Exhibit 10.1
                                  AMENDMENT TO
                                 LOAN AGREEMENT


         THIS AMENDMENT TO LOAN AGREEMENT (the  "Amendment") is made and entered
into this 11th day of January,  2000, by and between HERLEY INDUSTRIES,  INC., a
Delaware   corporation,   having  offices  at  10  Industry  Drive,   Lancaster,
Pennsylvania   17603   (the   "Borrower")   and   ALLFIRST   BANK,   a  Maryland
state-chartered  commercial  bank,  successor  to The  First  National  Bank  of
Maryland, a division of FMB Bank, having offices at 1703 Oregon Pike, Lancaster,
Pennsylvania 17601 (the "Lender").

                              B A C K G R O U N D :

     A. Borrower has borrowed from Lender and desires to continue to borrow from
Lender in  connection  with the operation of its  business(es).  On February 16,
1999, the parties entered into a Loan Agreement relative to a Revolving Loan and
a Mortgage  Loan (the  "Agreement").  The  Agreement is  incorporated  herein by
reference  and made a part hereof.  All  capitalized  terms used herein  without
definition  which are defined in the Agreement shall have the meanings set forth
therein.

     B. The parties desire to amend the Agreement.

     C. Borrower has no defense,  charge,  defalcation,  claim,  plea, demand or
set-off against the Agreement or any of the Loan Documents.

         NOW, THEREFORE, for valuable consideration,  receipt of which is hereby
acknowledged,  and  intending to be legally  bound  hereby,  the parties  hereto
covenant and agree as follows:

         1.       That the above Background is incorporated herein by reference.

         2. That  Section 1.1 of the  Agreement is amended to extend the current
Revolving  Loan  Maturity Date from January 31, 2001, to January 31, 2002 and to
increase  the stated  principal  amount of the  Revolving  Loan Note from Twenty
Million Dollars ($20,000,000) to Thirty Million Dollars ($30,000,000).

         3. That Section 2.2 of the Agreement is amended to increase the maximum
Outstanding  Revolving Loan Amount from Twenty Million Dollars  ($20,000,000) to
Thirty Million Dollars ($30,000,000).

         4. That  Section  2.2.3 of the  Agreement  is amended  to provide  that
Borrower  shall  now  have the  option,  exercisable  at any  time  prior to the
Revolving  Loan Maturity  Date, to convert all or any part of the Revolving Loan
to a term loan(s) payable in not more than sixty (60) consecutive  equal monthly
principal  payments  plus  accrued  interest.  Any such  term  loan(s)  shall be
evidenced by a promissory note of the Borrower in form and content  satisfactory
to Lender, which will supplement but not supersede or replace the Revolving Loan
Note.



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         5. That  Section  2.5 of the  Agreement  is  amended  to  provide  that
interest will accrue on the outstanding  principal balance of the Revolving Loan
at a rate per annum equal to the Federal Funds Target Rate as established by the
Federal Open Market  Committee of the Federal  Reserve Board,  as in effect from
time to time plus the following  increments based on the Borrower's Tangible Net
Worth  as  reported  (GAAP  defined)  quarterly  on its  10Q  or  10K  financial
statements.   The  interest  rate  shall  change   effective   with  the  Bank's
implementation  or  changes  in  the  Federal  Funds  Target  Rate  as  publicly
announced.

                  Tangible Net Worth                            Increment

                  Greater than $25,000,000                      1.65%

                  Less than or equal to $25,000,000             1.80%

The interest rate will revert  (prospectively)  automatically to the appropriate
rate should  Borrower's  Tangible Net Worth  subsequently  change from the level
which prompted the adjustment.

        6. That Section 2.7 of the Agreement is amended to add a subsection  (d)
to read in its entirety as follows:

                           (d)  The  Borrower   agrees  to  pay  to  the  Lender
                  quarterly  in  arrears,  on the last day of each  quarter,  an
                  availability  fee  calculated  at 15 basis points per annum on
                  the average daily unused portion of the Revolving Loan between
                  $20,000,000 and $30,000,000 during that quarter.

         7. That Section 5.9 of the Credit  Agreement is amended to provide that
the Revolving Loan will be subject to review and, at Bank's option, modification
by Bank in the event of any  change(s) in executive  management  or a sale(s) of
Borrower.

         8. That  Section  6.11 of the  Agreement  is amended  to  provide  that
Borrower will not permit the Tangible Net Worth of Borrower,  on a  consolidated
basis,  to be less  than  $18,000,000  at any time  until  FYE 2000 or less than
$22,000,000 at any time from FYE 2000 until FYE 2001 or less than $25,000,000 at
any time from FYE 2001 and  thereafter  while any Loan remains  outstanding  and
unpaid or any other amount is owing under any Loan Document to Lender.

         9. That  Section  6.12 of the  Agreement  is amended  to  provide  that
Borrower shall maintain a maximum  Debt-to-Tangible Net Worth Ratio of 2.50-to-1
until FYE 2000 and 2.25-to-1 from FYE 2000 until FYE 2001 and 1.70-to-1 from FYE
2001 and thereafter  while any Loan remains  outstanding and unpaid or any other
amount is owing under any Loan Document to Lender.

        10.  That the  Agreement  is amended  to add a  Section  6.14 to read in
its entirety as follows:


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                  6.14     Treasury Stock Repurchases.
                           --------------------------

                           Execute  treasury  stock  repurchases,   except  that
                  Borrower  may execute  treasury  stock  repurchases  in annual
                  amounts not in excess of 50% of net income  provided that such
                  repurchase(s)   does  not  trigger  any   financial   covenant
                  default(s).

         11. That the Borrower  reaffirms and restates the  representations  and
warranties  set  forth in  Article  VII of the  Agreement,  as  amended  by this
Amendment, and all such representations and warranties shall be true and correct
on the date  hereof  with the same  force and  effect  as if made on such  date,
except  as they may  specifically  refer to an  earlier  date(s).  The  Borrower
represents and warrants (which  representations and warranties shall survive the
execution  and delivery  hereof) to the Lender that (i) this  Amendment has been
duly  authorized,  executed and  delivered  and  constitute  a legal,  valid and
binding  obligation of the Borrower,  and is enforceable in accordance  with its
terms;  (ii) the  Borrower is not in default  under the  Agreement or any of the
other Loan  Documents,  and the Borrower is in full  compliance  with all of the
terms and conditions  thereof;  (iii) no event exists,  or is likely to exist in
the future,  which with the passage of time,  notice, or both, will constitute a
default under the Agreement or any of the other Loan  Documents;  and (iv) there
have been no material  adverse changes in the Borrower's  finances or operations
which  would  cause the  Borrower  to be in default  under any of the  financial
covenants contained in the Loan Documents.

         12. That the terms and conditions,  paragraph sections,  collateral and
guaranty requirements,  representations and warranties of the Agreement and Loan
Documents,  together with all  understandings by and between the parties to this
Amendment  evidenced by writings of the same or subsequent  date not in conflict
with the above modifications under this Amendment shall remain in full force and
effect as the  agreement  of the parties  relative to the Loans,  and are hereby
ratified, reaffirmed and confirmed.

         13. That all references to the Agreement,  the Loan Documents,  and the
other  documents  and  instruments   delivered  pursuant  to  or  in  connection
therewith, as well as in writings of the same or subsequent date, shall mean the
Agreement as amended hereby and as each may in the future be amended,  restated,
supplemented  or modified from time to time.  Similarly,  all  references to The
First National Bank of Maryland, a division of FMB Bank, shall be deemed to have
been made and to refer to Allfirst Bank, successor to The First National Bank of
Maryland, a division of FMB Bank.

         14. That the parties  hereto shall,  at any time, and from time to time
following the execution of this Amendment,  execute and deliver all such further
instruments  and take all such further action as may be reasonably  necessary or
appropriate in order to carry out the provisions of this Amendment.


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<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers all as of the day and year
first above written.

ATTEST:                                HERLEY INDUSTRIES, INC., a Delaware
                                       corporation



______________________________         By:________________________________

Title:________________________         Title:_____________________________



______________________________         By:________________________________

Title:________________________         Title:_____________________________



                                       ALLFIRST BANK, successor to The First
                                       National Bank of Maryland, a Division
                                       of FMB Bank


                                       By:________________________________

                                       Title:_____________________________


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