December 11, 2006
December
11, 2006
Wynnefield
Capital Management LLC
000
Xxxxxxx Xxxxxx
Suite
509
New
York,
New York 10123
Attn:
Xxxxxx Xxxx
Dear
Xxxxxx:
This
letter will memorialize our agreements concerning the Board of Directors (the
“Board”) of The Allied Defense Group, Inc. (“ADG”). You have requested that we
expand the Board and add Xxxxxxxxx X. Xxxxxxxxx (“Xxxxxxxxx”) thereto. We have
met with Xx. Xxxxxxxxx and agree that he would be a valuable addition to the
Board.
Accordingly,
we are willing to immediately expand the Board, to add Xx. Xxxxxxxxx to the
Board, and to include Xx. Xxxxxxxxx as a company-nominee in the ADG proxy
statement for the upcoming annual meeting of ADG stockholders (currently
scheduled for January 25, 2007). However, the Board conditioned these actions
on
the agreements set forth below.
Specifically,
we believe it appropriate that Wynnefield and its affiliates (“Wynnefield
Group”) agree that during Xx. Xxxxxxxxx’x tenure on the Board: (i) the
Wynnefield Group will be deemed an “insider” of ADG; and (ii) the Wynnefield
Group will be restricted with respect to the ADG securities transactions to
the
same extent as if you were a member of the Board. As we have discussed, each
member of the Board is subject to ADG stock trading restrictions as set forth
in
Policy Letter Number 2, a copy of which is attached hereto.
Our
offer
to add Xx. Xxxxxxxxx to the Board is further conditioned on the agreement of
the
Wynnefield Group to vote at the upcoming annual meeting all of its shares of
ADG
common stock in favor of the eight ADG management nominees to be included in
the
ADG proxy statement (i.e., Messrs. Xxxx, Xxxxxxxx, Xxxxx, Xxxxxx, Xxxxxxxx,
Xxxxxx, Xxxx and Xxxxxxxxx) and to take no actions inconsistent with the
election of these nominees.
Please
sign the enclosed copy of this letter and return it to me evidencing the
Wynnefield Group’s agreement with the foregoing. Upon receipt thereof, we will
formally extend the Board seat to Xx. Xxxxxxxxx and include him in the ADG
proxy
statement for the upcoming annual meeting.
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Sincerely,
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/s/
X. X. Xxxxxxx Xxxx, III
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X.
X. Xxxxxxx Xxxx, III
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AGREED
Wynnefield
Capital Management LLC
By:
/s/
Xxxxxx Xxxx
Xxxxxx Xxxx, Managing Member
