EMPLOYMENT AGREEMENT
 
 
            EMPLOYMENT AGREEMENT ("Agreement"), dated as of February 1, 2003, by
and between EDO Corporation, a New York corporation, and James M. Smith.
 
            WHEREAS, EDO Corporation (the "Company"), AIL Systems Inc. a wholly
- owned subsidiary of the Company ("AIL") and James M. Smith ("you") entered
into an amended and restated employment agreement, dated as of January 2, 2000,
which otherwise expires by its terms on May 1, 2003 (the "Expiring Agreement");
 
            WHEREAS, the Company desires that you continue in the positions of
Chairman, Chief Executive Officer and President and you are willing to continue
in such positions, all on the terms and conditions set forth in this new
Agreement;
 
            NOW, THEREFORE, the parties hereto agree as follows:
 
1.          Effective Date. This Agreement shall become effective as of the date
            first above written (the "Effective Date"), at which time the
            Expiring Agreement shall terminate and rendered void and without
            further effect.
 
2.          Employment Duties.
 
            (a)         Position and Duties. Subject to the terms and conditions
                        of this Agreement, the Company shall continue to employ
                        you as its Chairman, Chief Executive Officer and
                        President from and after the Effective Date until the
                        expiration of the Term (as defined in Section 3) of this
                        Agreement. In such position, you shall continue to be
                        responsible for the day-to-day operation and management
                        of the Company and have such powers, duties,
                        responsibilities and indemnification commensurate with
                        your experience and your position as Chief Executive
                        Officer and President as are set forth in the Company's
                        By-Laws and as may be assigned to you from time to time
                        by the Company's Board of Directors. You shall also
                        continue to serve, without additional compensation, in
                        such other position or positions with the Company and/or
                        its majority-owned subsidiaries commensurate with your
                        experience and position as Chief Executive Officer as
                        the Board of Directors shall assign to you at any time
                        and from time to time. It is understood that among your
                        duties during the term shall be to recommend to the
                        Board of Directors a mutually agreeable succession and
                        transition plan and the timely implementation of such
                        plan.
 
            (b)         Report to the Board. You shall continue to report
                        directly to the Company's Board of Directors. You shall
                        continue to serve as a member of the Board of Directors
                        of the Company and the Company will take such steps as
                        may be necessary and appropriate to have you nominated
                        for reelection for additional terms as a director during
                        the term of this Agreement.
 
            (c)         Working Time. You shall devote all of your working time,
                        on an exclusive basis, and except for vacations, periods
                        of illness, injury or other disability, to the business
                        and affairs of the Company.
 
            (d)         Location. Your principal place of employment shall be at
                        the Company's headquarters in New York City.
 
3.          Term. The term of this Agreement shall be the period from the
            Effective Date through May 31, 2006 (the "Term").
 
4.          Compensation and Benefits. During the Term, the Company shall pay to
            you, and you shall accept from the Company, as full compensation for
            all of your services hereunder, the amounts indicated in this
            Section 4:
 
            (a)         Base Salary. The Company shall pay to you an annual base
                        salary ("Base Salary") during the Term as followings:
 
                        -           $600,000 per annum during the first 12 month
                                    period of the Term;
 
                        -           $625,000 per annum during the second 12
                                    month period of the Term, and
 
                        -           $650,000 per annum thereafter.
 
            (b)         Annual Bonus. During each year of the Term you will be
                        eligible to receive an annual bonus in an amount
                        determined in the sole discretion of the Compensation
                        Committee of the Board of Directors (the "Committee").
                        Your bonus target shall be 75% of your Base Salary in
                        respect of the year in which the bonus is to be paid.
                        The Committee shall determine the time and manner of
                        payment.
 
            (c)         Other Compensation and Benefits. Except as otherwise
                        provided herein, you shall be eligible to participate
                        in, on a basis commensurate with your position with the
                        Company, all of the Company's employee compensation and
                        benefit plans and arrangements in effect at any time or
                        from time to time during the Term. You shall be entitled
                        to participate in or receive benefits under any employee
                        benefit plan or arrangement made available by the
                        Company to its executives and key management employees,
                        subject to and on a basis consistent with the terms and
                        conditions thereof. Notwithstanding the foregoing,
                        should their be a downward adjustment in the benefits
                        provided executive employees under the EDO Corporation
                        Supplemental Executive Retirement Plan (the "SERP"), the
                        Company shall provide you a benefit substantially
                        equivalent any shortfall resulting from such change,
                        payable on substantially the same basis and at
                        substantially the same time you would have received such
                        payments under the SERP had there been no downward
                        adjustment.
 
            (d)         Company Grant of Restricted Shares. You shall be granted
                        15,000 shares of the Company's common stock annually in
                        respect of each whole year in the Term, subject to your
                        execution of a restricted share agreement in a form
                        mutually agreed with the Company. The restricted shares
                        shall not be transferable and shall remain subject to
                        forfeiture until vested in accordance with the terms of
                        the grant, as reflected in the
                        restricted share agreement. It is not anticipated that
                        you will participate in any stock option program of the
                        Company during the term.
 
            (e)         Car Allowance. For your use during the Term, you will be
                        provided a new automobile every three years.
 
            (f)         Vacation. You shall be eligible for vacation benefits in
                        accordance with the Company's vacation policy. In no
                        event, however, shall you be provided less than four
                        weeks of vacation during any calendar year.
 
            (g)         Business Expenses. The Company shall reimburse you for
                        reasonable and necessary business expenses in accordance
                        with the Company's policies as the same may be amended
                        from time to time, and upon presentation of appropriate
                        documentation reasonably satisfactory to the Company.
 
            (h)         Legal Expenses. Upon your submission of receipts
                        reasonably acceptable to the Company and in accordance
                        with the Company's reimbursement policies, the Company
                        shall pay an additional amount during the Term in
                        respect of tax and estate planning not to exceed $15,000
                        in the aggregate.
 
5.          Termination of Employment. Your employment with the Company may
            terminate upon the occurrence of the following circumstances:
 
            (a)         Death and Disability. Your death or your inability to
                        perform your duties hereunder by reason of disability,
                        due to physical or mental illness, after reasonable
                        accommodation, for a period in excess of one hundred and
                        eighty (180) consecutive business days. Your employment
                        may be terminated by the Company by reason of your
                        disability, pursuant to this subsection (a) only if you
                        do not return to work within thirty (30) days after a
                        notice of termination has been provided to you in
                        writing by the Company.
 
            (b)         Cause. Termination of your employment by the Company for
                        "Cause", which for purposes of this Agreement shall
                        mean:
 
                        (i)         the willful and continued failure by you to
                                    substantially perform your duties hereunder
                                    (other than any such failure resulting from
                                    your disability due to physical or mental
                                    illness), after you have received from the
                                    Board of Directors of the Company a written
                                    demand for substantial performance that
                                    specifically identifies the manner in which
                                    the Board of Directors believes you have not
                                    substantially performed your duties and a
                                    reasonable opportunity under the
                                    circumstances to cure any such failure;
 
                        (ii)        the willful engaging by you in gross
                                    misconduct materially and demonstrably
                                    injurious to the Company;
 
                        (iii)       your having engaged in any conduct or failed
                                    to take any action, with respect to the
                                    Company, any of its employees, any of its
                                    affiliates or any of its
                                    shareholders, which act or failure to act
                                    constitutes a crime under federal or state
                                    law; or
 
                        (iv)        your having been convicted of or pleaded no
                                    contest to any crime involving moral
                                    turpitude or any crime that could carry a
                                    jail sentence as a penalty.
 
                        For purposes of this subsection (b), no act, or failure
                        to act, shall be considered "willful" unless done, or
                        omitted to be done, by you not in good faith and without
                        reasonable belief that your act or omission was in the
                        best interest of the Company. Notwithstanding the
                        foregoing, your employment shall not be deemed to have
                        terminated for Cause unless and until there shall have
                        been delivered to you a copy of a resolution duly
                        adopted by the affirmative vote of not less than
                        three-quarters (3/4) of the membership of the Board of
                        Directors of the Company (excluding you) at a meeting of
                        the Board of Directors called and held for such a
                        purpose (after reasonable notice to you and an
                        opportunity for you, together with your counsel, to be
                        heard before the Board of Directors), finding that in
                        the good faith opinion of the Board of Directors you
                        were guilty of the conduct set forth in this
                        subparagraph (b) and specifying the particular details
                        thereof in detail. Such finding by the Board of
                        Directors shall be conclusive and binding upon all
                        parties, and the Board of Directors is hereby granted
                        discretionary authority to make such determination.
 
            (c)         Retirement. Termination of your employment by you due to
                        your retirement in accordance with the terms of any
                        Company retirement plan in which you participate.
 
            (d)         Good Reason. Termination of your employment at any time
                        by you for "Good Reason." For the purpose of this
                        Agreement, Good Reason shall mean:
 
                        (i)         the assignment to you of any material duties
                                    inconsistent with your position, duties,
                                    responsibilities and status at the Company,
                                    as provided herein, without your express
                                    written consent;
 
                        (ii)        a change inconsistent with the provisions of
                                    this Agreement in your title as President
                                    and/or Chief Executive Officer, or
                                    substitution of a successor as President
                                    and/or Chief Executive Officer, or in your
                                    reporting responsibilities, except (A)
                                    during the final eighteen months of the Term
                                    with respect to a President and (B) during
                                    the final twelve months of the Term with
                                    respect to a Chief Executive Officer;
 
                        (iii)       a reduction in your Base Salary (as defined
                                    in Section 4(a));
 
                        (iv)        failure to allow you to participate in the
                                    any material employee benefit and executive
                                    compensation plans and arrangements
                                    available to senior executives in accordance
                                    with the provisions of Section 4(c) except
                                    as herein provided;
 
                        (v)         a requirement that you be based anywhere
                                    other than the Company's principal executive
                                    offices in the greater New York metropolitan
                                    area or, in the event you consent to any
                                    such relocation of the Company's principal
                                    executive offices, the failure by the
                                    Company to pay (or reimburse you for) all
                                    reasonable moving expenses incurred by you
                                    relating to a change of your principal
                                    residence in connection with such relocation
                                    and/or to indemnify you against any "loss"
                                    realized in the sale of your principal
                                    residence in connection with any such change
                                    of residence, where "loss" is defined as the
                                    amount by which the higher of (a) your
                                    aggregate investment in such residence and
                                    (b) the fair market value of such residence
                                    as determined by any real estate appraiser
                                    designated by you and reasonably
                                    satisfactory to the Company, exceeds the
                                    actual sale price of such residence; or
 
                        (vi)        if not automatic by operation of law, the
                                    failure of the Company to obtain the
                                    assumption of, and agreement to perform,
                                    this Agreement by any successor (whether
                                    direct or indirect, by purchase,
                                    consolidation or otherwise) to all or
                                    substantially all of the assets of the
                                    Company, by agreement in form and substance
                                    reasonably satisfactory to you.
 
6.          Compensation Upon Termination.
 
            (a)         Death or Disability. If your employment is terminated by
                        reason of your death or disability pursuant to Section
                        5(a), you or your estate, as the case may be, shall
                        receive your Base Salary through the date of your
                        termination and such other compensation and benefits to
                        which you are entitled in accordance with the terms and
                        conditions of the compensation and benefit plans and
                        arrangements in which you are then a participant.
 
            (b)         Cause. If your employment is terminated for Cause
                        pursuant to Section 5(b), you shall not be entitled to
                        any compensation for any period after termination, but
                        you shall receive such compensation and benefits for
                        time worked prior to such termination and to which you
                        are entitled in accordance with the terms of the
                        compensation and benefit plans in which you are then a
                        participant.
 
            (c)         Post-Retirement Consulting/Non-competition Payments. If
                        your employment is terminated by you due to your
                        retirement at the end of the Term pursuant to Section
                        5(c), you shall be provided the opportunity to provide
                        consulting services (the "Consulting Services"), for a
                        period of up to 2 years following such retirement (the
                        "Consulting Period"). As total consideration for the
                        Consulting Services, and in consideration of the
                        provisions of post-termination non-competition
                        provisions of Section 9(b) below, the Company will pay
                        you $300,000 during each year of the Consulting Period.
                        In the event of your demise during the Consulting
                        Period, the payment shall be made to your estate. In
                        accordance with the terms of the Company's health
                        insurance policy then in effect, you will be entitled to
                        participate in the Company's paid health insurance
                        during the Consulting Period. You shall not be eligible
                        to participate in any other plan or program of the
                        Company.
 
            (d)         Good Reason; Without Cause. Subject to the provisions of
                        Section 6(e), if your employment is terminated by you
                        for Good Reason pursuant to Section 5(d), or is
                        terminated by the Company for any reason other than
                        death, disability, Cause,
                        retirement, expiration of the Term or mutual written
                        agreement, the Company will pay to you the following
                        amounts ((collectively, the "Termination Payments"):
 
                        (i)         An amount equal to the product of (x) the
                                    number three multiplied by (y) the sum of
                                    (A) your annual Base Salary as defined in
                                    Section 4(a), plus (B) the average annual
                                    Company incentive bonus amount awarded to
                                    you for the three years preceding the
                                    termination of your employment, or the
                                    previous year's incentive bonus if higher.
                                    The Termination Payment will be paid in cash
                                    in a single sum promptly following the date
                                    of termination.
 
                        (ii)        If a payment is made under (i) above, in
                                    addition:
 
                                    (A)         for the three-year period
                                                following your termination of
                                                employment, you (and to the
                                                extent covered at the date of
                                                your termination of employment,
                                                your spouse and your eligible
                                                dependents) shall be entitled to
                                                continued coverage under the
                                                Company's medical, life and
                                                disability plans for employees,
                                                as the same may be modified from
                                                time to time for employees
                                                generally, on the same terms and
                                                conditions as though you had
                                                continued in the Company's
                                                employ (or, at the Company's
                                                election, coverage equivalent
                                                thereto); and
 
                                    (B)         during the same period you shall
                                                be entitled to five years (or up
                                                to age 65 whichever is earlier)
                                                of continued participation
                                                service accrual under each
                                                employee retirement plan in
                                                which you are then
                                                participating, whether or not
                                                qualified (the "Pension Plans"),
                                                to a period not to exceed the
                                                granting of credited service to
                                                all Plan participants; and
 
                                    (C)         upon the completion of the
                                                period set forth in (A) above,
                                                you will be entitled to those
                                                benefits (or their equivalent)
                                                to which retirees of the Company
                                                may be entitled in accordance
                                                with the terms and conditions of
                                                the Pension Plans and the
                                                medical and life insurance plans
                                                for retirees, as those plans may
                                                be modified from time to time
                                                for employees generally.
 
                                    (D)         Notwithstanding the provisions
                                                of (b)(ii)(B) above, in the
                                                event that the granting of
                                                vested service accrual credit to
                                                you under the Pension Plan
                                                could, in the reasonable opinion
                                                of the Company, adversely affect
                                                the tax-qualified status of the
                                                Pension Plan, such service
                                                credit shall not be granted and
                                                in lieu thereof, the Company
                                                shall pay you, upon the
                                                expiration of the period set
                                                forth in (A) above, a single
                                                cash payment equal to the
                                                actuarial equivalent of the
                                                increase in your retirement
                                                benefit that would have resulted
                                                if the service credit had been
                                                granted, as determined by the
                                                enrolled actuary regularly
                                                consulted by the Company for the
                                                Pension Plan, and shall be paid
                                                in accordance with the terms of
                                                the Pension Plan in effect at
                                                that time,
                                                with the determination of such
                                                actuary being final and binding
                                                upon all parties.
 
                                    (E)         All of the shares of Company
                                                restricted stock granted,
                                                whether pursuant to Section 4(d)
                                                or otherwise, shall fully and
                                                immediately vested on the date
                                                your employment terminates under
                                                the Section 6(d) and upon any
                                                termination described in Section
                                                6(d) any options to purchase
                                                Company stock not otherwise
                                                vested for any reason shall be
                                                deemed to be and shall become
                                                fully vested and nonforfeitable
                                                and immediately exercisable, and
                                                remain exercisable in accordance
                                                with the terms of the stock
                                                option plan.
 
            (e)         Release and Full Satisfaction. The Termination Payments
                        under Section 6(d) shall be in lieu of any other
                        severance or termination benefits to which you may be
                        entitled under the Company's plans, policies, programs
                        or agreements and shall be subject to your execution of
                        a release and separation agreement in form and substance
                        satisfactory to the Company and its counsel. Payment of
                        any amounts under Section 6(d) shall be in full and
                        complete satisfaction of any claims that you may have
                        under this Agreement or otherwise arising in connection
                        with your employment with or termination of employment
                        by the Company and/or any of its subsidiaries; provided
                        that, nothing contained in this clause shall be
                        construed to limit your right to any vested benefits
                        accrued or payable under the terms of any employee
                        benefit plan (other than any severance plan) established
                        and maintained by the Company, any vested rights under
                        any equity based incentive award, whether granted to you
                        under the terms of this Agreement or otherwise, or any
                        of its subsidiaries or your right to indemnification
                        with respect to his service as an employee, officer or
                        director of the Company or any of its subsidiaries.
 
7.      Gross-up Payment Upon a Change in Control.
 
            (a)         Imposition of Excise Tax. In the event that any amount
                        or benefit paid or distributed to you pursuant to this
                        Agreement, taken together with any amounts or benefits
                        otherwise paid or distributed to you by the Company, any
                        subsidiary or any affiliated company (collectively, the
                        "Covered Payments"), would be an "excess parachute
                        payment" as defined in Section 280G of the Internal
                        Revenue Code of 1986, as amended (the "Code"), and would
                        thereby subject you to the tax (the "Excise Tax")
                        imposed under Section 4999 of the Code (or any similar
                        tax that may hereafter be imposed), the Company shall
                        pay to you following your termination of your employment
                        an additional amount (the "Tax Adjustment") such that
                        the net amount retained by you with respect to such
                        Covered Payments, after deduction of any Excise Tax on
                        the Covered Payments and any Federal, state and local
                        income tax, employment tax and Excise Tax (including any
                        interest and penalties) on the Tax Adjustment provided
                        for by this Section 7, but before deduction for any
                        Federal, state or local income or employment tax
                        withholding on such Covered Payments, shall be equal to
                        the amount of the Covered Payments. The Tax Adjustment
                        shall be paid at the same time the payment is due to the
                        Internal Revenue Service in respect of the Covered
                        Payments.
 
            (b)         Calculation Assumptions. For purposes of determining
                        whether any of the Covered Payments will be subject to
                        the Excise Tax and the amount of such Excise Tax,
 
                        (i)         such Covered Payments will be treated as
                                    "parachute payments" within the meaning of
                                    Section 280G of the Code, and all "parachute
                                    payments" in excess of the "base amount" (as
                                    defined under Section 280G(b)(3) of the
                                    Code) shall be treated as subject to the
                                    Excise Tax, unless, and except to the extent
                                    that, in the good faith judgment of the
                                    Company's independent certified public
                                    accountants or tax counsel of national
                                    reputation selected by the Company (the "Tax
                                    Advisors"), the Company has a reasonable
                                    basis to conclude that such Covered Payments
                                    (in whole or in part) either do not
                                    constitute "parachute payments" or represent
                                    reasonable compensation for personal
                                    services actually rendered (within the
                                    meaning of Section 280G(b)(4)(B) of the
                                    Code) in excess of the "base amount," or
                                    such `parachute payments" are otherwise not
                                    subject to such Excise Tax, and
 
                        (ii)        the value of any non-cash benefits or any
                                    deferred payment or benefit shall be
                                    determined by the Tax Advisors in accordance
                                    with the principles of Section 280G of the
                                    Code.
 
            (c)         Overpayment Adjustment. In the event that the Excise Tax
                        is subsequently determined by the Tax Advisors or
                        pursuant to any proceeding or negotiations with the
                        Internal Revenue Service to be less than the amount
                        taken into account hereunder in calculating the Tax
                        Adjustment made, you shall repay to the Company, at the
                        time that the amount of such reduction in the Excise Tax
                        is finally determined, the portion of such prior Tax
                        Adjustment that would not have been paid if such Excise
                        Tax had been applied in initially calculating such Tax
                        Adjustment, plus interest on the amount of such
                        repayment at the rate provided in Section 1274(b)(2)(B)
                        of the Code. Notwithstanding the foregoing, in the event
                        any portion of the Tax Adjustment to be refunded to the
                        Company has been paid to any Federal, state or local tax
                        authority, repayment thereof shall not be required until
                        actual refund or credit of such portion has been made to
                        you, and interest payable to the Company shall not
                        exceed interest received or credited to you by such tax
                        authority for the period it held such portion. You and
                        the Company shall mutually agree upon the course of
                        action to be pursued (and the method of allocating the
                        expenses thereof) if your good faith claim for refund or
                        credit is denied.
 
            (d)         Underpayment Adjustment. In the event that the Excise
                        Tax is later determined by the Tax Advisors or pursuant
                        to any proceeding or negotiations with the Internal
                        Revenue Service to exceed the amount taken into account
                        hereunder at the time the Tax Adjustment is made
                        (including, but not limited to, by reason of any payment
                        the existence or amount of which cannot be determined at
                        the time of the Tax Adjustment), the Company shall make
                        an additional Tax Adjustment in respect of such excess
                        (plus any interest or penalty payable with respect to
                        such excess) at the time that the amount of such excess
                        is finally determined.
 
            (e)         Timing of Payment. Any Tax Adjustment (or portion
                        thereof) shall be paid to you not by wire transfer or
                        certified check not later than the day the applicable
                        tax payment is due in respect of the applicable Covered
                        Payment to which it relates; provided, however, that if
                        the amount of such Tax Adjustment (or portion thereof)
                        cannot be finally determined on or before the date on
                        which payment is due, the Company shall pay to you by
                        such date an amount estimated in good faith by the Tax
                        Advisors to be the minimum amount of such Tax Adjustment
                        and shall pay the remainder of such Tax Adjustment
                        (together with interest at the rate provided in Section
                        1274(b)(2)(IB) of the Code) as soon as the amount
                        thereof can be determined, but in no event later than
                        the due date pursuant to any demand therefor by the
                        Internal Revenue Service.
 
            (f)         Impact of Section 7. Notwithstanding anything else to
                        the contrary contained in this Section 7, you shall not
                        be required to take any actions or pay any amounts under
                        this Section that will in the aggregate, cause you to
                        receive less compensation (on a net-after tax basis)
                        than if this Section 7 was omitted from this Agreement
                        in its entirety.
 
8.          Successors. As used in this Agreement, "the Company" shall mean the
            Company as hereinbefore defined and any successor (whether direct or
            indirect, by purchase, merger, consolidation, reorganization or
            otherwise) to all or substantially all of the assets of the Company.
            This Agreement shall inure to the benefit of and be enforceable by
            your personal or legal representatives, executors, administrators,
            successors, heirs, distributees, devisees and legatees.
 
9.          Covenants. Confidential Information. You acknowledge and agree that
            you have and will come into contact with, have access to and learn
            various technical and non-technical trade secrets and other
            Confidential Information, which are the property of the Company.
            Such Confidential Information includes but is not limited to
            methods, procedures, devices and other means used by the Company in
            the conduct of its business, marketing plans and strategies, pricing
            plans and strategies, data processing programs, databases, formulae,
            secret processes, machines and adaptations thereto, inventions,
            research projects, and all other matters of a technical nature, all
            of which Confidential Information is not publicly available, but has
            been developed by the Company at its great effort and expense; names
            and addresses of the Company's customers and their representatives
            responsible for entering into contracts for the Company's services,
            customer leads or referrals, specific customer needs and
            requirements and the manner in which they have been met by the
            Company, information with respect to pricing, costs, profits, sales,
            markets, plans for future business and other development, all of
            which Confidential Information is not available from directories or
            other public sources; and information with respect to the Company's
            employees, their names and addresses, compensation, experience,
            qualifications, abilities, job performance and similar information.
            All of the Confidential Information has been developed, acquired or
            compiled by the Company at its great effort and expense.
 
            (a)         Non-Disclosure of Confidential Information. Except as
                        may be required in the proper performance of your duties
                        hereunder or as may be compelled by administrative or
                        judicial subpoena or other process, you acknowledge and
                        agree that any disclosure, divulging, revealing or other
                        use of any of the aforesaid Confidential Information by
                        you, other than in connection with the Company's
                        business will be highly detrimental
                        to the business of the Company and serious loss of
                        business and pecuniary damage may result therefrom.
                        Accordingly, you specifically covenant and agree to hold
                        all such Confidential Information and any documents
                        containing or reflecting the same in the strictest
                        confidence, and you will not, both during employment
                        with the Company or at any time thereafter, without the
                        Company's prior written consent, disclose, divulge or
                        reveal to any person whomsoever, or use for any purpose
                        other than the exclusive benefit of the Company, any
                        Confidential Information whatsoever, whether contained
                        in your memory or embodied in writing or other physical
                        form.
 
            (b)         Covenant Not to Compete. You acknowledge and agree that
                        the Company is engaged in a highly competitive business,
                        and by virtue of your position and responsibilities with
                        the Company, and your access to the Confidential
                        Information, engaging in any business which is directly
                        or indirectly competitive with the Company will cause it
                        great and irreparable harm. Consequently, you covenant
                        and agree that during the Term, and, in consideration of
                        the payments for the Consulting Services provided for in
                        Section 6(c) above, for the two-year period following
                        your termination of employment hereunder, you shall not
                        directly or indirectly own, manage, operate, control, be
                        employed by, participate in, or be connected with, in
                        any manner (other than as a shareholder of less than 2%
                        of the outstanding equity of any publicly traded
                        company), any business engaged in whole or in part in
                        any of the businesses conducted by the Company now or at
                        the time of the termination of your employment, or that
                        the Company has made substantial designs to pursue now
                        or at such time, in the United States, the same being
                        the same geographic area in which the Company's business
                        is conducted, without the prior written specific consent
                        of the Company. If requested, this consent shall not be
                        unreasonably withheld where the elements of competition
                        are not direct, or specific, to the Company's business.
 
            (c)         Non-Solicitation of Customers. You acknowledge and agree
                        that during the course and solely as a result of your
                        employment with the Company, you have and will become
                        aware of some, most or all of the Company's customers
                        and clients, their names and addresses, their
                        representatives responsible for engaging the Company's
                        services, their specific needs and requirements, and
                        lead and referrals to prospective customers and clients.
                        You further acknowledge and agree that the loss of such
                        customers and clients would cause the Company great and
                        irreparable harm. Consequently, you covenant and agree
                        that in the event of the termination of your employment
                        with the Company, whether voluntarily or involuntarily,
                        you will not, for the two year period following your
                        termination of employment hereunder, directly or
                        indirectly solicit to do business of a nature that is
                        directly or indirectly competitive with the business of
                        the Company or any of its subsidiaries with any customer
                        or client, former customer or client or prospective
                        customer or client of the Company with whom you came
                        into contact while employed by the Company or who was
                        known to you to be a current, former or prospective
                        customer or client of the Company. For purposes of the
                        immediately preceding sentence, a person or entity shall
                        be treated as a prospective customer only if and to the
                        extent that the Company has undertaken a deliberate
                        effort to obtain the business of such person or entity
                        and has a reasonable expectation of obtaining such
                        business.
 
            (d)         Non-Solicitation of Employees. You acknowledge and agree
                        that during the course of employment by the Company, you
                        have and may hereafter come into contact with some, most
                        or all of the Company's employees, their knowledge,
                        skills, abilities, salaries, commissions, benefits and
                        other matters with respect to such employees not
                        generally known to the public. You further acknowledge
                        and agree that any solicitation, luring away or hiring
                        of such employees of the Company will be highly
                        detrimental to the business of the Company and will
                        cause the Company serious loss of business and great and
                        irreparable harm. Consequently, you covenant and agree
                        that during the course of employment by the Company and
                        for the two year period following the termination of
                        your employment hereunder, you shall not directly or
                        indirectly, on behalf of yourself or another, solicit,
                        lure or hire any employees of the Company of whom you
                        became aware while employed by the Company, or assist or
                        aid in any such activity.
 
            (e)         Enforcement of Covenants. You acknowledge and agree that
                        compliance with the covenants set forth in this Section
                        9 is necessary to protect the business and goodwill of
                        the Company and that any breach of this Section 9 or any
                        subparagraph hereof will result in irreparable and
                        continuing harm to the Company, for which money damages
                        may not provide adequate relief Accordingly, in the
                        event of any breach or anticipatory breach of Section 9
                        by you, the Company and you agree that the Company shall
                        be entitled to the following particular forms of relief
                        as a result of such breach, in addition to any remedies
                        otherwise available to it at law or equity: (a)
                        injunctions, both preliminary and permanent, enjoining
                        or restraining such breach or anticipatory breach, and
                        you hereby consent to the issuance thereof forthwith and
                        without bond by any court of competent jurisdiction; and
                        (b) recovery of all reasonable sums and costs, including
                        attorneys' fees, incurred by the Company to enforce the
                        provisions of Section 9.
 
            (f)         Prior Commitments. The covenants set forth in this
                        Section 9 supplement, and do not supersede, the
                        covenants contained in any other agreement between you
                        and the Company.
 
            (g)         Interpretation. Nothing in Section 9(c) or (d) shall be
                        construed to prevent any entity to which you provide
                        services from independently engaging in conduct of a
                        nature and type that you would be prohibited from
                        undertaking by reason of such Sections so long as you do
                        not, directly or indirectly, assist such entity in such
                        conduct.
 
10.         Arbitration of Disputes and Jury Waivers. Except as set forth in
            Section 9 of this Agreement, the parties hereto agree to arbitrate
            any dispute, claim, or controversy (claim) against each other
            arising out of the cessation of your employment, any claim of
            unlawful discrimination or harassment that might or did arise during
            or as a result of your employment which could have been brought
            before an appropriate government administrative agency or in an
            appropriate court, including but not limited to claims of age
            discrimination under the Age Discrimination in Employment Act of
            1967, as amended, as well as any claim or controversy under this
            Agreement.
 
            The arbitration shall be arbitrated by one arbitrator in accordance
            with the National Rules for the Resolution of Employment Disputes of
            the American Arbitration Association. The parties hereto agree that
            the arbitration shall take place in New York County, New York. The
            arbitrator's fees will be shared equally by the parties. The
            decision or award of the arbitration shall be final and binding upon
            the parties. Any arbitral award may be entered as a judgment or
            order in any court of competent jurisdiction.
 
            Any Claims under Section 9 of this Agreement shall not be subject to
            arbitration, but shall be subject to the remedies set forth therein.
 
            (a)         Jury Trial. If for any reason this Arbitration provision
                        is declared unenforceable, you agree to waive any right
                        you may have to a jury trial with respect to any dispute
                        or claim against the Company relating to this Agreement,
                        your employment, and the termination or modification of
                        any terms and conditions of employment, including but
                        not limited to claims of age discrimination under the
                        Age Discrimination in Employment Act of 1967, as
                        amended.
 
            (b)         Venue. In the event this Arbitration provision is
                        declared unenforceable for any reason, or in the event
                        of any litigation arising pursuant to Section 9 of this
                        Employment Agreement, the parties agree that, with
                        respect to any litigation arising pursuant to this
                        Agreement, New York County, New York shall be the only
                        proper county for purposes of venue. The parties further
                        agree that they will submit to the personal jurisdiction
                        of any Court (Federal or State) located within New York
                        State.
 
11.         Miscellaneous.
 
            (a)         Waiver. No waiver or modification of the Agreement, nor
                        any portion hereof, shall be valid unless in writing and
                        signed by you and such officers as may be specifically
                        designated by the Board of Directors of the Company. No
                        waiver by either party hereto at any time of any breach
                        by the other party hereto of, or compliance with, any
                        condition or provision of this Agreement to be performed
                        by such other party shall be deemed a waiver of similar
                        or dissimilar provisions or conditions at the same or at
                        any prior or subsequent time. Any Notice of Termination
                        by you must be given not later than forty-five (45) days
                        after the occurrence of the event which you claim to
                        constitute Good Reason and any Notice of Termination by
                        the Company must be given not later than forty-five (45)
                        days after the Company becomes aware of the occurrence
                        of the event claimed by the Company to constitute Cause
                        or Disability. Subject to the preceding sentence, any
                        failure by the Company to claim promptly that any event
                        constitutes Cause, or failure by you to claim promptly
                        that any event constitutes Good Reason, shall not
                        preclude either the Company or you from claiming
                        subsequently that such event or any earlier or later
                        event constitutes Cause or Good Reason. No agreements or
                        representation, oral or otherwise, express or implied,
                        with respect to the subject matter hereof have been made
                        by any party which are not set forth expressly in this
                        Agreement.
 
            (b)         Notices. All notices required or permitted to be given
                        under the terms of the Agreement, or which any of the
                        parties desires to give hereunder, shall be in writing
                        and delivered personally or be sent by registered mail
                        or certified mail, postage prepaid, return receipt
                        requested, or by reputable private courier addressed as
                        follows:
 
                        If to the Company:     EDO Corporation
                                               60 E. 42nd St
                                               New York, New York
                                               Attn: Corporate Secretary
 
                        If to you:             Mr. James M. Smith
                                               35 Arrowhead Court
                                               Manhassett, NY 11030
 
                        With copy to:          Gavin McElroy, Esq.
                                               Frankfurt Kurnit Klein & Selz, PC
                                               488 Madison Avenue
                                               New York, NY 10022
 
                        Any party may change the address to which notice is to
                        be sent to it or to him by notice in writing to the
                        other party as provided above.
 
            (c)         Governing Law. This Agreement shall be subject to and
                        governed by the laws of the State of New York without
                        regard to its conflict of laws provisions.
 
            (d)         Severability. If any provision(s) of this Agreement
                        shall be found invalid or unenforceable, in whole or in
                        part, then such provision(s) shall be deemed to be
                        modified or restricted to the extent and in the manner
                        necessary to render the same value and enforceable, or
                        shall be deemed excised from the Agreement, as the case
                        may require, and this Agreement shall be construed and
                        enforced to the maximum extent permitted by law, as if
                        such provision(s) had been originally incorporated
                        herein as so modified or restricted or as if such
                        provision(s) had not been originally incorporated herein
                        as the case may be.
 
            (e)         Legal Fees and Expenses. If, following any final
                        adjudication of any proceeding, you shall have prevailed
                        as to at least one material issue presented in any
                        arbitration or other contest regarding your rights or
                        obligations under this Agreement or regarding the
                        validity or enforceability of any provision of this
                        Agreement, the Company shall pay the reasonable amount
                        of the legal fees and expenses you incurred as a result
                        of such arbitration or contest.
 
            (f)         Counterparts. This Agreement may be executed in multiple
                        counterparts, each of which shall be deemed an original.
 
 
                                        EDO CORPORATION
 
 
                                        By:     /s/ Patricia D. Comiskey
                                                ------------------------
                                        Name:   PATRICIA D. COMISKEY
                                        Title:  Vice President, Human Resources
 
 
 
                                        /s/     James M. Smith
                                                ------------------------
                                                JAMES M. SMITH