Document:

EXHIBIT 10.12
                                                                   -------------

                            TAKE TO AUCTION.COM. INC.
                            -------------------------

CONFIDENTIAL

Mr. Albert Friedman
President & Chief Executive Officer
Take to Auction.com, Inc.
2335 N.W. 107th Ave. Ste. 2M 23
Miami, FL 33172

1. This letter sets forth the terms of the engagement of ZeroDotNet, Inc.
("ZeroDotNet") by Take to Auction.com, Inc. ("Take to Auction" or the "Company")
to provide financial advisory and strategic planning services to the Company to
evaluate its strategic and financial alternatives. Capitalized terms not
otherwise defined are defined in the Glossary attached as EXHIBIT "A". Such
services may include:

         (a)      assisting the Company in considering strategic alternatives
                  for its long-term financial plans, including undertaking a
                  financial evaluation and analysis of one or more of the
                  strategic alternatives such as a Take to Auction Private
                  Placement and/or Initial Public Offering; and

         (b)      being available to meet with the Company's officers and board
                  of directors to discuss strategic alternatives and their
                  financial implications.

2. The Company will cooperate with and provide to ZeroDotNet all information
requested by ZeroDotNet in connection with this engagement. ZeroDotNet may rely,
without independent investigation, on the accuracy and completeness of all
information furnished by the Company.

3. The Company agrees that ZeroDotNet will have the exclusive first right of
refusal to serve as the Company's exclusive lead placement agent or financial
advisor, as the case may be, during the term hereof and for a period of twelve
months from the date of this Engagement Letter, in connection with: (i) any
private issuance of debt or equity securities (ii) a Corporate Transaction or
(iii) any financial or restructuring of indebtedness. The terms and conditions
of the engagement will be set forth in a separate engagement agreement
specifying the services, fees and indemnification of ZeroDotNet for the
transaction. The compensation provided ZeroDotNet pursuant to such future
engagement will be mutually agreed upon by the parties and will be based on the
compensation paid to nationally recognized investment banking firms involved in
transactions of similar size, scope, complexity, and value.

4. As compensation for its services under this engagement, ZeroDotNet will
receive a non-refundable cash retainer fee of $350,000 upon execution of this
Engagement Letter. Any monthly reimbursement for ZeroDotNet's Out-Of-Pocket
Expenses will be discussed and approved by the Company in advance. If the
company separately engages ZeroDotNet to act as its exclusive placement agent
for the Company's Private Placement and/or Initial Public Offering, then the
retainer fee will be credited agaist fees otherwise due for that Offering.

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5. This Engagement Letter and its contents, including the Offering and pricing
process and other proprietary information of ZeroDotNet, will be treated by the
Company as confidential. Any advice rendered by ZeroDotNet pursuant to this
engagement is also confidential. Confidential information may not be disclosed
publicly in any manner without ZeroDotNet's prior written approval.

6. The initial term of this engagement will be one year and the engagement will
automatically renew on a quarterly basis thereafter until terminated in writing
by either party. The engagement will terminate immediately: (i) upon execution
of a separate engagement letter regarding ZeroDotNet's engagement in connection
with a specific Transaction or Offering; (ii) upon manual written consent of
both parties; or (iii) if ZeroDotNet determines in its discretion that
completion of additional services is impractical, undesirable, or not advisable.
The provisions of paragraphs 3 and 5 through 9, will survive any termination.

7. This Engagement Letter will be governed by and construed and enforced in
accordance with the laws of the state of California, without regard to
principles of conflicts of laws. Any action arising out of any disputes between
the parties to this engagement letter shall be brought in either the Superior
Court for the County of San Francisco or the United States District Court of the
Northern District of California, and each of the parties hereto hereby submits
to the jurisdiction of such courts for purposes of any such action.

8. Any dispute arising between the parties hereunder will be resolved by
arbitration in accordance with the rules then in effect of the NASD, as governed
by the laws of the State of New York, which must be commenced by a written
notice of intention to arbitrate. Judgment upon an arbitration award may be
rendered in any court of competent jurisdiction. The parties agree to the
following facts about the arbitration procedures:

         (1)      Arbitration is final and binding on the parties.

         (2)      The parties are waiving their right to seek remedies in court,
                  including the right to jury trial.

         (3)      Pre-arbitration discovery is generally more limited than and
                  different from court proceedings.

         (4)      The arbitrator's award is not required to include factual
                  findings or legal reasoning and any party's right to appeal or
                  to seek modification of ruling by the arbitrators is strictly
                  limited.

         (5)      The panel of arbitrators will typically include a minority of
                  arbitrators who were or are affiliated with the securities
                  industry.

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<PAGE>

No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute arbitration agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until:

         o        the class certification is denied;

         o        the class is decertified; or

         o        the customer is excluded from the class by the court.

Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under this agreement except to the extent stated herein.

9. This Engagement Letter constitutes the entire understanding among the parties
and supersedes, in their entirety, any and all understandings, agreements,
contracts, arrangements, communications, discussions, representations and
warranties, whether oral or written, among the parties respecting the subject
matter.

Please confirm that the terms set forth in this Engagement Letter are in
accordance with your understanding by signing and returning to us the enclosed
duplicate of this Engagement Letter, along with a check for the retainer fee. We
look forward to working with you on this transaction. Please note that this
Engagement Letter contains a pre-dispute arbitration agreement, which is set
forth in Section 8 on page 2 of this Engagement Letter.

                                                     Very truly yours,

                                                     ZERODOTNET, INC.

                                                     By: /s/ Joe M. Marenda
                                                         ----------------------
                                                     Title: Managing Director
                                                           --------------------

AGREED and CONFIRMED

TAKE TO AUCTION.COM, INC.

By:  /s/ Albert Friedman
     ------------------------

Title:  President & CEO
      -----------------------

Date:  10/29/99
      ---------------

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<PAGE>

                              EXHIBIT A - GLOSSARY
                              --------------------

Unless otherwise expressly provided for, or unless the context otherwise clearly
requires, the definitions set forth in this Glossary govern the defined terms
used in the Engagement Letter and is part of, and is incorporated by reference
therein.

"Corporate Transaction" means any of the following:

         (i)      the sale of all or substantially all of the assets of the
                  Company or the acquisition of more than 50% of the voting
                  power of the Company by another entity by means of any
                  transaction or series of related transactions (including,
                  without limitation, any acquisition of capital stock,
                  reorganization, merger, or consolidation, but excluding any
                  merger effected exclusively for the purpose of changing the
                  domicile of the Company),

         (ii)     the sale of any equity or debt securities, or

         (iii)    any recapitalization or refinancing (except of real estate or
                  equipment indebtedness.)

"Engagement Letter" means the Engagement Letter between the Company and
ZeroDotNet relating to its services, including the Exhibits to the Engagement
Letter, and all documents executed in connection therewith.

"ZeroDotNet Private Placement" means the offer and sale of the Securities
conducted in compliance with Regulation D under the Securities Act of 1933,
including Rule 506, to "accredited investors", as that term is defined under
Rule 501(a).

"Out-of-Pocket Expenses" means any fees and expenses of ZeroDotNet's attorneys,
accountants, and other professionals of ZeroDotNet, if any, in connection with
services.

"ZeroDotNet" means ZeroDotNet, Inc., its parent corporation or any of the
parent's other subsidiaries.

"Representatives" means officers, directors, members, agents, employees,
consultants, management, or equity holders of at least 5% of the voting power of
the Company and attorneys, accountants, and other professionals.

"Retainer Fee" means the non-refundable retainer fee set forth in Section 4 of
the Engagement Letter.

"Securities" means the equity, equity-related, equity-linked or other securities
offered and sold by the Company.

                                       4<PAGE>
                 AMENDED AND RESTATED EMPLOYMENT AND RETIREMENT
 AGREEMENT made this 2nd day of January, 2000 by and between EDO Corporation, a
   New York corporation (the "Company"), and Frank A. Fariello ("Executive").

                              W I T N E S S E T H:

             WHEREAS, the Company and Executive have previously entered into an
Executive Termination Agreement (the "Termination Agreement") providing
Executive with certain rights upon the occurrence of a Change in Control;

             WHEREAS, substantially contemporaneously with the execution hereof,
the Company is entering into an Agreement and Plan of Merger (the "Merger
Agreement") with AIL Systems Inc. ("AIL") pursuant to which AIL will become a
wholly owned subsidiary of the Company;

             WHEREAS, the Company acknowledges that the merger contemplated
under the Merger Agreement (the "Merger") would constitute a Change of Control
of the Company under the terms of the Termination Agreement, and that Executive
would have the right to terminate his employment following the effective time of
the Merger (the "Effective Time") and receive the separation benefits payable
thereunder;

             WHEREAS, the Company has determined that, notwithstanding the
occurrence of such a Change of Control, it wants to have the services of the
Executive for a transition period following the Effective Time, and the
Executive is willing to agree to provide such services, in each case on the
terms and conditions set forth herein;

             WHEREAS, the Executive understands and agrees that, by agreeing to
the terms and conditions of this Agreement, if he terminates his own employment
voluntarily other than for Good Reason (as defined below) prior to the end of
the Employment Term, as specified in Section 2 below, he may lose the right to
receive the amounts that would otherwise have been payable to him under the
Termination Agreement;

             NOW, THEREFORE, the Company and Executive agree to supersede the
Termination Agreement and enter into the following Amended and Restated
Employment Agreement:

             1. Effect at Effective Time. This Amended and Restated Employment
Agreement shall be and become effective at the Effective Time. Until the time,
if any, at which the Effective Time occurs, the Termination Agreement shall
remain in full force and effect. Upon the occurrence of the Effective Time, the
Termination Agreement shall be superceded in its entirety by this Agreement and
neither the Company nor the Executive
<PAGE>
shall have any rights against, or obligations to, the other thereunder. In the
event that the Effective Time does not occur by June 15, 2000 or the Merger
Agreement is terminated in accordance with its terms, this Amended and Restated
Employment Agreement shall be rendered void and without effect and neither the
Company nor the Executive has or will have any rights against, or obligations
to, the other party hereunder.

             2.  Term; Duties.

             (a) Term. This Amended and Restated Employment Agreement shall have
an initial term commencing on the Effective Time and ending on July 2, 2000 (the
"Employment Term"). At the end of the Employment Term, the Executive shall
voluntarily resign from the Company's employment and, except as provided in
Section 2(b), as Chairman of the Board of Directors and as a member of the Board
of Directors.

             (b) Duties. During the Employment Term, the Executive shall serve
as the Chairman of the Board of Directors. In such capacity, the Executive shall
be responsible for shareholders relations and shall continue to be the Company's
principal representative to its shareholders, participate in the analysis of
strategic planning issues and opportunities and advise the Chief Executive
Officer and the Company with respect to matters pertaining to the Company's
international operations. The Executive shall also serve as a consultant to the
Chief Executive Officer, providing such assistance in the integration of the
Company and AIL and the transition of authority as the Chief Executive Officer
shall reasonably request from time to time, and have such other duties and
responsibilities commensurate with his position, training and experience as the
Board of Directors may assign. During the Employment Term, the Executive shall
also serve as a member of the Board of Directors. Following the end of the
Employment Term, the Executive shall resign from the Board of Directors unless
the Board of Directors requests in writing prior to the end of the Employment
Term that he continue to serve as Chairman and a member of the Board of
Directors, for such period as the Board specifies in writing, and Executive
agrees to continue in such capacity for such period. The Executive and the Chief
Executive Officer shall each report directly to the Board of Directors and,
except to the extent the Chairman is serving as a consultant to the Chief
Executive Officer, neither shall report to the other. The Executive shall devote
his full business time, other than periods of absence due to vacation or
illness, to the Company's affairs.

             3. Compensation. During the Employment Term, the Executive will
receive the following compensation for his services hereunder:

             (a) Base Salary. The Executive's annual base salary shall be at the
rate in effect on the date this Amended and Restated Employment Agreement is
executed. Such base salary shall be periodically reviewed by the Board of
Directors (or a duly authorized

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<PAGE>
committee thereof) and may, as a result of such review, be increased in
accordance with the Company's policies and practices for senior executives
generally. The Executive's base salary, as it may be increased from time to
time, shall not be decreased without his written consent.

             (b) Annual Incentive. With respect to calendar year 1999, the
Executive shall be eligible for an annual incentive award for his services as
Chief Executive Officer of the Company in accordance with the Company's policies
and practices applicable generally to the Company's senior executives; provided
that, the amount payable to the Executive in respect of 1999 shall be based on
the highest bonus amount paid to the Executive with respect to any of the three
immediately preceding fiscal years, pro-rated for his period of service as Chief
Executive Officer. Any bonus amounts payable to the Executive with respect to
his services as Chairman shall be determined by the Board or a duly authorized
committee thereof, in its sole discretion.

             (c) Benefits. The Executive shall be eligible to participate in
such employee and executive benefit plans and policies as shall generally be
made available to the Company's senior executives from time to time; including,
without limitation, all group life, health, accident and disability insurance
plans, and each qualified and nonqualified pension, profit-sharing or savings
plan maintained generally for the benefit of the Company's employees or for its
senior executives. Notwithstanding the foregoing, the amount of retirement
benefits (and the form in which any such benefits are) payable to the Executive
may not be modified.

             4.  Entitlement to Separation Benefits.

             (a) Termination Without Cause or For Good Reason. If during the
Employment Term Executive's employment is terminated due to his death or
Disability (as defined below), by the Company without "Cause" or by Executive in
a "Termination for Good Reason" (as each such term is defined below), the
Executive shall be paid the separation benefits described in Section 5 hereof.
For the avoidance of doubt, despite the provisions of the Termination Agreement,
Executive shall not be entitled to any payment of separation benefits hereunder
if he shall terminate his employment voluntarily (other than in a Termination
for Good Reason as expressly defined in this Amended and Restated Employment
Agreement) prior to the expiration of the current Employment Term.

             (b) Form of Payment. The total of the cash amounts to be paid under
Section 5(a) , subject to any taxes required to be withheld, shall be paid to
Executive as follows: (A) in a lump sum, on or before the fifth day following
"Date of Employment Termination" (as defined below); or (B) at Executive's
option, in monthly installments not to exceed a 36-month period, commencing on
the fifth day of the month following the

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<PAGE>
Date of Employment Termination, if written notification from the Executive is
received by the Company within 90 days prior to the Date of Employment
Termination or, if later, within 10 days prior to the Effective Time.

             (c) Loans. [The amount of any loan or advance to Executive shall be
due and payable as of the Date of Employment Termination. The Company shall have
no right of set off against any amount due Executive under this Agreement].

             (d) Termination for Cause. If the Executive's employment is
terminated by the Company for Cause, the Company shall pay the Executive his
full base salary through the Date of Employment Termination (at the rate in
effect as of the Date of Employment Termination), and the Company shall have no
further obligations to the Executive under this Agreement.

             (e) Disability. Disability shall mean the Executive's inability to
perform the principal duties of his position for a period of at least 180
consecutive days due to illness or injury. Disability shall be deemed to exist
under this Amended and Restated Employment Agreement if the Executive shall
become eligible to receive long-term disability benefits under any plan, policy
or arrangement maintained by the Company.

             (f) Definition of Cause. The following are the only reasons for
which the Company may terminate Executive's services for Cause without further
obligations under this Agreement:

            -     for providing the Company with materially false reports
                  concerning Executive's business interests or
                  employment-related activities;

            -     for making materially false representations relied upon by the
                  Company in furnishing information to shareholders, a stock
                  exchange, or the Securities and Exchange Commission;

            -     for maintaining an undisclosed, unauthorized and material
                  conflict of interest in the discharge of duties owed by
                  Executive to the Company;

            -     for misconduct causing a serious violation by the Company of
                  state or federal laws;

            -     for theft of Company funds or corporate assets; or

            -     for conviction of a crime (excluding traffic violations or
                  similar misdemeanors).

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<PAGE>
             (g) "Termination for Good Reason" shall mean termination of
Executive's employment by Executive following, or in connection with:

            -     during the Employment Term, any reduction in Executive's base
                  salary or any reduction in the Executive's bonus or incentive
                  compensation from the highest dollar amount or other rate of
                  bonus or incentive compensation payable to the Executive as an
                  annual bonus for the three calendar years preceding the
                  Effective Time or a significant reduction in the aggregate
                  value of the benefits to which Executive was entitled
                  immediately prior to the Effective Time;

            -     the Company's requiring Executive to be based at any office or
                  location other than the one where he worked immediately prior
                  to the Effective Time, except for travel reasonably required
                  in the performance of Executive's responsibilities;

            -     any purported termination by the Company of Executive's
                  employment otherwise than as permitted by this Agreement, it
                  being understood that any such purported termination shall not
                  be effective for any purpose of this Agreement; or

            -     any failure by the Company to obtain the assumption and
                  agreement to perform this Agreement by a successor as
                  contemplated by Section 9(a) hereof.

             (h) "Date of Employment Termination" shall mean the earlier of the
date on which Executive or the Company gives written notice of termination of
Executive's employment to the other party or, in the case where the Employment
Term expires due to the delivery of a notice of non-renewal, the date the
Employment Term lapses.

             5.  Amount of Separation Benefits.

             (a) Cash Separation Payments. Upon a termination of Executive's
employment under circumstances described in Section 4(a), the Executive shall
receive the following amounts in cash:

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<PAGE>
            -     Executive's full base salary through the Date of Employment
                  Termination, at the rate in effect ten (10) days prior to the
                  Date of Employment Termination; plus

            -     the product of

                  (A)   an amount equal to Executive's full base salary earned
                        from the beginning of the calendar year in which Date of
                        Employment Termination occurs through the Date of
                        Employment Termination, and

                  (B)   the greater of

                        (i)   20% and

                        (ii)  the percentage equal to the highest percentage of
                              base salary paid to the Executive as an annual
                              bonus for any of the three calendar years
                              preceding the calendar year in which the
                              Executive's termination of employment occurs (the
                              "Prior Bonus Percentage"),

             reduced by any installment of cash bonus previously paid by the
             Company to Executive for the applicable calendar year; plus

                  -     the full amount, if any, of any incentive or special
                        award which Executive earned but which has not yet been
                        paid; plus

                  -     three times the sum of

                        (A)   Executive's annual base salary, at the highest
                              rate in effect at any time up to Date of
                              Employment Termination, and

                        (B)   an amount equal to the product of

                             (i)   the annual base salary referred to in
                                   subclause (A) and

                             (ii)  the greater of

                                   (1)   20% and

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<PAGE>
                                   (2)   the Prior Bonus Percentage;

                  provided, however, that two-thirds of such amount (the
                  "Forfeitable Amount") shall be subject to recapture by the
                  Company in the event that a court of competent jurisdiction
                  finds that the Executive breached any of the covenants
                  contained in Section 7 in any material way; plus

            -     an amount which, as of the Date of Employment Termination, is
                  equal to the present value (calculated at a discount rate of
                  7% per annum) of (x) the lump sum value of the Retirement -
                  Pension to which Executive would have been entitled if the
                  four (4) years after the Date of Employment Termination were
                  added to his Credited Service under the EDO Corporation
                  Employees Pension Plan, reduced by (y) the lump sum value of
                  the Retirement Pension to which Executive - will be entitled
                  under the terms of such plan based upon termination of
                  employment as of the Date of Employment Termination and
                  assuming commencement of payment of Executive's pension
                  benefits at age 65. The lump sum value of Executive's
                  Retirement Pension shall be determined as of Executive's
                  retirement at age 65, using the same methods and assumptions
                  used at the Date of Employment Termination for purposes of the
                  EDO Corporation Employees Pension Plan.

            (b) Benefits. For three (3) years after the Date of Employment
Termination, the Company shall maintain in full force and effect and Executive
(and, if eligible dependents, if applicable) shall continue to participate in
all group life, health and accident, and disability insurance, and other
employee benefit plans, programs and arrangements in which Executive was
entitled to participate immediately prior to the Date of Employment Termination
(including, without limitation, the continued use of a company car, tax and
financial planning services and the right to an annual physical at the Company's
expense), provided that (i) continued participation is possible under the
general terms and provisions of such plans, programs and arrangements and (ii)
as of the third anniversary of Executive's Date of Termination, Executive shall
be deemed to have retired (regardless of Executive's age at such time) from
active employment with the Company for purposes of any plan or program
maintained by the Company under which medical, health, life or other welfare
benefits are provided to eligible retirees. If participation is barred, or an
applicable plan, program or arrangement is discontinued or the benefits
thereunder are materially reduced, the Company shall arrange to provide
Executive with benefits substantially similar to those which he was entitled to
receive immediately prior to the Date of Employment Termination. At the end of
the period of coverage above provided for, Executive shall have the option to
have assigned to him, at no cost and with no apportionment of prepaid premiums,
any assignable insurance owned by the Company and

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<PAGE>
relating specifically to him. The foregoing shall not be deemed to apply to any
plan which is intended to meet the requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") or any successor section
thereto.

             (c) No Offset or Mitigation. Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit so provided for be reduced by any compensation earned by him as the
result of employment by another employer after the Date of Employment
Termination, or otherwise.

             (d) Release. Notwithstanding the foregoing, payment of any amounts
under Section 5(a) shall be subject to and conditioned upon the execution by the
Executive of an appropriate release in such form as shall reasonably be
requested by the Company. For the avoidance of doubt, such release shall, among
other things, release the Company from any on going obligations under the
provisions of Section 10(g), pertaining to legal fees.

             (e) Treatment of Termination for Purposes of the SERP. If the
Executive's employment terminates in a manner which entitles the Executive to
receive the benefits payable under this Section 5, or terminates for any reason
other than Cause after the end of the Initial Term, the Executive shall be
eligible to receive a lump sum payment from the Company of an amount at least
equal to the present value of his accrued benefits under the Supplemental
Executive Retirement Plan ("SERP"), as in effect on the date hereof, regardless
of any amendment, termination or other modification the SERP occurring after the
date hereof.

             6. Special Retention Payment. To induce the Executive to enter into
this Amended and Restated Employment Agreement and to remain in the employ of
the Company during the critical transition period following the Effective Time
to enable the Company to successfully integrate the operations of the Company
and AIL, if the Executive is still employed by the Company on the last day of
the Employment Term, then subject to the execution from the Executive of a
release in accordance with the provisions of Section 5(d), the Company shall pay
to the Executive an amount in cash, in consideration for the performance of such
services on behalf of the Company following the Effective Time, equal to the
cash amount that would have been paid to the Executive pursuant to Section 5(a)
had his employment with the Company been terminated without Cause, which amount
shall be subject to the same conditions as apply to the amounts payable under
Section 5(a) (the "Special Retention Payment"). If payable in accordance with
the preceding sentence, such Special Retention Payment shall be paid to
Executive as follows: (A) in a lump sum, on or before the 10th day following the
date that Executive ceases to serve as Chairman or (B) at Executive's option, in
monthly installments not to exceed a 36-month period, commencing on the fifth
day of the month following the date

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<PAGE>
that Executive ceases to serve as Chairman, if written notification by the
Executive is received by the Company within 90 days prior to the date that
Executive ceases to serve as Chairman. If the Executive receives the Special
Retention Payment, the Company shall also provide to the Executive and his
dependents the same benefits (and on the same terms and for the same period of
time) as such benefits would have been provided under Section 5(b), were it
applicable.

             7.    Covenants.

             (a) Confidential Information. The Executive acknowledges and agrees
that the Executive has 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 (the "Confidential
Information"). 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.

             (b) Non-Disclosure of Confidential Information. The Executive
acknowledges and agrees that any disclosure, divulging, revealing or other use
of any of the aforesaid Confidential Information by the Executive, 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, the Executive specifically covenants and agrees
to hold all such Confidential Information and any documents containing or
reflecting the same in the strictest confidence, and the Executive 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 his
memory or embodied in writing or other physical form.

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<PAGE>
             (c) Covenant Not To Compete. The Executive acknowledges and agrees
that the Company is engaged in a highly competitive business, and by virtue of
his position and responsibilities with the Company, and his 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, the Executive covenants and agrees that during the Term, and
for a period of two years after the Date of Employment Termination, the
Executive shall not directly or indirectly own, manage, operate, control, be
employed by, participate in, or be connected with, in any manner, any business
engaged in whole or in part in the pursuit of electronic counter-measures,
environmental monitoring, radar systems, satellite communications or advanced
electro-optical products for the defense and aerospace industries in the
continental United States and any other country in which the Company conducts
business (or, with respect to the period following the Date of Termination, at
such Date of Termination), 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.

             (d) Non-Solicitation of Customers. The Executive acknowledges and
agrees that during the course and solely as a result of his employment with the
Company, the Executive has 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 leads and referrals to prospective customers and
clients. The Executive further acknowledges and agrees that the loss of such
customers and clients would cause the Company great and irreparable harm.
Consequently, the Executive covenants and agrees that the Executive will not,
for a period of two years after the Date of Employment Termination, directly or
indirectly solicit or seek to do business with any customer or client, former
customer or client or prospective customer or client of the Company with whom
the Executive came into contact while employed by the Company or who was known
to the Executive to be a current, former or prospective customer or client of
the Company, without the prior written specific consent of the Company. If
requested, this consent shall not be unreasonably withheld with respect to the
solicitation of any such customer or client in respect of a product, process or
service which, at the relevant time, is not competitive with any product,
process or service which is available from the Company or which the Company has
begun substantial efforts to make available to its clients or customers.

             (e) Non-Solicitation of Employees. The Executive acknowledges and
agrees that during the course of employment by the Company, the Executive has
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. The Executive further acknowledges and agrees that any solicitation,
luring away or hiring of such employees of

                                       10
<PAGE>
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, the Executive covenants and agrees that during the course of
employment by the Company and for a period of two years after the Date of
Employment Termination the Executive shall not directly or indirectly, on behalf
of himself or another, solicit, lure or hire any employees of the Company of
whom the Executive became aware while employed by the Company, or assist or aid
in any such activity.

             (f) Enforcement of Covenants. The Executive acknowledges and agrees
that compliance with the covenants set forth in this Section 7 is necessary to
protect the business and goodwill of the Company and that any breach of this
Section 7 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 7 by
the Executive, the Company and the Executive agree that the Company shall have
the right in its sole discretion to terminate any payments otherwise due under
this Agreement and shall also 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 the
Executive hereby consents to the issuance thereof forthwith and without bond by
any court of competent jurisdiction, (b) recovery of all reasonable sums and
costs, including attorneys' fees, incurred by the Company to enforce the
provisions of Section 7, and (c) as liquidated damages, to recapture the
Forfeitable Amount in accordance with the provisions of Section 5(a) hereof (or
Section 6 hereof, to the extent a payment is made thereunder which is calculated
based on the provisions of Section 5(a)).

             (g) Prior Commitments. The covenants set forth in this Section 7
supplement, and do not supersede, the covenants contained in any other agreement
between the Executive and the Company (other than the Termination Agreement).

             8.  Taxes.

             (a) Imposition of Excise Tax. In the event that any amount or
benefit paid or distributed to Executive pursuant to this Agreement, taken
together with any amounts or benefits otherwise paid or distributed to Executive
by the Company or any affiliated company (collectively, the "Covered Payments"),
would be an "excess parachute payment" as defined in Section 280G of the Code
and would thereby subject Executive to the tax (the "Excise Tax") imposed under
Section 4999 of the Code (or any similar tax that may hereafter be imposed), the
provisions of this Section 8 shall apply to determine the amounts payable to
Executive pursuant to this Agreement.

                                       11
<PAGE>
             (b) Present Value of Benefits. Immediately following Date of
Employment Termination, the Company shall notify Executive of the aggregate
present value of all termination benefits to which he would be entitled under
this Agreement and any other plan, program or arrangement as of the projected
date of termination, together with the projected maximum payments, determined as
of such projected date of termination that could be paid without Executive being
subject to the Excise Tax.

             (c) Payment Cap. If the aggregate value of all compensation
payments or benefits to be paid or provided to Executive under this Agreement
and any other plan, agreement or arrangement with the Company is less than 105%
of the amount which can be paid to Executive without Executive incurring an
Excise Tax, then the amounts payable to Executive under this Agreement may, in
the discretion of the Company, be reduced (but not below zero) to the maximum
amount which may be paid hereunder without Executive becoming subject to such an
Excise Tax (such reduced payments to be referred to as the "Payment Cap"). In
the event that Executive receives reduced payments and benefits hereunder,
Executive shall have the right to designate which of the payments and benefits
otherwise provided for in this Agreement that he will receive in connection with
the application of the Payment Cap.

             (d) Tax Adjustment. If the aggregate value of all compensation
payments or benefits to be paid or provided to Executive under this Agreement
and any other plan, agreement or arrangement with the Company is greater than
105% of the amount which can be paid to Executive without Executive incurring an
Excise Tax, the Company shall pay to Executive immediately following Executive's
termination of employment an additional amount (the "Tax Adjustment") such that
the net amount retained by Executive with respect to such Covered Payments,
after deduction of any Excise Tax on the Covered Payments and any Federal, state
and local income tax and Excise Tax 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.

             (e) Calculation of Payment. 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 appointed prior to the
       Effective Date or tax counsel selected by such Accountants (the
       "Accountants"), the Company has a reasonable basis to conclude that such
       Covered

                                       12
<PAGE>
       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 Accountants in accordance with the
       principles of Section 280G of the Code.

             (f) Assumptions on Rates. For purposes of determining whether
Executive would receive a greater net after-tax benefit were the amounts payable
under this Agreement reduced in accordance with Section 8(c), Executive shall be
deemed to pay:

             (i) Federal income taxes at the highest applicable marginal rate of
       Federal income taxation for the calendar year in which the first amounts
       are to be paid hereunder, and

             (ii) any applicable state and local income taxes at the highest
       applicable marginal rate of taxation for such calendar year, net of the
       maximum reduction in Federal incomes taxes which could be obtained from
       the deduction of such state or local taxes if paid in such year;

provided, however, that Executive may request that such determination be made
based on his individual tax circumstances, which shall govern such determination
so long as Executive provides to the Accountants such information and documents
as the Accountants shall reasonably request to determine such individual
circumstances.

             (g) Adjustments. If Executive receives reduced payments and
benefits under this Section 8 is determined not to be applicable to Executive
because the Accountants conclude that Executive is not subject to any Excise Tax
and it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding (a "Final Determination") that,
notwithstanding the good faith of Executive and the Company in applying the
terms of this Agreement, the aggregate "parachute payments" within the meaning
of Section 280G of the Code paid to Executive or for his benefit are in an
amount that would result in Executive being subject an Excise Tax, then the
amount equal to such excess parachute payments shall be deemed for all purposes
to be a loan to Executive made on the date of receipt of such excess payments,
which Executive shall have an obligation to repay to the Company on demand,
together with interest on such amount at the applicable Federal rate (as defined
in Section 1274(d) of the Code) from the date of the payment hereunder to the
date of repayment by Executive. If this Section 8 is not applied to reduce
Executive's entitlements because the Accountants determine that

                                       13
<PAGE>
Executive would not receive a greater net-after tax benefit by applying this
Section 8 and it is established pursuant to a Final Determination that,
notwithstanding the good faith of Executive and the Company in applying the
terms of this Agreement, Executive would have received a greater net after tax
benefit by subjecting his payments and benefits hereunder to the Payment Cap,
then the aggregate "parachute payments" paid to Executive or for his benefit in
excess of the Payment Cap shall be deemed for all purposes a loan to Executive
made on the date of receipt of such excess payments, which Executive shall have
an obligation to repay to the Company on demand, together with interest on such
amount at the applicable Federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by
Executive. If Executive receives reduced payments and benefits by reason of this
Section 8 and it is established pursuant to a Final Determination that Executive
could have received a greater amount without exceeding the Payment Cap, then the
Company shall promptly thereafter pay Executive the aggregate additional amount
which could have been paid without exceeding the Payment Cap, together with
interest on such amount at the applicable Federal rate (as defined in Section
1274(d) of the Code) from the original payment due date to the date of actual
payment by the Company.

             (h) Repayment of Excess Amounts. 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, Executive 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 Executive, and interest payable to the Company shall not exceed
interest received or credited to Executive by such tax authority for the period
it held such portion. Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the expenses
thereof) if Executive's good faith claim for refund or credit is denied.

             (i) Additional Company Payments. 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

                                       14
<PAGE>
interest or penalty payable with respect to such excess and the amount of any
other expenses incurred by Executive in connection with any audit, appeal,
litigation or other judicial or administrative process pertaining to the Tax
Adjustment or any amounts deemed subject to the Excise Tax) at the time that the
amount of such excess is finally determined.

             (j) Timing of Payment. Any Tax Adjustment (or portion thereof)
provided for in Section 8(d) above shall be paid to Executive not later than 10
business days following the payment of the Covered Payments; 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 Executive 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 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).

             9.  Successors, Binding Agreement.

             (a) Mandatory Assumption. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly assume
and agree to perform this Amended and Restated Employment Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.

             (b) Definition of Company. As used in this Amended and Restated
Employment Agreement, "Company" shall include any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided
for in Section 9(a) or which otherwise becomes bound by all the terms and
provisions of this Amended and Restated Employment Agreement by operation of
law.

             (c) Executive's Successors. This Amended and Restated Employment
Agreement shall inure to the benefit of, and be enforceable by, Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amounts
would still be payable if he had

                                       15
<PAGE>
continued to live, all such amounts shall be paid in accordance with the terms
of this Amended and Restated Employment Agreement to Executive's devisee,
legatee, or other designee or, if there be no such designee, to his estate.

             10. Miscellaneous Provisions.

             (a) Notices. Notices and all other communications provided for in
this Amended and Restated Employment Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Amended and Restated
Employment Agreement, provided that all notices to the Company shall be directed
to the attention of the Corporate Counsel, or to such other address as either
party may have furnished to the other in writing in accordance herewith. Notices
of change of address shall be effective only upon receipt.

             (b) Amendment, Waiver. No provisions of this Amended and Restated
Employment Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in writing signed by Executive
and, on behalf of the Company, by such officer as may be specifically designated
by the Board. Any failure at any time of either party to enforce any provision
of this Amended and Restated Employment Agreement shall not constitute a waiver
of such provision, or prejudice the right of either party to enforce such
provision at any subsequent time.

             (c) Unfunded Arrangement. All benefits provided for in this Amended
and Restated Employment Agreement are provided on an unfunded basis and are not
intended to meet the qualification requirements of section 401 of the Code. The
Company shall not be deemed to be a trustee of any amounts to be paid under this
Amended and Restated Employment Agreement and shall not be required to segregate
any assets with respect to benefits under this Amended and Restated Employment
Agreement. Such benefits shall be payable solely from the general assets of the
Company.

             (d) Entire Agreement. No agreements or representations, oral or
otherwise, expressed or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Amended and
Restated Employment Agreement.

             (e) Governing Law. The validity, interpretation, construction and
performance of this Amended and Restated Employment Agreement shall be governed
by the laws of the State of New York, without regard to principles of conflict
of laws.

                                       16
<PAGE>
             (f) Severability. The invalidity or unenforceability of any one or
more provisions of this Amended and Restated Employment Agreement shall not
affect the validity or enforceability of any other provision of this Amended and
Restated Employment Agreement, which shall remain in full force and effect.

             (g) Legal Fees. In the event of any action or proceeding between
the parties arising out of this Amended and Restated Employment Agreement, the
Company will pay the costs of any such legal proceedings including, but not
limited to, the costs of Executive for all expenses, including attorneys' fees,
incurred in such action or proceeding. Such costs and expenses shall be advanced
to Executive currently as reasonably required to continue such action or
proceeding.

                                       17
<PAGE>
             IN WITNESS WHEREOF, each of the duly authorized officer of the
Company and the Executive have executed this Amended and Restated Employment
Agreement as of the date first written above.

                                                  EDO CORPORATION

                                                  By
                                                    ----------------------------

                                                  FRANK A. FARIELLO

                                                  ------------------------------

                                       18

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