise complied with the applicable terms and conditions of such
      Award.

     

    7.4
      In the
      sole discretion of the Board and as set forth in the Award Agreement for an
      Award of Restricted Stock, all shares of Restricted Stock held by a Participant
      and still subject to restrictions shall be forfeited by the Participant upon
      the
      Participant's Termination of Service and shall be reacquired, canceled and
      retired by the Company. Notwithstanding the foregoing, unless otherwise provided
      in an Award Agreement with respect to an Award of Restricted Stock, in the
      event
      of the death, Disability or Retirement of a Participant during the Restriction
      Period, or in other cases of special circumstances (including hardship or other
      special circumstances of a Participant whose employment is involuntarily
      terminated), the Board may elect to waive in whole or in part any remaining
      restrictions with respect to all or any part of such Participant's Restricted
      Stock, if it finds that a waiver would be appropriate.

     

    7.5
      Except
      as otherwise provided in this Article VII, no shares of Restricted Stock
      received by a Participant shall be sold, exchanged, transferred, pledged,
      hypothecated or otherwise disposed of during the Restriction
      Period.

     

    7.6
      Upon an
      Award of Restricted Stock to a Participant, a certificate or certificates
      representing the shares of such Restricted Stock will be issued to and
      registered in the name of the Participant. Unless otherwise determined
      by
      the
      Board, such certificate or certificates will be held in custody by the Company
      until (i) the Restriction Period expires and the restrictions or limitations
      lapse, in which case one or more certificates representing such shares of
      Restricted Stock that do not bear a restrictive legend (other than any legend
      as
      required under applicable federal or state securities laws) shall be delivered
      to the Participant, or (ii) a prior forfeiture by the Participant of the shares
      of Restricted Stock subject to such Restriction Period, in which case the
      Company shall cause such certificate or certificates to be canceled and the
      shares represented thereby to be retired, all as set forth in the Participant's
      Award Agreement. It shall be a condition of an Award of Restricted Stock that
      the Participant deliver to the Company a stock power endorsed in blank relating
      to the shares of Restricted Stock to be held in custody by the
      Company.

     

    7.7
      Except
      as provided in this Article VII or in the related Award Agreement, a Participant
      receiving an Award of shares of Restricted Stock Award shall have, with respect
      to such shares, all rights of a shareholder of the Company, including the right
      to vote the shares and the right to receive any distributions, unless and until
      such shares are otherwise forfeited by such Participant; provided, however,
      the
      Board may require that any cash dividends with respect to such shares of
      Restricted Stock be automatically reinvested in additional shares of Restricted
      Stock subject to the same restrictions as the underlying Award, or may require
      that cash dividends and other distributions on Restricted Stock be withheld
      by
      the Company or its Affiliates for the account of the Participant. The Board
      shall determine whether interest shall be paid on amounts withheld, the rate
      of
      any such interest, and the other terms applicable to such withheld
      amounts.

     

        
      

    ARTICLE
      VIII -- STOCK AWARDS

     

    8.1
      The
      Board may, in its sole discretion, from time to time on or after the Effective
      Date grant Stock Awards to Eligible Persons in payment of compensation that
      has
      been earned or as compensation to be earned, including without limitation
      compensation awarded or earned concurrently with or prior to the grant of the
      Stock Award, subject to the terms and conditions set forth in this Article
      VIII.

     

    8.2
      For the
      purposes of this Plan, in determining the value of a Stock Award, all shares
      of
      Common Stock subject to such Stock Award shall be set in the Award Agreement
      and
      may be less than one hundred percent (100%) of the Fair Market Value of the
      Common Stock at the Grant Date.

     

    8.3
      Unless
      otherwise determined by the Board and set forth in the related Award Agreement,
      shares of Common Stock subject to a Stock Award will be issued, and one or
      more
      certificates representing such shares will be delivered, to the Participant
      as
      soon as practicable following the Grant Date of such Stock Award. Upon the
      issuance of such shares and the delivery of one or more certificates
      representing such shares to the Participant, such Participant shall be and
      become a shareholder of the Company fully entitled to receive dividends, to
      vote
      and to exercise all other rights of a shareholder of the Company.
      Notwithstanding any other provision of this Plan, unless the Board expressly
      provides otherwise with respect to a Stock Award, as set forth in the related
      Award Agreement, no Stock Award shall be deemed to be an outstanding Award
      for
      purposes of the Plan.

     

    ARTICLE
      IX -- PERFORMANCE SHARES

    

    9.1
      The
      Board may, in its sole discretion, from time to time on or after the Effective
      Date award Performance Shares to Eligible Persons as an incentive for the
      performance of future services that will contribute materially to the successful
      operation of the Company and its Affiliates, subject to the terms and conditions
      set forth in this Article IX. 

     

    9.2
      The
      Board shall determine the terms and conditions of any Award of Performance
      Shares, which shall be set forth in the related Award Agreement, including
      without limitation:

     

    (a)
      the
      purchase price, if any, to be paid for such Performance Shares, which may be
      zero, subject to such minimum consideration as may be required by applicable
      law;

     

    (b)
      the
      performance period (the "Performance
      Period")
      and/or
      performance objectives (the "Performance
      Objectives")
      applicable to such Awards;

     

    (c)
      the
      number of Performance Shares that shall be paid to the Participant if the
      applicable Performance Objectives are exceeded or met in whole or in part;
      and

     

    (d)
      the
      form of settlement of a Performance Share.

     

    9.3
      At any
      date, each Performance Share shall have a value equal to the Fair Market Value
      of a share of Common Stock.

     

    9.4
      Performance Periods may overlap and Participants may participate simultaneously
      with respect to Performance Shares for which different Performance Periods
      are
      prescribed.

     

    9.5
      Performance Objectives may vary from Participant to Participant and between
      Awards and shall be based upon such performance criteria or combination of
      factors as the Board may deem appropriate, including, but not limited to,
      minimum earnings per share or return on equity. If during the course of a
      Performance Period there shall occur significant events which the Board expects
      to have a substantial effect on the applicable Performance Objectives during
      such period, the Board may revise such Performance Objectives.

     

    9.6
      In the
      sole discretion of the Board and as set forth in the Award Agreement for an
      Award of Performance Shares, all Performance Shares held by a Participant and
      not earned shall be forfeited by
      the
      Participant upon the Participant's Termination of Service. Notwithstanding
      the
      foregoing, unless otherwise provided in an Award Agreement with respect to
      an
      Award of Performance Shares, in the event of the death, Disability or Retirement
      of a Participant during the applicable Performance Period, or in other cases
      of
      special circumstances (including hardship or other special circumstances of
      a
      Participant whose employment is involuntarily terminated), the Board may
      determine to make a payment in settlement of such Performance Shares at the
      end
      of the Performance Period, based upon the extent to which the Performance
      Objectives were satisfied at the end of such period and pro rated for the
      portion of the Performance Period during which the Participant was employed
      by
      the Company or an Affiliate; provided, however, that the Board may provide
      for
      an earlier payment in settlement of such Performance Shares in such amount
      and
      under such terms and conditions as the Board deems appropriate or
      desirable.

     

    9.7
      The
      settlement of a Performance Share shall be made in cash, whole shares of Common
      Stock or a combination thereof and shall be made as soon as practicable after
      the end of the applicable Performance Period. Notwithstanding the foregoing,
      the
      Board in its sole discretion may allow a Participant to defer payment in
      settlement of Performance Shares on terms and conditions approved by the Board
      and set forth in the related Award Agreement entered into in advance of the
      time
      of receipt or constructive receipt of payment by the Participant. 

     

    9.8
      Performance Shares shall not be transferable by the Participant. The Board
      shall
      have the authority to place additional restrictions on the Performance Shares
      including, but not limited to, restrictions on transfer of any shares of Common
      Stock that are delivered to a Participant in settlement of any Performance
      Shares.

     

    ARTICLE
      X -- CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES

     

    10.1
      Upon the
      occurrence of a Change of Control and unless otherwise provided in the Award
      Agreement with respect to a particular Award:

     

    (a)
      all
      outstanding Stock Options shall become immediately exercisable in full, subject
      to any appropriate adjustments in the number of shares subject to the Stock
      Option and the Option Price, and shall remain exercisable for the remaining
      Option Period, regardless of any provision in the related Award Agreement
      limiting the exercisability of such Stock Option or any portion thereof for
      any
      length of time;

     

    (b)
      all
      outstanding Performance Shares with respect to which the applicable Performance
      Period has not been completed shall be paid out as soon as practicable as
      follows:

     

    (i)
      all
      Performance Objectives applicable to the Award of Performance Shares shall
      be
      deemed to have been satisfied to the extent necessary to earn one hundred
      percent (100%) of the Performance Shares covered by the Award;

     

    (ii)
      the
      applicable Performance Period shall be deemed to have been completed upon
      occurrence of the Change of Control;

     

    (iii)
      the
      payment to the Participant in settlement of the Performance Shares shall be
      the
      amount determined by the Board, in its sole discretion, or in the manner stated
      in the Award Agreement, as multiplied by a fraction, the numerator of which
      is
      the number of full calendar months of the applicable Performance Period that
      have elapsed prior to occurrence of the Change of Control, and the denominator
      of which is the total number of months in the original Performance Period;
      and

     

    (iv)
      upon
      the making of any such payment, the Award Agreement as to which it relates
      shall
      be deemed terminated and of no further force and effect.

     

    (c)
      all
      outstanding shares of Restricted Stock with respect to which the restrictions
      have not lapsed shall be deemed vested, and all such restrictions shall be
      deemed lapsed and the Restriction Period ended.

    

    10.2
      Anything
      contained herein to the contrary notwithstanding, upon the dissolution or
      liquidation of the Company, each Award granted under the Plan and then
      outstanding shall terminate; provided, however, that following the adoption
      of a
      plan of dissolution or liquidation, and in any event prior to the effective
      date
      of such dissolution or liquidation, each such outstanding Award granted
      hereunder shall be exercisable in full and all restrictions shall lapse, to
      the
      extent set forth in Section 10.1 (a), (b) and (c) above.

     

    10.3
      After
      the merger of one or more corporations into the Company or any Affiliate, any
      merger of the Company into another corporation, any consolidation of the Company
      or any Affiliate of the Company and one or more corporations, or any other
      corporate reorganization of any form involving the Company as a party thereto
      and involving any exchange, conversion, adjustment or other
      modification
      of the
      outstanding shares of the Common Stock, each Participant shall, at no additional
      cost, be entitled, upon any exercise of such Participant's Stock Option, to
      receive, in lieu of the number of shares as to which such Stock Option shall
      then be so exercised, the number and class of shares of stock or other
      securities or such other property to which such Participant would have been
      entitled to pursuant to the terms of the agreement of merger or consolidation
      or
      reorganization, if at the time of such merger or consolidation or
      reorganization, such Participant had been a holder of record of a number of
      shares of Common Stock equal to the number of shares as to which such Stock
      Option shall then be so exercised. Comparable rights shall accrue to each
      Participant in the event of successive mergers, consolidations or
      reorganizations of the character described above. The Board may, in its sole
      discretion, provide for similar adjustments upon the occurrence of such events
      with regard to other outstanding Awards under this Plan. The foregoing
      adjustments and the manner of application of the foregoing provisions shall
      be
      determined by the Board in its sole discretion. Any such adjustment may provide
      for the elimination of any fractional shares which might otherwise become
      subject to an Award. All adjustments made as the result of the foregoing in
      respect of each Incentive Stock Option shall be made so that such Incentive
      Stock Option shall continue to be an Incentive Stock Option, as defined in
      Section 422 of the Code.

     

    ARTICLE
      XI -- AMENDMENT AND TERMINATION

     

    11.1
      Subject
      to the provisions of Section 11.2, the Board of Directors at any time and from
      time to time may amend or terminate the Plan as may be necessary or desirable
      to
      implement or discontinue the Plan or any provision hereof. To the extent
      required by the Act or the Code, however, no amendment, without approval by
      the
      Company's shareholders, shall:

     

    (a)
      materially alter the group of persons eligible to participate in the
      Plan;

     

    (b)
      except as provided in Section 3.4, change the maximum aggregate number of shares
      of Common Stock that are available for Awards under the Plan;

     

    (c)
      alter
      the class of individuals eligible to receive an Incentive Stock Option or
      increase the limit on Incentive Stock Options set forth in Section 4.1(d) or
      the
      value of shares of Common Stock for which an Eligible Employee may be granted
      an
      Incentive Stock Option.

     

    11.2
      No
      amendment to or discontinuance of the Plan or any provision hereof by the Board
      of Directors or the shareholders of the Company shall, without the written
      consent of the Participant, adversely affect (in the sole discretion of the
      Board) any Award theretofore granted to such Participant under this Plan;
      provided, however, that the Board retains the right and power to:

     

    (a)
      annul
      any Award if the Participant is terminated for cause as determined by the Board;
      and

     

    (b)
      convert any outstanding Incentive Stock Option to a Nonqualified Stock
      Option.

     

    11.3
      If a
      Change of Control has occurred, no amendment or termination shall impair the
      rights of any person with respect to an outstanding Award as provided in Article
      X. 

     

    ARTICLE
      XII -- MISCELLANEOUS PROVISIONS

     

    12.1
      Nothing
      in the Plan or any Award granted hereunder shall confer upon any Participant
      any
      right to continue in the employ of the Company or its Affiliates or to serve
      as
      a Director or shall interfere in any way with the right of the Company or its
      Affiliates or the shareholders of the Company, as applicable, to terminate
      the
      employment of a Participant or to release or remove a Director at any time.
      Unless specifically provided otherwise, no Award granted under the Plan shall
      be
      deemed salary or compensation for the purpose of computing benefits under any
      employee benefit plan or other arrangement of the Company or its Affiliates
      for
      the benefit of their respective employees unless the Company shall determine
      otherwise. No Participant shall have any claim to an Award until it is actually
      granted under the Plan and an Award Agreement has been executed and delivered
      to
      the Company. To the extent that any person acquires a right to receive payments
      from the Company under the Plan, such right shall, except as otherwise provided
      by the Board, be no greater than the right of an unsecured general creditor
      of
      the Company. All payments to be made hereunder shall be paid from the general
      funds of the Company, and no special or separate fund shall be established
      and
      no segregation of assets shall be made to assure payment of such amounts, except
      as provided in Article VII with respect to Restricted Stock and except as
      otherwise provided by the Board.

     

    12.2
      The Plan
      and the grant of Awards shall be subject to all applicable federal and state
      laws, rules, and regulations and to such approvals by any government or
      regulatory agency as may be required. Any provision herein relating to
      compliance with Rule 16b-3 under the Act shall not be applicable with respect
      to
      participation in the Plan by Participants who are not subject to Section 16
      of
      the Act.

     

    12.3
      The
      terms of the Plan shall be binding upon the Company, its successors and
      assigns.

     

    12.4
      Neither
      a Stock Option nor any other type of equity-based compensation provided for
      hereunder shall be transferable except as provided for in Section 6.2. In
      addition to the transfer restrictions otherwise contained herein, additional
      transfer restrictions shall apply to the extent required by federal or state
      securities laws. If any Participant makes such a transfer in violation hereof,
      any obligation hereunder of the Company to such Participant shall terminate
      immediately.

     

    12.5
      The Plan
      shall be governed by, and construed in accordance with, the laws of the State
      of
      Nevada (without regard to its choice-of-law provisions).

     

    12.6
      Each
      Participant exercising an Award hereunder agrees to give the Board prompt
      written notice of any election made by such Participant under Section 83 (b)
      of
      the Code or any similar provision. 

     

    12.7
      If any
      provision of this Plan or an Award Agreement is or becomes or is deemed invalid,
      illegal or unenforceable in any jurisdiction, or would disqualify the Plan
      or
      any Award Agreement under any law deemed applicable by the Board, such provision
      shall be construed or deemed amended to conform to applicable laws, or if it
      cannot be construed or deemed amended without, in the determination of the
      Board, materially altering the intent of the Plan or the Award Agreement, it
      shall be stricken, and the remainder of the Plan or the Award Agreement shall
      remain in full force and effect.

     

    12.8
      The
      grant of an Award pursuant to this Plan shall not affect in any way the right
      or
      power of the Company or any of its Affiliates to make adjustments,
      reclassification, reorganizations, or changes of its capital or business
      structure, or to merge or consolidate, or to dissolve, liquidate or sell, or
      to
      transfer all or part of its business or assets. 

     

    12.9
      The Plan
      is not subject to the provisions of ERISA or qualified under Section 401(a)
      of
      the Code.

     

    12.10
      If a
      Participant is required to pay to the Company an amount with respect to income
      and employment tax withholding obligations in connection with (i) the exercise
      of a Nonqualified Stock Option, (ii) certain dispositions of Common Stock
      acquired upon the exercise of an Incentive Stock Option, or (iii) the receipt
      of
      Common Stock pursuant to any other Award, then the issuance of Common Stock
      to
      such Participant shall not be made (or the transfer of shares by such
      Participant shall not be required to be effected, as applicable) unless such
      withholding tax or other withholding liabilities shall have been satisfied
      in a
      manner acceptable to the Company. To the extent provided by the terms of an
      Award Agreement, the Participant may satisfy any federal, state or local tax
      withholding obligation relating to the exercise or acquisition of Common Stock
      under an Award by any of the following means (in addition to the Company's
      right
      to withhold from any compensation paid to the Participant by the Company) or
      by
      a combination of such means: (i) tendering a cash payment; (ii) authorizing
      the
      Company to withhold shares of Common Stock from the shares of Common Stock
      otherwise issuable to the Participant as a result of the exercise or acquisition
      of Common Stock under the Award, provided, however, that no shares of Common
      Stock are withheld with a value exceeding the minimum amount of tax required
      to
      be withheld by law; or (iii) delivering to the Company owned and unencumbered
      shares of Common Stock.

    

    
                X
/s/
      J. Wade
      Mezey

                    Mezey
      Howarth Racing
      Stables, Inc

                    Its:
      Secratary

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