Exhibit 10.27



                              EMPLOYMENT AGREEMENT

     AGREEMENT  dated  as of June  7,  2006,  between  HERLEY  INDUSTRIES,  INC.
("Company"),  a Delaware  corporation,  having its  principal  place of business
located at 101 North Pointe Boulevard,  Lancaster,  Pennsylvania 17601-4133, and
John M. Kelley  ("Employee"),  residing 803 Bent Creek Drive,  Lititz,  PA 17543
("Employee").

                                   WITNESSETH:

     WHEREAS,  the Company  desires to continue to employ the  Employee  and the
Employee  desires  to be  employed  by the  Company  subject  to the  terms  and
conditions hereinafter set forth.

     NOW,  THEREFORE,  in consideration of the mutual premises and of the mutual
covenants  hereinafter  contained and for good and valuable  consideration,  the
parties hereto agree as follows:

     1.  Employment.  The Company  hereby  employs the Employee as President for
Herley  Industries,  Inc. and the Employee  hereby accepts  employment  upon the
terms and conditions hereinafter set forth.

     2. Term. The term of this Agreement  shall be 36 months,  commencing on the
date hereof ("Effective Date") and ending June 6, 2009.

     3. Compensation.

     (a) For all services rendered under this Agreement:

          (i) The  Company  shall pay the  Employee a base salary at the rate of
     $250,000 per annum payable in equal bi-weekly installments ("Base Salary").
     The Base Salary shall be reviewed by the Company's Board of Directors on an
     annual basis.

          (ii) an auto allowance that provides a $600 per month car allowance as
     well  as  reimbursement  for  other  expenses  such as  gasoline,  repairs,
     insurance.

          (iii) Employee may be entitled to receive a bonus at the discretion of
     the Board of Directors.

     4. Duties.  The Employee  shall perform on a full time basis such duties of
an Employee nature as shall be customarily associated with his position with the
Company subject to the direction of the Chief Executive Officer and the Board of
Directors.  The Employee  shall perform and discharge  well and  faithfully  the
duties  which  may be  assigned  to him  from  time to time  by the  Company  in
connection with the conduct of its business.

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     5. Extent of  Services.  So long as during the term of his  employment  the
Company has not  notified  the  Employee of his  disability  pursuant to Section
10(a) hereof,  the Employee shall devote his full business  time,  attention and
best efforts to the business of the Company  subject to reasonable  absences for
vacation  and illness and may not during the term of his  employment  be engaged
(whether  or not  during  normal  business  hours)  in  any  other  business  or
professional activity,  whether or not such activity is pursued for gain, profit
or other pecuniary advantage.  Notwithstanding the foregoing,  Employee may join
professional  associations  that do not  interfere  with his  attention and best
efforts on behalf of the Company.

     6. Benefits/Expenses.

     (a) During the term of his  employment,  the Employee  shall be entitled to
participate in employee benefit plans or programs of the Company,  to the extent
that his position, tenure, salary, age, health and other qualifications make him
eligible  to  participate,  subject  to the  rules  and  regulations  applicable
thereto. Such benefits shall include life insurance, medical and dental coverage
for Employee and his eligible dependents,  and the opportunity to participate in
a company-sponsored 401(k) savings plan, to the extent available. In addition to
these group benefits, Employee shall be entitled to four (4) weeks paid vacation
per year, commencing during the first year of employment.

     (b)  Employee  shall be entitled to timely  reimbursement  of all  business
expenses  reasonably  incurred  by him in the  performance  of his duties to the
Company  subject to the  business  expense  policy of the  Company,  and further
subject  to the  presenting  of  appropriate  vouchers  in  accordance  with the
Company's policy.

     7. Disclosure of Information.

     (a) The  Employee  represents  and  warrants to the  Company  that no prior
employment or business agreements or arrangements  preclude,  or interfere with,
his ability to execute and perform his obligations under this Agreement.

     (b)  The  Employee   recognizes   and   acknowledges   that  the  Company's
confidential  or  proprietary  data or  information  as they have existed,  will
exist, may continue to exist from time to time, are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of the Employee's  duties  hereunder.  The Employee will not,
during or after the term of his employment by the Company,  in whole or in part,
directly  or  indirectly   disclose,   divulge  or  communicate   such  secrets,
information or processes to any person, firm, corporation,  association or other
entity for any reason or purpose whatsoever,  nor shall the Employee make use of
any such  property for his own purposes or for the benefit of any person,  firm,
corporation  or other  entity  (except  the  Company)  under  any  circumstances
provided  that after the term of his  employment  these  restrictions  shall not
apply to such secrets,  information  and processes  which are then in the public
domain (provided that the Employee was not responsible,  directly or indirectly,

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for such secrets,  information or process entering the public domain without the
Company's consent).  The Employee agrees to hold as the Company's property,  all
memoranda,  books,  papers,  letters,  formulas  and other data,  and all copies
thereof  and  therefrom,  in any way  relating  to the  Company's  business  and
affairs,  whether made by him or otherwise  coming into his  possession,  and on
termination  of his  employment,  or on demand of the Company,  at any time,  to
deliver the same to the Company.

     (c) The term "confidential or proprietary data or information":  as used in
this Agreement  shall mean  information  not generally  available to the public,
including without limitation,  all database information,  personnel information,
financial information,  customer lists, supplier lists, trade secrets,  patented
or proprietary information,  forms,  information regarding operations,  systems,
services,  know how, computer and any other processed or collated data, computer
programs, pricing, marketing and advertising data.

     (d) All written  materials,  records and documents  made by the Employee or
coming into Employee's  possession during  Employee's  employment by the Company
concerning any products,  processes or equipment manufactured,  used, developed,
investigated,  purchased,  sold  or  considered  by  the  Company  or  otherwise
concerning  the business or affairs of the Company shall be the sole property of
the Company,  and upon termination of Employee's  employment by the Company,  or
upon  request  of the  Company  during  Employee's  employment  by the  Company,
Employee  shall  promptly  deliver the same to the Company.  In  addition,  upon
termination  of Employee's  employment by the Company,  Employee will deliver to
the  Company  all other  Company  property  in  Employee's  possession  or under
Employee's  control,   including  but  not  limited  to,  financial  statements,
marketing and sales data, customer and supplier lists,  database information and
other documents, and any Company credit cards.

     8.  Inventions.  The Employee  hereby  sells,  transfers and assigns to the
Company or to any person, or entity designated by the Company, all of the entire
right,  title and  interest  of the  Employee in and to all  inventions,  ideas,
disclosures and improvements,  whether patented or unpatented, and copyrightable
material,  made or conceived by the Employee,  solely or jointly, or in whole or
in part,  during or before the term hereof (but after the Effective  Date) which
(i) relate to methods, apparatus,  designs, products, processes or devices sold,
leased,  used  or  under  construction  or  development  by the  Company  or any
subsidiary or (ii) otherwise relate to or pertain to the business,  functions or
operations of the Company or any  subsidiary,  or (iii) arise (wholly or partly)
from the efforts of the  Employee  during the term hereof.  The  Employee  shall
communicate  promptly and  disclose to the Company,  in such form as the Company
requests,  all  information,  details and data pertaining to the  aforementioned
inventions,  ideas,  disclosures and improvements;  and, whether during the term
hereof or thereafter, the Employee shall execute and deliver to the Company such
formal  transfers and  assignments and such other papers and documents as may be
required  of the  Employee  to  permit  the  Company  or any  person  or  entity
designated by the Company to file and prosecute the patent  applications and, as
to copyrightable  material,  to obtain copyright  thereon.  Any invention by the
Employee  within one year following the  termination of this Agreement  shall be
deemed to fall within the  provisions  of this  paragraph  unless  proved by the
Employee to have been first  conceived and made following such  termination.  To

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the extent that the Employee  shall be required to expend time or incur expenses
fulfilling  his  obligations  under  this  paragraph,  post-termination  of  the
original term of this Agreement or any renewal term thereof,  the Company agrees
to reasonably compensate Employee for such time and/or such expenses.

     9. Restrictive Covenant.

     Non-Competition/Non-Solicitation

        During the Term of this Agreement and for a period of one (1) year
after the date of such termination for any reason, Employee shall not without
the prior written consent of the Company:

          (i) become on officer or  employee  of, or render any  service to, any
     direct competitor of Herley;

          (ii)  solicit or induce  any  customer  of Herley to cease  purchasing
     goods or services from Herley or to become a customer of any  competitor of
     Herley; or

          (iii)  solicit or induce any employee of Herley to become  employed by
     any competitor of Herley.

     10. Termination.

     (a)  Disability.  The  Company  shall  have the  right in the  event of the
permanent disability of the Employee,  to terminate this Agreement upon five (5)
days prior written notice. Upon termination,  the Company shall pay the Employee
all compensation earned under Section 3 through the date of termination. For the
purposes of this subparagraph  "permanent disability" shall mean the physical or
mental incapacity of the Employee for any consecutive  ninety (90) day period or
any aggregate  period of a one hundred and eighty (180) day period in any twelve
(12) month period of such a nature that the Employee  shall be unable to perform
his  duties as  contemplated  hereby.  Such  determination  shall be made by the
mutual agreement of the parties hereto, or in the event such agreement cannot be
reached, by the following procedure:

          (i) If the Company  maintains a disability  income policy with respect
     to the Employee,  the  definition  set forth in such policy shall  control,
     provided  the  issuing  insurance  company  agrees to  commence  disability
     payments as a result of such permanent disability.

          (ii) If the Company does not maintain a disability  income policy with
     respect to the Employee:

               (A) Each party shall select an  independent  physician  who shall
          examine  the  subject  Employee.  The  mutual  agreement  of  the  two
          examining  physicians  shall  control,  and  their  decision  shall be
          binding.


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               (B) If the two  physicians  cannot agree,  they (the  physicians)
          shall select a third  physician to examine the subject  Employee.  The
          majority  opinion of such three  physicians  shall control,  and their
          decision shall be binding.

     (b) Death. This Agreement shall terminate  automatically  upon the death of
the Employee.  In such event,  the Company shall pay the estate of the Employee,
within thirty (30) days after the date of death, all  compensation  earned under
Section 3 through the date of termination.

     (c) For Cause.  In addition to its rights under  Section 10 (a) above,  the
Company shall have the right,  at its sole option,  to terminate  this Agreement
"for Cause", as hereinafter defined, at any time, without any further payment to
the Employee other than  compensation  earned under Section 3(a)(i) prior to the
date of termination,  by notice to the Employee, as provided herein,  specifying
the reason for such  termination.  For purposes of this Section 10 (c),  "cause"
shall mean solely (i) the Employee's conviction of a felony, (ii) the Employee's
willful misconduct or gross negligence materially  detrimental to the Company in
the performance of his duties, or (iii) the breach by the Employee of a material
term of this Agreement which continues for thirty (30) days after written notice
thereof  is  given  to the  Employee  (constituting  an  opportunity  to  cure),
specifying the nature and the details of the breach.

     11. Remedies.  With respect to the covenants contained in Sections 7, 8 and
9 of this  Agreement,  Employee  agrees that any remedy at law for any breach or
threatened or attempted  breach of such covenants may be inadequate and that the
Company  shall  be  entitled  to  specific  performance  or any  other  mode  of
injunctive  and/or other equitable relief to enforce its rights hereunder or any
other  relief a court might award  without the  necessity  of showing any actual
damage or  irreparable  harm or the posting of any bond or  furnishing  of other
security.  Nothing  herein shall be construed  as  prohibiting  the Company from
pursuing any other remedies for such breach or threatened breach.

     12. Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company,  and unless clearly
inapplicable,  all  references  herein to the Company shall be deemed to include
any successors.  In addition,  this Agreement shall be binding upon and inure to
the benefit of the Employee and his heirs, executors,  legal representatives and
assigns;  provided,  however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of the Board of Directors of the
Company.

     13.  Successor  Company.  The Company shall 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,  to expressly
assume and agree to perform  this  Agreement  in the same manner and to the same
extent  that the Company  would be required to perform as if no such  succession
had taken place.

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     14.  Notices.  Any notice  required  or  permitted  to be given  under this
Agreement  shall be  sufficient  if in  writing  and shall be deemed  given when
delivered personally or three days after being sent by first-class registered or
certified mail, return receipt requested, to the party for which intended at its
or his address set forth at the beginning of this Agreement  (which, in the case
of the  Company,  shall be sent  "Attention:  Chairman of the Board") or to such
other  address as either party may  hereafter  specify by similar  notice to the
other.

     15.  Waiver of Breach.  A waiver by the Company or the Employee of a breach
of any  provision  of this  Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.

     16.  Entire  Agreement.  This  Agreement  supersedes  all prior  agreements
between the parties,  written and oral, and cannot be amended or modified except
by a  writing  signed  by  both  parties.  It may  be  executed  in one or  more
counterpart copies, each of which shall be deemed an original,  but all of which
shall constitute the same instrument.

     17. Choice of Law/Forum.  This Agreement shall be governed and construed in
accordance with the laws of the State of New York,  without regard to principles
of  conflicts  of law.  Any  disputes  arising  out of this  Agreement  shall be
adjudicated  in the Federal or State court  presiding in the County of New York,
State of New York.

     18. Captions/Exhibits.  Captions used in this Agreement are for convenience
of reference  only and shall not be deemed a part of this  Agreement nor used in
the  construction of its meaning.  Exhibits  attached to this Agreement shall be
deemed as fully a part of this Agreement as if set forth in full herein.

     19.  Severability.  If any  provision  of this  Agreement  shall be  deemed
invalid  or  unenforceable  as written it shall be  construed,  to the  greatest
extent possible, in a manner which shall render it valid and enforceable and any
limitations on the scope or duration of any such provision  necessary to make it
valid and  enforceable  shall be deemed to be part  thereof;  no  invalidity  or
unenforceability  shall affect any other  portion of this  Agreement  unless the
provision deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.

     20.  Acknowledgment.  Employee acknowledges that he has carefully read this
Agreement  and hereby  represents  and warrants to the Company  that  Employee's
entering  into this  Agreement,  and the  obligations  and duties  undertaken by
Employee hereunder,  will not conflict with, constitute a breach of or otherwise
violate the terms of any other  agreement to which  Employee is a party and that
Employee is not  required to obtain the consent of any person or entity in order
to enter into and perform his obligations under this Agreement.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.

                             HERLEY INDUSTRIES, INC.


                             By:    /S/     Myron Levy
                                    -----------------------------------
                                    Myron Levy, Chairman and CEO



                                    /S/     John M. Kelley
                                    -----------------------------------
                                    John M. Kelley, Employee