Exhibit 10.4
                                                                  ------------


                             MODIFICATION AGREEMENT


         MODIFICATION  AGREEMENT made this 26th day of January, 1999 and between
HERLEY INDUSTRIES,  INC., a Delaware corporation (hereinafter the "Company") and
LEE N. BLATT, an individual  residing at 471 North Arrowhead Trail,  Vero Beach,
Florida 32963 (hereinafter "the Employee").

                              W I T N E S S E T H:

         WHEREAS,  the Company and Employee entered into an Employment Agreement
dated October 1, 1998 (hereinafter the "Employment Agreement"); and

         WHEREAS,  the  Company  and  Employee  desire to amend said  Employment
Agreement.

         NOW, THEREFORE, the parties agree as follows:

         1. Paragraph "5 (iii)" of the Employment Agreement is hereby deleted in
its entirety, and in its place and stead shall be the following:

                  "(iii)   Not later than one  hundred  twenty  (120) days after
                           the end of the fiscal  year of the  Company  and each
                           subsequent  fiscal year of the Company  ending during
                           the period of  employment,  the Company  shall pay to
                           Employee,  as incentive  compensation an amount equal
                           to  five  (5%)  percent  of the  Consolidated  Pretax
                           Earnings  of the  Company in excess of the  Company's
                           Minimum  Consolidated  Pretax  Earnings,  as  defined
                           below in this clause (iii).

                  For purposes hereof, the term  "Consolidated  Pretax Earnings"
         of the  Company  shall  mean,  with  respect  to any fiscal  year,  the
         consolidated income, if any, of the Company for such fiscal year as set
         forth in the audited, consolidated financial statements (the "Financial
         Statements") of the Company and its subsidiaries included in its Annual
         Report to stockholders for such fiscal year,  before deduction of taxes
         based on income or of the incentive compensation to be paid to Employee
         for such fiscal year under this Agreement.  For the purposes hereof the
         term "Minimum  Consolidated  Pretax Earnings" of the Company shall mean
         with respect to any fiscal year, the  consolidated  Pretax  Earnings of
         the Company equal to $2,000,000."

<PAGE>

         2. Paragraph "12" of the Employment  Agreement is hereby deleted in its
entirety, and in its place and stead shall be the following:

                  "12.  CHANGE OF CONTROL.  In the event there shall be a change
         in the present control of the Company as hereinafter defined, or in any
         person directly or indirectly  presently  controlling  the Company,  as
         hereinafter defined,  Employee shall have the right, exercisable within
         six  months of his  becoming  aware of such  event,  to  terminate  his
         employment.  Upon such termination,  Employee shall immediately receive
         as a lump sum payment an amount  equal to (i) three (3) times his "base
         amount",  within the meaning of Section  280G of the  Internal  Revenue
         Code of 1986,  as amended  (hereinafter  "the  Code"),  reduced by (ii)
         $100.00.

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

                  a)       a change in control as such term is presently defined
                           in Regulation 240.12b-2 under the Securities Exchange
                           Act of 1934 ("Exchange Act"); or

                  b)       if any  "person"  (as  such  term is used in  Section
                           13(d) and 14 (d) of the Exchange  Act) other than the
                           Company  or any  "person"  who on the  date  of  this
                           Agreement  is a director  or officer of the  Company,
                           becomes  the  "beneficial  owner" (as defined in Rule
                           13(d)-3   under  the  Exchange   Act),   directly  or
                           indirectly, of securities of the Company representing
                           twenty-five   (25%)  of  the  voting   power  of  the
                           Company's then outstanding securities; or

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


         3.  Paragraph  "12-A"  shall be added to the  Employment  Agreement  as
following:

                                      -2-

<PAGE>



                  "12-A.  PARACHUTES.  If all, or any  portion,  of the payments
         provided under this  Agreement,  and/or any other payments and benefits
         that  Employee  receives or is entitled  to receive  from the  Company,
         whether or not under an existing plan,  arrangement or other agreement,
         constitutes an excess "parachute payment" within the meaning of Section
         280G(b)  of  the  Code  (each  such  parachute  payment,  a  "Parachute
         Payment")  and will result in the  imposition  on Employee of an excise
         tax under  Section  4999 of the Code,  then,  in  addition to any other
         benefits  to which  Employee  is  entitled  under this  Agreement,  the
         Company  shall pay him an amount in cash equal to the sum of the excise
         taxes payable by him by reason of receiving  Parachute  Payments,  plus
         the amount necessary to put him in the same after-tax  position (taking
         into account any and all  applicable  federal,  state and local excise,
         income or other taxes at the highest possible  applicable rates on such
         Parachute  Payments,  including  without  limitation any payments under
         this Employment Agreement,  as if no excise taxes had been imposed with
         respect to Parachute Payments (the "Parachute Gross-up")."

         4. The aforesaid  Employment  Agreement in all other respects is hereby
ratified and confirmed.

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

                                                     HERLEY INDUSTRIES, INC.

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

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




                                      -3-

<PAGE>


                                             July 30, 1999


Mr. Lee N. Blatt
471 North Arrowhead Trail
Vero Beach, Fl 32963

Re:    Employment Agreement dated October 1, 1998, as modified January 26, 1999,
       between Herley Industries, Inc. and Lee N. Blatt (the "Employment
       Agreement")

Dear Mr. Blatt:

The following will set forth our mutual  agreement as to the modification of the
Employment Agreement effective June 17, 1999:

          1.   Paragrapah  5(i) is amended to  provide  for an annual  salary of
               $587,972  reflecting an increase of $100,000  annually,  plus the
               cumulative  cost of living  adjustment  through  June 30, 1999 as
               provided in Paragraph 5(ii),

          2.   Paragraph 5 (ii) of the Employment  Agreement shall be amended to
               change  the base  period  for  computation  of the cost of living
               adjustment to July 1, 1999.

          3.   You shall receive an allowance  for life  insurance in the annual
               amount of $56,000,  which shall be payable  semi-annually  by the
               Company on August 1, and February 1, as presently provided for in
               the Employment Agreement.

         In all other respects,  the Employment Agreement is hereby ratified and
confirmed.

         If you agree with all of the above,  would you please sign and return a
         coy of this  letter  whereupon  the same  shall  constitute  a  binding
         agreement between us.

                                                    HERLEY INDUSTRIES, INC.




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


         ACCEPTED AND AGREED:



         ---------------------------
         Lee N. Blatt