HERLEY INDUSTRIES INC /NEW
ASSET PURCHASE AGREEMENT-AMER. MICROWAVE TECH. INC
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT-AMER. MICROWAVE TECH. INC
<TEXT>


                                                                    Exhibit 10.1
                                                                    ------------

                            ASSET PURCHASE AGREEMENT



         ASSET  PURCHASE  AGREEMENT  ("Agreement")  made as of the  12th  day of
October, 2000, by and between AMERICAN MICROWAVE TECHNOLOGY,  INC., a California
corporation  (hereinafter  called  "Seller")  and  HERLEY  INDUSTRIES,  INC.,  a
Delaware corporation (hereinafter called "Buyer").

                              W I T N E S S E T H:

         WHEREAS, Seller is engaged in the business of manufacturing and selling
radio frequency power  amplifiers and desires to sell to Buyer its business unit
commonly  referred  to  as  medical   /scientific  unit  ("Business  Unit")  and
substantially  all of the Business Unit assets,  as herein  provided,  and Buyer
desires to purchase  the Business  Unit and assets,  all at the price and on the
terms and conditions hereinafter set forth.

         NOW, THEREFORE, for and in consideration of the mutual representations,
covenants and  warranties  herein  contained,  and intending to be legally bound
hereby, the parties hereto agree as follows:

ARTICLE 1.

         1.1  Purchase and Sale of Assets.  Subject to the terms and  conditions
hereof and based upon the representations,  warranties, covenants and agreements
of the parties  hereafter set forth,  Buyer hereby agrees to purchase and accept
from Seller, and Seller agrees to sell, assign,  transfer and convey to Buyer on
the Closing  Date (as  hereinafter  defined)  except as  otherwise  set forth in
Section 1.2 below and the Exhibits attached hereto, all of the assets used in or
related to the Business Unit, including without limitation,  all of the Business
Unit related tangible and intangible assets, rights, interests and properties of
every kind and nature,  wherever  located and by  whomever  possessed,  owned by
Seller as of the date hereof  (together with any proceeds thereof or any payment
thereon which may be received by Seller  subsequent to the date hereof),  except
as  otherwise  specifically  stated  herein,  free  and  clear  of all  security
interests, liens and encumbrances, including, without limitation, the following:

     (a) All Business Unit related real property, machinery and other equipment,
     telephone systems, vehicles,  furniture,  fixtures,  computers and computer
     software  and fixed  assets of  Seller  of any kind  whatsoever,  including
     without  limitation those Business Unit related assets reflected on the pro
     forma  Balance  Sheet of  Seller  ("Balance  Sheet")  which  reflects  only
     Business Unit related assets as described on Exhibit "A" attached hereto.

     (b) All  catalogues,  shipping  and office  supplies,  books of account and
     other financial records  necessary to or useful in the continued  operation
     of the  Business  Unit,  customer  lists and vendor  lists,  Business  Unit
     customer backlogs,  telephone numbers and telephone directory listings, the
     name AMT and any variation  thereof,  Business  Unit  patents,  copyrights,
     licenses and rights listed in Exhibit "B" attached hereto, all rights under


                                        1

<PAGE>



     any Business Unit contracts  subject to consents required for assignment of
     government contracts,  licenses and permits, the Business Unit of Seller as
     an operating  business,  and all Business Unit related intangible assets of
     Seller of any kind whatsoever.

     (c) All other Business Unit related assets property and rights of Seller of
     any kind whatsoever,  including, but not limited to, tax refunds,  accounts
     receivable and prepaid expenses.

     (d)  All  Business  Unit  related  inventories  of  supplies,  merchandise,
     packaging  and  promotional  materials  including  raw  material,  works in
     process and finished goods as attached in Exhibit H.

     (e) All Business Unit related intellectual property rights.

         The assets,  property and rights to be  transferred  to Buyer by Seller
hereunder  on the Closing  Date are  hereafter  sometimes  called the  "Assets".
Notwithstanding  the  foregoing,  it is  expressly  agreed that Seller  shall be
entitled to use the name American  Microwave  Technology but not the name AMT in
connection with the assets and liabilities it retains.

         1.2      Excluded Assets.   The assets listed on Exhibit "E" are not
                  ---------------    Assets and are excluded from the purchase
                                     contemplated by this Agreement.

ARTICLE  2.

         2.1      Payment  of  Purchase  Price  and Assumption  of  Liabilities.
                  -------------------------------------------------------------
                  Subject  to  the  terms and conditions set forth in this
                  Agreement, Buyer shall, in full consideration of the Assets to
                  be sold and assigned to Buyer:

                  (a) Pay to Seller or as  otherwise  directed by Seller the sum
         of  Five  Million,   Four  Hundred  Thousand  Dollars  ($5,400,000)  by
         cashier's check, bank check or wire transfer on the Closing Date.

                    (b) On the Closing Date, assume the following liabilities of
                    Seller and no others:

                    (i) Accounts  payable as set forth in the  attached  Exhibit
                    "C", the aggregate of which shall not exceed $800,000.

                           (ii) Equipment lease  obligations as set forth in the
                  attached  Exhibit "D", the aggregate of which shall not exceed
                  $200,000.

                    (iii) All  liabilities set forth in Exhibit "A" in an amount
                    not to exceed $1,153,191.

         The  liabilities  and  obligations to be assumed and referred to in (i)
through (iii) above are hereinafter termed the "Assumed Liabilities".  Except as
expressly set forth in this  Agreement,  no liabilities or obligations of Seller
shall be assumed by Buyer.


                                        2

<PAGE>



          (c) Any provision of this  Agreement to the contrary  notwithstanding,
          Buyer  will not and does not  assume  the  following  liabilities  and
          obligations  of Seller even if, to any extent,  they were reflected in
          the Financials set forth at Exhibit "F" and arose in connection  with,
          were  incurred by or were  related to the  operation  of the  Business
          Unit:

          (i)  liabilities or obligations of Seller to any officer,  director or
          stockholder  of the Seller,  whether or not owed to such person in his
          capacity as such, any person  affiliated  with any of the foregoing or
          any person related to or sharing a household with any of the foregoing
          except  liabilities  for accrued  wages and salaries  reflected in the
          Balance Sheet.

          (ii)  expenses   incurred  by  the  Seller  in  connection   with  the
          transactions contemplated herein, including,  without limitation, fees
          and expenses of Seller's finder's fees to  Decisionpoint,  counsel and
          accountants.

          (iii) any obligation or liability of the Seller to the Buyer.

          (iv) any  foreign,  federal,  state o local  tax  based on  income  or
          revenues or interest or penalties relating thereto, whether arising by
          reason of the sale of the  Assets as herein  provided  or by reason of
          the  existence or  operations of the Seller prior to or after the date
          hereof  and any sales or use taxes  incurred  by Seller on or prior to
          the Closing.

          (v) to the  extent  not paid for  under  existing  insurance  policies
          assigned to Buyer  hereunder,  workman's  compensation  claims against
          Seller based on occurrences prior to the Closing Date.

          (vi) to the  extent  not paid for under  existing  insurance  policies
          assigned to Buyer hereunder, liabilities to third parties for tort and
          product liability claims made against Seller prior to the Closing Date
          based upon occurrences prior to the Closing Date.

          (vii) all  obligations of Seller  incurred after the date hereof other
          than those incurred in the ordinary course of business.

          (viii) all other  liabilities  or  obligations of Seller to the extent
          any of such  liabilities  or  obligations  constitute  a breach of the
          representations or warranties of Seller set forth in Article 3 hereof.




                                        3

<PAGE>



          (ix) obligations or liabilities of Seller with respect to any employee
          option or benefit plan including, without limitation, any underfunding
          or termination liability.

          (x)  liabilities  or  obligations  of  Seller in  connection  with its
          failure to obtain, its failure to maintain in full force and effect or
          its default under any approval, authorization, consent, certificate of
          occupancy (or local equivalent),  license,  franchise,  order or other
          permit of any  governmental  or regulatory  agency,  whether  federal,
          state,  local  or  foreign  necessary  to the  operation  of  Seller's
          business as presently conducted  including,  without  limitation,  the
          construction,  alteration, operation, use or occupancy of the premises
          occupied by Seller, or any improvements thereon.

          (xi) except to the extent  provided in Section  2.1(c)(i)  above or as
          otherwise  expressly provided herein or in any other document executed
          in  connection  herewith,  any  liabilities  to  employees  or  former
          employees of the Seller, and their beneficiaries,  whether pursuant to
          agreement  or  otherwise,  including  those  for  salaries,  bonus and
          employment  benefits,  fringe  benefits,   insurance,   welfare,  post
          retirement medical, medical reimbursement, deferred compensation, sick
          pay, termination,  severance, stock option, stock purchase,  accident,
          disability,   vacation,  health,  medical  and  worker's  compensation
          insurance or benefits.

          (xii)  any  and  all  environmental  liabilities  arising  out  of  or
          resulting  from  any  or  all  of  the  following  conditions,   which
          hereinafter are collectively referred to as the "pre-closing liability
          conditions":  (A) the existence prior to the Closing Date of hazardous
          materials  upon,  within  or  beneath  any of the  real  property,  or
          migrating from such real property; (B) any violations of environmental
          requirements  premised  upon, or arising out of any of the  conditions
          described  in  (A)  above;   (C)  any   violations  of   environmental
          requirements  pertaining  to the use or operation of the real property
          or any other of the Assets prior to the Closing  Date,  or the conduct
          of operation of the business of the Seller prior to the Closing  Date;
          and (D) the  existence of any  underground  storage tank (USTs) at the
          real property.

          (xiii) any other  liabilities  or  obligations of Seller which are not
          expressly assumed hereunder.

          Notwithstanding the foregoing,  Seller shall not have any liability or
          responsibility whatsoever arising in any way from actions or inactions
          of Buyer relative to the Assumed  Liabilities,  Assets or the Business
          Unit  purchased  by Buyer  hereunder  after the  Closing to the extent
          Buyer's actions impair the Assets or Business Unit.




                                        4

<PAGE>



ARTICLE  3.

          3.1  Representations  and  Warranties  of Seller.
               -------------------------------------------   Seller  represents,
          warrants  and  covenants as follows:

                  (a) Seller is a corporation  duly organized,  validly existing
         and in good standing under the laws of the State of California.  Seller
         is not  required  by reason of its  present  ownership  of  property or
         present  operations  to be qualified to do business in any other state.
         Seller does not have any subsidiaries.

               (b) Seller has  corporate  power to enter into and carry out this
          Agreement  and  related   documents,   has  no  contractual  or  other
          restriction upon its so doing and has properly secured the approval of
          this  Agreement  by its  Board  of  Directors  and  stockholders;  and
          Seller's  executing  officers are  authorized  thereby to execute this
          Agreement,  and such other documents as may be necessary to consummate
          the  transaction   contemplated  herein.  The  Agreement  and  related
          documents to which Seller is a party executed on the Closing Date will
          be valid and binding agreements of Seller,  enforceable against Seller
          in accordance with their terms.

               (c)  Attached  hereto as Exhibit "F" are copies of the  unaudited
          financial  statements  of Seller for the year ended  December 31, 1999
          and  unaudited  financial  statements  for the period ended August 26,
          2000, including the balance sheet of the Seller as at August 26, 2000,
          and statement of operations  and retained  earnings,  and.  changes of
          cash flows of the Seller,  with appended  notes to all such  financial
          statements,   which   are  an   integral   part  of  such   statements
          (collectively the "Financials").  The Financials have been prepared in
          conformity with generally accepted accounting  principles applied on a
          consistent basis and present fairly the financial position and results
          of operations of Seller at the dates and for the periods specified.

               (d) There has been no material change in the financial condition,
          assets or  liabilities  of Seller as they relate to the Business  Unit
          and the Assets  from August 26,  2000 to the date  hereof,  except for
          changes which have occurred in the ordinary  course of business,  none
          of which have been materially adverse.

               (e) The only real property owned by Seller are real estate leases
          as described in Exhibit "G" attached  hereto.  Aside from Exhibit "G",
          the  Seller  neither  owns nor has  interest  in or rights to any real
          estate.

               (f) Exhibit  "A",  attached  hereto,  includes a true and correct
          list of all fixed assets owned by Seller used in the Business Unit and
          a schedule of all leases of fixed assets used in the Business Unit and
          personal  property  used in the  Business  Unit under which  Seller is
          lessee,  all of which leases are valid and binding and not in default,
          by either lessor or lessee thereunder.

               (g) Seller has not  received  any  notice  from any  governmental
          authority that its real estate, or personal property within the Assets
          violate the provisions of any building or


                                        5

<PAGE>



               similar  code,  nor does Seller have  knowledge  of any basis for
          such a claim.  Seller  is  conveying  to Buyer all the  equipment  and
          property previously required by Seller for the proper operation of its
          Business  Unit.  Except  with  respect  to  government  contracts  and
          governmental licenses and permits, no consent (except those which have
          already been  obtained)  are necessary to transfer to the Buyer any of
          the Assets,  property or rights of the Business  Unit,  including  any
          leases or licenses of personal property or other rights.

               (h) The  Assets  are and  will be on the  Closing  Date  owned by
          Seller  free and clear of any  liens,  encumbrances  or  restrictions,
          except as specifically reflected in the Exhibit "J".

               (i) From and  after  the date of this  Agreement  and  until  the
          Closing  Date,  the Business Unit has been and will be operated in the
          ordinary  course  consistent  with past practices and there has not or
          will not have been:

               (i) any damage,  destruction  or loss,  whether or not covered by
          insurance,  which has had, or will have, a material  adverse effect on
          the Business Unit;

               (ii) any strike,  picketing or similar  labor  trouble  which has
          had, or will have, a material adverse effect on the Business Unit;

               (iii) any license, sale, transfer,  mortgage or other disposition
          of any  Assets  except  in the  ordinary  course of  business,  or any
          license,  sale,  assignment,  transfer  or  other  disposition  of any
          patent,   copyright,    trademark,   license,   franchise,   know-how,
          proprietary  process,  formula or other  intangible  asset used in the
          Business Unit;

               (iv) any change in the  benefits  or  compensation  payable or to
          become  payable  to  officers  or  employees  in any  form,  including
          bonuses, pension, severance, etc.;

               (v) any loans,  advances or capital contribution to or investment
          in any person or entity;

               (vi) any issuances or sale of any stock,  bond or other corporate
          security;

               (vii) any material adverse change in the condition  (financial or
          otherwise) of the Business Unit.

               (j)  Seller  has not  received  any notic  from any  governmental
          agency with  respect to any "alleged  material  violation"  (i.e.,  an
          alleged  violation  which would have a material  adverse effect on the
          Business  Unit)  by it of  any  applicable  federal,  state  or  local
          environmental  or  health  and  safety  statutes  and  regulations  in
          connection  with the Business  Unit, nor does Seller know of any basis
          for any investigation or proceeding  against it by any federal,  state
          or  local  environmental  or  health  and  safety  enforcement  agency
          regarding  such a violation in  connection  with the  operation of the
          Business Unit. To the best knowledge of Seller, neither Seller nor any
          predecessor of Seller has been


                                        6

<PAGE>



               alleged to be in material  violation  of, or has been  subject to
          any   administrative   or   judicial   proceeding   pursuant  to  such
          environmental  laws and regulations with respect to the Business Unit,
          either now or at any time during the past three  years,  and so far as
          Seller is aware,  there are no such threatened or proposed  violations
          with respect to the Business Unit.

               (k) The equipment and other personal property included within the
          Assets  taken  as a  whole,  is in  good  operating  condition  in all
          material respects, subject to normal wear and tear.

               (l) Except as set forth in  Exhibit  "I ", there are no  material
          agreements  or  contracts  to which the  Business  Unit of Seller is a
          party or by which it is bound.

               (m) With  respect to  government  contracts  or OEM  subcontracts
          included within the Assets,  there are (i) no outstanding written cure
          notices  or  show  causes,   (ii)  any  written  notices  of  contract
          termination  or stop work  orders,  (iii) any written  final  decision
          assessing a penalty or damages, (iv) any written assertion of a formal
          claim based on violation of government  cost  accounting  standards or
          government pricing, or (v) any formal notice of proposed  disallowance
          of indirect  cost claims,  any subpoena or written  notice  signifying
          government investigation.

               (n) Seller is not aware of any fact or  circumstance  which would
          have an  adverse  effect on the  efforts of Seller and Buyer to obtain
          novation agreements and to otherwise obtain all required consents.

               (o)  Seller is not in  default  or  breach  with  respect  to any
          material  obligation  under any of its  vendor,  supplier  or customer
          contracts, including the government contracts relative to the Assets.

               (p) All  inventory  within the Assets  reflected  on the  balance
          sheet at  August  26,  2000 is,  and on the  Closing  Date will be, of
          usable quality,  except as may be otherwise reserved for and reflected
          on the Seller's financial statements.

               (q)  Seller  has never had any labor  trouble,  by which is meant
          employee  strikes,  work  stoppages,  slow downs or lock outs,  or any
          threats thereof. None of Seller's employees has ever been covered by a
          collective bargaining agreement between Seller and any labor union.

               (r) Exhibit "B",  attached hereto contains a complete  listing of
          all  patents,   licenses,   trademarks,   trade  names,  brand  names,
          copyrights,  logos,  inventions,  trade secrets, and other proprietary
          information used or required by Seller in connection with the carrying
          on and  conduct  of its  Business  Unit,  none of  which,  to the best
          knowledge  of Seller,  infringes  the rights of others.  Seller is the
          sole owner of or has the  exclusive  right to use, for the life of the
          proprietary   rights,   all  patents,   trademarks,   service   marks,
          tradenames, copyrights, inventions, logos, trade secrets, etc. used in
          the Business Unit.

               (s) Seller has timely and properly  filed all federal,  state and
          other tax returns


                                        7

<PAGE>



               and reports,  statements and other  documents  which it is or has
          been required to file, and has paid all taxes,  including interest and
          penalties,  if any,  which have become due pursuant to tax returns and
          reports filed and pursuant to assessments  received by it. Seller has,
          to the date  hereof,  properly  accrued,  and will pay when  due,  all
          federal, state and other tax liabilities of Seller.

               (t) To the best of its  knowledge,  Seller  has  complied  in all
          material  respects  with all  laws,  rules,  regulations,  ordinances,
          judgments,  decrees and orders of federal, state and local authorities
          and agencies  applicable to its Business  Unit, the violation of which
          could  result in  liability  to Seller of $2,000 or more.  Seller  has
          substantially  complied with all requirements under necessary permits,
          authorizations,  or licenses and has, as of the date  hereof,  secured
          such  permits,  authorizations  and  licenses in  connection  with the
          Assets.  Notwithstanding the foregoing,  Seller has fully disclosed to
          Buyer the circumstances  surrounding its ESOP, including the fact that
          the Department of Labor has requested information about the ESOP.

               (u) Except as set forth on  Exhibit  "K," there are no actions at
          law  or in  equity  pending  or,  to the  best  knowledge  of  Seller,
          threatened against or adversely affecting Seller or any of the Assets,
          and  except  as set forth on  Exhibit  "K,"  there are no  proceedings
          pending or, to the best knowledge of Seller, threatened against Seller
          by or before any governmental board, department,  commission or agency
          involving the Assets.

               (v) None of the real  property  nor to the best  knowledge of the
          Seller any real property  previously  owned or leased by Seller or any
          of its predecessors  have been used at any time in connection with the
          Business  Unit:  (i) as a site for the  storage or  disposal  of waste
          (including,  without limitation,  as that term is used in the Resource
          Conservation  Recovery Act (the "Conservation  Act") (42 U.S.C. 901 et
          seq);  (ii) so as to cause a violation of or to give rise to a removal
          or  restoration  obligation  or liability  for the costs of removal or
          restoration by others,  or liability for damages to others,  under any
          statute,  ordinance,  order,  decree,  or under the  common law of any
          state, federal, municipal or other governmental entity, body or agency
          having  jurisdiction  over  any  of the  real  property  or  any  such
          previously owned or leased property,  including,  without  limitation,
          the Comprehensive  Environmental Response,  Compensation and Liability
          Act, as amended  ("CERCLA") (42 U.S.C.  9601 et seq.),  or any similar
          Environmental Requirement,  nor has any such violation,  obligation or
          liability  been  created by the  removal  by or at the  request of the
          Seller  or,  to  the  best  knowledge  of  the  Seller,   any  of  its
          predecessors  of any waste from the real  property  or such  leased or
          previously owned or leased properties, the disposition of such removed
          waste or by reason of the discontinuance of operations of any business
          conducted  at the real  property  or the  previously  owned or  leased
          properties or (iii) to the best  knowledge of the Seller,  for storage
          of hazardous  materials in USTs.  Seller has  delivered to Buyer true,
          complete  and  correct  copies or results of any  reports,  studies or
          tests in the  possession of or initiated by Sellers  pertaining to the
          existence of hazardous materials and other  environmental  concerns at
          any part of the real property or any  properties  previously  owned or
          leased by Seller or any of its  predecessors or concerning  compliance
          with or  liability  under  laws  relating  to toxic  waste  and  other
          environmental  matters in the operation of the business and properties
          of the Seller or any of its predecessors.


                                        8

<PAGE>




               (w) Seller has no reason to believe that the accounts  receivable
          being conveyed to Buyer hereunder are uncollectible.

               (x) Seller is not in default, or alleged to be in default,  under
          any  agreement,  instrument  or  obligation,  which  singly  or in the
          aggregate might have an adverse effect on the Seller's  Business Unit.
          There is no default by any party with whom the Seller has an agreement
          which is of material importance to the Seller's Business Unit.

               (y) Except with  respect to  government  contracts,  licenses and
          permits for which  consent is  required,  there is no material  asset,
          property  or right used or required by the Buyer in the conduct of the
          Business Unit which is not being conveyed, transferred, or assigned to
          Buyer under this Agreement.

               (z) Except as set forth on Exhibit "L", neither the execution and
          delivery of this Agreement,  nor the  consummation of the transactions
          contemplated  hereby,  violates  any  provision  of  the  articles  of
          incorporation or by-laws of Seller; violates or is in conflict with or
          constitutes  a default  (or an event  which,  with  notice or lapse of
          time, or both,  would  constitute a default)  under, or results in the
          termination of, or accelerates the performance required by, or excuses
          performance by any person of any of its or their obligations under, or
          causes the  acceleration  of the  maturity  of any debt or  obligation
          pursuant to, or results in, the creation or  imposition of any lien or
          encumbrance  upon any of the Assets under any  agreement or commitment
          to which Seller is a party or by which any of its Assets is bound,  or
          to which any of the Assets of the Seller is subject;  or violates  any
          statute,  law,  regulation,  rule,  judgment  or order of any court or
          other governmental body.

               (aa)  The  insurance   coverage  of  Seller  is  within  industry
          standards for the Assets and Business Unit.

               (bb)  Seller has not  employed  any  broker,  finder,  investment
          banker  or  financial  advisor  as to  whom  the  Seller  may  have an
          obligation to pay monies,  or incurred any liability for any brokerage
          fees  or  commissions  or  for  any  finders'  investment  banking  or
          financial  advisory  fees for which the Seller may be  responsible  in
          connection with the transactions  contemplated  hereby except finder's
          fees to Decisionpoint in the amount of $432,000.




                                        9

<PAGE>



               (cc) No  representation or warranty made in this Agreement by the
          Seller, nor any statement,  schedule or certificate furnished or to be
          furnished to the Buyer  pursuant  hereto,  or in  connection  with the
          transactions  contemplated hereby, contains or will contain any untrue
          statement  of a  material  fact,  or  omits  or will  omit to  state a
          material fact  necessary to make the  statements  contained  herein or
          therein not misleading.

ARTICLE 4.

         4.1      Representations  and Warranties  of Buyer.
                  ----------------------------------------- Buyer represents and
                  warrants to Seller that:

     (a) Buyer is a corporation  duly  organized,  validly  existing and in good
standing under the laws of the State of Delaware with  corporate  power to carry
on its business as now  conducted.  Buyer has corporate  power to enter into and
carry out this Agreement,  has no contractual or other  restriction  upon its so
doing, and has properly secured the approval of its Board of Directors to do so,
no other  approval being  required.  Buyer's  executing  officers are authorized
thereby to execute this Agreement,  and such other documents as may be necessary
to consummate the transactions contemplated herein.

     (b)  Neither  the  execution  and  delivery  of  this  Agreement,  nor  the
consummation of the transactions  contemplated hereby, violates any provision of
the certificate of incorporation or by-laws of Buyer; violates or is in conflict
with or constitutes a default (or an event which,  with notice or lapse of time,
or both, would constitute a default) under, or results in the termination of, or
accelerates the performance required by, or excuses performance by any person of
any of its or  their  obligations  under,  or  causes  the  acceleration  of the
maturity of any debt or  obligation  pursuant  to, or results in the creation or
imposition of any lien or encumbrance upon any property or assets of Buyer under
any  agreement  or  commitment  to which Buyer is a party or by which any of its
property  or assets is bound,  or to which any of the  property or assets of the
Buyer is subject; or violates any statute,  law,  regulation,  rule, judgment or
order of any court or other governmental body.

     (c) Buyer will use all  reasonable  efforts to  release  Seller  from those
liabilities which Buyer has expressly agreed to assume under this Agreement.

     (d) No  representation or warranty made in this Agreement by the Buyer, nor
any  statement,  schedule or  certificate  furnished  or to be  furnished to the
Seller  pursuant  hereto,  or in connection with the  transactions  contemplated
hereby,  contains or will contain any untrue  statement of a material  fact,  or
omits or will omit to state a material  fact  necessary  to make the  statements
contained herein or therein not misleading.

ARTICLE 5.

         5.1  Operations  of Business  Unit Since August 26, 2000 . Since August
26, 2000, the Seller has adhered to the following restrictions:

          (a)      Seller  has  conducted  the  Business
                   Unit  in  the ordinary and usual course


                                       10

<PAGE>



     and has  used  its best  efforts  to  maintain  the  Business  Unit and the
goodwill thereof in accordance with its prior practice.

     (b) Seller has  maintained the Assets owned or leased by Seller in the same
condition as the same were on August 26, 2000, reasonable wear and tear excepted
and dispositions in the ordinary course of business, which dispositions have not
been material in the aggregate.

     (c)  Seller  has  not  mortgaged,  pledged  or  subjected  to any  lien  or
encumbrance  any of the Assets or  suffered or  permitted,  any of the Assets to
become encumbered or subject to any lien.

     (d) Seller has not made or declared any distribution,  transfer or dividend
to its  shareholders,  or sold or disposed  of, or made any offer,  agreement or
contract  relating to the sale or disposition  of, any of the Assets acquired by
Seller since August 26 2000 (with the further exception of those which have been
disposed  of in the  ordinary  course of  business  consistent  with  historical
practice).

     (e) Except as  otherwise  disclosed  to Buyer  Seller has not  incurred  or
become  liable  for any  obligation  or  liability  except  current  liabilities
incurred in the ordinary course of business  consistent with historical business
practices.

     (f)  Seller has not made  increases  in  employees'  salaries  or  benefits
subsequent to August 26, 2000 except for a $150,000  termination payment to Hans
Gregory Wood which is not being paid from the Business Unit Assets.

     (g) Seller has paid or accrued all  operating  costs since August 26, 2000,
including  but not  limited  to all wages and  salaries  as the same  shall have
become due and payable,  any premiums due on employee health insurance and other
insurance policies,  utility bills, rents, all payments required for merchandise
and services  received  during such period,  and all other  expenses of the type
ordinarily and reasonably incurred by Seller's business since August 26, 2000.

ARTICLE 6.

         6.1 Conditions to Obligation of Buyer to Close. The obligation of Buyer
to purchase the Assets and otherwise to consummate the transactions  that are to
be consummated at the Closing is subject to the  satisfaction,  on or before the
Closing Date, of the following  conditions  (any of which may be waived by Buyer
in whole or in part):

     (a) All required consents shall have been duly obtained or obviated, except
where (i) the failure to obtain any such required  consents would not reasonably
be expected to subject Buyer to any material penalty or loss,  including loss of
partial revenue,  or (ii) such required consent relates to an assigned  contract
or a related assumed liability, as to which the parties will proceed pursuant to
Article 8.



                                       11

<PAGE>



     (b) The  representations  and  warranties  of Seller set forth in Article 3
shall be true and correct in all material respects on the Closing Date.

     (c)  Seller  shall  have  complied  with  and  performed,  in all  material
respects,  all  obligations  required by this  Agreement to be complied  with or
performed by Seller on or before the Closing Date.

     (d) Seller  shall have  delivered to Buyer a  certificate,  dated as of the
Closing  Date, to the effect that the  conditions  set forth in Sections (b) and
(c) pursuant to this Article 6 have been satisfied.

     (e) Buyer shall have entered into an employment agreement with Hans Gregory
Wood, in conformity with the form of agreement annexed hereto as Exhibit "M".

     (f) Seller shall have fully  complied with the  provisions of any so-called
Bulk Sales Laws applicable to the conveyance to Buyer of the Assets.

ARTICLE 7.

         7.1  Conditions  to Obligation  of Seller to Close.  The  obligation of
Seller to sell the Assets to Buyer and otherwise to consummate the  transactions
that are to be consummated at the Closing is subject to the satisfaction,  on or
before the Closing Date, of the following conditions (any of which may be waived
by Seller in whole or in part):

     (a) All required consents shall have been duly obtained or obviated, except
where (i) the failure to obtain any such required  consents would not reasonably
be  expected  to  subject  Seller  to a  material  penalty  or loss or (ii) such
required consent relates to an assigned contract or a related assumed liability,
as to which the party will proceed pursuant to Article 8.

     (b) The  representations and warranties of Buyer set forth in Article 4 and
the  representations  and warranties of Buyer set forth in the other instruments
shall be true and correct in all material respects on the Closing Date.

     (c) Buyer shall have complied with and performed, in all material respects,
all  obligations  required by this Agreement to be complied with or performed by
Buyer on or before the Closing Date.

     (d) Buyer  shall  have  delivered  to Selle a  certificate  dated as of the
Closing  Date, to the effect that the  conditions  set forth in Sections (b) and
(c) of this Article 7 above have been satisfied.

     (e) Buyer shall have entered into an Employment Agreement with Hans Gregory
Wood, in conformity with the form of agreement annexed hereto as Exhibit "M".

ARTICLE 8.


                                       12

<PAGE>



         8.1      Best Efforts to Obtain Consents.
                  -------------------------------

     (a) Where required,  Seller and Buyer shall notify  Seller's  customers and
suppliers that Seller's  obligations under its contracts,  including  government
contracts, will, after the closing, be performed by Buyer. Prior to the Closing,
Seller  will use its best  efforts to obtain the  consents of any parties to the
contracts  which  require such  consent to be obtained  prior to transfer of the
contracts to Buyer ("Pre-closing Consents"). Seller and Buyer will cooperate and
use their  best  reasonable  efforts to obtain (i)  novation  agreements  to the
extent required by law to each government  contract  ("Novation  Contracts ") as
soon as reasonably possible,  (ii) any security clearances,  licenses or similar
permits  required to operate any facility or conduct any portion of the Business
Unit, and (iii) all other consents, approvals,  novations, and waivers necessary
to  convey  to Buyer  any of the  Assets  which  are not  required  by law or by
contract to be obtained prior to the Closing Date.  (All Novation  Contracts and
other consents, security clearances, permits, approvals and waivers described in
(i), (ii) and (iii) above are hereinafter referred to as "Post-closing  Consents
".).

     (b) To the extent that the assignment by Seller and the assumption by Buyer
of any  contracts  included  within  the Assets  shall  require  the  consent or
approval of any third party,  this Agreement  shall not constitute an assignment
and/or  assumption  thereof if such  attempted  assignment or  assumption  would
constitute a breach thereof.

     (c) Until (i) any Novation  Contract  legally  required with respect to any
government  contract has been  executed and  delivered and (ii) Seller and Buyer
have  obtained  any  Post-closing  Consents  necessary  to  convey  to Buyer any
contract not requiring a Novation Contract pursuant to Section 1 of this Article
8 above,  Buyer on behalf of  Seller,  from and after the  Closing  Date,  shall
assume  and  perform  (as a  subcontractor  to Seller in the case of  government
contracts)  and Buyer shall  assume and  perform,  for the benefit of the issuer
thereof or other party or parties thereto, the liabilities, responsibilities and
obligations of Seller thereunder  (other than the liabilities,  responsibilities
and obligations of Seller under Section (d) of this Article 8.

     (d)  Until  Seller  and Buyer  have  obtained  any  Novation  Contracts  or
Post-closing  Consents  necessary  to convey to Buyer any  contracts,  including
government  contracts pursuant to Section (a) of this Article 8, Seller from and
after the  Closing  Date  will (i)  promptly  transmit  to  Seller's  government
contract customers, Seller's invoices based upon the invoices submitted by Buyer
to Seller  pursuant  to Section  (e) of this  Article 8, (ii)  receive  payments
tendered to Seller by such government contract customers and promptly remit such
payments to Buyer,  (iii)  enforce for the benefit of Buyer all rights of Seller
under  any  government  contract,  and (iv) take any  other  reasonable  actions
necessary to allow Buyer to perform its obligations and derive its benefits as a
subcontractor under the government contracts.

     (e) From and after the Closing Date and until the  applicable  Post-closing
Consents are obtained, Buyer shall take all reasonable action necessary to allow
Seller to perform its obligations under the government contracts,  including but
not limited to


                                       13

<PAGE>



     promptly  submitting invoices to Seller for such payments or reimbursements
as are  appropriate in accordance  with the respective  terms of such government
contracts.

ARTICLE 9.

         9.1      The Closing.
                  -----------

     (a) The Closing  hereunder  shall take place at the  offices of  McAndrews,
Allen & Matson on October 12, 2000 at 9:00 a.m, (the "Closing Date").

     (b) On the Closing Date,  (a) Seller shall  transfer the Assets to Buyer by
good and sufficient  deeds,  bills of sale,  assignments and other documents and
instruments of conveyance reasonably  satisfactory to counsel for Buyer; and (b)
Buyer shall  deliver to Seller the cash payment  payable on the Closing Date (by
cashier's  check or wire  transfer) and duly executed  instrument or instruments
reasonably satisfactory to counsel for Seller evidencing the assumption by Buyer
of the Assumed Liabilities.

     (c) Seller  shall  furnish to Buyer,  on the Closing  Date,  the  Exhibits.

     (d) Except as otherwise provided in Articl 8, Seller shall have received on
or prior to the Closing  Date,  all  required  consents of third  parties to the
consummation of the transactions provided for herein,  including consents to the
assignment of the material contracts,  leases and agreements  addressed above in
Section 6.1.

     (e) Seller  shall  furnish to Buyer on the Closing  Date  resolutions  duly
adopted and carried by its directors  authorizing  the  execution,  delivery and
performance of this  Agreement and evidence of shareholder  approval of the sale
of the Business Unit certified by its secretary.

     (f) Seller  shall  furnish to Buyer,  on the  Closing  Date,  an opinion of
counsel for Seller in form and substance reasonably  satisfactory to counsel for
Buyer to the effect that:

               (i) Seller is a corporation duly organized,  existing and in good
          standing  under the laws of the State of  California,  with  corporate
          power to enter into and perform this Agreement and transfer the Assets
          as provided for herein.

               (ii)  This  Agreement  has been  duly  authorized,  executed  and
          delivered by Seller and constitutes  its legal,  valid and enforceable
          obligation in accordance with its terms,  except as enforceability may
          be  limited  by  applicable  bankruptcy,  insolvency,  reorganization,
          moratorium  or similar laws  affecting the  enforcement  of creditors'
          rights generally.

               (iii) The  carrying out of the  transactions  provided for herein
          will not violate  any  charter or by law of Seller  nor, to  counsel's
          knowledge,  any corporate  restriction,  agreement,  or arrangement to
          which Seller is a party or to which it is


                                       14

<PAGE>



          subject.

               (iv) The  bills of sale and other  documents  of  conveyance  and
          transfer  delivered  to Buyer by Seller on the Closing  Date have been
          duly  authorized,  executed  and  delivered by Seller and are adequate
          under the laws of California to effect such conveyance and transfer.

          (g) Buyer shall furnish to Seller,  on the Closing Date, an opinion of
     counsel for Buyer in form and substance reasonably  satisfactory to counsel
     for Seller to the effect that:

               (i) Buyer is a corporation  duly organized,  existing and in good
          standing under the laws of the State of Delaware with corporate  power
          to enter into and perform this Agreement.

               (ii)  This  Agreement  has been  duly  authorized,  executed  and
          delivered by Buyer and  constitutes  the legal,  valid and enforceable
          obligation in accordance with its terms,  except as enforceability may
          be  limited  by  applicable  bankruptcy,  insolvency,  reorganization,
          moratorium  or similar laws  affecting the  enforcement  of creditors'
          rights generally.

               (iii) This  Agreement  and the carrying  out of the  transactions
          herein  provided for will not violate any charter or to our  knowledge
          other  corporate  restrictions,  agreements or  arrangements  to which
          Buyer is subject.

ARTICLE 10.

10.1     Survival of Representations and Warranties  of Seller, and
         Indemnification.
         ---------------

               (a) The  representations,  covenants  and  warranties  of  Seller
          contained  in this  Agreement  or any Exhibit  attached  hereto or any
          certificate  delivered  pursuant hereto shall survive the Closing Date
          for two years.

               (b)  Notwithstanding any investigation of Seller or the Assets or
          Business  Unit  which is made by or on  behalf  of Buyer  prior to the
          Closing Date, Seller shall indemnify,  defend, and hold harmless Buyer
          against any loss, expense (including  reasonable cost of investigation
          and legal  fees),  or other  damage  resulting  from (i) any  material
          breach  by  Seller  of any of  their  warranties,  representations  or
          agreements contained herein, (ii) any action or claim which is brought
          or asserted by third parties  against  Buyer or any successor  arising
          out of the conduct of Seller (except the Assumed Liabilities expressly
          assumed  by Buyer  pursuant  to Article 2 hereof) or on account of the
          non-compliance  by Buyer with the  provisions  of any  so-called  Bulk
          Sales Law applicable to the  conveyance to Buyer of the Assets,  (iii)
          any  failure  by  Seller  to  perform  any  covenant,  undertaking  or
          obligation hereunder, or (iv) any liability arising as a result of any
          of the proceedings listed on Exhibit "K"; to the extent any such claim
          or claims exceed in the aggregate $50,000.


                                       15

<PAGE>




               (c) If any action or claim  shall be brough or  asserted  against
          Buyer or any  successor  in respect of which  indemnity  may be sought
          from Seller  pursuant to paragraph  10.1 (b) of this Article 10, Buyer
          shall  timely  notify  Seller and  Seller  shall  assume  the  defense
          thereof,  including the employment of counsel reasonably  satisfactory
          to Buyer, and the payment of all expenses.  Buyer shall have the right
          to employ  separate  counsel in any such action and participate in the
          defense thereof,  but the fee and expenses of such counsel shall be at
          the expense of Buyer unless (i) the employment thereof shall have been
          specifically directed by Seller, or (ii) Seller shall have elected not
          to assume the  defense  and employ  counsel.  For the  purpose of this
          section,  notice  given within  thirty (30) days after the  occurrence
          giving  rise to the right of  indemnification  shall be  "timely"  but
          notice  given later than such  thirty (30) days shall not  terminate a
          party's  right to  indemnification  unless  the party  receiving  such
          notice can demonstrate that its rights have been adversely affected in
          a material fashion by such allegedly untimely notice.

               (d) The indemnity liability of the Seller herein shall not exceed
          the amount of the purchase  price to be paid by Buyer under  Article 2
          hereof.

10.2     Survival of Representations and Warranties of Buyer, and
         Indemnification.
         ---------------

               (a) The representations and warranties of Buyer contained in this
          Agreement or any Exhibit attached hereto or any certificate  delivered
          pursuant hereto shall survive the Closing Date for two years.

               (b)  Notwithstanding  any investigation of Buyer which is made by
          or on  behalf  of  Seller  prior  to the  Closing  Date,  Buyer  shall
          indemnify,  defend, and hold harmless Seller against any loss, expense
          (including  reasonable cost of investigation and legal fees), or other
          damage  resulting  from  (i)  any  breach  by  Buyer  of  any  of  its
          warranties,  representations or agreements  contained herein, (ii) any
          failure by Buyer to perform any  covenant,  undertaking  or obligation
          hereunder,  or (iii) any action or claim brought or asserted, by third
          parties  against  Seller which relates to the Assets or the conduct of
          the Business  Unit by Buyer after the Closing  Date; to the extent any
          such claim or claims exceed in the aggregate $50,000.

               (c) If any action or claim  shall be brough or  asserted  against
          Seller or any  successor in respect of which  indemnity  may be sought
          from Buyer  pursuant to paragraph  10.2(b) of this Article 10.  Seller
          shall timely notify Buyer and Buyer shall assume the defense  thereof,
          including the employment of counsel reasonably satisfactory to Seller,
          and the payment of all expenses. Seller shall have the right to employ
          separate  counsel in any such  action and  participate  in the defense
          thereof,  but the fee and  expenses  of such  counsel  shall be at the
          expense of Seller  unless (i) the  employment  thereof shall have been
          specifically  directed by Buyer,  or (ii) Buyer shall have elected not
          to assume the  defense  and employ  counsel.  For the  purpose of this
          section,  notice  given within  thirty (30) days after the  occurrence
          giving  rise to the right of  indemnification  shall be  "timely"  but
          notice  given later than such  thirty (30) days shall not  terminate a
          party's  right to  indemnification  unless  the party  receiving  such
          notice can demonstrate that its rights have been adversely affected


                                       16

<PAGE>



         in a material fashion by such allegedly untimely notice.

ARTICLE 11

     11.1  Covenants  and  Agreements  Pertaining  to the Period  Subsequent  to
           ---------------------------------------------------------------------
           Closing.
           -------

               (a) After the Closing:

                         (i) Seller shall indemnify Buyer from, and use its best
                    efforts to promptly  discharge or cause to be  discharged as
                    they become due, all debts,  obligations  and liabilities of
                    Seller other than the Assumed Liabilities

                         (ii) Buyer shall  indemnify  Seller from,  and promptly
                    discharge, or cause to be discharged as they become due, the
                    Assumed Liabilities and those liabilities arising out of the
                    conduct  of the  Business  Unit by Buyer  after the  Closing
                    Date.

               (b) Upon the  request of either  Buyer o Seller,  the other party
          will execute and deliver to the requesting  party all such instruments
          and documents of further  assurance or otherwise,  and will do any and
          all such acts and things as may  reasonably  be  required to carry out
          the  obligations  of  such  party  hereunder  and  to  consummate  the
          transactions contemplated hereby.

               (c) Seller and its representatives  shall, upon reasonable notice
          and at reasonable  times,  have access to Seller's  records which have
          been left in the possession of Buyer for the purpose of winding up its
          affairs and filing and paying its tax obligations.

               (d) From and after the date  hereof,  the Seller and its officers
          and directors  will,  and Seller will cause its officers and directors
          to,  hold  in a  fiduciary  capacity  for the  benefit  of  Buyer  all
          confidential information, knowledge, and data relating to or



                                       17

<PAGE>



               concerned with the Business Unit and shall not divulge, and shall
          cause  such  officers  and   directors   not  to  divulge,   any  such
          confidential  information,  knowledge,  or data to any person, firm or
          corporation other than Buyer.

               (e) Buyer will not assign,  transfer or convey the Business  Unit
          to any third party  without  requiring  such third party to assume the
          obligations  of  Buyer  hereunder.   Such   assignment,   transfer  or
          conveyance  will not release or modify any of the obligations of Buyer
          under this Agreement.

               (f) Buyer will be entitled, for a period of five (5) months after
          the Closing,  to use Seller's leased  premises in Anaheim,  California
          without  additional  cost to Buyer.  Should  Buyer  continue to use or
          otherwise occupy such premises after the five (5) month period,  Buyer
          shall pay to Seller  $12,500 per month,  and pro rated for any portion
          of a month.

ARTICLE 12.

12.1     Miscellaneous.
         -------------

               (a) Any notices,  approvals or other communications  provided for
          herein to be given  hereunder by any party to another  shall be deemed
          validly  and  properly  given  or made  if in  writing  and  delivered
          personally  or sent by  overnight or certified  mail,  return  receipt
          requested, postage prepaid, as follows:

                       If to  Seller:  American  Microwave  Technology,  Inc.
                                       c/o Edgewater Private Equity Fund II, LP
                                       2 Corporate  Plaza
                                       Newport Beach,  CA 92660
                                       Attention: Robert G. Allison

                      With a copy to:  McAndrews  Allen & Matson
                                       1301 Dove Street,  Ste 1020
                                       Newport Beach, CA 92660
                                       Attention: Stephanie E. Allen, Esq.

                         If to Buyer:  Herley  Industries,  Inc.
                                       10 Industry  Drive
                                       Lancaster, Pennsylvania 17603
                                       Attention: Mr. Lee N. Blatt
                                                  Chairman of the Board

                      With a copy to: Blau,  Kramer, Wactlar, &  Lieberman, P.C.
                                      100 Jericho  Quadrangle
                                      Jericho,  New  York  11753
                                      Attention:  David  H. Lieberman, Esq.

               Either of the parties  hereto may give notice to the other at any
          time by the  methods  specified  above of a change in the  address  at
          which, or the persons to whom, notices addressed to it are to be



                                       18

<PAGE>



delivered in the future, and such notice shall be deemed to amend this paragraph
until superseded by a later notice of the same type. Any notice given by mail as
aforesaid shall be  conclusively  deemed to have been received by a party hereto
and be effective on the third  business day after the day on which mailed to the
address set forth above.

                    (a) This Agreement  shall be binding upon and shall inure to
               the benefit of the parties hereto and their respective successors
               and assigns.

                    (b)  This   Agreement   may  be  executed  in  one  or  more
               counterparts, each of which shall constitute an original hereof.

                    (c) This Agreement may be modified,  amended or supplemented
               only by mutual  written  agreement  of the  Seller and the Buyer.
               Each amendment,  modification  or supplement  shall be in writing
               signed by the party or parties to be charged.

                    (d)  This  Agreement,  the  Exhibits  hereto  and the  other
               documents delivered hereto constitute the entire agreement of the
               parties in respect of the subject  matter  hereof and  supersedes
               all prior  statements or agreements  among the parties in respect
               of such subject matter.

                    (e)  Article   headings  used  in  this  Agreement  are  for
               convenience  only and shall not affect the  construction  of this
               Agreement.

                    (f) Whenever in this  Agreement it is provided  that a party
               hereto  shall  deliver an agreement  or other  instrument  to the
               other of them,  such  agreement  or  instrument  shall be in form
               reasonably  satisfactory  to counsel  for the party to  which-the
               same is to be delivered.

                    (g) In the event of  litigation  to enforce this  Agreement,
               the  prevailing  party  shall  receive  an  award  of  reasonable
               attorney's fees and costs.

                    (h)  This  Agreement  shall  be  construed  and  interpreted
               according to the laws of the State of Delaware  without regard to
               its conflicts of laws provisions.




                         [SIGNATURES ON FOLLOWING PAGE]


                                       19

<PAGE>


         IN WITNESS  WHEREOF,  Seller and Buyer have caused this Agreement to be
executed  by their duly  authorized  officers  and their  corporate  seals to be
affixed and attested by their  respective  Secretaries  as of the day, month and
year first above written.

                                            AMERICAN MICROWAVE TECHNOLOGY, INC.


                                            By:    /s/ James P. Burra
                                                 --------------------
                                                  James P. Burra
                                                  Interim Chairman of the Board



                                            HERLEY INDUSTRIES, INC.

                                            By: /s/ Myron Levy
                                                ---------------------
                                                Myron Levy, President



                                       20

</TEXT>
</DOCUMENT>
