EMPLOYMENT AGREEMENT
                              --------------------
     AGREEMENT  made as of this 1st day of October 1998,  by and between  HERLEY
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
MYRON  LEVY  residing  at 147 Deer  Ford  Drive,  Lancaster  PENNSYLVANIA  17603
(hereinafter called the "Employee").

                                   WITNESSETH
                                   ----------
     WHEREAS,  the Employee has been employed by the Company under an Employment
Agreement,  dated October 3, 1988, as amended, which agreement was superseded by
a second Employment Agreement between Employee and the Company, dated January 1,
1997; by a third Employment  Agreement between Employee and the Company dated as
of November  1, 1997,  and the  Company  desires to enter into a new  employment
agreement with Employee which  agreement  shall  supersede all prior  employment
agreements; and,

     WHEREAS,  Employee desires to enter into the new employment  agreement with
the Company;

     NOW THEREFORE, it is agreed as follows:

     1. PRIOR AGREEMENTS  SUPERSEDED.  This Agreement  supersedes any employment
agreements, oral or written, entered into between Employee and the Company prior
to the date of this  Agreement,  including,  but not limited to, the  Employment
Agreements  between the  Employee  and the Company,  dated  October 3, 1988,  as
amended and January 1, 1997, and November 1, 1997, respectively.

     2.  RETENTION  OF  SERVICES.  The Company  hereby  retains the  services of
Employee,  and  Employee  agrees to furnish  such  services,  upon the terms and
conditions hereinafter set forth.

     3.  TERM.  Subject  to  earlier  termination  on the terms  and  conditions
hereinafter  provided,  the term of this Agreement  shall be comprised of a four
(4) year and three (3) month period of employment commencing October 1, 1998 and
ending December 31, 2002 and a five year "consulting  period"  commencing at the
end of active employment.  On each January 1, commencing January 1, 2000, unless
either party  provides  prior written notice to the other party that it does not
want the term of the Agreement to be extended,  the term of the Agreement  shall
extend to three (3) years from each January 1.

     4.   DUTIES AND EXTENT OF SERVICES  DURING PERIOD OF EMPLOYMENT

          (a)  During  the  period  of  active  employment,  Employee  shall  be
               employed  as an  executive  of the  Company.  In  such  capacity,
               Employee  agrees  that he  shall  serve  the  Company  under  the
               direction  of the Chief  Executive  Officer of the Company to the
               best  of his  ability,  shall  devote  full  time  during  normal
               business  hours to such  employment,  shall  perform  all  duties
               incident  to his  offices  on  behalf of the  Company,  and shall
               perform such other duties as may from time to time be assigned to
               him by the Chief Executive Officer of the Company.

          (b)  In the event that this  agreement is not renewed,  Employee shall
               cease to be an employee of the Company.  However,  in recognition
               of the  continued  value to the Company of  Employee's  extensive
               knowledge and expertise,  Employee shall serve as a consultant to

<PAGE>

               the  Company  during the  consulting  period.  In such  capacity,
               Employee shall consult with the Company and its respective senior
               executive officers with respect to its respective  businesses and
               operations.  Such consulting services shall not require more than
               fifty (50) days in any one year, it being  understood  and agreed
               that during the consulting  period  Employee shall have the right
               to undertake full time or part time  employment with any business
               enterprise  which is not a competitor of the Company.  Employee's
               services as a consultant to the Company shall be required at such
               times and such places as shall result in the least  inconvenience
               to Employee,  having in mind his other business commitments which
               may obligate him to perform  services prior to the performance of
               his services hereunder.  To the end that there shall be a minimum
               of interference with Employees other commitments,  his consulting
               services  shall  be  rendered  by  personal  consultation  at his
               residence or office  wherever  maintained,  or by  correspondence
               through mail,  telegram or  telephone,  or other similar modes of
               communications at times,  including  weekends and evenings,  most
               convenient to him. During the consulting  period,  Employee shall
               not be  obligated  to serve as a member of the Board of Directors
               of the Company or to occupy any office on behalf of the  Employer
               or any of its subsidiaries or affiliates.

     5.   REMUNERATION

          (a)  During  the  period  of  active  employment,  Employee  shall  be
               entitled to receive the following  compensation for his services:

               (i)  The Company  shall pay to  Employee an annual  salary at the
                    rate  of  THREE  HUNDRED  TWENTY-FIVE   THOUSAND  ($325,000)
                    DOLLARS  commencing  October  1,  1998,  payable  in  weekly
                    installments,  or in such other manner as shall be agreeable
                    to the Company and Employee.

               (ii) In addition to his salary set forth in Paragraph 5(i) above,
                    Employee  shall  receive an  increment in an amount equal to
                    the cumulative cost of living on his base salary as reported
                    in the  "Consumer  Price Index,  New York  Northeastern  New
                    Jersey,   all  items",   published  by  the  United   States
                    Department  of  Labor,  Bureau  of Labor  Statistics,  using
                    January 1,1998 as the base year for  computation.  Such cost
                    of living  increment with respect to the aforesaid salary of
                    Employee shall be made  semi-annually  as follows:

                    (A)  With  respect to the first six months of each  calendar
                         year during the period of  employment,  such  increment
                         shall be  calculated  and  payable  cumulatively  on or
                         before the first day of August of such year; and

                    (B)  With  respect to the last six  months of each  calendar
                         year during the period of  employment,  such  increment
                         shall be  calculated  and  payable  cumulatively  on or
                         before  the  first  day of  February  of the  following
                         calendar year.

      If Employee's  employment  shall  terminate  during any  six-month  period
referred to in this Paragraph 5 (ii), then the cost of living increment provided
for herein shall be prorated accordingly.
<PAGE>

               (iii)Not later than one hundred  twenty  (120) days after the end
                    of the fiscal year of the Company and each subsequent fiscal
                    year of the  Company  ending  during the four year and three
                    month  period  of  employment,  the  Company  shall  pay  to
                    Employee, as incentive  compensation an amount equal to four
                    (4%)  percent of the  Consolidated  Pretax  Earnings  of the
                    Company  in excess  of the  Company's  Minimum  Consolidated
                    Pretax Earnings,  as defined below. For purposes hereof, the
                    term  "Consolidated  Pretax  Earnings" of the Company  shall
                    mean,  with  respect to any fiscal  year,  the  consolidated
                    income,  if any,  of the Company for such fiscal year as set
                    forth in the audited, consolidated financial statements (the
                    "Financial  Statements") of the Company and its subsidiaries
                    included  in its  Annual  Report  to  stockholders  for such
                    fiscal year, before deduction of taxes based on income or of
                    the incentive  compensation  to be paid to Employee for such
                    fiscal year under this  Agreement  as defined  below in this
                    clause  (iii) and in no event  more than  Employee's  annual
                    salary set forth in clause (i) immediately above.

      For purposes hereof the term "Minimum Consolidated Pretax Earnings" of the
Company shall mean,  with respect to any fiscal year, the amount of Consolidated
Pretax  Earnings of the Company  equal to ten percent (10%) of (x) the Company's
Stockholders' Equity, as set forth in the Financial Statements for the beginning
of such fiscal year, plus (y) the proceeds from the sale of the Company's equity
securities,  less (z) the purchase  price from the  acquisition of the Company's
equity securities, on a time-proportioned basis, during such fiscal year.

          (b)  During the  consulting  period,  Employee  shall be entitled to a
               consulting  fee at the rate of ONE  HUNDRED  THOUSAND  ($100,000)
               dollars per annum, paid on a monthly basis.

     6.   EMPLOYEE BENEFITS - EXPENSES

          a)   During the period of active  employment,  Employee  shall receive
               all fringe benefits in the nature of health, medical, life and/or
               other  insurance,  a Company car and related expenses as received
               by other officers of the Company.

          b)   The Company  shall  reimburse  Employee  for all proper  expenses
               incurred by him, including  disbursements made in the performance
               of  his  duties  to  the  Company;   provided,  however  that  no
               extraordinary  expenses and/or disbursements shall be incurred by
               Employee  without  the  prior  approval  of the  Chief  Executive
               Officer or the Board of Directors of the Company.

          c)   Employee shall be eligible to participate in the Company's  stock
               option  and stock  purchase  plans  and to  acquire  warrants  to
               purchase the Company's stock to the extent determined in the sole
               discretion of the  Compensation  Committee of the Company's Board
               of Directors.

          d)   During  the  period  of  active  employment,  Employee  shall  be
               furnished with office space and facilities  commensurate with his
               position and adequate for the performance of his duties; he shall
               be provided with the perquisites  customarily associated with the
               position of a Senior  Executive of the  Company;  and he shall be
               entitled to six weeks regular vacation during each year.
<PAGE>

          e)   In the event of the death of Employee,  within 30 days thereafter
               the Company shall  promptly make a lump sum payment to Employee's
               widow, or to such other person or persons as may be designated by
               Employee in his Will, or to his estate in the event of Employee's
               intestacy,  of the salary and  compensation  to which Employee is
               entitled hereunder for the two year period from date of death and
               one-half of such salary for the balance of the period  covered by
               this  Agreement,  and in the year of death an additional  payment
               equal to the pro rata  amount  for said year of the  compensation
               set forth in paragraph 5 (iii), the Company's contribution to the
               401(k),  and  the  pro-rata  cost  of  living  increment,   which
               additional  payment shall be made in accordance  with paragraph 5
               (ii).  and  thereafter  one-half  of such  compensation  Board of
               Directors of the Company or a committee thereof.

          f)   Disability  for Employee  shall occur if he becomes  unable,  for
               twelve  consecutive  months or more,  due to ill  health or other
               incapacity  to perform  the  services  described  above.  In that
               event, the Company may thereafter,  upon at least 90 days written
               notice to employee,  place him on disability status and terminate
               this  agreement.  If employee is so  determined by the Company as
               disabled,  he shall be entitled to his annual compensation as set
               forth in  paragraph  5 (i) and 5 (ii)  hereof  payable  in weekly
               installments  for the first two years after notice of disability,
               payable  in weekly  installments  for the  balance  of the period
               covered by this agreement.

     7. NON-COMPETITION. Employee agrees that, during term of this Agreement, he
will not,  without the prior  written  approval of the Board of Directors of the
Company,  directly or indirectly  through any other  individual  or entity,  (a)
become an officer or employee of, or render any services to, any  competitor  of
the Company, (b) solicit,  raid, entice or induce any customer of the Company to
cease  purchasing  goods or services from the Company or to become a customer of
any  competitor of the Company,  and Employee will not approach any customer for
any such  purpose  or  authorize  the  taking of any such  actions  by any other
individual or entity, or (c) solicit, raid, entice or induce any employee of the
Company to become  employed by any competitor of the Company,  and Employee will
not approach any such  employee for any such purpose or authorize  the taking of
any such action by any other individual or entity. However, nothing contained in
this  paragraph 7 shall be construed as preventing  Employee from  investing his
assets in such form or manner as will not  require  him to become an  officer or
employee  of, or render any services  (including  consulting  services)  to, any
competitor of the Company.

     8.   TERMINATION FOR CAUSE

          a)   The  Company  has been  intimately  familiar  with  the  ability,
               competence and judgment of Employee, which are acknowledged to be
               of the highest  caliber.  Accordingly,  the Company and  Employee
               agree that Employee's services hereunder may be terminated by the
               Company  only  (i)  for  an  act of  moral  turpitude  materially
               adversely  affecting the financial  condition of the Company,  or
               (ii) breach of the terms of this Agreement which shall materially
               adversely affect the financial condition of the Company.
<PAGE>

          b)   If the Company terminates Employee's employment hereunder for any
               reason  other  than  as set  forth  in  paragraph  8 (a)  hereof,
               Employee's  compensation  shall  continue  to be  paid  to him as
               provided in paragraph 5 hereunder  for the  remainder of the term
               of this  Agreement.  Employee  shall have no duty to mitigate the
               Company's  damages  hereunder.  Therefore,  no deduction shall be
               made by the Company for any compensation  earned by Employee from
               other employment or for monies or property  otherwise received by
               Employee   subsequent  to  such  termination  of  his  employment
               hereunder.   Employee  and  the  Company   acknowledge  that  the
               foregoing  provisions of this  paragraph  8(b) are reasonable and
               are based upon the facts and  circumstances of the parties at the
               time of  entering  into this  Agreement,  and with due  regard to
               future expectations.

     9.  CONSOLIDATION OR MERGER. In the event of any consolidation or merger of
the  Company  into  or  with  any  other  corporation  during  the  term of this
Agreement,  or the sale of all or substantially all of the assets of the Company
to  another  corporation  during  the  term of this  Agreement,  such  successor
corporation  shall assume this Agreement and become  obligated to perform all of
the terms and  provisions  hereof  applicable  to the  Company,  and  Employee's
obligations hereunder shall continue in favor of such successor corporation.

     10.  INDEMNIFICATION.  The Company  agrees to indemnify the Employee to the
fullest  extent  permitted  by  applicable  law  consistent  with the  Company's
Certification of Incorporation and By-Laws as in effect on the effective date of
this Agreement with respect to any action or failure to act on his part while he
was an officer,  director  and/or  employee (a) of the Company or any subsidiary
thereof or (b) of any other  entity if his  service  with such entity was at the
request of the Company.  This  provision  shall survive the  termination of this
Agreement.

     11. NOTICES.  Notice is to be given hereunder to the parties by telegram or
by certified or  registered  mail,  addressed to the  respective  parties at the
addresses  herein  below set forth or to such  addresses  as may be  hereinafter
furnished, in writing:

           TO: Myron Levy
               147 Deer Ford Drive
               Lancaster, PA 17601

           TO: HERLEY INDUSTRIES, INC.
               10 Industry Drive
               Lancaster, PA 17603
               Attention:  Lee N. Blatt, Chairman

     12. CHANGE OF CONTROL.  In the event there shall be a change in the present
control of the  Company as  hereinafter  defined,  or in any person  directly or
indirectly presently  controlling the Company, as hereinafter defined,  Employee
shall have the right,  exercisable  within six months of his  becoming  aware of
such event, to terminate his employment.  Upon such termination,  Employee shall
immediately receive as a lump sum payment an amount equal to (i) three (3) times
his "base  amount",  within the meaning of Section 280G of the Internal  Revenue
Code of 1986, as amended (hereinafter "the Code"),  reduced by (ii) $100.00, but
in no event shall he receive an amount greater than is deductible  under Section
280G of the  Internal  Revenue  Code of 1986,  as  amended,  such  amount  to be
determined by the Company's independent auditors.

     For purposes of this Agreement,  a change in control of the Company,  or in
     any person directly or indirectly controlling the Company, shall mean:
<PAGE>

     a)   a change in control as such term is  presently  defined in  Regulation
          240.12b-2 under the Securities  Exchange Act of 1934 ("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-five  (25%) of the voting power of the  Company's
          then outstanding securities; or

     c)   if during the term of this Agreement, individuals who at the beginning
          of such period  constitute the Board of Directors cease for any reason
          to constitute at least a majority thereof, unless the election of each
          director  who is not a director  at the  beginning  of such period has
          been approved in advance by directors representing at least two-thirds
          (2/3)  of the  directors  then in  office  who were  directors  at the
          beginning of the period.

     13. SUCCESSORS AND ASSIGNS.  This agreement shall be binding upon and inure
to the benefit of the  successors  and assigns of the  Company.  Unless  clearly
inapplicable,  reference  herein to the Company  shall be deemed to include such
other successor.  In addition, this Agreement shall be binding upon and inure to
the benefits 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 Directors of the company.

     14.  AMENDMENTS.  This agreement may not be altered,  modified,  amended or
terminated except by a written instrument signed by each of the parties hereto.

     15.  GOVERNING LAW. This  agreement  shall be governed by and construed and
interpreted  in  accordance  with the laws of  Delaware,  without  reference  to
principles of conflict of laws.

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

HERLEY INDUSTRIES, INC.                 HERLEY INDUSTRIES, INC.

BY: /s/ David Lieberman                 BY:  /s/ Lee Blatt
    -------------------                      -------------------------------
        David Lieberman                          Lee Blatt, Chairman and CEO
           Secretary

                                        BY:  /s/ Myron Levy
                                             -------------------------------
                                                 Myron Levy, Employee