ALLIED DEFENSE GROUP INC
EX-10.1
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<DESCRIPTION>EX-10.1
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<P align="center" style="font-size: 10pt"><FONT style="font-size: 12pt">$2,000,000.00<BR>
<U><B>TERM LOAN PROMISSORY NOTE</B></U></FONT>



<P align="center" style="font-size: 12pt">From



<P align="center" style="font-size: 12pt">THE ALLIED DEFENSE GROUP, INC.<BR>
A Delaware Corporation



<P align="center" style="font-size: 12pt">Borrower



<P align="center" style="font-size: 12pt">To The Order Of



<P align="center" style="font-size: 12pt">ROBERT P. DOWSKI, OR ASSIGNEE



<P align="center" style="font-size: 12pt">Lender



<P align="left" style="font-size: 12pt; text-indent: 34%">Dated As of February&nbsp;3, 2006


<P align="center" style="font-size: 10pt; display: none; text-indent: 34%">1
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<P align="left" style="font-size: 12pt">Vienna, Virginia $2,000,000.00
<BR>
February&nbsp;3, 2006


<P align="center" style="font-size: 12pt"><U><B>TERM LOAN PROMISSORY NOTE</B></U>



<P align="left" style="font-size: 12pt; text-indent: 4%">FOR VALUE RECEIVED, the undersigned, THE ALLIED DEFENSE GROUP, INC., a Delaware corporation
(hereafter, the &#147;BORROWER&#148;), promises to pay to the order of ROBERT P. DOWSKI, or his assignee
(hereafter, the &#147;LENDER&#148;), at such place as the holder of this Promissory Note may from time to
time designate, the principal sum of Two Million Dollars ($2,000,000.00), or such lesser sum
actually advanced by the LENDER to the BORROWER hereunder at the request of the BORROWER (the
Lender has advanced to the BORROWER the principal sum of $1,000,000.00 on the date hereof),
together with interest thereon at the rate or rates hereafter specified. The following terms shall
apply to this Promissory Note.


<P align="left" style="font-size: 12pt; text-indent: 4%">1.&nbsp;<U>Interest Rate</U>. For the period from the date hereof until all unpaid sums
hereunder, whether principal, interest, charges, fees or other sums, have been paid in full,
interest shall accrue on the unpaid principal balance of this Promissory Note at twelve percent
(12%) per annum.


<P align="left" style="font-size: 12pt; text-indent: 4%">2.&nbsp;<U>Calculation of Interest</U>. Interest shall be calculated on the basis of a three
hundred sixty (360)&nbsp;days per year factor applied to the actual days on which there exists an unpaid
balance hereunder.


<P align="left" style="font-size: 12pt; text-indent: 4%">3.&nbsp;<U>Repayment</U>. Payment of accrued and unpaid interest and the unpaid principal sum
shall be made by the BORROWER to the holder of this Promissory Note in a lump sum on March&nbsp;15,
2006.


<P align="left" style="font-size: 12pt; text-indent: 4%">4.&nbsp;<U>Application Of Payments</U>. All payments made hereunder shall be applied first to
accrued interest, and then to principal, or in such other order or proportion as the holder, in the
holder&#146;s sole discretion, may elect from time to time.


<P align="left" style="font-size: 12pt; text-indent: 4%">5.&nbsp;<U>Prepayment</U>. The BORROWER may prepay this Promissory Note in whole or in part at
any time or from time to time without premium or additional interest.


<P align="left" style="font-size: 12pt; text-indent: 4%">6.&nbsp;<U>Default Interest Rate</U>. Upon a default in the payment of any sum due hereunder,
and without notice or demand, the rate of interest accruing on the unpaid principal balance shall
be automatically increased by two (2)&nbsp;percentage points until full and final payment of this
Promissory Note.


<P align="left" style="font-size: 12pt; text-indent: 4%">7.&nbsp;<U>Expenses Of Collection</U>. Should this Promissory Note be referred to any attorney
for collection, whether or not suit has been filed, the BORROWER shall pay all of the holder&#146;s
reasonable costs, fees (including, but not limited to, reasonable attorneys&#146; fees) and expenses
resulting from such referral.


<P align="left" style="font-size: 12pt; text-indent: 4%">8.&nbsp;<U>Subsequent Holders</U>. In the event that any holder of this Promissory Note
transfers this Promissory Note for value, the BORROWER agrees that no subsequent holder of this
Promissory Note shall be subject to any claims or defenses which the BORROWER may have against a
prior holder, all of which are waived as to the subsequent holder, and that all subsequent holders
shall have all of the rights of a holder in due course with respect to the BORROWER even though the
subsequent holder may not qualify, under applicable law, absent this paragraph, as a holder in due
course.


<P align="left" style="font-size: 12pt; text-indent: 4%">9.&nbsp;<U>Waiver Of Protest</U>. The BORROWER, and all parties to this Promissory Note,
whether maker, endorser, or guarantor, waive presentment, notice of dishonor and protest.


<P align="left" style="font-size: 12pt; text-indent: 4%">10.&nbsp;<U>Assignability</U>. This Promissory Note may be assigned by the LENDER or any holder
at any time or from time to time.


<P align="left" style="font-size: 12pt; text-indent: 4%">11.&nbsp;<U>Binding Nature</U>. This Promissory Note shall inure to the benefit of and be
enforceable by the LENDER and the LENDER&#146;S successors and assigns and any other person to whom the
LENDER may grant an interest in the BORROWER&#146;S obligations to the LENDER, and shall be binding and
enforceable against the BORROWER and the BORROWER&#146;S successors and assigns.


<P align="left" style="font-size: 12pt; text-indent: 4%">12.&nbsp;<U>Invalidity Of Any Part</U>. If any provision or part of any provision of this
Promissory Note shall for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions of this Promissory
Note and this Promissory Note shall be construed as if such invalid, illegal or unenforceable
provision or part thereof had never been contained herein, but only to the extent of its
invalidity, illegality, or unenforceability.


<P align="left" style="font-size: 12pt; text-indent: 4%">13.&nbsp;<U>Choice Of Law; Consent To Venue And Jurisdiction</U>. This Promissory Note shall
be governed, construed and interpreted strictly in accordance with the laws of the Commonwealth of
Virginia.


<P align="left" style="font-size: 12pt; text-indent: 4%">14.&nbsp;<U>Subordination</U>. It is understood that the BORROWER&#146;S obligation to satisfy its
obligations to the LENDER under this Promissory Note is subordinate to the LENDER&#146;S obligations to
Wilton Funding, LLC pursuant to the Loan and Security Agreement dated as of May&nbsp;28, 2004, as
amended, and all ancillary documents and instruments thereto.


<P align="center" style="font-size: 10pt; display: none; text-indent: 4%">2
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<P align="left" style="font-size: 12pt; text-indent: 4%">IN WITNESS WHEREOF, the BORROWER has executed this Promissory Note specifically intending this
Promissory Note to constitute an instrument under seal.

<DIV align="center">
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">WITNESS/ATTEST:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">THE BORROWER:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR></TD>
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<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">THE ALLIED DEFENSE GROUP, INC.<BR>
A Delaware Corporation
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><BR>
<BR></TD>
</TR>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(SEAL)</TD>
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    <TD valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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<P align="center" style="font-size: 10pt; display: none">3


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