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
LEE N.  BLATT,  residing at 471 North  Arrowhead  Trail,  Vero Beach,  Fl 32963,
(hereinafter called the "Employee").

                                   WITNESSETH

     WHEREAS,  the  Employee  was  initially  employed by the  Company  under an
Employment  Agreement,  dated June 11, 1984,  as amended,  which  agreement  was
superseded by a second  Employment  Agreement  between Employee and the Company,
dated  January 1, 1997,  which  agreement was  superseded by a third  Employment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 PRIOR AGREEMENTS  SUPERSEDED.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 June 11,  1984,  as
amended, 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. 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.  During the
period of employment,  Employee  shall be employed as a Senior  Executive of the
Company. In such capacity, Employee agrees that he shall serve the Company under
the  direction  of the  Board of  Directors  of the  Company  to the best of his
ability,  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 Board of Directors of the  Company.  Employee  shall also
serve  in  similar  capacities  of such of the  subsidiary  corporations  of the
Company as may be  selected by the Board of  Directors  and shall be entitled to
such  additional  compensation  therefore as may be  determined  by the Board of
Directors of the Company.  Notwithstanding  the foregoing,  it is understood and
agreed that the duties of Employee during the period of employment  shall not be
inconsistent with (i) his position and title as Senior Executive of the Company;
or (ii)  with  those  duties  ordinarily  performed  by a  comparable  executive
officer.

     5.  REMUNERATION.  During  the  period  of  employment,  Employee  shall be
entitled to receive the following compensation for his services:
<PAGE>

          (i)  The Company shall pay to Employee an annual salary at the rate of
               FOUR HUNDRED  SEVENTY-FIVE  ($475,000) 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.

          (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 period of employment, the Company shall
               pay to  Employee,  as incentive  compensation  an amount equal to
               five (5%)  percent of the  Consolidated  Pretax  Earnings  of the
               Company in excess of the Company's  Minimum  Consolidated  Pretax
               Earnings,  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 "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.  For the  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.

     6.   EMPLOYEE BENEFITS - EXPENSES
          a)   During the term of this agreement,  the Company shall provide, at
               its expense  $56,000  annually to purchase life  insurance,  with
               Employee  having the right to designate  the  insurer,  owner and
               beneficiary of such life insurance.
<PAGE>

          b)   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 three 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).

          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 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.

          e)   It  is  contemplated  that,  during  the  period  of  employment,
               Employee  may be  required  to incur  out-of-pocket  expenses  in
               connection  with  the  performance  of  his  services  hereunder,
               including    expenses    incurred   for   travel   and   business
               entertainment.  Accordingly,  the Company shall pay, or reimburse
               Employee,  for all out-of-pocket  expenses reasonably incurred by
               Employee in the performance of his duties hereunder in accordance
               with the usual  procedures  of the Company.  Notwithstanding  the
               foregoing,  the recognition that Employee will be required during
               the term of this Agreement to do a considerable amount of driving
               in  connection  with his services  hereunder,  the Company  shall
               provide  Employee with the use of a suitable  automobile  and all
               expenses  incidental  throughout  the  term  of  this  Agreement,
               including fuel, repairs, maintenance and insurance.

          f)   All benefits to Employee  specially  provided for herein shall be
               in addition to, and shall not diminish,  (i) such other  benefits
               and/or compensation as may hereafter be granted to or afforded to
               Employee by the Board of Directors  of the Company;  and (ii) any
               rights  which   Employee  may  have  or  may  acquire  under  any
               hospitalization,   life   insurance,   pension,   profit-sharing,
               incentive  compensation  or  other  present  or  future  employee
               benefit plan or plans of the Company.

          g)   Employee currently works from offices in Lancaster,  Pennsylvania
               and from  his  homes  where he has  created  work  space  and his
               responsibilities do not require regular attendance at any Company
               office.  These  responsibilities  include,  among  other  things,

<PAGE>

               conducting  executive  recruiting  tasks and visiting  customers,
               investment banks and potential acquisition candidates in the best
               interests  of  the  Company.  In  recognition  of  these  special
               employment conditions,  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 and thereafter one-half of such compensation
               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.

          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.
<PAGE>

     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:  Lee N. Blatt
               471 North Arrowhead Trail
               Vero Beach, FL  32963

          TO:  HERLEY INDUSTRIES, INC.
               10 Industry Drive
               Lancaster, PA 17603
               Attention:  Myron Levy, President

     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:

     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.
<PAGE>

     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/ Myron Levy
     --------------------                        -------------------------------
          David Lieberman                            Myron Levy, President
             Secretary

                                                /s/ Lee N. Blatt
                                                --------------------------------
                                                    Lee N. Blatt, Employee