EDO CORPORATION
 
                          INCENTIVE COMPENSATION PLAN
 
I.  PURPOSE
 
     The purpose of this Plan is to provide an annual incentive opportunity for
eligible employees of EDO Corporation ("EDO" or "Company") in executive,
professional, technical or advisory positions whose actions are considered to
have a significant impact on the success of the Company.
 
II.  ADMINISTRATION
 
     This Plan is adopted, and shall be administered, by the Compensation
Committee of the Board of Directors of EDO (the "Committee"). The Committee
shall have complete authority to interpret all provisions of this plan.
 
III.  ELIGIBILITY
 
     Any salaried employee of EDO who, in the judgment of the Committee, meets
the criteria described in Article I may be selected for participation in the
Plan. The Committee has final authority for designating participants, but may
delegate this authority, as it deems advisable.
 
IV.  DEFINITIONS
 
  BUSINESS UNIT EARNINGS:
 
     Are pre-tax but exclude defined benefit plan pension income or expense,
amortization of acquisition-related intangibles (for acquisitions after December
31, 2002) and corporate interest income and/or expense.
 
  CORPORATE EARNINGS:
 
     Earnings before corporate interest income or expense, taxes, defined
benefit pension income or expense, amortization of acquisition-related
intangibles (for acquisitions after December 31, 2002), merger related costs and
non-cash ESOP income.
 
  GROSS SALES:
 
     The total at each business unit level, roll-up to group and corporate
totals are net of inter-company sales.
 
  AWARDS:
 
     Receipt of funded contracts within the year.
 
  INCENTIVE POOL:
 
     The amount arrived at by taking the sum of all individual incentive
targets.
 
  INDIVIDUAL INCENTIVE TARGET:
 
     The amount arrived at by taking the sum of the annual midpoint of each
participant's salary grade multiplied by the assigned target incentive
percentage to derive the amount of the individual's unadjusted target incentive
compensation.
 
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  THRESHOLD:
 
     The entry point of a measure used for calculation, which is seventy percent
(70%) of the measured factor's target. Meeting threshold would generate 50% of
the incentive pool.
 
  TARGET:
 
     The number submitted as the business plan for the incentive compensation
plan year. The business plan number may be adjusted up to meet either minimum
performance requirements or a stretch goal against the business plan for that
measure. Meeting target generates 100% of the incentive pool.
 
  MAXIMUM:
 
     One hundred and fifty percent (150%) of the target number for the measured
item, which generates 150% of the target pool.
 
V.  POOL SIZE
 
     The total Incentive Compensation Pool amount will not exceed 20% of
corporate earnings, nor 20% of the business unit's earnings, except as
authorized by the Compensation Committee.
 
VI.  CALCULATION
 
     To arrive at the current incentive compensation pool total and
subsequently, individual awards:
 
          1) Adjust incentive pool for changes to participants. Adjustments
     would include new hires and promotional adjustments since date of calendar
     year approval.
 
          2) Adjust the total incentive pool by corporate or business unit
     performance measurement factor. The Corporate threshold for earnings must
     be met for there to be an award at any level. Individual business units
     must meet their earnings threshold for there to be an incentive payment to
     that business unit.
 
          3) Calculate the actual individual award based on individual
     contribution to EDO performance. Individual Award assessment will be
     determined by individual goals set for the plan year. Individual
     performance ratings may range from zero (0) to 150 percent (150%).
 
     The sum of individual awards may not exceed the total adjusted pool without
Committee approval.
 
     The targets or adjusted targets for the Chief Executive Officer shall be
carved out of the pool prior to the calculations for individual awards. The
Compensation Committee shall calculate the CEO award.
 
     Excepted from this provision are special awards made to those employees
submitted by management and approved by the Committee. These awards shall be
paid from Company general funds, rather than Incentive Plan funding. The
Committee shall establish the size of this fund. Generally, recipients of
Special Awards are not Incentive Compensation Plan participants.
 
VII.  PERFORMANCE MEASUREMENT FACTOR
 
  INCENTIVE POOL DETERMINATION
 
  A)  Corporate and Group or Sector Level
 
     Plan participants, who are members of the Corporate Staff, Group
Vice-Presidents, and their staff, as well as other senior managers as designated
by management and approved by the Committee, will have
 
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<PAGE>
 
their target incentive compensation performance measurement factor calculated
based on the following factors:
 
<Table>
<S>                                                           <C>
EARNINGS....................................................  35%
AWARDS......................................................  15%
SALES.......................................................  15%
CASH FLOW MANAGEMENT........................................  15%
RETURN ON CAPITAL EMPLOYED..................................  20%
</Table>
 
(Group measure will be a roll-up of the weighted individual business units in
each Group or Sector.)
 
  B)  Business Unit Level
 
     For Plan Participants who are the management and employees of an EDO
business unit:
 
<Table>
<S>                                                           <C>
EARNINGS....................................................  40%
AWARDS......................................................  20%
SALES.......................................................  20%
CASH MANAGEMENT.............................................  20%
</Table>
 
     The threshold for each measure will be 70% of the target, which would
generate 50% of the incentive pool. The maximum for the measure would be 150% of
the target, which would generate a maximum Incentive Pool of 150%. Performance
results will be interpolated between threshold, target and maximum.
 
     All recommended awards are subject to final review and approval by the
President and Chief Executive Officer and the Committee. The Committee may, on
its own discretion or upon the recommendation of Management, adjust Business
Unit, Sector, Group or Corporate Performance Results for extraordinary events.
 
VIII.  OTHER PROVISIONS
 
     The Committee has sole authority to grant an amount, which is a percent of
the sum of all the Target Incentive Payout representing a Special Fund. The
Special Fund shall be for the express purpose of recognizing Incentive
Compensation Plan participants extraordinary contributions to the corporation.
 
IX.  PAYMENT
 
     Incentive compensation, if awarded, will be paid in the year subsequent to
the year in which it is earned at the earliest feasible date following the
determination of EDO's performance for the period. Payment is typically made in
the first quarter of the year following the Plan Year, after approval of year-
end results by the Audit Committee. (That is, not prior to the availability of
necessary approved financial and other information.) An exception to this policy
can be made in the event of plant closing or divestiture. The Committee will
have sole discretion with regard to the timing and payment of all incentive
awards.
 
X.  SERVICE FOR PART OF THE YEAR
 
     A participant whose employment commences after the start of an incentive
year will be eligible for incentive compensation on a pro-rata basis using the
number of full months of employment and personnel performance objectives.
 
     A participant whose employment terminated during an incentive year by
reason of retirement (normal or early), death, disability or for other reasons
acceptable to the Board, may, at the Committee's sole discretion, be paid
incentive compensation on a pro-rata basis at the same time other participants
are paid.
 
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There is no guarantee, however, that such payment will be made. Staff members
who terminate voluntarily, excluding retirement, during the course of the Plan
Year will NOT receive any incentive compensation for the Plan Year in which the
termination occurred.
 
     In the event of a salary grade change during the Plan Year, the
participant's target will be the pro-rated target of each respective salary
grade.
 
XI.  ACCOUNTING PROVISIONS
 
     Awards paid out under the provisions of this Plan will be accrued for, and
charged to each EDO operating unit in accordance with their unit targets. All
payments are subject to normal payroll tax withholding.
 
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