Exhibit 10.9
                                                                   ------------
        THIS LOAN  AGREEMENT is made as of February  16,  1999,  by and between
HERLEY  INDUSTRIES,  INC.  (the  "Borrower")  and  THE  FIRST  NATIONAL  BANK OF
MARYLAND, a division of FMB BANK (the "Lender").


1.       DEFINITIONS.

         1.1      Defined Terms.

                  As used in this Agreement,  terms defined in the preamble have
the meanings  therein  indicated,  and the  following  terms have the  following
meanings:

     "Advance":  each loan or advance made under the Revolving Loan at such time
as such loan or advance is made or is being maintained.

     "Agreement":  this Loan Agreement, as the same may be amended, supplemented
or otherwise modified from time to time.

     "Authorized Signatory": the chairman of the board or the president.

     "Borrowing Date": any Business Day on which any Advance is made.

     "Business  Day": any day other than a Saturday,  a Sunday or a day on which
commercial  banks located in  Pennsylvania  are authorized or required by law or
other governmental action to close.

     "Collateral":  all of the tangible and intangible assets,  property rights,
and benefits with respect to which the Borrower has granted a security  interest
or other  Lien to or for the  direct or  indirect  benefit  of the Lender or has
assigned  as  security  or  otherwise  pledged to or for the direct or  indirect
benefit of the Lender pursuant to the Loan Documents.

     "Debt":  for any  date  of  determination,  the  aggregate  of all  amounts
outstanding  on the Loans and all other  indebtedness  for which the Borrower is
liable,  whether as borrower,  maker,  guarantor or endorser  (excluding payment
instruments  endorsed  for  deposit  or  collection  in the  ordinary  course of
business).

     "Debt Service  Coverage  Ratio":  with respect to Borrower,  Borrower's Net
Profit After Tax for the applicable  fiscal year, less dividends to stockholders
with respect to the  applicable  fiscal year,  plus  non-cash  charges  (such as
depreciation  and  amortization)  for such  fiscal  year,  divided by  scheduled
principal payments on Borrower's Debt for such fiscal year.
<PAGE>

     "Default":  any event or condition which constitutes an Event of Default or
which,  with the giving of notice,  the lapse of time,  or any other  condition,
would, unless cured or waived, become an Event of Default.

     "Environmental Laws": any and all federal, state and local laws relating to
the  environment,  the  use,  storage,  transporting,  manufacturing,  handling,
discharge,   disposal  or  recycling  of  hazardous  substances,   materials  or
pollutants or industrial  hygiene and  including,  without  limitation,  (i) the
Comprehensive  Environmental  Response,   Compensation  and  Liability  Act,  as
amended,  42 USCA ss.9601 et seq.; (ii) the Resource  Conservation  and Recovery
Act of 1976,  as amended,  42 USCA  ss.6901 et seq.;  (iii) the Toxic  Substance
Control  Act,  as amended,  15 USCA  ss.2601 et seq.;  (iv) the Water  Pollution
Control  Act, as  amended,  33 USCA  ss.1251 et seq.;  (v) the Clean Air Act, as
amended,  42 USCA ss.7401 et seq.;  (vi) the Hazardous  Material  Transportation
Act,  as amended,  49 USCA  ss.1801 et seq.;  and (vii) all rules,  regulations,
judgments,  decrees,  injunctions  and  restrictions  thereunder and any similar
state law.

     "Event of Default":  any of the events  specified in Section 8.1,  provided
that any  requirement  for the giving of notice,  the lapse of time or any other
condition has been satisfied.

     "Federal  Funds Target Rate":  the Federal Funds Target Rate as established
by the Federal Open Market  Committee of the Federal  Reserve Board from time to
time.

     "GAAP":  generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of  Certified  Public  Accountants  and  statements  and  pronouncements  of the
Financial  Accounting  Standards  Board or in such other statement by such other
entity as may be approved by a significant segment of the accounting profession,
which  are  applicable  to the  circumstances  as of the date of  determination,
consistently applied.

     "Governmental  Authority":  any  nation or  government,  any state or other
political  subdivision  thereof, any entity exercising  executive,  legislative,
judicial,  regulatory or administrative functions of or pertaining to government
and any court or arbitrator.

     "Hazardous Substance": any hazardous or toxic substance, material or waste,
including, but not limited to, (i) those substances, materials and wastes listed
in the United States Department of Transportation  Hazardous Materials Table (49
CFR 172.101) or by the Environmental  Protection Agency as hazardous  substances
(40 CFR Part 302) and amendments thereto and replacements  therefor and (ii) any
substance, pollutant or material defined as, or designated in, any Environmental
Law  as  a  "hazardous  substance,"  "toxic  substance,"  "hazardous  material,"
"hazardous waste," "restricted  hazardous waste," "pollutant," "toxic pollutant"
or words of similar import.
<PAGE>

     "Highest  Lawful  Rate":  with  respect  to  Lender,  the  maximum  rate of
interest,  if any, that at any time or from time to time may be contracted  for,
taken,  charged  or  received  by  Lender  on the Notes or which may be owing to
Lender  pursuant to this Agreement  under the laws applicable to Lender and this
Agreement.

     "Lender's Counsel": Rhoads & Sinon LLP, counsel to the Lender in connection
with the transactions contemplated by this Agreement.

     "Lender's  Marginal Cost of Funds":  a rate of interest per annum specified
by the Lender  from time to time as a  reference  rate for the  guidance  of its
officers.

     "LIBOR": as defined in Section 2.5(a).

     "Lien":  any  mortgage,  pledge,  hypothecation,   assignment,  deposit  or
preferential  arrangement,  encumbrance,  lien  (statutory  or other),  or other
security  agreement  or  security  interest  of any kind or  nature  whatsoever,
including,  without  limitation,  any conditional  sale or other title retention
agreement  and any capital or  financing  lease  having  substantially  the same
economic effect as any of the foregoing.

     "Loan" and "Loans":  the  Revolving  Loan and/or the Mortgage  Loan, as the
case may be.

     "Loan Documents": collectively, this Agreement, the Notes, the Mortgage and
all other documents executed and delivered in connection with the Loans, and any
future or additional  loan documents  executed and delivered in connection  with
the Loans, and any amendments or modifications thereof.

     "Mortgage":  the Mortgage and Security  Agreement  made by the Borrower and
delivered  to the  Lender  for the  benefit  of the  Lender,  as the same may be
amended,  supplemented  or otherwise  modified  from time to time,  securing the
Mortgage Loan and encumbering the Mortgaged Property.

     "Mortgaged  Property":  that certain parcel or tract of real property,  and
the improvements thereon and hereafter constructed thereon, known as 10 Industry
Drive, Lancaster, Lancaster County, Pennsylvania, as more fully described in the
Mortgage.

     "Mortgage Loan": as defined in Section 2.3.

     "Mortgage  Loan Note":  the Mortgage  Loan Note from the  Borrower,  as the
maker thereof, payable to the order of the Lender, evidencing the Mortgage Loan,
as the same may be amended,  extended, renewed or otherwise modified or replaced
from time to time.
<PAGE>

     "Note" and "Notes":  the Revolving Loan Note and/or the Mortgage Loan Note,
as the case may be.

     "Outstanding  Revolving Loan Amount":  for any date of  determination,  the
aggregate principal amount of all outstanding Advances.

     "Permitted Liens": any of the liens described in clauses (i) through (v) of
Section 6.4 of this Agreement.

     "Person": an individual, a partnership,  a corporation, a business trust, a
joint stock company,  a trust, a limited  liability  company,  an unincorporated
association,  a joint venture,  a Governmental  Authority or any other entity of
whatever nature.

     "Prepayment Premium": an amount equal to the greater of: (i) the sum of the
present values (as of the Principal  Prepayment Date) of the interest  payments,
discounted at the Treasury Rate, which the Borrower would have made with respect
to the Principal  Prepayment Amount after the Principal  Prepayment Date but for
the  Principal  Prepayment  Event,  or (ii) one percent  (1.0%) of the Principal
Prepayment Amount.

     "Principal  Prepayment  Amount":  the amount of principal  prepaid upon the
occurrence of a Principal Prepayment Event.

     "Principal  Prepayment  Date":  the date that a Principal  Prepayment Event
occurs.

     "Principal  Prepayment Event": the prepayment of principal,  in whole or in
part, prior to the date provided under the Mortgage Loan Note for payment of the
Principal  Prepayment Amount for any reason whatsoever,  whether by declaration,
acceleration or otherwise and whether or not an Event of Default has occurred.

     "Revolving Loan": as defined in Section 2.2.

     "Revolving  Loan  Commitment  Period":  the period from the Effective  Date
through the day preceding the Revolving Loan Maturity Date.

     "Revolving Loan Maturity  Date":  January 31, 2001, or such earlier date on
which the Revolving  Loan Note shall become due and payable,  whether by demand,
acceleration or otherwise, unless extended in writing by the Bank.

     "Revolving Loan Note": the Revolving Loan Note, of even date herewith, from
the Borrower,  as the maker  thereof,  payable to the order of the Lender in the
stated principal amount of Twenty Million Dollars ($20,000,000.00),  as the same
may be amended, extended, renewed or otherwise modified or replaced from time to
time.
<PAGE>

     "Surety" and "Sureties":  one or more of HMS Investments,  Inc.,  Metraplex
Corporation,   General   Microwave   Corporation,   General   Microwave   Israel
Corporation,  General Microwave Israel, Ltd., General Microcircuits  Corporation
and any  additional  operating  subsidiaries  which  Borrower  or any Surety may
create or acquire  at any time any Loan  remains  outstanding  and unpaid or any
other amount is owing under any Loan Document to Lender.

     "Tangible  Net  Worth":  with  respect  to  any  Person,  at  any  time  of
determination,  that amount which is equal to the excess of all of such Person's
assets (excluding  inter-affiliate items and any and all intangible assets, such
as, but not limited  to,  customer  lists,  covenants  not to compete,  deferred
financing costs, deferred charges,  goodwill,  intellectual property,  licenses,
organization  costs,  officer and stockholder  advances or receivables,  mineral
rights  and  the  like)   over  all  of  such   Person's   liabilities   (except
inter-affiliate items), determined in accordance with GAAP.

     "Treasury  Rate":  the average coupon  equivalent  yield,  in the secondary
market, that Lender could obtain by purchasing United States Treasury Securities
on  the  Principal  Prepayment  Date,  in  amounts  approximately  equal  to the
Principal  Prepayment  Amount,  and  maturing  on or about the date on which the
Principal  Prepayment  Amount would have been paid  pursuant to the terms of the
Mortgage Loan Note. (Lender shall use standard yield interpolation methods if no
such securities mature on or about such date.)

         1.2      Other Definitional Provisions.

                  (a)  All  terms  defined  in this  Agreement  shall  have  the
meanings  given  such  terms  herein  when  used in the  Loan  Documents  or any
certificate,  opinion or other  document  made or delivered  pursuant  hereto or
thereto, unless otherwise defined therein.

                  (b) As  used in the  Loan  Documents  and in any  certificate,
opinion  or  other  document  made or  delivered  pursuant  hereto  or  thereto,
accounting terms not defined in Section 1.1, and accounting terms partly defined
in Section 1.1, to the extent not defined,  shall have the  respective  meanings
given to them under GAAP.

                  (c) The words "hereof," "herein," "hereto" and "hereunder" and
similar  words when used in this  Agreement  shall refer to this  Agreement as a
whole  and not to any  particular  provision  of this  Agreement,  and  Section,
schedule and exhibit references  contained herein shall refer to Sections hereof
or schedules or exhibits hereto unless otherwise expressly provided herein.

                  (d)  The  word  "or"  shall  not be  exclusive;  "may  not" is
prohibitive  and not  permissive  an  "agreement"  of a Person shall include any
applicable promise, covenant,  representation,  warranty or other undertaking of
such Person.
<PAGE>

                  (e)  Unless  the  context  otherwise  requires,  words  in the
singular  number  include  the  plural,  and  words in the  plural  include  the
singular.

                  (f) Unless  specifically  provided  in a Loan  Document to the
contrary,  references to time shall refer to the  prevailing  time in Lancaster,
Pennsylvania.


 2.      TERMS OF THE LOANS.

         2.1      The Loans.

                  Subject to the terms and conditions of the Loan Documents, the
Lender  agrees to extend to the  Borrower  the  Revolving  Loan and the Mortgage
Loan.

         2.2      Revolving Loan.

                  Subject to the terms and conditions  hereof,  Lender agrees to
make a revolving  line of credit  loan (the  "Revolving  Loan")  under which the
Borrower,  from time to time during the Revolving Loan  Commitment  Period,  may
obtain Advances from time to time;  provided,  that in no event shall the Lender
have any  obligation  to make any Advance if, after giving effect  thereto,  the
Outstanding   Revolving  Loan  Amount  shall  exceed  Twenty   Million   Dollars
($20,000,000.00).  The Borrower  covenants  that it will not request any Advance
under the Revolving Loan which would cause the Outstanding Revolving Loan Amount
to exceed the aforesaid  limitation.  Any  termination  of the  Revolving  Loan,
whether by expiration of the Revolving Loan Commitment  Period or as a result of
the existence or continuance  of any Event of Default,  shall relieve the Lender
of the Lender's obligation to lend money or to make financial  accommodations to
or for the  Borrower and for any of its  accounts,  but shall in no way release,
terminate,  discharge  or excuse the Borrower  from its absolute  duty to pay or
perform any or all of its obligations  under this Agreement.  The application of
the  preceding  sentence  is  intended  to apply only so long as any sums remain
outstanding, due or owing under the Loans.

                  2.2.1  Procedure for  Advances.  The Borrower may borrow under
the Revolving  Loan at any time and from time to time during the Revolving  Loan
Commitment  Period by notifying  the Lender (by  telephone or telecopy) no later
than 11:00 A.M. on the requested  Borrowing  Date,  specifying (A) the aggregate
principal  amount to be borrowed  under the  Revolving  Loan,  (B) the requested
Borrowing  Date, and (C) the account of the Borrower  maintained with the Lender
to be  credited  with  the  amount  of the  Advance.  Any such  notice  shall be
irrevocable.  The Lender  shall be  authorized  to rely upon any  request for an
Advance by any  representative  of the Borrower as  constituting  an  authorized
request for an Advance under the Revolving Loan by the Borrower.
<PAGE>

                  2.2.2 Repayment and Interest. All Advances under the Revolving
Loan shall be evidenced by and shall be repaid with interest in accordance  with
the provisions of the Revolving Loan Note, the terms and conditions of which are
incorporated  herein by reference.  The date and amounts of each Advance made by
the Lender and each payment made by the Borrower shall be recorded by the Lender
on the books and records of the Lender,  but any failure to record such dates or
amounts  shall  not  relieve  the  Borrower  of its duty to pay  under  the Loan
Documents.  All  repayments  shall be  credited  to the  balances  due under the
Revolving  Loan in  accordance  with the normal and  customary  practices of the
Lender.  Interest  accrued  under  the  Revolving  Loan  shall  be  computed  on
outstanding balances as reflected on the Lender's books and records.

                  2.2.3  Duration of the Revolving  Loan.  All sums  outstanding
under the  Revolving  Loan  shall be paid in full and the  Revolving  Loan shall
expire on the Revolving  Loan  Maturity  Date. At any time and from time to time
during the Revolving Loan Commitment Period,  the Company may borrow,  repay and
reborrow under the Revolving Loan, subject, however, to the continued observance
by the Borrower of the terms and conditions of the Loan Documents.

         2.3      Mortgage Loan.

                  Subject to the terms and conditions  hereof,  Lender agrees to
make to the  Borrower a Mortgage  Loan in an aggregate  principal  amount not to
exceed Two Million Nine Hundred Fifteen Thousand Dollars ($2,915,000.00).

2.3.1  Mortgage  Loan Note.  The Mortgage  Loan shall be evidenced by and repaid
with interest in accordance  with a separate  Mortgage Loan Note,  the terms and
conditions  of which shall be  incorporated  herein by  reference.  The date and
amount of the  Mortgage  Loan made by the  Lender and each  payment  made by the
Borrower  with respect to such  Mortgage Loan shall be recorded by the Lender on
the books and  records of the  Lender,  but any  failure to record such dates or
amounts  shall  not  relieve  the  Borrower  of its duty to pay  under  the Loan
Documents.  All  repayments  shall be  credited  to the  balances  due under the
Mortgage  Loan in  accordance  with the normal and  customary  practices  of the
Lender.  Interest  accrued  under the  Mortgage  Loan shall be  computed  on the
outstanding balances as reflected on the Lender's books and records.

2.3.2  Duration of the Mortgage  Loan.  The Mortgage Loan shall be for a term of
ten (10) years,  subject to the right of the Lender to accelerate  payment under
the  Mortgage  Loan in  accordance  with the  terms and  conditions  of the Loan
Documents.  The amount of the required  monthly  installments  of principal  and
interest shall be based upon a twenty (20) year amortization.


<PAGE>




         2.4      Prepayments of the Loans.

                  (a) Revolving  Loan.  The Borrower may, at its option,  prepay
the Revolving Loan, in whole or in part, without premium or penalty, at any time
and from time to time.

                  (b) Mortgage  Loan. In the event interest shall be accruing on
the Mortgage Loan at a floating  rate of interest as provided in Section  2.5(a)
of this Agreement, the Borrower may, at its option, prepay the Mortgage Loan, in
whole or in part, without premium or penalty, at any time and form time to time.
In the event  interest shall be accruing on the Mortgage Loan at a fixed rate of
interest as provided in Section  2.5(a) of this Agreement and any portion of the
principal  amount  of the  Mortgage  Loan is  prepaid,  in whole  or in part,  a
Prepayment  Premium shall be due and payable by the Borrower to Lender,  without
notice, at the time of prepayment.  The Prepayment  Premium shall become part of
the  indebtedness  evidenced  by the  Mortgage  Loan  Note,  and  secured by the
Collateral.  In no event shall the Prepayment  Premium,  together with all other
amounts payable under the Loan Documents to the extent the same are construed to
constitute  interest,  exceed the Highest Lawful Rate. Partial prepayments shall
be applied against the remaining  installments of principal  required to be paid
under the Mortgage Loan in the inverse order of the maturity thereof.

         2.5      Interest Rate and Payment Dates.

               (a) Prior to  Maturity.  Except  as  otherwise  provided  in this
          Section 2.5,  prior to maturity  the Loans shall bear  interest on the
          outstanding  principal balance thereof at the applicable interest rate
          or rates per annum set forth below.

        Loan                                   Rate

     Revolving Loan

               Federal  Funds  Target  Rate plus one and  sixty-five  hundredths
               percent (1.65%)

     Mortgage Loan


               Prior to the closing on the Mortgage  Loan,  the  Borrower  shall
               elect one or the other of the  following  interest  rate options:
               (i) a daily  adjusted rate of interest equal to the 30 day London
               Interbank  Offered  Rate  (LIBOR) as quoted by the Lender two (2)
               Business Days prior to the date any change in the 30 day LIBOR is
               to be  effective,  plus  one and  sixty-five  hundredths  percent
               (1.65%);  (ii) a fixed rate of interest for a period of up to ten
               (10) years as offered by the Lender in its sole discretion  equal
               to the Lender's  Marginal  Cost of Funds plus one and  sixty-five
               hundredths percent (1.65%);  or (iii) such other rate or rates as
               the Lender and the Borrower shall agree in writing.

<PAGE>

                  (b) Event of  Default.  After the  occurrence  and  during the
continuance of an Event of Default,  the  outstanding  principal  balance of the
Loans and any overdue  interest or other amount payable under the Loan Documents
shall bear  interest at a rate per annum equal to two percent (2%) plus the rate
which would otherwise be applicable under Section 2.5(a) of this Agreement.

                  (c) General.  Interest  shall be  calculated on the basis of a
three  hundred  sixty (360) days per year  factor  applied to the actual days on
which there exists an outstanding principal balance on the Loans. Interest shall
be  payable in arrears  on a monthly  basis as part of the  monthly  installment
payments  provided  for in the  Mortgage  Loan  Note  and,  in the  case  of the
Revolving  Loan,  as  provided  in the  Revolving  Loan Note.  Any change in the
interest rate on the Loans  resulting  from a change in the Federal Funds Target
Rate or the 30 day LIBOR,  as the case may be, shall become  effective as of the
opening of business on the day on which such change shall become effective.  The
Lender shall notify the  Borrower of the  effective  date and the amount of each
such change in the Federal  Funds  Target Rate or the 30 day LIBOR,  as the case
may be, by means of a monthly statement of account, but any failure to so notify
shall not in any manner affect the  obligations  of the Borrower to pay interest
on the Loans in the amounts and on the dates required. Each determination of the
Federal  Funds Target Rate,  the 30 day LIBOR or the Lender's  Marginal  Cost of
Funds,  as the case may be, by the Lender  pursuant to this  Agreement  shall be
conclusive and binding on the Borrower  absent  manifest error. At no time shall
the interest rate payable on the Loans,  together with all other amounts payable
under the Loan  Documents  to the extent the same are  construed  to  constitute
interest,  exceed the Highest  Lawful  Rate  applicable  to Lender.  If interest
payable to Lender on any date would exceed the maximum  amount  permitted by the
Highest  Lawful  Rate  applicable  to  Lender,   such  interest   payment  shall
automatically be reduced to such maximum permitted amount,  and interest for any
subsequent period, to the extent less than the maximum amount permitted for such
period by the Highest  Lawful Rate,  shall be increased by the unpaid  amount of
such reduction.  Any interest actually received for any period in excess of such
maximum allowable amount for such period shall be deemed to have been applied as
a prepayment of the Loans without incurring a Prepayment  Premium.  The Borrower
acknowledges  that to the extent  interest  payable on the Loans is based on the
Federal  Funds Target Rate,  the 30 day LIBOR or the Lender's  Marginal  Cost of
Funds,  such rates are only some of the bases for  computing  interest  on loans
made by the Lender,  and by basing  interest  payable on any of such rates,  the
Lender  has  not  committed  to  charge,  and  the  Borrower  has not in any way
bargained for,  interest based on a lower or the lowest rate at which the Lender
may now or in the future make loans to other borrowers.



<PAGE>



         2.6      Use of Proceeds.

                  (a) The  proceeds  of the  Revolving  Loan  shall  be used for
working capital and general  corporate  purposes;  provided,  however,  that the
maximum aggregate amount of Advances outstanding under the Revolving Loan at any
time for purposes of financing an acquisition by the Borrower as contemplated by
Section  6.2 or Section  6.8 of this  Agreement  shall not  exceed  Ten  Million
Dollars  ($10,000,000.00)  without  Lender's prior written  consent (except that
Advances  for the purpose of  financing  the  acquisition  of General  Microwave
Corporation  shall not be subject to such  limitation).  To the extent  that the
Lender,  in its sole  discretion,  determines that funds are available under the
Revolving  Loan,  the Lender may issue one or more standby  letters of credit on
behalf of the Borrower,  subject to such terms and conditions as may be required
and approved by the Lender in its discretion,  including without limitation, the
term of the  letter of credit  and the terms of  repayment  to be set forth in a
separate reimbursement agreement in form and substance acceptable to the Lender.

                  (b) The proceeds of the Mortgage Loan shall be used to satisfy
the existing mortgage indebtedness encumbering the Mortgaged Property.

2.7      Fees.

(a) If the Lender is requested to issue a standby  letter of credit  pursuant to
Section  2.6(a) of this  Agreement,  a  separate  letter of credit  fee equal in
amount to one percent (1.00%) of the amount of the letter of credit shall be due
and payable by the  Borrower  to the Lender  upon the  issuance of the letter of
credit and at each annual  anniversary of the issuance date occurring during the
term of the letter of credit.

(b) The Borrower  shall pay to the Lender at the closing of the Mortgage Loan an
amount equal to one-half of one percent (0.5%) of the actual principal amount of
the Mortgage Loan.

(c) All such fees shall be the  absolute  property of the Lender  upon  payment.
Payment of such fees  shall not be  considered  payment  of any of the  Lender's
expenses incurred in connection with the Loans, and shall be paid independent of
the amount of proceeds of the Loans ultimately  disbursed to the Borrower,  even
if such amounts are less than the above-stated  principal  amounts of the Loans.
No portion of such fees shall be refunded in the event the Borrower  prepays any
Loan including, without limitation, any prepayment of the Borrower's obligations
under a letter of credit reimbursement agreement, whether in whole or in part.

         2.8      Lender's Records.

                  The Lender's  records with respect to the Loans,  the interest
rates applicable thereto, each payment by the Borrower of principal and interest
on the  Loans,  and fees,  expenses  and any other  amounts  due and  payable in
connection  with  the  Loan  Documents  shall be  presumptively  correct  absent
manifest  error as to the  amount of the  Loans,  the  amount of  principal  and
interest  paid by the  Borrower  in  respect  of such  Loans and as to the other
information  relating to the Loans, and amounts paid and payable by the Borrower
hereunder and under the Notes and other Loan Documents.
<PAGE>

         2.9      Set-Off: Payment From Accounts.

2.9.1    Security Interest in Money and Property Held By Lender; Set-Offs.
[Not Applicable]

2.9.2  Application  of  Deposits.  In addition to any rights of set-off  arising
under the Loan Documents or under law, the Borrower hereby authorizes the Lender
to apply any amount on deposit in any  deposit  account of the  Borrower  now or
hereafter maintained with the Lender against any of the Borrower's  indebtedness
under the Loan Documents which is not paid when due.

 3.      CONDITIONS OF LENDING - GENERAL.

         In addition  to the  conditions  precedent  set forth in Section 4, the
obligation  of Lender to make the Loans shall be subject to the  fulfillment  of
the following conditions precedent:

         3.1      Evidence of Action.

                  The Lender shall have received a  certificate  dated as of the
closing  date of the  Secretary  or  Assistant  Secretary  of the  Borrower  (i)
attaching a true and complete copy of the resolutions of the Borrower's Board of
Directors and of all documents  evidencing other necessary  corporate action (in
form and substance satisfactory to the Lender) taken by it to authorize the Loan
Documents to which it is a party and the transactions contemplated thereby, (ii)
attaching a true and complete copy of the Borrower's  articles of  incorporation
and by-laws,  (iii) setting forth the  incumbency of the  Borrower's  officer or
officers  who may  sign  the Loan  Documents  to which it is a party,  including
therein a signature  specimen of such officer or officers,  and (iv) attaching a
certificate  of good standing of the Secretary of State of the  Commonwealth  of
Pennsylvania.

         3.2      This Agreement.

                  The Lender shall have received  counterparts of this Agreement
duly executed by an Authorized Signatory of the Borrower.


<PAGE>



         3.3      Notes.

                  The Lender shall have received the Revolving Loan Note and the
Mortgage  Loan  Note,  each duly  executed  by an  Authorized  Signatory  of the
Borrower.

         3.4      Security Agreement. [ Not Applicable]

         3.5      Mortgage.

                  The Lender shall have  received from the Borrower the Mortgage
(and UCC-1  Financing  Statements  appurtenant  thereto),  duly  executed  by an
Authorized Signatory of the Borrower.

         3.6      Mortgaged Property Documentation.

               The Lender shall have received the following  items, all of which
          must be satisfactory to the Lender:

                           (1)  Mortgage  title  insurance  dated  the  date  of
                  closing of the Mortgage  Loan with respect to the Mortgage and
                  the  Mortgaged  Property  in a face  amount  not less than the
                  principal  amount of the Mortgage Loan,  free and clear of all
                  liens,  encumbrances  and  objections,  and shall  insure  the
                  Mortgage  as a  first  and  best  lien  on  and  covering  the
                  respective  Mortgaged  Property,  with  standard  Pennsylvania
                  endorsements  100, 300 and 710,  together with evidence of the
                  payment of the premiums  therefor,  which  policies must be in
                  form and substance  satisfactory to the Lender and issued by a
                  title  insurance  company  or  companies  satisfactory  to the
                  Lender;

                           (2) Tax and  municipal  violations  searches  and, if
                  required by the Lender,  escrows or  affidavits  regarding the
                  future correction of any violations;

                           (3) Casualty and liability  insurance with respect to
                  the  Mortgaged  Property in the form  required by Section 5.3,
                  together with the endorsements thereto required thereby;

                           (4) An appraisal of the Mortgaged Property conforming
                  in all respects with the  applicable  regulations  promulgated
                  under Title XI of the Financial Institutions Reform,  Recovery
                  and Enforcement Act of 1989, as amended; and

                           (5) A Phase I  environmental  site  assessment of the
                  Mortgaged  Property in form and substance  satisfactory to the
                  Lender and issued by an environmental  consultant satisfactory
                  to Lender,  certifying that the Mortgaged  Property is free of
                  the presence of any Hazardous Substance.
<PAGE>

         3.7      Opinion of Counsel to the Borrower.

                  The Lender  shall have  received  an opinion of counsel to the
Borrower,  addressed to the Lender and Lender's Counsel, dated the closing date,
in form and  substance  and covering  such matters as the Lender may  reasonably
request.

         3.8      Litigation.

                  There shall be no injunction,  writ,  preliminary  restraining
order or other order of any nature issued by any  Governmental  Authority in any
respect  affecting  the  transactions  provided  for  herein  and no  action  or
proceeding by or before any Governmental Authority shall have been commenced and
be pending or, to the knowledge of the Borrower,  threatened, seeking to prevent
or delay the transactions  contemplated by the Loan Documents or challenging any
other  terms  and  provisions  hereof or  thereof  or  seeking  any  damages  in
connection therewith.

         3.9      Search Reports.

                  The Lender shall have  received  UCC,  tax and  judgment  lien
search  reports with respect to each  applicable  public  office where Liens are
filed  disclosing  that there are no Liens of record in such  official's  office
covering any of the  Collateral or showing the Borrower as a debtor,  except for
Permitted Liens.

         3.10     Property, Public Liability and Other Insurance.

                  The Lender shall have received a certificate  or  certificates
of all insurance  maintained  by the Borrower in form and  substance  reasonably
satisfactory to the Lender,  together with the endorsements described in Section
5.3.

         3.11     Other Documents.

                  The Lender  shall have  received  such other  documents as the
Lender shall reasonably request.



<PAGE>




         3.12     Fees and Expenses of Lender's Counsel.

                  The fees and expenses of Lender's  Counsel in connection  with
the  preparation,  negotiation and closing of the Loan Documents shall have been
paid by Borrower.

         3.13     Sureties.

                  Each of the Sureties  shall  execute and deliver to the Lender
Suretyship Agreements in form and substance acceptable to the Lender,  providing
joint and  several  suretyship  for the  absolute,  full and timely  payment and
performance  by the  Borrower  of the terms and  conditions  of each of the Loan
Documents.

4.       CONDITIONS OF LENDING - REVOLVING LOAN.

         The  obligation of Lender to make any Advance under the Revolving  Loan
is subject to the satisfaction of the following additional  conditions precedent
as of each Borrowing Date:

         4.1      Compliance.

                  On each  Borrowing Date and after giving effect to the Advance
to be made  thereon,  (a) the Borrower  shall be in  compliance  with all of the
terms,  covenants and conditions of the Loans,  (b) there shall exist no Default
or Event of  Default,  and (c) the  Outstanding  Revolving  Loan Amount will not
exceed  the  limitations  as to  the  maximum  unpaid  principal  amount  of the
Revolving Loan specified in Section 2.2 of this Agreement. Each borrowing by the
Borrower shall constitute a certification by the Borrower as of the date of such
borrowing  that  each of the  foregoing  matters  is  true  and  correct  in all
respects.

         4.2      Loan Documentation.

                  All documents required by the provisions of the Loan Documents
to be executed or delivered to the Lender on or before the applicable  Borrowing
Date shall have been executed and shall have been delivered at the office of the
Lender set forth in Section 9.6 on or before such Borrowing Date.

         4.3      Documentation and Proceedings.

                  All  corporate  and legal  proceedings  and all  documents and
papers in connection  with the  transactions  contemplated by the Loan Documents
shall be in form and  substance  reasonably  satisfactory  to the Lender and the
Lender shall have received all information and copies of all documents which the
Lender may  reasonably  have requested in connection  therewith,  such documents
(where  appropriate) to be certified by an Authorized  Signatory of the Borrower
or proper Governmental Authorities.
<PAGE>

         4.4      Required Acts and Conditions.

                  All  acts,   conditions   and   things   (including,   without
limitation,  the obtaining of any necessary  regulatory approvals and the making
of any filings,  recordings or registrations) required to be done, performed and
to have happened on or prior to such  Borrowing Date and which are necessary for
the  continued  effectiveness  of the Loan  Documents,  shall have been done and
performed and shall have happened in due compliance with all applicable laws.

         4.5      Approval of Counsel.

                  All  legal  matters  in  connection  with the  making  of each
Advance shall be reasonably satisfactory to Lender's Counsel.

         4.6      Supplemental Opinions.

                  If  requested  by the Lender  with  respect to the  applicable
Borrowing  Date,  there  shall  have  been  delivered  to the  Lender  favorable
supplementary  opinions of counsel to the Borrower,  addressed to the Lender and
dated such Borrowing Date,  covering such matters  incident to the  transactions
contemplated herein as the Lender may reasonably request.

         4.7      Other Documents.

                  The Lender  shall have  received  such other  documents as the
Lender shall reasonably request.


 5.      AFFIRMATIVE COVENANTS.

                  The  Borrower  covenants  and  agrees  that,  so  long as this
Agreement is in effect,  any Loan remains  outstanding and unpaid,  or any other
amount is owing under any Loan Document to Lender, the Borrower shall, except as
otherwise specifically provided:

         5.1      Reports to Lender.

                  Deliver to the Lender the following reports:

                           (a) The Borrower's  financial  statements as follows:
                  (1) the first  three  (3)  quarterly  consolidated  statements
                  certified by the  Borrower's  chief  financial  officer within
                  forty-five  (45) days after the end of each calendar  quarter;
                  (2) year-end  consolidated  statements within ninety (90) days
                  after Borrower's  fiscal  year-end,  which statements shall be
                  audited by an  independent  certified  public  accountant  and
                  include  an  unqualified  opinion  of  such  accountant,   any
                  management  letter  issued to the Borrower by such  accountant
                  and the Borrower's  response to such  management  letter.  All
                  financial statements shall be prepared in accordance with GAAP
                  consistently applied.
<PAGE>

                           (b) The Borrower's  quarterly report on Form 10-Q and
                  annual  report on Form 10-K as filed with the  Securities  and
                  Exchange Commission within ten (10) days after filing.

                           (c) With the year-end financial  statements  required
                  under Section 5.1(a)(3),  a certificate of compliance with the
                  requirements set forth in Sections 6.12, 6.13 and 6.14 of this
                  Agreement signed by the Borrower's chief financial officer.

                           (d) Such other reports as may be reasonably requested
                  by the Lender from time to time.

All  of  the  foregoing  reports  shall  be in  form  and  substance  reasonably
satisfactory  to the Lender.  If the  reports  are  required to be audited by an
independent  certified  public  accountant,  such  independent  certified public
accountant shall be reasonably acceptable to the Lender.

         5.2      Certificates; Other Information.

                  Furnish  to the  Lender  prompt  written  notice  if:  (i) any
indebtedness  of the Borrower is declared or shall become due and payable  prior
to its stated  maturity,  or called and not paid when due,  (ii) a default shall
have  occurred  under any note  (other than the Notes) or the holder of any such
note, or other evidence of indebtedness,  certificate or security evidencing any
such  indebtedness or any obligee with respect to any other  indebtedness of the
Borrower has the right to declare any such indebtedness due and payable prior to
its stated  maturity,  or (iii) there shall occur and be continuing a Default or
an Event of Default.

         5.3      Insurance.

                  (a)      Borrower shall maintain insurance as follows:

                           (i) Insurance against loss or damage to the Mortgaged
                  Property by fire and any of the risks  covered by insurance of
                  the type now  known as "fire  and  extended  coverage,"  in an
                  amount  not  less  than  the  appraised  market  value  of the
                  Mortgaged  Property  as set  forth in the  appraisal  required
                  pursuant  to  Section   3.6(4)  of  this   Agreement  or  that
                  percentage of the full  replacement  cost of all buildings and
                  improvements  now or hereafter  erected thereon  (exclusive of
                  the cost of excavations,  foundations,  and footings below the
                  lowest  basement  floor),  required to satisfy any  applicable
                  co-insurance requirement in such policy and with not more than
                  $5,000.00  deductible  from the loss payable for any casualty.
                  The  policies of  insurance  carried in  accordance  with this
                  subparagraph   (i)  shall   contain  the   "Replacement   Cost
                  Endorsement";
<PAGE>

                      (ii)  Comprehensive   public  liability  insurance  on  an
                  "occurrence  basis"  against  claims  for  "personal  injury,"
                  including without limitation bodily injury,  death or property
                  damage  occurring on, in or about the  Mortgaged  Property and
                  the  adjoining  streets,   sidewalks  and  passageways,   such
                  insurance to afford immediate minimum protection to a limit of
                  not less than  $1,000,000  under a primary policy of insurance
                  together  with a limit of not less  than  $2,000,000  under an
                  umbrella  policy of insurance with respect to personal  injury
                  or death to any one or more persons or damage to property;

                     (iii) Worker's compensation insurance (including employer's
                  liability insurance, if requested by Lender) for all employees
                  of  Borrower  engaged  on or  with  respect  to the  Mortgaged
                  Property  in such  amount  as is  reasonably  satisfactory  to
                  Lender,  or if such  limits are  established  by law,  in such
                  amounts;

                      (iv)  During the course of  construction  or repair of the
                  Mortgaged  Property,  builder's completed value risk insurance
                  against  "all risks of physical  loss,"  during  construction,
                  with  deductibles not to exceed  $1,000.00,  in  non-reporting
                  form,   covering  the  total  value  of  work   performed  and
                  equipment,  supplies and materials furnished.  If requested by
                  Lender, such policy of insurance shall contain the "permission
                  to occupy upon completion of work or occupancy" endorsement.

                      (v) Directors and Officers liability  insurance to a limit
                  of not less than $3,000,000.

                     (vi) Such other insurance, and in such amounts, as may from
                  time to time be reasonably required by Lender against the same
                  or other hazards.
<PAGE>

                  (b)  All  policies  of  insurance  required  by the  terms  of
paragraph (a) shall contain an  endorsement or agreement by the insurer that any
loss   shall  be  payable  in   accordance   with  the  terms  of  such   policy
notwithstanding  any act or negligence of Borrower which might otherwise  result
in forfeiture of such insurance and the further agreement of the insurer waiving
all rights of set-off, counterclaim or deduction against Borrower.

                  (c) All policies of insurance shall be issued by companies and
in amounts  reasonably  satisfactory to Lender.  All policies of insurance shall
have  attached  thereto  a  mortgagee  clause  in favor of  Lender,  and in form
reasonably  satisfactory  to  Lender,  providing  that the  Lender  shall not be
subject to contribution,  and a lender's loss payable endorsement for benefit of
Lender, all of a form satisfactory to Lender. Borrower shall furnish Lender with
a signed  duplicate  original  policy  with  respect to all  required  insurance
coverage. If Lender consents to Borrower providing any of the required insurance
through  blanket  policies  carried  by  Borrower  and  covering  more  than one
location,  then  Borrower  shall  furnish  Lender with a signed  certificate  of
insurance  for each such  policy  setting  forth  the  coverage,  the  limits of
liability,  the name of the carrier, the policy number, and the expiration date,
and listing  Lender as First  Mortgagee.  At least twenty (20) days prior to the
expiration  of each such policy,  Borrower  shall  furnish  Lender with evidence
satisfactory  to Lender of  payment of premium  and the  reissuance  of a policy
continuing insurance in force as required by this Agreement.  All such policies,
including  policies for any amount carried in excess of the required minimum and
policies not specifically  required by Lender,  shall be in form satisfactory to
Lender, shall be maintained in force and effect, shall be assigned and delivered
to Lender,  with  premiums  prepaid as  collateral  security  for payment of the
indebtedness  secured  hereby,  and shall contain a provision that such policies
will not be  canceled  or  materially  amended  which  term  shall  include  any
reduction  in the scope or limits of  coverage,  without  at least ten (10) days
prior written  notice to Lender.  If the insurance,  or any part thereof,  shall
expire, or be withdrawn, or become void or unsafe by reason of Borrower's breach
of any  condition  thereof,  or become  void or unsafe by reason of the value or
impairment  of the  capital of any  company in which the  insurance  may then be
carried,  or if for any reason whatever the insurance shall be reasonably deemed
by Lender to be unsatisfactory,  Borrower shall obtain new insurance  reasonably
satisfactory to Lender.

                  (d) In the event the Borrower fails to provide, maintain, keep
in force or deliver or furnish to Lender the policies of  insurance  required by
this Agreement,  Lender may procure such insurance or single-interests insurance
for such risks covering  Lender's  interest,  and Borrower will pay all premiums
thereon  promptly  upon  demand by  Lender,  and until  such  payment is made by
Borrower, the amount of all such premiums, together with interest thereon at the
rate specified in the Revolving Loan Note, shall be secured by the Mortgage.
<PAGE>

                  (e) In the event of loss,  Borrower will give immediate notice
thereof to Lender,  and  Lender may make proof of loss if not made  promptly  by
Borrower.  Each insurance company concerned is hereby authorized and directed to
make  payment  under such  insurance,  including  return of  unearned  premiums,
directly  to Lender  instead of to Borrower  and Lender  jointly,  and  Borrower
appoints Lender irrevocably, as Borrower's attorney-in-fact to endorse any draft
therefor. If otherwise,  such policies,  including all right, title and interest
of the Borrower thereunder, shall become the absolute property of the Lender.

                  (f) The proceeds of all  insurance on the  Mortgaged  Property
shall be applied as follows:

                                    (i) If the  Mortgaged  Property is partially
                           or totally  destroyed  by fire,  flood,  windstorm or
                           other casualty so as to render the Mortgaged Property
                           unsuitable  for Borrower's  continued  use,  Borrower
                           shall have the option of not replacing,  restoring or
                           repairing the damaged Mortgaged Property but, in lieu
                           of such replacement,  restoration or repair, have the
                           Lender  apply the  proceeds of such  insurance on the
                           Mortgaged  Property toward  prepayment of the amounts
                           due under the Mortgage Loan Note (any excess proceeds
                           to be paid to Borrower); or

                                    (ii) If Borrower does not elect to apply the
                           proceeds of such  insurance to prepay the amounts due
                           under the  Mortgage  Loan Note,  the proceeds of such
                           insurance  shall be held by the  Lender in a separate
                           insurance  loss  account  until such time as Borrower
                           shall have  delivered  to Lender for its approval and
                           to its satisfaction, sufficient plans, specifications
                           and contracts  containing a detailed breakdown of the
                           costs to  replace,  restore  or  repair  the  damaged
                           Mortgaged Property; thereafter, the Lender will, upon
                           delivery to it of a certificate  of Borrower  setting
                           forth the costs theretofore incurred or paid, subject
                           to   Lender   inspection   and   acceptance   of  the
                           replacement,  restoration  or repair  of the  damaged
                           Mortgaged Property, apply so much as may be necessary
                           of the proceeds of such insurance  toward the payment
                           of the  costs  of such  replacement,  restoration  or
                           repair. If said proceeds are not sufficient to pay in
                           full the costs as  reflected  in the  certificate  of
                           Borrower of such replacement,  restoration or repair,
                           the Borrower will  nonetheless  complete (or cause to
                           be  completed)  the  work  thereof  and will pay such
                           excess costs prior to requesting  Lender to apply any
                           of the proceeds of such insurance to the cost of such
                           replacement,  restoration  or repair.  Any balance of
                           said  proceeds  of  insurance   remaining  after  the
                           payment of all costs of such replacement, restoration
                           or repair,  shall be applied toward the prepayment of
                           the  amounts  due under the Loan  Documents.  If said
                           amounts shall have been paid in full,  any balance of
                           said  proceeds  of  insurance  shall  be  paid to the
                           Borrower;  provided,  however,  that if the  Borrower
                           does not elect to prepay  amounts  due under the Loan
                           Documents in full, there shall be no diminution in or
                           postponement of future installments payable under the
                           Loan Documents until payment thereof in full, and the
                           Borrower shall proceed  promptly to replace,  restore
                           or repair the Mortgaged Property damaged or destroyed
                           or cause said work, to be done.
<PAGE>

         5.4      Taxes.

                  Duly pay and  discharge  all taxes or other claims which might
become a Lien upon any of Borrower's  properties  except to the extent that such
items are being in good faith  appropriately  contested  with adequate  reserves
therefor having been set aside and with security satisfactory to the Lender.

         5.5      Properties.

                  Maintain,  preserve  and keep  Borrower's  properties  in good
repair,   working  order  and  condition,   and  make  all  reasonable  repairs,
replacements, additions, betterments and improvements thereto.

         5.6      Corporate Existence.

                  Maintain  Borrower's  corporate  existence and comply with all
statutes, rules and regulations,  the non-compliance with which would materially
and adversely affect its business, assets or condition, financial or otherwise.

         5.7      Issuance Taxes.

                  Pay all stamp or issuance taxes, if any,  payable by reason of
the  execution,  delivery  or  issuance  of this  Agreement,  the  Notes or Loan
Documents  under any  applicable  ordinance or statute now existing or hereafter
enacted,  and the Borrower  will at all times  indemnify  and hold  harmless the
Lender against any liability in respect thereof.

         5.8      Audits by Lender.

                  Upon the  occurrence  of an Event of  Default or if the Lender
reasonably  believes  that an Event of Default is  imminent  based on reports or
financial reports received by Lender,  permit the Lender and its duly authorized
agents to make, or cause to be made, inspections of any of Borrower's properties
and examinations and audits of any books, records and papers of the Borrower and
to make  extracts  therefrom  at all such  reasonable  times and as often as the
Lender may reasonably require.

         5.9      Management.

                  Maintain the current management and executive personnel of the
Borrower or other management and executive personnel reasonably  satisfactory to
the Lender,  and furnish to the Lender  within five (5) days of any  election or
appointment  of  officers  or  directors  written  notice of any  change of such
officers and directors.

5.10     Compliance With Laws.

                  Fully  comply with all  applicable  Laws with  respect to: (a)
products  that the Borrower  sells and services it performs,  (b) the conduct of
its business generally,  (c) its use,  maintenance and operation of the real and
personal  properties owned or leased by it; and, without limiting the foregoing,
the Borrower  shall obtain and  maintain  all  permits,  licenses and  approvals
necessary or  appropriate  to engage in its business as presently  conducted and
presently contemplated.

5.11     Employee Benefit Plans.

                  Comply,  and shall cause each of Borrower's  employee  benefit
plans to comply, with all applicable provisions of law.
<PAGE>

5.12     Environmental Matters.

                  Comply, and shall cause Borrower's  properties  (whether owned
or leased) to comply,  with all applicable  Environmental Laws. Without limiting
the foregoing,

         (a) the Borrower shall:

                  (1)  promptly  notify the Lender and each other Person that it
is required under  applicable  Environmental  Laws to notify upon the Borrower's
acquiring  knowledge  of a  release  or  threatened  release  of  any  Hazardous
Substance on, from, or near any of its properties,

                  (2)   promptly   notify  the  Lender  once  an   environmental
investigation  or clean-up  proceeding is instituted by any Person in connection
with the Borrower or any of its properties,

                  (3) comply in all  material  respects  with and  provide  such
assistance as may be reasonably required in any such environmental investigation
and clean-up proceeding,

                  (4) promptly execute and complete  remedial actions  necessary
to ensure that no  environmental  liens or  encumbrances  are levied  against or
exist with respect to any of the Borrower's properties or other assets, and

                  (5) promptly notify the Lender of any citation,  notification,
complaint,  or written  notice of  violation  which it receives  from any Person
which relates or pertains to the making, storing, handling, treating, disposing,
generating, transporting or release of any Hazardous Substance; and

         (b) the  Borrower  shall not use,  produce,  transport,  dispose  of or
otherwise handle any Hazardous Substances or permit any other Person to do so at
or from any of the  Borrower's  properties  except  in the  ordinary  course  of
Borrower's business and in compliance with all applicable Environmental Laws.

         The Borrower, promptly upon the written request of the Lender from time
to time after (1) the  occurrence of an Event of Default,  or (2) the occurrence
of any release of any  Hazardous  Substance  in, on or from any  property of the
Borrower in violation of any Environmental Law, shall provide the Lender with an
environmental  site  assessment  or  report,  all in scope,  form,  and  content
satisfactory to the Lender.  Upon any such event, the Lender,  or its designated
agent,  may  interview  any or all of the agents and  employees  of the Borrower
regarding  environmental matters,  including any consultants or experts retained
by the Borrower,  all of whom are directed to discuss environmental issues fully
and  openly  with  the  Lender  or its  designated  agent  and to  provide  such
information as may be requested.  All of the costs and expenses  incurred by the
Lender with respect to the audits,  tests,  inspections,  and examinations which
the Lender may  conduct  pursuant  to this  Section,  including  the fees of the
engineers, laboratories, and contractors, shall be paid by the Borrower.

         The  Borrower  shall  indemnify  and hold  harmless the Lender from all
loss,  liability,  damage,  reasonable  costs and expenses  (including,  but not
limited to, reasonable legal fees),  fines, or other penalties or payments,  for
failure  of the  Borrower  or any of its  properties  to comply  fully  with all
environmental Laws. The provisions of this Section shall survive the payment and
satisfaction of the Loans and the termination of this Agreement.


<PAGE>




5.13     Deposit Relationship.

                  Maintain  Borrower's  primary  deposit  relationship  with the
Lender.

5.14     Further Assurances And Power Of Attorney.

                  Execute  from time to time such other and  further  documents,
including but not limited to promissory notes,  security agreements,  mortgages,
financing  statements,  continuation  statements,  and the  like  which,  in the
opinion of the Lender or the Lender's  counsel,  may be reasonably  necessary to
perfect, confirm, establish,  reestablish,  continue, or complete the agreements
of the Borrower under the Loan Documents, the security interests and other Liens
in the Collateral and the purposes and  intentions of this  Agreement,  it being
the intention of the Borrower to provide hereby a full and absolute  warranty of
further  assurance to the Lender,  provided that Borrower shall not be obligated
under this Section  5.14 to execute any document  that could effect an amendment
or  modification  of any term or condition  of this  Agreement or any other Loan
Document.  If the Borrower fails to execute any document requested by the Lender
to establish,  reestablish,  continue,  complete, confirm or perfect any Lien or
security  interest in any Collateral or collect any amount payable thereon,  the
Borrower  hereby  appoints  the  Lender  or any  officer  of the  Lender  as the
Borrower's  attorney in fact for  purposes of  executing  such  documents in the
Borrower's name, place and stead, which power of attorney shall be considered as
coupled with an interest and irrevocable.

6.       NEGATIVE COVENANTS.

         The Borrower  agrees that, so long as this Agreement is in effect,  any
Loan remains outstanding and unpaid, or any other amount is owing under any Loan
Document to Lender, the Borrower will not, directly or indirectly, without prior
adequate  notice to Lender  with  respect to Section  6.3 and  without the prior
written consent of the Lender for all other Sections:


         6.1      Borrower's Indebtedness.  [Not Applicable]

         6.2      Combinations.  [Not Applicable]

         6.3      Loans and Investments.

                  Lend or advance money,  credit or property to or invest in (by
capital  contribution,  loan, purchase or otherwise) any firm,  corporation,  or
other  person,  except:  (a)  extensions  of credit to customers in the ordinary
course of business,  (b) securities with maturities of 180 days or less from the
date of acquisition  issued or fully  guaranteed or insured by the United States
government or any agency  thereof and backed by the full faith and credit of the
United States, (c) certificates of deposit, eurodollar time deposits,  overnight
bank deposits and bankers'  acceptances of any domestic  commercial  bank having
capital and surplus in excess of $500,000,000  having  maturities of one year or
less from the date of acquisition,  and (d) commercial  paper of an issuer rated
at least  A-1 by  Standard  & Poor's  Corporation  or P-1 by  Moody's  Investors
Services,  Inc.,  or carrying an  equivalent  rating by a nationally  recognized
rating agency if both of the two named rating agencies cease publishing  ratings
of  investments,  in each case,  with  maturities of not greater than sixty (60)
days from the date acquired.
<PAGE>

         6.4      Create Encumbrances.

                  Create, assume or permit to exist, any mortgage,  pledge, Lien
or  encumbrance  of or upon,  or security  interest  in, any of its  property or
assets now owned or hereafter acquired except (i) mortgages,  Liens, pledges and
security  interests  in favor of the  Lender;  (ii)  other  Liens,  charges  and
encumbrances  incidental  to the conduct of its business or the ownership of its
property and assets which were not incurred in connection  with the borrowing of
money or the obtaining of advances or credit and which do not materially  impair
the use thereof in the operation of its business; (iii) Liens for taxes or other
governmental  charges which are not  delinquent or which are being  contested in
good faith and for which a reserve  shall have been  established  in  accordance
with generally accepted accounting  principles;  (iv) any Lien created under the
Loan  Documents;   and  (v)  any  purchase  money  security   interest  securing
indebtedness incurred in the ordinary course of business,  provided that no such
purchase money  security  interest shall attach to the Collateral or any portion
thereof.

         6.5      Guaranties.

                  Assume,  endorse,  be or become  liable for or  guarantee  the
obligations  of any  person or  entity  except  the  endorsement  of  negotiable
instruments  for deposit or  collection  in the ordinary  course of business and
performance  bonds and indemnities  with bonding  companies and similar entities
entered into in the ordinary course of business.

6.6      Dividends and Other Distributions of Capital.

                  Pay  dividends  on any of its  outstanding  shares of  capital
stock or make treasury purchases of any such shares.

         6.7      Impairment of Collateral.

                  Permit  anything  to be done that may  materially  impair  the
value of the Collateral.


<PAGE>




         6.8      Changes in Business.

                  Make or permit to be made any  material  change in the nature,
character,  name or conduct of the Borrower's  business as conducted on the date
hereof.

         6.9      Articles of Incorporation and By-Laws.

                  Amend  or  otherwise   modify  the   Borrower's   articles  of
incorporation  or by-laws in any way which would adversely  affect the interests
of the Lender under any of the Loan Documents.

         6.10     Prepayments of Indebtedness.

                  Prepay or obligate itself to prepay,  in whole or in part, any
indebtedness (other than the obligations under the Loan Documents).

         6.11     Minimum Tangible Net Worth.

                  Permit  the  Tangible  Net  Worth  of  the   Borrower,   on  a
consolidated  basis,  to be less than  $25,000,000  at any time any Loan remains
outstanding and unpaid,  or any other amount is owing under any Loan Document to
Lender.

         6.12     Maximum Debt to Tangible Net Worth Ratio.

                  Maintain a Debt to Tangible Net Worth Ratio of the Borrower at
not greater than 1.70-to-1 at any time any Loan remains  outstanding and unpaid,
or any other amount is owing under any Loan Document to Lender.

         6.13     Minimum Debt Service Coverage Ratio.

                  Permit the Debt Service  Coverage  Ratio of the Borrower to be
less than 2.0-to-1 on the last day of each fiscal year of Borrower that any Loan
remains  outstanding  and  unpaid,  or any other  amount is owing under any Loan
Document to Lender.

7.       REPRESENTATIONS AND WARRANTIES.

         In order to induce the Lender to enter into this  Agreement and to make
the Loans,  the Borrower makes the following  representations  and warranties to
the Lender and  acknowledges the Lender's  justifiable  right to rely upon these
representations and warranties:

         7.1      Corporate Organization.

                  The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.

         7.2      Enforceability of Documents.

                  This Agreement, the Notes and each of the other Loan Documents
to which  the  Borrower  is a party  have  been duly  authorized,  executed  and
delivered  and  constitute  the  valid and  legally  binding  obligation  of the
Borrower, enforceable in accordance with their respective terms.

         7.3      Legality of Documents.

                  The  execution and delivery of this  Agreement,  the Notes and
all of the other Loan Documents to which the Borrower is a party and performance
thereof  will  not  violate  any   provision  of  law  or  of  the  articles  of
incorporation  or  by-laws  of the  Borrower  or  any  agreement,  indenture  or
instrument  to which the Borrower is a party or its  properties or assets may be
bound or affected or of any other agreement to which the Borrower is a party.

         7.4      Pending or Threatened Litigation.

                  As of the date  hereof,  there are no  outstanding  judgments,
actions  or  proceedings  pending  before any court or  governmental  authority,
bureau or  agency,  with  respect to or  threatened  against  or  affecting  the
Borrower  which  would  result in a  material  adverse  change in the  financial
condition  of the  Borrower  or its  subsidiaries.  Borrower  agrees to promptly
provide to Lender written notice of any and all outstanding  judgments,  actions
or  proceedings  which may at any time  hereafter be pending before any court or
governmental authority,  bureau or agency, with respect to or threatened against
or affecting  the Borrower  which may  reasonably be expected to have a material
adverse effect on the Borrower, its financial condition, business, properties or
prospects,  or the ability of Lender to enforce the Loan Documents in accordance
with their respective terms.
<PAGE>

         7.5      No Defaults.

                  As of the date hereof the Borrower is not in material  default
under,  or in  material  violation  of,  nor will  the  execution,  delivery  or
performance of this  Agreement,  the Notes or any of the other Loan Documents to
which the Borrower is a party  constitute a default  under or violation  of, any
term of any agreement,  ordinance,  resolution,  decree, bond, note,  indenture,
order or judgment used in the conduct of the  Borrower's  business or in respect
of the Mortgaged Property. The operations of the Borrower comply in all material
respects  with all laws,  ordinances  and  regulations  applicable  to it and no
consents, authorizations or approvals of any Governmental Authority are required
by the Borrower in connection with the Loan Documents.

         7.6      No Onerous Agreements.

                  The  Borrower  is not a party to nor bound by,  nor are any of
the  properties  or assets  owned by it or used in the  conduct of its  business
affected  by,  any  agreement,   ordinance,   resolution,  decree,  bond,  note,
indenture,  order or  judgment,  or  subject to any  charter or other  corporate
restriction,  which  materially  and adversely  affects its business,  assets or
condition, financial or otherwise.

         7.7      Financial Statements.

                  All  balance  sheets,  profit  and loss  statements  and other
financial  information  heretofore  furnished  to the Lender by the Borrower are
true,  correct and complete in all  material  respects,  and present  fairly the
financial condition of the Borrower and its subsidiaries, if any, as at the date
thereof and for the periods covered thereby, including contingent liabilities of
every kind, which financial condition has not materially adversely changed since
the date of the most recently  dated  balance  sheet of the Borrower  heretofore
furnished to the Lender.

         7.8      No Margin Stock Purchases.

                  No part of the  proceeds of the Loan will be used  directly or
indirectly for the purpose of purchasing or carrying,  or for payment in full or
in part of  indebtedness  which was  incurred for the purpose of  purchasing  or
carrying,  any margin stock as such term is defined by Regulation U of the Board
of Governors of the Federal Reserve System.

         7.9      Power and Authority.

                  The  Borrower  has the  power  to  execute  and  deliver  this
Agreement, the Notes and all other Loan Documents to which it is a party and has
taken all necessary action to authorize the execution,  delivery and performance
of the same.


<PAGE>




         7.10     Properties.

                  The  Borrower  has  good  and  marketable  title to all of its
assets, including without limitation the Mortgaged Property, subject to no Liens
except Permitted Liens.

         7.11     Taxes.

                  The  Borrower  has  filed all  returns  and  reports  that are
required to be filed by it in connection  with any federal,  state or local tax,
duty or charge  levied,  assessed or imposed upon it or its property or withheld
by it, including unemployment, social security and similar taxes and all of such
taxes have been  either  paid or adequate  reserve or other  provision  has been
made.

         7.12     Environmental Matters.

                  (a)      The Borrower is in compliance  with the  requirements
of all  applicable  Environmental Laws.

                  (b)  No   Hazardous   Substances   have  been   generated   or
manufactured  on,  transported  to or from,  treated at, stored at or discharged
from the Mortgaged Property in violation of any Environmental Laws; no Hazardous
Substances  have been  discharged  into  subsurface  waters under the  Mortgaged
Property in violation of any  Environmental  Laws; no Hazardous  Substances have
been  discharged  from the  Mortgaged  Property  on or into  property  or waters
(including subsurface waters) adjacent to the Mortgaged Property in violation of
any  Environmental  Laws;  and any  underground  or above ground  storage  tanks
situated on the Mortgaged  Property and regulated under any  Environmental  Laws
are in compliance with all applicable Environmental Laws.

                  (c) The Borrower (i) has not received notice (written or oral)
or otherwise learned of any claim,  demand,  suit,  action,  proceeding,  event,
condition,  report, directive, Lien, violation,  non-compliance or investigation
indicating or concerning any potential or actual liability  (including,  without
limitation,  potential liability for enforcement,  investigatory  costs, cleanup
costs,  government  response  costs,  removal  costs,  remedial  costs,  natural
resources damages,  property damages, personal injuries or penalties) arising in
connection with: (x) any non-compliance with or violation of the requirements of
any  applicable  Environmental  Laws,  or (y)  the  presence  of  any  Hazardous
Substance on the Mortgaged  Property or the release or threatened release of any
Hazardous  Substance into the  environment,  (ii) has not received notice of any
threatened or actual  liability in connection with the presence of any Hazardous
Substance on the Mortgaged  Property or the release or threatened release of any
Hazardous  Substance into the environment,  (iii) has not received notice of any
federal or state investigation  evaluating whether any remedial action is needed
to respond to the presence of any Hazardous  Substance on the Mortgaged Property
or a  release  or  threatened  release  of  any  Hazardous  Substance  into  the
environment for which the Borrower is or may be liable, or (iv) has not received
notice  that  the  Borrower  is or  may  be  liable  to  any  Person  under  any
Environmental Law.

                  (d) To the Borrower's knowledge, the Mortgaged Property is not
located in an area identified by the Secretary of Housing and Urban  development
as an area having special flood hazards.
<PAGE>


7.13     Employee Benefit Plans.

                  Each  employee  benefit plan as to which the Borrower may have
any liability  complies in all material respects with all applicable  provisions
of the Employee  Retirement  Income  Security Act of 1974  ("ERISA"),  including
minimum  funding  requirements,  and (i) no Prohibited  Transaction  (as defined
under ERISA) has  occurred  with  respect to any such plan,  (ii) no  Reportable
Event (as defined  under Section 4042 of ERISA) has occurred with respect to any
such plan  which  would  cause  the  Pension  Benefit  Guaranty  Corporation  to
institute  proceedings  under Section 4042 of ERISA,  (iii) the Borrower has not
withdrawn from any such plan or initiated steps to do so, and (iv) no steps have
been taken to terminate any such plan.

7.14     Solvency.

                  As  of  the  date  hereof  and  after  giving  effect  to  the
transactions  contemplated by the Loan Documents, (i) the aggregate value of the
Borrower's   assets  will   exceed  its   liabilities   (including   contingent,
subordinated,  unmatured and unliquidated  liabilities),  (ii) the Borrower will
have  sufficient  cash flow to enable  it to pay its debts as they  mature,  and
(iii) the Borrower will not have unreasonably  small capital for the business in
which it is engaged.

7.15     Year 2000.

         (i) Based on a  comprehensive  review and assessment of its systems and
equipment the Borrower  reasonably  believes that Year 2000 issues  (hereinafter
defined)  including costs of  remediation,  could not be expected to result in a
material adverse change in the financial condition of the Borrower or any Surety
from that expressed in the financial  statements most recently  submitted to the
Lender  prior to the  date  hereof;  (ii) the  Borrower  and  each  Surety  have
developed  plans for  responding to Year 2000 Issues and the  implementation  of
such plans,  including testing,  are on schedule in all material  respects;  and
(iii) the  Borrower  and each Surety  shall  provide the Lender with any further
assurances as a resolution of Year 2000 Issues requested by the Lender. The term
"Year 2000  Issues"  shall  include,  but not be limited  to, the  inability  of
computers and computer software, as well as embedded microchips in non-computing
devices, to perform properly,  including performance of date-sensitive functions
with respect to certain dates prior to and after December 31, 1999.

         7.17     Disclosure.

                  No  representation  or warranty by the  Borrower  set forth in
this  Agreement,  any other Loan Document or in any other document or instrument
delivered by the Borrower to the Lender pursuant to this Agreement,  contains or
will contain any untrue  statement  of a material  fact or omits or will omit to
state any material fact necessary to make the statements made not misleading.
<PAGE>

8.       DEFAULT.

         8.1      Events of Default.

                  If any one or more of the  following  Events of Default,  each
constituting an "Event of Default," shall occur, the obligation of the Lender to
make Advances  shall cease and the entire unpaid balance of the principal of and
interest on the Loans shall immediately  become due and payable at the option of
the Lender  without  notice,  presentment,  protest or demand  (all of which are
expressly  waived by the  Borrower) to the  Borrower  being  required  except as
specified below:

                           (a)  Failure of the  Borrower  to make any payment of
                  principal  or interest in respect of the Loans  within 10 days
                  after it is due; or

                           (b) The failure of the  Borrower to pay the amount by
                  which  the  unpaid  principal  amount  of the  Revolving  Loan
                  exceeds the  limitations  as to the maximum  unpaid  principal
                  amount  of  such  Loan  as set  forth  herein  within  two (2)
                  Business  Days after  written  notice  thereof shall have been
                  given by the Lender to the Borrower; or

                           (c) Failure by the Borrower or other party to perform
                  any other term,  condition or covenant of this Agreement,  the
                  Notes, any Loan Document or any other agreement, instrument or
                  document delivered  pursuant hereto or in connection  herewith
                  or therewith,  which shall remain unremedied for the period of
                  thirty (30) days after written  notice thereof shall have been
                  given by the Lender to the Borrower; or

                           (d) Subject to the expiration of any applicable grace
                  or cure period expressly provided for in or in connection with
                  the applicable "Debt Instrument" (as hereinafter  defined) (i)
                  failure to perform  any term,  condition  or  covenant  of any
                  note, loan agreement,  guaranty,  mortgage or other instrument
                  or agreement in connection  with the borrowing of money or the
                  obtaining  of  advances  or credit to which the  Borrower is a
                  party  or by  which  it is  bound,  or by  which  any  of  its
                  properties or assets may be affected (a "Debt Instrument"), so
                  that,   as  result  of  any  such  failure  to  perform,   the
                  indebtedness included therein or secured or covered thereby is
                  declared  due and  payable  prior to the  date on  which  such
                  indebtedness  would otherwise become due and payable;  or (ii)
                  any  event or  condition  referred  to in any Debt  Instrument
                  shall occur or fail to occur,  so that,  as a result  thereof,
                  the  indebtedness  included  therein  or  secured  or  covered
                  thereby is declared due and payable prior to the date on which
                  such indebtedness  would otherwise become due and payable;  or
                  (iii)  any   material   indebtedness   included  in  any  Debt
                  Instrument or secured or covered thereby is not paid when due,
                  except to the extent that such matters are being appropriately
                  contested  by  Borrower in good faith with  adequate  reserves
                  therefor having been set aside and with security  satisfactory
                  to the Lender; or

                           (e) A material  breach of or material  default by the
                  Borrower  under the  terms,  covenants  or  conditions  of any
                  agreements,  loans or other  transactions of the Borrower with
                  the Lender or any other  lender,  after the  expiration of any
                  applicable grace or cure period; or

                           (f) Any representation or warranty made in writing to
                  the  Lender  in  this  Agreement,  the  Notes  or  other  Loan
                  Documents or in connection with the making of the Loans or any
                  certificate,  statement or report made in compliance with this
                  Agreement,  shall have been false in any material respect when
                  made; or

                           (g) The  Borrower or any  endorser or surety  thereof
                  shall make an assignment for the benefit of creditors,  file a
                  petition under the Federal Bankruptcy Code or any similar law,
                  state  or  federal,  be  adjudicated  insolvent  or  bankrupt,
                  petition or apply to any  tribunal  for the  appointment  of a
                  receiver,  or trustee or a custodian  for it or a  substantial
                  part of its assets, or shall commence any proceeding under any
                  bankruptcy, reorganization, arrangement, readjustment of debt,
                  dissolution,   or   liquidation   law   or   statute   of  any
                  jurisdiction,  whether now or hereafter in effect; or if there
                  shall have been filed any such petition or application, or any
                  such petition or  application,  or any such  proceeding  shall
                  have been commenced against it, which remains  undismissed for
                  a period of sixty (60) days or more;  or the  Borrower  or any
                  endorser or surety by any act or omission  shall  indicate its
                  consent to approval of or  acquiescence  in any such petition,
                  application or proceeding or the appointment of a receiver, or
                  trustee or a custodian for it or any  substantial  part of any
                  of its  properties,  or shall  suffer  any such  receivership,
                  trusteeship,  or custodianship to continue  undischarged for a
                  period of sixty (60) days or more; or
<PAGE>

                           (h) Any  judgment  against the  Borrower in excess of
                  $500,000.00,  or any attachment, levy or execution against any
                  of its  properties  in  excess  of  $500,000.00  shall  remain
                  unpaid,   unstayed  on  appeal,   undischarged,   unbonded  or
                  undismissed for a period of thirty (30) days or more; or

                           (i) The  Borrower  shall  be  unable,  or  admit  its
                  inability, to meet its obligations as they come due or failure
                  of the Borrower generally to pay its debts as they become due;
                  or

                           (j)  Occurrence,  in  Lender's  sole and  independent
                  discretion, reasonably exercised, of a material adverse change
                  in the  business,  properties  or  financial  condition of the
                  Borrower, or an event or condition which, in Lender's sole and
                  independent  discretion reasonably exercised would be expected
                  to result in such a material adverse change.

         8.2      Remedies.

                  In the event of the occurrence and during the  continuation of
any Event of Default,  the Lender may,  but shall not be required to (i) proceed
to apply to the payment of the Loans the balance to the credit of any account or
accounts maintained with the Lender by the Borrower and all property of Borrower
now or at any time in Lender's possession in any capacity  whatsoever  (set-off)
and  (ii)  sell  all or any  part  of the  Collateral  in  accordance  with  the
Pennsylvania Uniform Commercial Code, as applicable, and the Loan Documents, and
the  obligation  of the Lender to make loans or otherwise  extend  credit to the
Borrower shall immediately terminate. The Lender may exercise any other right or
remedy provided  pursuant to the Loan Documents and hereby granted or allowed to
it by law  including  but not  limited to the rights and  remedies  of a secured
party under the Uniform Commercial Code of Pennsylvania and each and every right
and remedy  provided  pursuant to the Loan  Documents and hereby  granted to the
Lender or allowed to it by law shall be cumulative  and not exclusive the one of
the other,  and may be exercised by the Lender from time to time and as often as
may be  necessary.  The Lender shall have at any time,  in its  discretion,  the
right to enforce  collection and payment of any of the Collateral by appropriate
action or proceedings,  and the net amounts received therefrom,  after deduction
of all costs and expenses incurred in connection therewith,  shall be applied on
account of the Loans and any other  indebtedness  or liabilities of the Borrower
aforesaid,  all without notice to the Borrower. The Lender shall not be required
to  marshall  any  security  or  guarantees  or to  resort  to the  same  in any
particular order.

 9.      GENERAL.

         9.1      Survival of Warranties.

                  All  agreements,  representation  and  warranties  made herein
shall survive the delivery of this Agreement.

         9.2      Modification of Documents.

                  No  modification or waiver of any provision of this Agreement,
the  Notes,  the other Loan  Documents  or other  instruments  or consent to any
departure by the Borrower from any of the terms or conditions thereof,  shall in
any event be  effective  unless it shall be in writing  and signed by the Lender
and the Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
the Borrower in any case shall, of itself,  entitle the Borrower to any other or
further notice or demand in similar or other circumstances.

         9.3      Rights Cumulative.

                  Each and every right granted to the Lender  hereunder or under
any other document delivered hereunder or in connection herewith,  or allowed it
by law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of the Lender to exercise,  and no delay in exercising,  any
right  shall  operate  as a waiver  thereof,  nor  shall any  single or  partial
exercise  of any right  preclude  any other or future  exercise  thereof  or the
exercise of any other right.

         9.4      Construction and Severability.

                  This Agreement, the Notes and the other Loan Documents and the
rights and  obligations  of the parties  shall be construed and  interpreted  in
accordance with the laws of the Commonwealth of Pennsylvania.  The provisions of
this  Agreement  are  severable  and if any  clause or  provision  shall be held
invalid  or  unenforceable  in whole or in part in any  jurisdiction,  then such
invalidity or  unenforceability  shall affect only such clause or provision,  or
part  thereof,  in such  jurisdiction  and shall not in any manner  affect  such
clause or provision in any other jurisdiction,  or any other clause or provision
in this Agreement in any jurisdiction.


<PAGE>




         9.5      Conflict of Documents.

                  The  provisions of this  Agreement are in addition to, and not
in limitation of, the provisions of the Notes and the other Loan  Documents.  In
the  event  of  conflict  between  the  provisions  of  this  Agreement  and the
provisions of the Notes or any Loan  Document,  the provisions of this Agreement
shall prevail.
         9.6      Notices.

                  Notices  by one party to the  other  shall be in  writing  and
shall be deemed to have been  validly  given at the time when posted in the U.S.
Mails,  postage  prepaid,  or hand delivered to the following  address or to any
alternate address designated in writing by the recipient:

         The Borrower:                      Herley Industries, Inc.
                                            10 Industry Drive
                                            Lancaster, Pennsylvania 17603
                                      Attn: Lee N. Blatt, Chairman & CEO

         The Lender:                       The First National Bank of Maryland,
                                              a division of FMB Bank
                                           1703 Oregon Pike
                                           Lancaster, Pennsylvania 17601-4201
                                    Attn:  Eric A. Rebert, Senior Vice President

         9.7      Expenses of Lender.

                  The  Borrower  shall  pay all  fees  and  expenses  reasonably
incurred by the Lender in connection with the preparation,  execution,  delivery
and performance of this Agreement,  the Notes,  the other Loan Documents and all
other  instruments  executed in connection  herewith or in  connection  with the
collection  of  the  indebtedness   hereunder,  or  any  part  thereof,  or  the
perfection,   protection  and  maintenance  of  the  Lender's  interest  in  any
collateral.  These fees and expenses shall include, without limitation, fees and
disbursements of legal counsel for the Lender.

         9.8      Binding Effect.

                  This  Agreement  and  any  other   documents  and  instruments
delivered or required to be delivered pursuant hereto shall inure to the benefit
of and shall be binding  upon the  parties  hereto and their  heirs,  executors,
administrators, personal representatives,  successors and assigns of the parties
hereto. The Borrower may not assign its rights or obligations  hereunder without
the prior written consent of Lender.
         9.9      Waiver of Trial by Jury.

                  THE LENDER AND THE BORROWER HEREBY KNOWINGLY,  VOLUNTARILY AND
INTENTIONALLY  WAIVE  ANY  RIGHT  EITHER  OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION  ARISING OUT OF, UNDER OR IN CONNECTION  WITH THE LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, THE BORROWER HEREBY
CERTIFIES  THAT NO  REPRESENTATIVE  OR AGENT OF THE  LENDER,  OR  COUNSEL TO THE
LENDER, HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  THAT THE LENDER WOULD NOT, IN
THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.  THE BORROWER  ACKNOWLEDGES THAT THE LENDER HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.

         9.10     Jurisdiction and Venue.

                  The  Borrower  hereby  irrevocably  consents to the  exclusive
jurisdiction  of any state or federal court for the county or judicial  district
where the Bank's office  indicated in Section 9.6 of this  Agreement is located,
and  consents  that all  service  of process  be sent by  nationally  recognized
overnight courier service directed to the Borrower at the Borrower's address set
forth  herein and service so made will be deemed to be completed on the business
day after  deposit with such courier;  provided  that nothing  contained in this
Agreement will prevent the Bank from bringing any action, enforcing any award or
judgment or exercising any rights against the Borrower individually, against any
security or against any property of the Borrower within any other country, state
or other foreign or domestic jurisdiction.  The Bank and the Borrower agree that
the venue provided above is the most convenient  forum for both the Bank and the
Borrower.  The Borrower waives any objection to venue and any objection based on
a more convenient forum in any action instituted under this Agreement.

         The  Borrower  acknowledges  that it has read and  understands  all the
provisions of this  Agreement,  including  Waiver of Trial by Jury, and has been
advised by counsel as necessary or appropriate.



<PAGE>



         IN WITNESS WHEREOF, the parties hereto,  intending to be legally bound,
have caused this Agreement to be duly executed on its  respective  behalf on the
date first set forth above.


ATTEST:                                              HERLEY INDUSTRIES, INC.

_____________________________________      By:_________________________________
Asst. Secretary, Margaret M. Guzzetti                Myron Levy, President

_____________________________________      By:__________________________________
Asst. Secretary, Margaret M. Guzzetti         Anello C. Garefino, Vice President
 (SEAL)


                                                THE FIRST NATIONAL BANK OF
                                                MARYLAND, a division of FMB BANK

                                                By:____________________________
                                                    Eric A. Rebert
                                                    Senior Vice President



<PAGE>









                                 LOAN AGREEMENT


                                 by and between



                            HERLEY INDUSTRIES, INC.,

                                   as Borrower


                                       and


                      THE FIRST NATIONAL BANK OF MARYLAND,
                                  a division of
                                    FMB BANK,

                                    as Lender








                          Dated as of February 16, 1999