EXHIBIT 10.26

                             HERLEY INDUSTRIES, INC.

                       2006 New Employee Stock Option Plan
                       -----------------------------------

SECTION 1.  GENERAL PROVISION
            -----------------

1.1  Name and General Purpose
     ------------------------

     The name of this plan is the  Herley  Industries,  Inc.  2006 New  Employee
Stock Option Plan (hereinafter called the "Plan").  The Plan is intended to be a
broadly-based  incentive  plan  which  enables  Herley  Industries,   Inc.  (the
"Company")  and its  subsidiaries  and  affiliates  to foster  and  promote  the
interests  of the Company by  attracting  new  employees to the Company who will
contribute to the Company's success by their ability, ingenuity and industry, to
enable such employees to participate in the long-term  success and growth of the
Company by giving  them a  proprietary  interest  in the  Company and to provide
incentive  compensation   opportunities  competitive  with  those  of  competing
corporations.

1.2  Definitions
     -----------

     a.   "Affiliate"  means any person or entity  controlled by or under common
          control  with the  Company,  by  virtue  of the  ownership  of  voting
          securities, by contract or otherwise.

     b.   "Board" means the Board of Directors of the Company.

     c.   "Change in Control"  means a change of control of the  Company,  or in
          any person directly or indirectly controlling the Company, which shall
          mean:

          (a) a  change  in  control  as  such  term  is  presently  defined  in
          Regulation  240.12b-(2) under the Securities  Exchange Act of 1934, as
          amended (the "Exchange Act"); or

          (b) if any "person"  (as such term is used in Section  13(d) and 14(d)
          of the Exchange Act) other than the Company or any "person" who on the
          date of this  Agreement  is a  director  or  officer  of the  Company,
          becomes the  "beneficial  owner" (as defined in Rule 13(d)-3 under the
          Exchange  Act)  directly or  indirectly,  of securities of the Company
          -representing  twenty percent (20%) or more of the voting power of the
          Company's then outstanding securities; or

          (c) if during any period of two (2) consecutive  years during the term
          of  this  Plan,  individuals  who  at the  beginning  of  such  period
          constitute the Board of Directors,  cease for any reason to constitute
          at least a majority thereof.

     d.   "Committee"  means the  Committee  referred  to in Section  1.3 of the
          Plan.

     e.   "Common  Stock" means shares of the Common  Stock,  par value $.10 per
          share, of the Company.

     f.   "Company" means Herley Industries, Inc., a corporation organized under
          the laws of the State of Delaware (or any successor corporation).

     g.   "Fair Market  Value" means the market price of the Common Stock on the
          National   Association  of  Securities  Dealers  Automated   Quotation
          ("NASDAQ")  system on the date of the  grant or on any  other  date on
          which the  Common  Stock is to be valued  hereunder.  If no sale shall
          have been reported on the NASDAQ on such date, Fair Market Value shall
          be determined by the Committee.

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     h.   "Non-Employee Director" shall have the meaning set forth in Rule 16(b)
          promulgated  by the  Securities  and  Exchange
          Commission ("Commission").

     i.   "Option" means any option to purchase  Common Stock under Section 2 of
          the Plan.

     j.   "Option Agreement" means the option agreement described in Section 2.4
          of the Plan.

     k.   "Participant"  means any new employee of the Company,  a Subsidiary or
          an Affiliate  whose options are issued in  connection  with his or her
          initial employment and who is selected by the Committee to participate
          in the Plan.

     l.   "Subsidiary"  means any  corporation  in which the  Company  possesses
          directly or indirectly 50% or more of the combined voting power of all
          classes of stock of such corporation.

     m.   "Total  Disability"  means accidental  bodily injury or sickness which
          wholly and  continuously  disabled an optionee.  The Committee,  whose
          decisions  shall  be  final,  shall  make  a  determination  of  Total
          Disability.

1.3  Administration of the Plan
     --------------------------

     The Plan shall be administered  by the Board or by the Committee  appointed
by the Board consisting of two or more members of the Board all of whom shall be
Non-Employee  Directors.  The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.

     Subject to this  Section 1.3,  the  Committee  shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and  practices  governing  the  operation of the Plan as it shall,  from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.

     The Committee  shall keep minutes of its meetings and of action taken by it
without a meeting.  A majority of the Committee shall  constitute a quorum,  and
the acts of a majority of the  members  present at any meeting at which a quorum
is present,  or acts  approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.

1.4  Eligibility
     -----------

     Options may be granted only to new employees of the Company or a Subsidiary
or  Affiliate  whose  options are issued in  connection  with his or her initial
employment.

1.5  Shares
     ------

     The aggregate  number of shares reserved for issuance  pursuant to the Plan
shall be  250,000  shares of Common  Stock,  or the number and kind of shares of
stock or other securities which shall be substituted for such shares or to which
such shares shall be adjusted as provided in Section 1.6.

     Such number of shares may be set aside out of the  authorized  but unissued
shares of Common Stock or out of issued shares of Common Stock  acquired for and
held in the Treasury of the Company, not reserved for any other purpose.  Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason  prior to its  exercise in full will again be  available  for Options
thereafter granted during the balance of the term of the Plan.

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1.6  Adjustments Due to Stock Splits, Mergers, Consolidation, Etc.
     -------------------------------------------------------------

     If, at any time,  the  Company  shall  take any  action,  whether  by stock
dividend,  stock split,  combination of shares or otherwise,  which results in a
proportionate  increase  or  decrease  in the  number of shares of Common  Stock
theretofore issued and outstanding,  the number of shares which are reserved for
issuance  under the Plan and the  number  of shares  which,  at such  time,  are
subject to Options shall, to the extent deemed appropriate by the Committee,  be
increased or  decreased  in the same  proportion,  provided,  however,  that the
Company shall not be obligated to issue fractional shares.

     Likewise,  in the event of any change in the  outstanding  shares of Common
Stock by reason of any recapitalization, merger, consolidation,  reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common  Stock or other  securities  which are
reserved  for  issuance  under  the  Plan  and the  number  of  shares  or other
securities which, at such time are subject to Options.

     In the  event  of a  Change  in  Control,  at the  option  of the  Board or
Committee,  (a) all  Options  outstanding  on the date of such Change in Control
shall become  immediately  and fully  exercisable,  and (b) an optionee  will be
permitted to surrender for cancellation within sixty (60) days after such Change
in Control any Option or portion of an Option  which was  granted  more than six
(6) months prior to the date of such surrender, to the extent not yet exercised,
and to receive a cash payment in an amount  equal to the excess,  if any, of the
Fair  Market  Value (on the date of  surrender)  of the  shares of Common  Stock
subject  to the  Option  or  portion  thereof  surrendered,  over the  aggregate
purchase price for such Shares under the Option.

1.7  Non Alienation of Benefits
     --------------------------

     Except as herein  specifically  provided,  no right or unpaid benefit under
the Plan shall be subject to  alienation,  assignment,  pledge or charge and any
attempt to  alienate,  assign,  pledge or charge the same shall be void.  If any
Participant  or other person  entitled to benefits  hereunder  should attempt to
alienate,  assign,  pledge or charge any benefit  hereunder,  then such  benefit
shall, in the discretion of the Committee, cease.

1.8  Withholding or Deduction for Taxes
     ----------------------------------

     If, at any time,  the Company or any  Subsidiary  or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise,  the
Participant  shall be  required  to pay to the  Company  or such  Subsidiary  or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company,  the Company or such  Subsidiary  or Affiliate may
accept a  sufficient  number  of shares  of  Common  Stock to cover  the  amount
required to be withheld.

1.9  Administrative Expenses
     -----------------------

     The entire expense of administering the Plan shall be borne by the Company.

1.10 General Conditions
     ------------------

     a.   The Board or the Committee may, from time to time,  amend,  suspend or
          terminate  any or all of the  provisions of the Plan,  provided  that,
          without the Participant's  approval, no change may be made which would
          alter or impair any right theretofore granted to any Participant.

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     b.   With the consent of the Participant  affected  thereby,  the Committee
          may  amend  or  modify  any  outstanding  Option  in  any  manner  not
          inconsistent   with  the  terms  of  the  Plan,   including,   without
          limitation,  and  irrespective  of the  provisions  of Section  2.3(c)
          below,  to accelerate  the date or dates as of which an installment of
          an Option becomes exercisable;  provided, that the Committee shall not
          have the right to reprice any outstanding Options.

     c.   Nothing  contained  in the Plan  shall  prohibit  the  Company  or any
          Subsidiary or Affiliate from establishing  other additional  incentive
          compensation  arrangements  for  employees  of  the  Company  or  such
          Subsidiary or Affiliate.

     d.   Nothing in the Plan shall be deemed to limit, in any way, the right of
          the  Company  or  any   Subsidiary   or   Affiliate   to  terminate  a
          Participant's   employment  or  service  with  the  Company  (or  such
          Subsidiary or Affiliate) at any time.

     e.   Any decision or action taken by the Board or the Committee arising out
          of  or  in   connection   with   the   construction,   administration,
          interpretation  and effect of the Plan shall be conclusive and binding
          upon all  Participants  and any person  claiming  under or through any
          Participant.

     f.   No member of the Board or of the Committee shall be liable for any act
          or action,  whether of  commission  or  omission,  (i) by such  member
          except in  circumstances  involving  actual bad faith, nor (ii) by any
          other member or by any officer, agent or employee.

1.11 Compliance with Applicable Law
     ------------------------------

     Notwithstanding  any other  provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock,  or grant any Option with respect
thereto,  unless it is advised by  counsel  of its  selection  that it may do so
without  violation of the  applicable  Federal and State laws  pertaining to the
issuance of  securities  and the Company  may require any stock  certificate  so
issued to bear a legend, may give its transfer agent  instructions  limiting the
transfer  thereof,  and may  take  such  other  steps,  as in its  judgment  are
reasonably required to prevent any such violation.

1.12 Effective Dates
     ---------------

     The Plan was  adopted  by the  Board on  August  1,  2006.  The Plan  shall
terminate on July 31, 2016.

Section 2. OPTION GRANTS
           -------------

2.1  Authority of Committee
     ----------------------

     Subject to the  provisions of the Plan,  the Committee  shall have the sole
and complete  authority to determine (i) the  Participants to whom Options shall
be granted;  (ii) the number of shares to be covered by each  Option;  and (iii)
the  conditions  and  limitations,  if any,  in  addition  to those set forth in
Sections 2 and 3 hereof,  applicable  to the  exercise  of an Option,  including
without limitation,  the nature and duration of the restrictions,  if any, to be
imposed upon the sale or other  disposition of shares  acquired upon exercise of
an Option.

     Options granted under the Plan shall be non-qualified stock options.

     The Committee shall have the authority to grant Options.

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2.2  Option Exercise Price
     ---------------------

     The exercise  price set forth in the Option  Agreement at the time of grant
shall not be less than the Fair  Market  Value of the  Common  Stock at the time
that the Option is granted.

     The  purchase  price  is to be  paid in full  in  cash,  certified  or bank
cashier's  check or, at the option of the  Company,  Common  Stock valued at its
Fair Market Value on the date of exercise,  or a combination  thereof,  when the
Option is exercised and stock  certificates  will be delivered only against such
payment.

2.3  Option Grants
     -------------

     Each Option will be subject to the following provisions:

     a.   Term of Option
          --------------

          An Option  will be for a term of not more than ten years from the date
     of grant.

     b.   Exercise
          --------

          (i)  By an Employee:
               --------------

               Unless  otherwise  provided  by the  Committee  and except in the
               manner described below upon the death of the optionee,  an Option
               may be exercised only in installments as follows:

                    Up to 20% on and after the first  anniversary  of the of the
                    date of the grant of such Option;

                    Up to 40% on and after the second anniversary of the date of
                    grant of the date of the grant of such Option;

                    Up to 60% on and after the third  anniversary of the date of
                    grant of the date of the grant of such Option;

                    Up to 80% on and after the fourth anniversary of the date of
                    grant of the date of the grant of such Option;

                    Up to all of the  subject  shares  on and  after  the  fifth
                    anniversary of the date of grant of the date of the grant of
                    such Option,  but in no event later than the  expiration  of
                    the term of the Option.

               An Option shall be  exercisable  during the  optionee's  lifetime
               only by the optionee and shall not be exercisable by the optionee
               unless,  at all times  since the date of grant and at the time of
               exercise,  such optionee is an employee of or providing  services
               to the  Company,  any parent  corporation  of the  Company or any
               Subsidiary or Affiliate,  except that,  upon  termination  of all
               such  employment  or provision of services  (other than by death,
               Total Disability, or by Total Disability followed by death in the
               circumstances  provided  below),  the  optionee  may  exercise an
               Option at any time within three months thereafter but only to the
               extent   such  Option  is   exercisable   on  the  date  of  such
               termination.

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               Upon termination of all such employment by Total Disability,  the
               optionee  may  exercise  such Options at any time within one year
               thereafter,  but only to the extent such Option is exercisable on
               the date of such termination.

               In the event of the death of an optionee (i) while an employee of
               or providing  services to the Company,  any parent corporation of
               the Company or any Subsidiary or Affiliate,  or (ii) within three
               months after  termination of all such  employment or provision of
               services  (other than for Total  Disability)  or (iii) within one
               year after termination on account of Total Disability of all such
               employment or provision of services,  such  optionee's  estate or
               any person who  acquires  the right to  exercise  such  option by
               bequest or  inheritance or by reason of the death of the optionee
               may exercise such optionee's Option at any time within the period
               of three years from the date of death. In the case of clauses (i)
               and (iii) above, such Option shall be exercisable in full for all
               the remaining shares covered  thereby,  but in the case of clause
               (ii) such Option shall be  exercisable  only to the extent it was
               exercisable  on the date of such  termination  of  employment  or
               service.

          (ii) By Persons other than Employees:
               -------------------------------

               If the  optionee  is not an employee of the Company or the parent
               corporation  of the Company or any  Subsidiary or Affiliate,  the
               vesting of such optionee's right to exercise his Options shall be
               established  and  determined  by  the  Committee  in  the  Option
               Agreement covering the Options granted to such optionee.

               Notwithstanding the foregoing  provisions  regarding the exercise
               of an  Option  in the event of  death,  Total  Disability,  other
               termination  of employment or provision of services or otherwise,
               in no event  shall an Option be  exercisable  in whole or in part
               after the termination date provided in the Option Agreement.

     c.   Transferability
          ---------------

     An Option granted under the Plan shall not be  transferable  otherwise than
     by will or by the  laws  of  descent  and  distribution,  except  as may be
     permitted by the Board or the Committee.

2.4  Agreements
     ----------

     In  consideration  of any Options granted to a Participant  under the Plan,
each such  Participant  shall  enter into an Option  Agreement  with the Company
providing,  consistent  with the  Plan,  such  terms as the  Committee  may deem
advisable.

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