EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT  AGREEMENT (this "Agreement"),  made and entered into as of
May 30, 2007, by and between HERLEY  INDUSTRIES,  INC., a Delaware  corporation,
with its  principal  office  located at 101 North Pointe  Boulevard,  Lancaster,
Pennsylvania  17601  (together with its successors and assigns  permitted  under
this  Agreement,  "Herley")  and  JEFFREY L.  MARKEL  ("Markel")  residing  at 5
Constitution Lane, Totowa, NJ 07512.

                                   WITNESSETH:

     WHEREAS,  Herley has determined  that it is in the best interests of Herley
and its  stockholders  to employ  Markel and to set forth in this  Agreement the
obligations and duties of both Herley and Markel; and

     WHEREAS,  Herley  wishes to assure itself of the services of Markel for the
period hereinafter provided,  and Markel is willing to be employed by Herley for
said period, upon the terms and conditions provided in this Agreement;

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
contained herein and for other good and valuable  consideration,  the receipt of
which is mutually  acknowledged,  Herley and Markel  (individually a "Party" and
together the "Parties" ) agree as follows:

     1. DEFINITIONS.

     (a) "Beneficiary" shall mean the person or persons named by Markel pursuant
to Section 15 below or, in the event that no such  person is named who  survives
Markel, his estate.

     (b) "Board" shall mean the Board of Directors of Herley.

     (c) "Cause" shall mean:

     (i)  Markel's  conviction  of,  or  pleading  guilty  to, a felony  or nolo
contender  to a charge of any felony or of any lesser crime  involving  fraud or
moral turpitude;

     (ii)  willful  failure  of Markel to  perform  his  obligations  under this
Agreement,  resulting in economic harm to Herley,  which willful  failure is not
discontinued within ten (10) days after written  notification thereof to Markel,
or

     (iii) a material breach by Markel of the provisions of Sections 12 or 13 of
this Agreement; or
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     (iv)  commission  of any other  act  which is done with the  intent to harm
Herley or its shareholders or employees.

     Any  act or  failure  to act  based  upon  authority  given  pursuant  to a
resolution  adopted by the Board or based upon the written advice of counsel for
Herley  shall be  conclusively  presumed to be done,  or omitted to be done,  by
Markel in good faith and in the best interests of Herley.

     (d) "Change in Control"  shall mean the  occurrence of any of the following
events:

     (i) the acquisition by any individual,  entity or group (within the meaning
of Section  13(d)(3)  or  14(d)(2)  of the  Securities  Exchange  Act of 1934 as
amended (the "Exchange  Act") (a "Person") of beneficial  ownership  (within the
meaning of Rule 13d-3  promulgated  under the Exchange Act) of voting securities
of Herley when such  acquisition  causes such Person to  beneficially  own 50.1%
percent or more of the  combined  voting  power of the then  outstanding  voting
securities  of Herley  entitled to vote  generally  in the election of directors
(the  "Outstanding  Herley  Voting  Securities");  provided,  however,  that for
purposes of this subsection (i), the following  acquisitions shall not be deemed
to result in a Change of Control:  (A) any acquisition directly from Herley, (B)
any acquisition by Herley,  (C) any acquisition by any employee benefit plan (or
related trust)  sponsored or maintained by Herley or any corporation  controlled
by Herley or (D) any  acquisition  pursuant to a transaction  that complies with
clauses (A), (B) and (C) of subsection (iii) below; and provided,  further, that
if any Person's beneficial ownership of the Outstanding Herley Voting Securities
reaches or exceeds 50.1 percent as a result of a transaction described in clause
(A) or (B) above, and such Person subsequently  acquires beneficial ownership of
additional  voting  securities of Herley,  such subsequent  acquisition shall be
treated as an  acquisition  that causes such  Person to  beneficially  own 50.1%
percent or more of the Outstanding Herley Voting Securities; or

     (ii)  individuals  who, as of the date  hereof,  constitute  the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided,  however, that any individual becoming a director subsequent to
the  date  hereof  whose  election,  or  nomination  for  election  by  Herley's
stockholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual were a member of the Incumbent  Board, but excluding for this purpose
any such individual whose initial  assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened  solicitation  of proxies or consents by
or on behalf of a Person other than the Board; or

     (iii) consummation of a reorganization,  merger or consolidation or sale or
other  disposition  of all or  subsequently  all of the  assets of Herley or the
acquisition of assets of another  entity  ("Business  Combination");  excluding,
however,  such a Business Combination pursuant to which (A) all or substantially
all of the  individuals  and  entities  who were the  beneficial  owners  of the
Outstanding  Herley  Voting  Securities   immediately  prior  to  such  Business

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Combination  beneficially own, directly or indirectly,  more than 60 percent of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors,  as the case may be, of the  corporation
resulting from such Business  Combination in substantially  the same proportions
as their  ownership,  immediately  prior  to such  Business  Combination  of the
Outstanding  Herley Voting  Securities,  (B) no Person  (excluding  any employee
benefit plan (or related  trust) of Herley or such  corporation  resulting  from
such Business Combination) beneficially owns, directly or indirectly, 20 percent
or more of,  respectively,  the then  outstanding  shares of common stock of the
corporation  resulting  from such Business  Combination  or the combined  voting
power of the then outstanding  voting  securities of such corporation  except to
the extent that such ownership existed prior to the Business Combination and (C)
at least a majority of the members of the board of directors of the  corporation
resulting  from such Business  Combination  (including,  without  limitation,  a
corporation  that  as a  result  of  such  transaction  owns  Herley  or  all or
substantially  all of  Herley's  assets  either  directly or through one or more
subsidiaries)  were members of the Incumbent  Board at the time of the execution
of the  initial  agreement,  or of the action of the Board,  providing  for such
Business Combination; or

     (iv) approval by the  stockholders  of Herley of a complete  liquidation or
dissolution of the Company.

     (e) "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from
time to time.

     (f) "Committee" shall mean the Compensation Committee of the Board.

     (g) "Consulting Period" shall mean the period specified in Section 11 below
during which Markel serves as a consultant to Herley.

     (h)  "Disability"  shall  mean the  illness  or other  mental  or  physical
disability  of Markel,  as  determined  by a physician  acceptable to Herley and
Markel,  resulting  in  his  failure  during  the  Employment  Term  to  perform
substantially  his applicable  material duties under this Agreement for a period
of six consecutive months.

     (i)  "Employment  Term"  shall mean the period  specified  in Section  2(b)
below.

     (j)  "Fiscal  Year"  shall mean the 52-week  period  beginning  on or about
August 1 and  ending on or about  the next  subsequent  July 31,  or such  other
12-month period as may constitute Herley's fiscal year at any time hereafter.

     (k) "Good Reason" shall mean,  at any time during the  Employment  Term, in
each case without Markel's prior written consent or his acquiescence:

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     (i) reduction in his then current Salary; or

     (ii) Herley's  failure to pay Markel any amounts  otherwise  vested and due
him under  Sections 3 and 4 hereof which breach is not cured within  thirty (30)
business days after written notification to Herley of such breach; or

     (iii) assignment to Markel of duties materially  incompatible with his then
current title and position of COO or such higher  position as may be agreed upon
in writing  between the parties,  which  breach is not cured within  thirty (30)
business days after written notification to Herley of such breach; or

     (iv) relocation of Markel's principal place of work to a location more than
thirty (30) miles from Lancaster, Pennsylvania.

     (l) "Salary" shall mean the annual salary  provided for in Section 3 below,
as adjusted from time to time.

     (m) "Spouse"  shall mean,  during the Term of Employment and the Consulting
Period, the woman who as of any relevant date is legally married to Markel.

     (n) "Subsidiary" shall mean any corporation of which Herley owns,  directly
or indirectly, more than 50 percent of its voting stock.


     2. EMPLOYMENT TERM, POSITIONS AND DUTIES.

     (a) Employment of Markel. Herley hereby agrees to employ Markel, and Markel
hereby accepts  employment with Herley, in the positions and with the duties and
responsibilities set forth below and upon such other terms and conditions as are
hereinafter  stated.  Markel  shall  render  services to Herley  principally  at
Herley's corporate  headquarters in Lancaster,  Pennsylvania,  and shall do such
traveling on behalf of Herley as shall be  reasonably  required in the course of
the performance of his duties hereunder.

     (b) Employment  Term. The Employment Term shall commence as of June 4, 2007
and shall  terminate on July 31, 2010,  provided that the Employment  Term shall
extend  for  additional  one-year  periods on July 31,  2008 and July 31,  2009,
unless this agreement is terminated under the provisions of Section 10 below. In
no event, however, shall the Employment Term extend beyond July 31, 2012.

     (c) Titles and  Duties.  Until the date of  termination  of his  employment
hereunder, Markel shall be employed as Chief Operating Officer, reporting to the
Chief  Executive  Officer.  In his capacity as Chief Operating  Officer,  Markel
shall have the  customary  powers,  responsibilities  and  authorities  of chief
operating officers of corporations of the size, type and nature of Herley.

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     (d) Time and Effort.

     (i) Markel  agrees to devote his best efforts and  abilities,  and his full
time and  attention,  to the  affairs of Herley in order to carry out his duties
and responsibilities under this Agreement.

     (ii) Notwithstanding the foregoing,  nothing shall preclude Markel from (A)
serving on the boards of a reasonable number of trade  associations,  charitable
organizations  and/or businesses not in competition with Herley, (B) engaging in
charitable  activities  and  community  affairs and (C)  managing  his  personal
investments  and  affairs;  provided,  however,  that,  such  activities  do not
interfere  with  the  proper  performance  of his  duties  and  responsibilities
specified in Section 2 (c) above.

     3. SALARY.

(a) Initial Salary. Markel shall receive from Herley a Salary, payable in
accordance with the regular payroll practices of Herley, at the annual rate of
$350,000.

     (b)  Cost-of-Living  Increase.  During the Employment  Term Markel's Salary
shall be increased  semiannually by an amount equal to the change in the cost of
living index since the prior semiannual adjustment, as reported in the "Consumer
Price  Index,  New York and  Northeastern  New  Jersey,  All  Items,  Series  ID
CUURA101SA0" published by the United States Department of Labor, Bureau of Labor
Statistics (or, if such index is no longer published,  a successor or comparable
index that is published),  using July 31, 2007 as the base year of  computation.
Such amount shall be calculated  and paid to Markel in a single sum on or before
the first day of the second month  following the applicable  calendar half year,
and  thereafter  his Salary  shall be adjusted to include the amount of any such
increase.  The first  calculation  and payment shall be made with respect to the
six month  period from and after July 31,  2007.  If Markel's  employment  shall
terminate during any such six-month period, the cost-of-living increase provided
in this Section 3(b) shall be prorated accordingly.

     (c) Salary Increase.  Any amount to which Markel's Salary is increased,  as
provided in Section 3(b) above or  otherwise,  shall not  thereafter  be reduced
without his consent, and the term "Salary" as used in this Agreement shall refer
to his Salary as thus increased.

     4. ANNUAL BONUS.

     Not later than one  hundred  twenty  (120) days after the end of the fiscal
year of the Company and each subsequent fiscal year of the Company ending during
the employment  term commencing with the fiscal year ending on or about July 31,
2008, the Company shall pay to Markel, as incentive compensation an amount to be

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determined  by the Board of Directors  in its  discretion.  Notwithstanding  the
foregoing,  the  minimum  incentive  compensation  to be paid to Markel  for the
fiscal year ending on or about July 31, 2008 shall be $300,000.

     5. LONG-TERM INCENTIVE.

     During the Employment Term, Markel shall be eligible for an award under any
long-term  incentive  compensation plan established by Herley for the benefit of
Markel or, in the absence  thereof,  under any such plan that may be established
for the benefit of members of the senior management of Herley.

     6. EQUITY GRANTS.

     As a condition to his employment,  Markel shall receive options to purchase
250,000 shares of Herley's common stock at a price of $15.77 per share, which is
the closing market price of Herley's common stock on the date prior to execution
of this Agreement. Twenty percent (20%) of the options shall vest upon execution
hereof with the  balance  vesting at the rate of twenty  percent  (20%) per year
over the next four (4) years  commencing  June 1, 2008, so that all options will
be fully vested by June 1, 2011.  During the  Employment  Term,  Markel shall be
eligible to receive  further  grants of options to  purchase  shares of Herley's
stock and awards of shares of Herley's  stock,  either or both as  determined by
the  Committee,  under and in accordance  with the terms of applicable  plans of
Herley and related option and award agreements.

     7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.

     During the  Employment  Term and any  Consulting  Period,  Markel  shall be
entitled  to prompt  reimbursement  by Herley for all  reasonable  out-of-pocket
expenses incurred by him in performing services under this Agreement.

     8. PERQUISITES.

     During the Employment Term and any Consulting Period,  Herley shall provide
Markel with the following perquisites:

     (a) an  office  in  Lancaster,  Pennsylvania  with  secretarial  and  other
assistance; and

     (b)  use of an  automobile  and  reimbursement  of  related  expenses;

     (c)  reimbursement  for relocation  expenses to his permanent  residence in
Lancaster, Pennsylvania;

     (d) reimbursement for temporary living expenses in Lancaster,  Pennsylvania
for up to six (6) months from the date of this Agreement.

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     9. EMPLOYEE BENEFIT PLANS.

     (a)  General.  During the  Employment  Term,  Markel  shall be  entitled to
participate  in all  employee  benefit  plans and  programs  made  available  to
Herley's  senior  executives  or to its  employees  generally,  as such plans or
programs  may be in effect  from time to time,  including,  without  limitation,
pension and other retirement plans,  profit-sharing  plans,  savings and similar
plans,  group life  insurance,  accidental  death and  dismemberment  insurance,
travel accident insurance,  hospitalization insurance, surgical insurance, major
and excess major medical insurance,  dental insurance,  short-term and long-term
disability insurance,  sick leave (including salary continuation  arrangements),
holidays, vacation (not less than four weeks in any calendar year) and any other
employee  benefit plans or programs that may be sponsored by Herley from time to
time,  including plans that supplement the above-listed types of plans,  whether
funded or unfunded.

     (b) Medical Care  Reimbursement  and Insurance.  During the Employment Term
Herley shall provide Markel and his Spouse, with life insurance, hospitalization
insurance,  surgical  insurance,  major and excess major  medical  insurance and
dental insurance in accordance with the most favorable plans, policies, programs
and  practices of Herley made  available  generally  to other  senior  executive
officers of Herley.


     10. TERMINATION OF EMPLOYMENT.

     (a) Voluntary  Termination and Termination by Mutual Agreement.  Markel may
terminate  his  employment  voluntarily  at any time after July 31,  2010 in the
event  of a  Change  in  Control  at any  time  during  the  Employment  Term in
accordance with the provisions of Section  10(f)(ii).  The Parties may terminate
this Agreement by mutual written  agreement at any time. If they do so, Markel's
entitlements shall be as the Parties mutually agree.

     (b) General.  Notwithstanding anything to the contrary herein, in the event
of  termination  of  Markel's  employment  under  this  Agreement,   he  or  his
Beneficiary,  as the case may be,  shall be entitled to receive (in  addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):

     (i) his Salary through the date of termination;

     (ii) any annual or special bonus awarded but not yet paid to him;

     (iii) any other  compensation  or benefits,  including  without  limitation
long-term incentive  compensation  described in Section 5 above,  benefits under
equity  grants and awards  described  in Section 6 above and  employee  benefits
under plans  described in Section 9 above,  that have vested through the date of
termination  or to  which  he may  then  be  entitled  in  accordance  with  the
applicable terms and conditions of each grant, award or plan; and

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     (iv)  reimbursement  in accordance  with Sections 9(a) and (b) above of any
business and medical expenses  incurred by Markel or his Spouse,  as applicable,
through the date of termination but not yet paid to him.

     (c)  Termination  due to Death.  In the event that  Markel's  employment is
terminated due to his death, his Beneficiary  shall be entitled,  in addition to
the  compensation  and benefits  specified in Section 10(b), to his compensation
payable for the remainder of the Consulting Term as set forth in Section 11.

     (d)  Termination due to Disability.  In the event of Disability,  Herley or
Markel may terminate Markel's  employment.  If Markel's employment is terminated
due to Disability,  he shall be entitled,  in addition to the  compensation  and
benefits  specified  in  Section  10(b),  to his  compensation  payable  for the
remainder  of the  Consulting  Term as set forth in  Section  11,  offset by any
long-term  disability  insurance benefit that Herley may have elected to provide
for him.

     (e)  Termination  by  Herley  for  Cause.  Herley  may  terminate  Markel's
employment  hereunder for Cause only upon written notice to Markel not less than
fifteen (15) days prior to any intended termination,  which notice shall specify
the grounds for such termination in reasonable  detail.  Cause shall in no event
be deemed to exist except upon a finding reflected in a resolution approved by a
majority  of the  members of the Board at a meeting of which  Markel  shall have
been given proper notice and at which Markel shall have a reasonable opportunity
to present his case.

     In the event that Markel's  employment is terminated for Cause, he shall be
entitled only to the compensation and benefits specified in Section 10(b).

     (f) Termination Without Cause or by Markel for Good Reason.

     (i) Termination without Cause shall mean termination of Markel's employment
by Herley and shall exclude  termination (A) due to death,  Disability or Cause,
(B) by Markel  voluntarily  or (C) by mutual  written  agreement  of Markel  and
Herley.  Herley shall provide  Markel fifteen (15) days' prior written notice of
termination  by it without  Cause,  and Markel shall provide Herley fifteen (15)
days' prior written notice of his termination for Good Reason.

     (ii) In the event of termination by Herley of Markel's  employment  without
Cause or of termination by Markel of his employment for Good Reason, he shall be
entitled,  in addition to the  compensation  and  benefits  specified in Section
10(b), to:

          (A) a  lump-sum  payment  equal to the  Salary  payable to him for the
     remainder of the Employment Term at the rate in effect  immediately  before
     such termination;

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          (B) a lump sum payment  equal to the annual  bonuses for the remainder
     of the Employment  Term  (including a prorated bonus for any partial Fiscal
     Year) equal to the average of the annual bonuses  awarded to him during the
     Agreement,  provided that in no event shall such bonus for purposes of this
     subparagraph  be less than  $300,000 for the fiscal year ending on or about
     July 31, 2008;

          (C) a lump sum payment of  $500,000  representing  full  consideration
     under the ten (10) year Consulting Term;

          (D) the immediate  vesting of all outstanding  unvested stock options;
     and

          (E)  continued   medical   reimbursement  for  the  remainder  of  the
     Employment Term.


     (iii) Prior  written  consent by Markel to any of the events  described  in
Section 1(k) above shall be deemed a waiver by him of his right to terminate for
Good Reason under this Section 10(f) solely by reason of the events set forth in
such waiver.

     (g) Voluntary  Termination  by Markel after Change in Control.  At any time
after July 31, 2010, and provided there is a Change in Control at any time under
this Agreement, Markel shall have the right, upon sixty (60) days' prior written
notice,  voluntarily to terminate his employment,  in which event his employment
shall cease and he shall be entitled to receive  compensation and benefits as if
Herley had  terminated  his  employment  Without  Cause,  as provided in Section
10(f)(ii).

     (h) Change in Control.  Notwithstanding  anything  to the  contrary in this
Section 10,  termination of Markel's  employment by the Company or its successor
within the  one-year  period  following a Change in Control for any reason other
than For Cause, death or Disability,  shall be governed by Section 10(f). In the
event of any such  termination,  Markel  shall be entitled to  compensation  and
benefits in accordance with the provisions of Section 10(f)(ii).

     11. CONSULTING PERIOD.

     (a) General. Effective upon the end of the Employment Term (but only if the
Employment  Term  ends  by  reason  of its  expiration)  or,  if  earlier,  upon
termination of Markel's employment (i) voluntarily,  (ii) by mutual agreement or
(iii) by death or Disability, Markel shall become a consultant to Herley. Unless
earlier terminated,  as provided in this Agreement,  the Consulting Period shall
continue for ten (10) years.

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         (b) Duties and Extent of Services.

     (i) During the Consulting Period,  Markel shall consult with Herley and its
senior executive  officers  regarding its respective  businesses and operations.
Such  consulting  services  shall not require  more than 50 days in any calendar
year,  nor more than one day in any week,  it being  understood  and agreed that
during the Consulting  Period Markel shall have the right,  consistent  with the
prohibitions  of Sections 12 and 13 below,  to engage in  full-time or part-time
employment with any business enterprise that is not a competitor of Herley.

     (ii) Markel's  service as a consultant shall only be required at such times
and such  places  as shall  not  result in  unreasonable  inconvenience  to him,
recognizing his other business  commitments  that he may have to accord priority
over the performance of services for Herley.  In order to minimize  interference
with Markel's  other  commitments,  his  consulting  services may be rendered by
personal  consultation  at his residence or office  wherever  maintained,  or by
correspondence   through  mail,   telephone,   fax  or  other  similar  mode  of
communication at times, including weekends and evenings, most convenient to him.

     (iii) During the Consulting Period,  Markel shall not be obligated to serve
as a member of the Board or to occupy  any  office on behalf of Herley or any of
its Subsidiaries.

     (c) Compensation.  During the Consulting Period,  Markel shall receive from
Herley each year the annual sum of $100,000, payable on a monthly basis.

     (d)  Disability  or Death.  In the event of  Disability or death during the
Consulting Period, Markel, his spouse or his other beneficiary,  as the case may
be, shall be entitled to compensation, in accordance with Section 11(c), for the
remainder of the Consulting Period.

     12. CONFIDENTIAL INFORMATION.

     (a) General.

     (i)  Markel  understands  and hereby  acknowledges  that as a result of his
employment with Herley he will necessarily become informed of and have access to
certain  valuable  and  confidential  information  of  Herley  and  any  of  its
Subsidiaries,  joint ventures and  affiliates,  including,  without  limitation,
inventions,   trade  secrets,  technical  information,   computer  software  and
programs,  know-how and plans  ("Confidential  Information"),  and that any such
Confidential Information,  even though it may be developed or otherwise acquired
by Markel, is the exclusive property of Herley to be held by him in trust solely
for Herley's benefit.

     (ii) Accordingly, Markel hereby agrees that, during the Employment Term and
the Consulting  Period and subsequent to both, he shall not, and shall not cause
others to, use, reveal, report,  publish,  transfer or otherwise disclose to any

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person,  corporation or other entity any Confidential  Information without prior
written consent of the Board,  except to (A) responsible  officers and employees
of Herley or (B)  responsible  persons  who are in a  contractual  or  fiduciary
relationship  with  Herley  or who need such  information  for  purposes  in the
interest of Herley.  Notwithstanding,  the foregoing,  the  prohibitions of this
clause  (ii) shall not apply to any  Confidential  Information  that  becomes of
general public knowledge other than from Markel or is required to be divulged by
court order or administrative process.

     (b) Return of  Documents.  Upon  termination  of his  Employment  Term with
Herley for any reason  or, if  applicable,  upon  expiration  of the  Consulting
Period,  Markel shall promptly deliver to Herley all plans,  drawings,  manuals,
letters, notes, notebooks, reports, computer programs and copies thereof and all
other materials,  including without limitation those of a secret or confidential
nature,  relating  to  Herley's  business  that  are then in his  possession  or
control.

     (c)  Remedies  and  Sanctions.  In the event that  Markel is found to be in
violation of Section  12(a) or (b) above,  Herley shall be entitled to relief as
provided in Section 14 below.

     13. NON-COMPETITION/NON-SOLICITATION.

     (a)  Prohibitions.  During the  Employment  Term and,  if  applicable,  the
Consulting Period,  Markel shall not, without prior written authorization of the
Board, directly or indirectly, through any other individual or entity:

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

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

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

     (b)  Remedies  and  Sanctions.  In the event that  Markel is found to be in
violation of Section 13(a) above, Herley shall be entitled to relief as provided
in Section 14 below.

     (c) Exceptions.  Notwithstanding  anything to the contrary in Section 13(a)
above, its provisions shall not:

     (i) apply if Herley terminates  Markel's employment without Cause or Markel
terminates  his  employment  for Good Reason,  each as provided in Section 10(f)
above; or

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<PAGE>

     (ii) be construed as  preventing  Markel from  investing  his assets in any
business that is not a direct competitor of Herley.

     14. REMEDIES/SANCTIONS.

     Markel  acknowledges that the services he is to render under this Agreement
are of a unique and  special  nature,  the loss of which  cannot  reasonably  or
adequately be compensated for in monetary damages,  and that irreparable  injury
and damage may result to Herley in the event of any breach of this  Agreement or
default by Markel. Because of the unique nature of the Confidential  Information
and the importance of the  prohibitions  against  competition and  solicitation,
Markel further  acknowledges and agrees that Herley will suffer irreparable harm
if he fails to comply with his  obligations  under Section 12(a) or (b) above or
Section 13(a) above and that monetary  damages would be inadequate to compensate
Herley for any such breach. Accordingly,  Markel agrees that, in addition to any
other remedies available to either Party at law, in equity or otherwise,  Herley
will be entitled to seek  injunctive  relief or specific  performance to enforce
the  terms,  or  prevent  or remedy the  violation,  of any  provisions  of this
Agreement.

     15. BENEFICIARIES/REFERENCES.

     Markel  shall be entitled to select (and  change,  to the extent  permitted
under  any  applicable  law) a  beneficiary  or  beneficiaries  to  receive  any
compensation  or benefit  payable  under this  Agreement  following his death by
giving Herley written notice  thereof.  In the event of Markel's  death, or of a
judicial  determination  of his  incompetence,  reference  in this  Agreement to
Markel shall be deemed to refer, as appropriate,  to his beneficiary,  estate or
other legal representative.

     16. TAXES.

     (a) All payments to Markel or his Beneficiary under this Agreement shall be
subject to withholding on account of federal,  state and local taxes as required
by law.

     (b) 409A Compliance. To the extent necessary to comply with the restriction
in Section  409A(a)(2)(B)  of the Internal Revenue Code of 1986, as amended (the
"Code") concerning payments to "specified  employees,"  payments hereunder shall
be made on the  first  business  day of the  seventh  month  following  the date
Markel's employment terminates.

     (c)  Excess  parachute   payments.   In  the  event  that  either  Herley's
independent  public  accountants or the Internal Revenue Service determines that
any payment, coverage or benefit provided to Markel is subject to the excise tax
imposed Section 4999 (or any successor  provision) of the Code ("Section 4999"),
Herley  shall pay to  Markel,  on the later of the 30th day  thereafter  (or the
first business day following such 30th day) or the date that the payment is paid
pursuant to Section 16(b) above,  in addition to any other payment,  coverage or

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<PAGE>

benefit due and owing hereunder, an amount determined by multiplying the rate of
excise tax then imposed by Section  4999 by the amount of the "excess  parachute
payment" received by Markel  (determined  without regard to any payments made to
Markel  pursuant to this  Section 16 (c) and dividing the product so obtained by
the amount obtained by subtracting the aggregate local, state and Federal income
tax rate applicable to the receipt by Markel of the "excess  parachute  payment"
(taking into account the  deductibility  for Federal  income tax purposes of the
payment of state and local income  taxes  thereon)  from the amount  obtained by
subtracting from 1.00 the rate of excise tax then imposed by Section 4999 of the
Code, it being the  intention of the parties  hereto that Markel's net after tax
position be  identical to that which would have  obtained had Sections  280G and
4999 not been part of the Code.

     17. INDEMNIFICATION AND LIABILITY INSURANCE.

     Nothing herein is intended to limit Herley's indemnification of Markel, and
Herley shall  indemnify him to the fullest  extent  permitted by applicable  law
consistent with Herley's  Certificate of Incorporation  and By-Laws as in effect
at the beginning of the Employment  Term,  with respect to any action or failure
to act on his part while he is an officer, director or employee of Herley or any
Subsidiary.  Herley shall cause Markel to be covered at all times by  directors'
and officers' liability insurance.  Herley shall continue to indemnify Markel as
provided  above and maintain such  liability  insurance  coverage for him for at
least three (3) years after the Employment  Term for any claims that may be made
against him with respect to his service as an officer of Herley.

     18. EFFECT OF AGREEMENT ON OTHER BENEFITS.

     The  existence of this  Agreement  shall not prohibit or restrict  Markel's
entitlement to participate  fully in  compensation,  employee  benefit and other
plans of Herley in which senior executives are eligible to participate.

     19. ASSIGNABILITY; BINDING NATURE.

     This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
Parties  and their  respective  successors,  heirs (in the case of  Markel)  and
assigns. No rights or obligations of Herley under this Agreement may be assigned
or transferred  by Herley except  pursuant to (a) a merger or  consolidation  in
which Herley is not the  continuing  entity or (b) sale or liquidation of all or
substantially all of the assets of Herley, provided that the surviving entity or
assignee or  transferee  is the  successor  to all or  substantially  all of the
assets of Herley and such surviving entity or assignee or transferee assumes the
liabilities,  obligations  and  duties of Herley  under this  Agreement,  either
contractually or as a matter of law.

     Herley further agrees that, in the event of a sale of assets or liquidation
as described  in the  preceding  sentence,  it shall use  reasonable  commercial
efforts  to have such  assignee  or  transferee  expressly  agree to assume  the
liabilities, obligations and duties of Herley hereunder; provided, however, that
notwithstanding such assumption,  Herley shall remain liable and responsible for

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<PAGE>

fulfillment  of the  terms  and  conditions  of this  Agreement;  and  provided,
further, that in no event shall such assignment and assumption of this Agreement
adversely affect Markel's right upon a Change in Control, as provided in Section
10(h) above.  No rights or  obligations  of Markel under this  Agreement  may be
assigned or transferred by him.

     20. REPRESENTATIONS.

     The  Parties  respectively   represent  and  warrant  that  each  is  fully
authorized and empowered to enter into this  Agreement and that the  performance
of its or his  obligations,  as the case may be, under this  Agreement  will not
violate  any  agreement  between  such  Party  and  any  other  person,  firm or
organization.  Herley  represents and warrants that this Agreement has been duly
authorized  by  all  necessary  corporate  action  and  is  valid,  binding  and
enforceable in accordance with its terms.

     21. ENTIRE AGREEMENT.

     Except to the extent otherwise provided herein, this Agreement contains the
entire  understanding and agreement  between the Parties  concerning the subject
matter hereof and  supersedes  any prior  agreements,  whether  written or oral,
between the Parties concerning the subject matter hereof.  Payments and benefits
provided  under this  Agreement  are in lieu of any  payments or other  benefits
under any severance  program or policy of Herley to which Markel would otherwise
be entitled.

     22. AMENDMENT OR WAIVER.

     No  provision in this  Agreement  may be amended  unless such  amendment is
agreed to in writing  and signed by both  Markel  and an  authorized  officer of
Herley.  No  waiver  by either  Party of any  breach  by the other  Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent  time.  Any waiver must be in writing and
signed by the Party to be charged  with the waiver.  No delay by either Party in
exercising  any right,  power or privilege  hereunder  shall operate as a waiver
thereof.

     23. SEVERABILITY.

     In the event  that any  provision  or portion  of this  Agreement  shall be
determined to be invalid or unenforceable  for any reason,  in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

     24. SURVIVAL.

     The respective  rights and  obligations of the Parties under this Agreement
shall survive any termination of Markel's employment with Herley.

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<PAGE>

     25. GOVERNING LAW/JURISDICTION.

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

     26. NOTICES.

     Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally,  by fax, by overnight delivery
service  (such as Federal  Express)  or sent by  certified  or  registered  mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the  address  indicated  below or to such  changed  address  as the Party may
subsequently give notice of.

If to Herley or the Board:
Herley Industries, Inc.
101 North Pointe Boulevard
Lancaster, Pennsylvania  17601
Fax No.  717-397-9503
Attn:  Mr. Myron Levy, Chairman

With a copy to:
Beckman, Lieberman & Barandes, LLP
100 Jericho Quadrangle, Suite 329
Jericho, NY  11753
Fax No. 516-433-5858
Attn:  David H. Lieberman, Esq.

If to Markel:
Jeffrey L. Markel
5 Constitution Lane
Totowa, NJ 07512
Fax No. 973-720-9225

With a copy to:
Ogletree, Deakins, Nash,
Smoak & Stewart, P.C.
10 Madison Avenue, Suite 402
Morristown, New Jersey  07960
Fax No.   973-656-1611
Attn:  Patrick M. Stanton, Esq.

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<PAGE>

     27. HEADINGS.

     The  headings  of  the  sections   contained  in  this  Agreement  are  for
convenience  only and shall not be deemed to control  or affect  the  meaning or
construction of any provision of this Agreement.

     28. COUNTERPARTS.

     This  Agreement  may be  executed  in  counterparts,  each of which when so
executed and delivered shall be an original,  but all such counterparts together
shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
May 30, 2007.

                                         HERLEY INDUSTRIES, INC.

                                         By: /s/ Myron Levy
                                            -------------------------
                                                   Myron Levy

                                                    EMPLOYEE

                                             /s/ Jeffrey L. Markel
                                            -------------------------
                                                Jeffrey L. Markel



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