Document:

exv10w26

 

Exhibit 10.26

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

     AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of June
     , 2007, by and among The Allied Defense Group, Inc., a Delaware corporation, 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: (703) 847-5268

Facsimile: (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.

* * * * * *

 

 

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:

     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:

     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:

     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:

     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:

 

 

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

 

 

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.

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.

 

 

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:                     

 

 

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.”

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	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.

 

 

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.

 

 

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:

[                                                                                                                                                      ]exv10w27

 

Exhibit 10.27

THE ALLIED DEFENSE GROUP, INC.

MECAR CERTIFICATE

     The undersigned, being the duly elected Chief Executive Officer and President of The Allied
Defense Group, Inc., a Delaware corporation (the “Company”), hereby represents, warrants and
certifies solely in his capacity as Chief Executive Officer and President (and not individually),
to the Buyers pursuant to Paragraph 1(c) of the Securities Purchase Agreement, dated as of June 19,
2007 (the “Securities Purchase Agreement”), by and among the Company and the investors identified
on the Schedule of Buyers attached thereto, as follows (capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities Purchase Agreement):

	 	1.	 	On July 11, 2007, Mecar S.A. (the “Supplier”) and Mecar LTD
(E.C.) (the “Buyer”) signed and delivered that certain contract (the “MECAR
Contract”), whereby the Buyer and the Seller have agreed on certain terms and
conditions with respect to orders for the delivery of product for a minimum
aggregate value of EUR 110,000,000, to be executed in two tranches, over a
two-year period as follows:

	 	(a)	 	The first tranche of the MECAR Contract shall
have a value of not less than EUR 60,000,000.
	 
	 	(b)	 	The orders under the MECAR Contract shall have
firm fixed price, and all currency risk shall be borne by the Supplier.
	 
	 	(c)	 	For each tranche of the MECAR Contract, (i)
the Buyer will provide a down payment of 15-20% against a Counter Bank
Guarantee provided by the Supplier, (ii) the Buyer will pay 70-75% of
the contract price for each partial shipment and (iii) the remaining
10% will be paid upon completion of the contract.
	 
	 	(d)	 	In accordance with the MECAR Contract, the
Buyer may inspect and accept/reject the supplied materials within three
months from delivery.
	 
	 	(e)	 	Under the MECAR Contract the maximum fine for
delay in delivery is 12% of the total value of the goods not delivered.
	 
	 	(f)	 	The terms of the MECAR Contract provide that
costs of transport, shipping, and insurance will be paid by the
Supplier to the port of entry.

	 	2.	 	As of the date hereof, the MECAR Contract has been executed and
delivered on behalf of the Buyer and the Supplier and constitute the legal,
valid and binding obligations of the Buyer and the Supplier enforceable against
the Buyer and the Supplier in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity or to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
	 
	 	3.	 	On July 11, 2007, the Company issued a press release announcing
the execution and delivery of the MECAR Contract.

[The remainder of the page is intentionally left blank]

 

 

     IN WITNESS WHEREOF, the undersigned has executed this certificate this 11th day of July, 2007.

	 	 	 
	 

	 	John J. Marcello
	 

	 	Chief Executive Officer and President
	 

	 	The Allied Defense Group, Inc.
	 

	 	8000 Towers Crescent Drive, Suite 260
	 

	 	Vienna, VA 22182

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