Exhibit 10.5
                                                                   ------------

                             MODIFICATION AGREEMENT


         MODIFICATION  AGREEMENT made this 26th day of January, 1999 and between
HERLEY INDUSTRIES,  INC., a Delaware corporation (hereinafter the "Company") and
MYRON  LEVY,  an  individual  residing  at  147  Deer  Ford  Drive,   Lancaster,
Pennsylvania 17603 (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  four  year and  three  month  period  of
          employment,   the  Company   shall  pay  to  Employee,   as  incentive
          compensation an amount equal to four (4%) percent of the  Consolidated
          Pretax  Earnings  of the  Company in excess of the  Company's  Minimum
          Consolidated  Pretax Earnings,  as defined below. 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 as defined below in this clause
          (iii).

                   For 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/ Lee N. Blatt
                                                        ----------------------
                                                        Lee N. Blatt, Chairman

                                                           /s/ Myron Levy
                                                        ----------------------
                                                         Myron Levy, Employee





                                      -3-

<PAGE>



                                  July 30, 1999




Mr. Myron Levy
807 Bent Creek Drive
Lititz, Pennsylvania 17543

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

Dear Mr. Levy:

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

          1.   Paragraph  5(i) is  amended to  provide  for an annual  salary of
               $433,876  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.


          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
     copy of this letter whereupon the same shall constitute a binding agreement
     between us.

                                                  HERLEY INDUSTRIES, INC.




                                                  By:   /s/ Lee N. Blatt
                                                      -----------------------
                                                        Lee N. Blatt
                                                        Chairman of the Board


         ACCEPTED AND AGREED:


         ---------------------------
         Myron Levy