AGREEMENT

Exhibit 10.1

EXECUTION COPY

AGREEMENT

     THIS AGREEMENT (“ Agreement ”), dated as of February 4, 2009, is made by and among White Electronic Designs Corporation, an Indiana corporation (“ WEDC ”), Wynnefield Partners Small Cap Value, L.P. (and its affiliates) (“ Wynnefield Partners ”), Caiman Partners, L.P. (and its affiliates), Kahn Capital Management LLC (“ Kahn Partners ”) (“Kahn Partners”, “Caiman Partners” with Wynnefield Partners, each a “ Shareholder Party ” and collectively, the “ Shareholder Parties ”) and, solely with respect to Section 8(b) of this Agreement in each of their respective capacities as shareholders, Jack A. Henry, Paul D. Quadros, Thomas M. Reahard, Thomas J. Toy and Edward A. White. From time to time in this Agreement, WEDC, the Shareholder Parties and the individuals specified in the immediately preceding sentence are referred to individually as a “ Party ” and together as the “ Parties .”

     WHEREAS, the Shareholder Parties may be deemed to beneficially own shares of common stock of WEDC (the “ Common Stock ”) totaling, in the aggregate, 2,230,701 shares, or approximately 9.8% of the Common Stock issued and outstanding; and

     WHEREAS, WEDC and the Shareholder Parties have agreed that it is in their mutual interests to enter into this Agreement.

     NOW, THEREFORE, in consideration of the premises and the representations, warranties, and agreements contained herein, and other good and valuable consideration, the Parties mutually agree as follows:

      1. Representations and Warranties of the Shareholder Parties . Each of the Shareholder Parties represents and warrants to WEDC that (a) this Agreement has been duly authorized, executed and delivered by such Shareholder Party, and is a valid and binding obligation of such Shareholder Party, enforceable against such Shareholder Party in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles; (b) neither the execution of this Agreement nor the consummation of any of the transactions contemplated hereby nor the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of such Shareholder Party or any of its subsidiaries pursuant to any law, any order of any court or other agency of government, the organizational documents of such Shareholder Party as currently in effect, or the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which such Shareholder Party is a party or bound or to which its or its property or assets is subject; and (c) as of the date of this Agreement, the Shareholder Parties may be deemed to beneficially own in the aggregate 2,230,701 shares of Common Stock.

      2. Representations and Warranties of WEDC . WEDC hereby represents and warrants to the Shareholder Parties that (a) this Agreement has been duly authorized, executed and delivered by WEDC, and is a valid and binding obligation of WEDC, enforceable against WEDC in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy,

insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles; (b) neither the execution of this Agreement nor the consummation of any of the transactions contemplated hereby nor the fulfillment of the terms hereof, in each case in accordance with the terms hereof, will conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of WEDC or any of its subsidiaries pursuant to any law, any order of any court or other agency of government, WEDC’s Restated Articles of Incorporation, Amended and Restated Bylaws, or the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which WEDC is a party or bound or to which its property or assets is subject nor trigger any “change of control” provisions in any agreement to which WEDC is a party; and (c) the only proposals to be included in WEDC’s definitive proxy statement for its 2009 annual shareholder meeting will be a proposal for a slate of nominees to the Board of Directors of WEDC, the proposal described in Section 5(a) of this Agreement and a proposal to approve WEDC’s independent auditors.

      3. Directorships .

          (a) Prior to the time that WEDC mails its definitive proxy statement for its 2009 annual shareholder meeting, but in any event no later than seven (7) days after the date hereof, WEDC shall increase the size of its board of directors (the “ Board ”) from five (5) to seven (7) members. The Nominating and Corporate Governance Committee of the Board (the “ Nominating Committee ”) has in good faith, having reviewed and approved the credentials of Messrs. Brian Kahn and Mel Keating in the exercise of its fiduciary duties, concluded that each such candidate has business experience in such areas as would reasonably be expected to enhance the Board, and determined, consistent with WEDC’s guidelines relating to director qualifications and Board composition, to immediately appoint Messrs. Brian Kahn and Mel Keating to the Board (the “ New Appointees ”) to fill the vacancy on the Board created by increasing its size to seven (7) members, pending the Nominating Committee’s expected completion of background checks of the New Appointees by February 6, 2009.

          (b) WEDC agrees that the Board will take all actions necessary and appropriate to:

               (1) nominate the New Appointees as directors of WEDC at WEDC’s 2009 annual shareholder meeting (other than in the case of such person’s refusal to serve or if such person has committed an act that would be grounds for removal from the Board for cause, in which case the Shareholder Parties will have the right to designate and substitute another person or persons, subject to prompt reasonable evaluation and determination by the Nominating Committee in good faith after exercising its fiduciary duties that such candidate has business experience in such areas as would reasonably be expected to enhance the Board, consistent with WEDC’s guidelines relating to director qualifications and Board composition), together with the other persons included in WEDC’s slate of nominees for director, with terms expiring at WEDC’s 2010 annual shareholder meeting;

               (2) recommend, and reflect such recommendation in WEDC’s definitive proxy statement in connection with WEDC’s 2009 annual shareholder meeting, that the shareholders of WEDC vote to elect the New Appointees as directors of WEDC at the 2009 annual shareholder meeting;

               (3) use reasonable efforts consistent with the efforts used to obtain proxies for the other candidates nominated by the Board to obtain proxies in favor of the election of the New Appointees at the 2009 annual shareholder meeting; and

               (4) ensure that, for all times that either of the New Appointees or any replacement director appointed pursuant to Section 3(c) below, remains in office, one such appointee will have the right, subject to compliance with applicable Securities and Exchange Commission (the “ SEC ”)) and Nasdaq corporate governance rules, to serve on all committees and sub-committees of the Board (or any substitutes therefor), provided that the Board shall not be obligated to appoint or designate either New Appointee as the chairman of any such committee or sub-committee.

          (c) WEDC agrees that, during the term of this Agreement, if a New Appointee resigns or is otherwise unable to serve as a director or is removed for cause as a director, the Shareholder Parties will have the right to designate and substitute a person or persons for appointment to the Board as a replacement director, subject to evaluation and determination by the Nominating Committee using the standards described in Section 3(b)(1) ; provided that (1) the Board’s approval and appointment of the Shareholder Parties’ replacement nominee shall not be unreasonably withheld or delayed and (2) the Board shall not be required to approve more than one replacement at a time for each Board position to which the Shareholder Parties are entitled pursuant to Section 3(a) .

          (d) Each of the New Appointees, upon appointment or election to the Board, will be governed by the same protections and obligations regarding confidentiality, conflicts of interests, fiduciary duties, trading and disclosure policies and other governance guidelines, and shall have the same rights and benefits, including (but not limited to) with respect to insurance, indemnification, compensation and fees, as are generally applicable to any non-employee directors of WEDC. WEDC represents, warrants and agrees that it does not have any current policy nor will it adopt any policy requiring any director on the Board to purchase or sell securities of WEDC pursuant to a 10b5-1 plan to be adopted by any such director.

          (e) WEDC shall not, and shall cause the Board not to, take any action during the term of this Agreement, to increase the number of members on the Board to more than seven (7) directors; provided, however, that the Board may expand the number of members on the Board to eight (8) solely in the event that the Board determines that WEDC’s Chief Executive Officer should be appointed to the Board and, at such time, there are seven members then serving on the Board.

          (f) WEDC agrees that it shall hold the 2009 annual meeting of WEDC shareholders as soon as practicable, but in any event, no later than on or before May 15, 2009.

      4. Strategic Review Committee . WEDC hereby confirms that the Board has formed a Strategic Review Committee. Such committee shall, as promptly as practicable, approve and adopt a committee charter that incorporates the provisions attached hereto as Exhibit A . Any actions taken by the Board’s Strategic Review Committee (and any successor or other committee of the Board that performs a similar function), including any committee approvals or recommendations to the full Board, shall require the unanimous approval of all then serving members of such committee. For purposes of clarity, at all times during the duration of this Agreement, Mr. Kahn, one of the New Appointees (or such other director designated by the Shareholder Parties as provided for in Section 3(c) above) shall be a member of the Strategic Review Committee.

      5. Charter Documents .

          (a) WEDC shall recommend to its shareholders and reflect in its definitive proxy statement for its 2009 annual shareholder meeting that the shareholders approve amendments to WEDC’s Restated Articles of Incorporation authorizing WEDC’s shareholders representing a majority of WEDC’s outstanding shares of Common Stock to amend WEDC’s Amended and Restated Bylaws (the “ Bylaws ”). In addition, promptly following the execution of this Agreement, the Board shall amend the Bylaws in order to (1) allow shareholders owning at least 30% of WEDC’s outstanding shares of Common Stock to call a special meeting of shareholders and (2) limit the number of directors constituting the entire Board to no more than seven (7) directors; provided, however, that the Board may expand the number of members on the Board to eight (8) solely in the event that the Board determines that its Chief Executive Officer should be appointed to the Board and, at such time, there are seven members then serving on the Board.

          (b) In connection with the 2009 annual meeting of shareholders, the Board shall take all actions necessary and appropriate to recommend that the shareholders of WEDC vote to approve the proposal described in Section 5(a) above.

          (c) WEDC shall use reasonable efforts consistent with the efforts used to obtain proxies for the other proposals set forth in the proxy statement for the 2009 annual meeting to obtain proxies in favor of approval of the proposal described in Section 5(a) .

      6. Standstill Restrictions . Subject to applicable law, including Section 13(d) and (g) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), except as permitted pursuant to the terms of this Agreement, during the term of this Agreement, the Shareholder Parties shall not, and shall cause their respective officers, directors, employees, representatives and agents not to, in any manner, directly or indirectly:

          (a) solicit (as such term is used in the proxy rules of the SEC) proxies or written consents of shareholders, or conduct any nonbinding referendum with respect to Common Stock, or make, or in any way participate in, any “solicitation” of any “proxy” within the meaning of Rule 14a-1 promulgated by the SEC under the Exchange Act to vote any shares of Common Stock with respect to any matter, or become a “participant” in any “contested solicitation” for the election of directors with respect to WEDC (as such terms are defined or used in the Exchange Act and the rules promulgated thereunder), other than solicitations or acting as a participant in support of all of WEDC’s nominees and proposal described in Section 5(a) above;

          (b) purchase or cause to be purchased or otherwise acquire or agree to acquire beneficial ownership (as determined under Rule 13d-3 promulgated under the Exchange Act) of any Common Stock or other securities issued by WEDC, if in any such case, immediately after the taking of such action, (1) Wynnefield Partners would, in the aggregate, beneficially own more than 9.9% of the then outstanding shares of Common Stock or (2) Kahn Partners and Caiman Partners, L.P. (with its affiliates) would, in the aggregate, collectively beneficially own more than 9.9% of the then outstanding shares of Common Stock;

          (c) make or be the proponent of any shareholder proposal, whether pursuant to Rule 14a-8 of the Exchange Act or otherwise;

          (d) form, join or in any way participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to the Common Stock (other than a group comprised solely of the Shareholder Parties);

          (e) deposit any Common Stock in any voting trust or subject any Common Stock to any arrangement or agreement with respect to the voting of any Common Stock, other than any such voting trust, arrangement or agreement solely among the Shareholder Parties;

           ( f) execute any written consent as a shareholder with respect to WEDC or its Common Stock, except as set forth herein;

          (g) otherwise act, alone or in concert with others, to (i) make any public statement critical of WEDC, its directors or management or (ii) control or seek to control the Board, other than through non-public communications with the officers and directors of WEDC;

          (h) seek, alone or in concert with others, (i) to call a meeting of shareholders, (ii) representation on the Board, except as specifically contemplated in Sections 3(a), (b) and (c), or (iii) the removal of any member of the Board, except as specifically contemplated in Section 3(b)(5);

          (i) make any proposal regarding any of the foregoing;

          (j) publicly disclose any request to amend, waive or terminate any provision of this Agreement; or

          (k) take or seek to take, or cause or seek to cause others to take, directly or indirectly, any action inconsistent with any of the foregoing.

     Notwithstanding anything contained herein to the contrary, any member of the Shareholder Parties shall be entitled to:

               (i) vote their shares in favor of the election of the New Appointees at the 2009 WEDC annual meeting of shareholders and in favor of the proposal described in Section 5(a) hereof;

               (ii) vote their shares in accordance with Section 8 of this Agreement;

               (iii) propose a slate of nominees for election as directors and/or a proposal for consideration or approval by shareholders at the 2010 WEDC annual meeting or any special meeting of shareholders called for such purpose (other than by the Shareholder Parties) in order to comply with the advance notice provisions or other requirements of WEDC’s Restated Articles of Incorporation or Bylaws and to take such other actions with respect thereto as required to comply with the laws of the State of Indiana and the United States of America, and the regulations thereunder.

      7. Actions by the Shareholder Parties.

          (a) At WEDC’s 2009 annual shareholder meeting, the Shareholder Parties shall vote, and cause their respective officers, directors, employees and agents to vote, all of the shares of Common Stock beneficially owned by him or them for each of WEDC’s nominees for election to the Board, for the ratifica