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                           SECOND AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT


           SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of January
2, 2000, by and among AIL Systems Inc., a Delaware corporation, EDO Corporation,
a New York corporation, and James M. Smith.

           WHEREAS, AIL Systems Inc. ("AIL") and James M. Smith ("you") entered
into an employment agreement, dated as of April 29, 1998 (the "Employment
Agreement");

           WHEREAS, contemporaneously with the date hereof, AIL and EDO
Corporation (the "Company") are entering into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which AIL will become a wholly-owned
subsidiary of the Company;

           WHEREAS, the Company desires that you assume the positions of Chief
Executive Officer and President immediately following the effective time of the
merger contemplated under the Merger Agreement (the "Effective Time") and you
are willing to assume such positions, all on the terms and conditions set forth
herein;

           NOW, THEREFORE, the parties hereto agree as follows:

1.    Effective Date. This Agreement shall be and become effective as of the
      Effective Time. The Employment Agreement shall continue in full force in
      effect until the Effective Time, at which time it shall be amended and
      restated and superseded in its entirety by this Agreement. In the event
      that the Merger Agreement is terminated in accordance with its terms or
      that the Effective Time does not occur prior to June 15, 2000, this
      Agreement shall be rendered void and without effect and none of the
      parties hereto shall have any duties or obligations to, or rights against,
      any other party.
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2.    Employment, Duties.

      (a)   Position and Duties. Subject to the terms and conditions of this
            Agreement, the Company shall employ you as its Chief Executive
            Officer and President from and after the Effective Time until the
            expiration of the Term (as defined in Section 3) of this Agreement.
            In such position, you shall be responsible for the day to day
            operation and management of the Company and have such powers,
            duties, responsibilities and indemnifications 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 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.

      (b)   Report to the Board. You shall report directly to the Company's
            Board of Directors. Immediately following the Effective Time, you
            shall be elected as a member of the Board of Directors of the
            Company. During the term hereof, you shall be duly and timely
            nominated by the Board of Directors for reelection as a member of
            the Board at all appropriate times.

      (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 of three (3) years
      commencing on the Effective Date (the "Term"). The Company shall give you
      at least 90 days' written notice prior to the end of the Term regarding
      whether it intends to negotiate in good faith an agreement with you to
      replace this Agreement.

4.    Compensation and Benefits. During the Term of this Agreement, the Company
      shall pay to you, and you shall accept from the Company, as full
      compensation for your services hereunder, the following:

      (a)   Base Salary. The Company shall pay to you a salary at the rate of
            $425,000 per year ("Base Salary"), to be paid in accordance with the
            Company's customary payroll practices. Base Salary will be reviewed
            at least annually at or about April

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            of each year by the Company's Compensation Committee in light of
            competitive practices, the annual base salaries paid to other
            executives of the Company and your performance and that of the
            Company. Any increase in such base salary shall not reduce or
            otherwise offset any other obligation of the Company hereunder.

      (b)   Other Compensation and Benefits. You shall be eligible to
            participate in, on a basis commensurate with your position with the
            Company as provided herein, 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.

      (c)   Company Equity Awards. As of the Effective Time, you shall be
            granted 25,000 shares of the Company's common stock which shall not
            be transferrable and which shall remain subject to forfeiture until
            vested in accordance with the terms of such award. Such restricted
            shares shall generally vest in five approximately equal
            installments, on each of the first five anniversaries of the date of
            grant. The remaining terms and conditions of each such award shall
            be as set forth in a separate award agreement to be entered into
            between you and the Company.

      (d)   Car Allowance. During the Term, the Company will provide you with a
            new vehicle every three years.

      (e)   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.

      (f)   Business Expenses. The Company shall reimburse you for reasonable
            and necessary business expenses (including travel by business
            class), 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.

5.    Special Retention Payment. If you remain continuously employed on a
      full-time basis by the Company for a period of one year following the
      Effective Time, the Company will pay to you in a lump sum, within fifteen
      days of the first anniversary of the Effective Time, an amount equal to
      your Base Salary as in effect at the Effective Time.



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6.    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, 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; or

            (ii)  the willful engaging by you in gross misconduct materially and
                  demonstrably injurious to the Company.

           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,


                                       4
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           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)   without your express written consent, the assignment to
                        you of any duties inconsistent with your position,
                        duties, responsibilities and status at the Company, as
                        provided herein, or a change inconsistent with the
                        provisions of this Agreement in your reporting
                        responsibilities, titles or offices; provided that, in
                        the event that there occurs a Change of Control of the
                        Company (as defined in the Company's 1996 Long-Term
                        Incentive Plan, as currently in effect), you shall not
                        have "Good Reason" following such event under this
                        subclause (i) so long as you continue to be responsible
                        for the day to day operation and management of the
                        Company (or the successor in interest to the Company);

                  (ii)  a reduction in your Base Salary (as defined in Section
                        4(a)), as the same may be increased from time to time.

                  (iii) failure to allow you to participate in the employee
                        benefit and executive compensation plans and
                        arrangements in accordance with the provisions of
                        Section 4(b).

                  (iv)  the relocation of the Company's principal executive
                        offices to a location outside the New York metropolitan
                        area, or a requirement that you be based anywhere other
                        than the Company's principal executive offices 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. For
                        purposes of this paragraph, "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




                                       5
<PAGE>
                        satisfactory to the Company, exceeds the actual sale
                        price of such residence.

                  (v)   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.

      7.    Compensation Upon Termination.

            (a)   Death or Disability. If your employment is terminated by
                  reason of your death or disability pursuant to Section 6(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 6(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)   Good Reason; Without Cause. If your employment is terminated
                  by you for Good Reason pursuant to Section 6(c), or is
                  terminated by the Company for any reason other than death,
                  disability, Cause or mutual written agreement, the Company
                  will pay to you the amount set forth in subsection (i), below,
                  and in the manner provided in subsection (ii), below. Such
                  amount 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.

                  (i)   A termination payment ("Termination Payment") equal to:

                        (A)   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 amount awarded to you for
                              the three years preceding the termination of your
                              employment (including, for this purpose, any
                              bonuses payable to you by AIL), or the previous
                              year's incentive if higher, minus

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                        (B)   If your employment terminates on or after (but not
                              before) the first anniversary of the Effective
                              Time, an amount equal to the amount paid to you
                              pursuant to Section 5 times

                             (i)   one, if your termination of employment with
                                   the Company occurs at the first anniversary
                                   of the Effective Time or

                             (ii)  a fraction, the numerator of which is the
                                   number of whole calendar months between the
                                   termination of your employment and the end of
                                   the three-year period following the Effective
                                   Time, and the denominator of which is twenty-
                                   four, if your termination of employment
                                   occurs after such first anniversary and prior
                                   to the third anniversary of the Effective
                                   Time.

            (ii)  The Termination Payment will be paid in cash in a single sum
                  promptly following the date of termination. 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). 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. Upon the completion of the period set forth
                  above, you will also 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.

            (iii) Notwithstanding the foregoing, 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. In lieu thereof, the
                  Company shall pay you, upon the expiration of the period set
                  forth in (ii) above, a single cash payment equal to the
                  actuarial equivalent of the increase in your retirement
                  benefit that would


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                  have resulted if the service credit had been granted. This
                  amount will be determined by the enrolled actuary regularly
                  consulted by the Company for the Pension Plan and shall be
                  made in accordance with the terms of the Pension Plan in
                  effect at that time. Such determination will be final and
                  binding upon all parties.

            (iv)  Upon a termination described in Section 7(c) prior to the
                  second anniversary of the Effective Date, all of the shares of
                  Company restricted stock granted pursuant to Section 4(c)
                  shall fully and immediately vested on the date your employment
                  terminates and all of the shares of the Company common stock
                  subject to stock options issued in substitution of the options
                  granted in respect of Ail common stock on December 3, 1999
                  (the "Special Grant") shall become and remain exercisable
                  thereunder for a period of one year from the date of your
                  termination of employment. Following the second anniversary of
                  the Effective Time, no special vesting shall be applicable to
                  the restricted shares or the Special Option in the event of
                  your termination of employment for any reason.

            (v)   Upon any termination described in Section 7(c) (whenever
                  occurring during the Employment Term), any options to purchase
                  Company stock granted in substitution of options (other than
                  the Special Option) granted to you prior to the Effective Time
                  under the AIL Stock Option Plan shall be deemed to be and
                  shall become fully vested and nonforfeitable and immediately
                  exercisable, and remain exercisable for three years after the
                  date of your termination of employment.

            (vi)  If your employment terminates prior to the date as of which
                  you shall have accrued the right to be paid the special
                  retention bonus payable under Section 5, the Company shall
                  also pay you an amount equal to the amount that would have
                  been payable to you thereunder on the first anniversary of the
                  Effective Time had you remained in the Company's employ.

      (d)   Full Satisfaction. Payment of any amounts under Section 7(c) 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
            Section 7(d) 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

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            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.

8           Gross-up Payment.

      (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 immediately 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 8, 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.

      (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 selected by such
                  Accountants (the "Accountants"), 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






                                       9
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            (ii)  the value of any non-cash benefits or any deferred payment or
                  benefit shall be determined by the Accountants 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 Accountants 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 Accountants 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 later than 10 business days following the payment of
            the 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 Accountants 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)(B) of the Code) as soon as the amount thereof can be
            determined, but in no event later than 45 calendar days after
            payment of the related Covered Payment. In the event that the amount
            of


                                       10
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           the estimated Tax Adjustment exceeds the amount subsequently
           determined to have been due, such excess shall constitute a loan by
           the Company to Executive, payable on the fifth business day after
           written demand by the Company for payment (together with interest at
           the rate provided in Section 1274(b)(2)(B) of the Code).

      (f)  Impact of Section 8. Notwithstanding anything else to the contrary
           contained in this Section 8, 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 8 was omitted from this Agreement in its
           entirety.

9.    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.

10.   Covenants. Confidential Information. You acknowledge and agree that you
      have and will come into contact with, have access to and learn various
      technical and nontechnical 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
      adaptions 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.



                                       11
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      (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, or 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 the pursuit of electronic counter-measures, environmental
            monitoring, radar systems or satellite communications in the
            continental 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


                                       12
<PAGE>
            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
            subsidiaires 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 preceeding 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 10 is necessary to
            protect the business and goodwill of the Company and that any breach
            of this Section 10 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 10 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 10.



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<PAGE>
      (f)   Prior Commitments. The covenants set forth in this Section 10
            supplement, and do not supersede, the covenants contained in any
            other agreement between you and the Company.

      (g)   Interpretation. Nothing in Section 10(c) or (d) shall be construed
            to prevent any entity to which you provide services from
            independently enagaging 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.

11.   Arbitration of Disputes and Jury Waivers. Except as set forth in Section
      10 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 Suffolk 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 10 of this Employment 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 10 of this Employment Agreement, the
            parties agree that, with respect to any litigation


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<PAGE>
            arising pursuant to this Agreement, Suffolk 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.

12.   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: Secretary

           If to you:                Mr. James M. Smith
                                     8 Dexter Court
                                     Hauppauge, NY 11788



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<PAGE>
            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 proceding, 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 any legal fees and expenses which you shall have 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.



                                       16
<PAGE>
                                          EDO CORPORATION

                                          By:_________________________________
                                          Name:
                                          Title:


                                          AIL SYSTEMS INC.
                                          By:_________________________________
                                          Name:
                                          Title:



                                             _________________________________
                                             JAMES M. SMITH

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