[FORM OF [FOR AMENDED NOTES: AMENDED AND RESTATED] SENIOR SECURED CONVERTIBLE
NOTE]
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OR ASSIGNED UNLESS (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. NOTHING IN THE PRECEDING SHALL PROHIBIT THE PLEDGE OF THE
SECURITIES IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE
SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND
19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
The Allied Defense Group, Inc.
[FOR AMENDED NOTES: Amended and Restated] Senior Secured Convertible Note
[FOR AMENDED NOTES:: Original
Issuance Date: March 9, 2006]
Exchanged for New Note with
Issuance Date: [
],
2007]
[FOR INITIAL NOTES:
Issuance Date: [
], 2007]
Original Principal Amount: U.S. $[
]1
FOR VALUE RECEIVED, The Allied Defense Group, Inc., a Delaware corporation (the
"Company"), hereby promises to pay to [PORTSIDE GROWTH & OPPORTUNITY FUND][OTHER
BUYERS] or registered assigns ("Holder") the amount set out above as the
Original Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, and including any Capitalized Interest (as
defined in Section 2 below) thereon, the "Principal") when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof) and to pay interest (including, any
amounts of Additional Interest required to be paid pursuant to Section 2(d),
"Interest") on any outstanding Principal at a rate per annum equal to the
Interest Rate (as defined below), from June [
], 2007, the date set out
above as the Issuance Date, (the "Issuance Date") until the same becomes due and
payable, whether upon an Interest Date (as defined below), the Maturity Date,
acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). [FOR AMENDED NOTES: This Amended and Restated Senior
Secured Convertible Note (including all Senior Secured Convertible Notes issued
in exchange, transfer or replacement hereof, this "Note") amends, supplements,
modifies and completely restates and supersedes the Senior Subordinated
Convertible Note, dated March 9, 2006 (the "Existing Note"), issued by the
Company to the Holder in the Original Principal Amount