AMENDMENT AGREEMENT NO. 3 TO SECOND AMENDED
                         AND RESTATED CREDIT AGREEMENT

         This AMENDMENT  AGREEMENT NO. 3 (this  "Amendment"),  dated as of March
29, 1996, by and among SIGNAL  TECHNOLOGY  CORPORATION,  a Delaware  corporation
("STC"),  those  Subsidiaries  of STC that are  parties to the Credit  Agreement
referred to below (together with STC, the  "Companies"),  and The First National
Bank of  Boston,  a  national  banking  association  (the  "Bank"),  amends  the
Second Amended  and Restated Credit Agreement dated as of September 30, 1993, as
the same may be  amended,  modified,  or  supplemented  from  time to time  (the
"Credit Agreement"),  by and among the Companies and the Bank. Capitalized terms
used but not defined  herein shall have the meanings set forth for such terms in
the Credit Agreement.

         WHEREAS,  the Companies  have  requested that the Bank agree to certain
amendments  to the Credit  Agreement,  including,  without  limitation,  certain
changes to the financial covenants; and

         WHEREAS,  subject  to the terms  and  provisions  hereof,  the Bank has
agreed to so amend the Credit Agreement;

         NOW THEREFORE, the parties hereto hereby agree as follows:


         ss. 1. Amendment to Credit  Agreement.  Subject to the  satisfaction of
the  conditions  precedent  set forth in ss. 3 hereof,  the Credit  Agreement is
hereby amended as follows:

         ss. 1.1. Interest on Revolving Credit Loans. The text of Section 2.8 of
the Credit  Agreement is hereby amended,  effective as of April 1, 1996, to read
as follows:

                  "(a) Except as provided in ss. 5.1 hereof, each Base Rate Loan
         shall bear  interest  at the rate per annum equal to the Base Rate plus
         0.50% per annum.

                  (b) Except as provided in ss. 5.1 hereof, each Eurodollar Rate
         Loan shall bear  interest for the period  commencing  with the Drawdown
         Date  thereof  and  ending  on the  last  day of  the  Interest  Period
         applicable  thereto at the rate per annum equal to the Eurodollar  Rate
         determined for such Interest Period plus 2.25% per annum.

                  (c) The Companies hereby jointly and severally  promise to pay
         the interest on each Revolving  Credit Loan in arrears on each Interest
         Payment Date with respect  thereto and at the stated or any accelerated
         maturity of the Revolving Credit Loans."

         ss. 1.2. Investments. Section 12.2(e) of the Credit Agreement is hereby
amended by  deleting  the phrase  "with  respect to each  transaction  shall not
exceed  $4,000,000  (exclusive of any Indebtedness of the acquired Person)" from
the final two lines of Section 12.2(e), and
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inserting  in  place  of such  deleted  language,  and  immediately  before  the
semi-colon  at the end of ss.  12.2(e),  the phrase "is  permitted  by the final
sentence of ss. 12.6 hereof".

         ss. 1.3.  Mergers and  Acquisitions,  Etc.  Section  12.6 of the Credit
Agreement is hereby  amended by inserting the phrase "which becomes a Subsidiary
of STC at such time" immediately after the word "Person", and immediately before
the word "provided" in the sixth line of Section 12.6. In addition, Section 12.6
of the Credit Agreement is hereby amended by deleting from the final sentence of
Section  12.6 the phrase  "with  respect to each such  transaction  in excess of
$4,000,000"  and inserting in place of such deleted  language,  and  immediately
before the period at the end of ss. 12.6.  the phrase  "exceeding  $2,000,000 in
the aggregate, determined on a cumulative basis, in any fiscal year".

         ss.  1.4.  Net Worth.  The Bank  hereby  waives any Default or Event of
Default  directly  resulting  from a  violation  of  Section  12.7 of the Credit
Agreement  only as such  Section  12.7 was in  effect  immediately  prior to the
effectiveness  of this  Amendment,  and then only  with  respect  to the  fiscal
quarter  ended December 31, 1995. Section 12.7 of the Credit Agreement is hereby
amended  by  deleting  the table set forth  therein  and  replacing  it with the
following table:

                                        Period                      Amount
                                        ------                      ------
                 December 31, 1995 through June 29, 1996          $28,500,000
                 June 30, 1996 through December 30, 1996          $29,200,000
                 December 31, 1996 through December 30, 1997      $29,500,000
                 December 31, 1997 through April 1, 1998          $30,500,000

         ss. 1.5. Interest Coverage. The Bank hereby waives any Default or Event
of Default  directly  resulting  from a violation  of Section 12.8 of the Credit
Agreement  only as such  Section  12.8 was in  effect  immediately  prior to the
effectiveness of this Amendment, and then only with respect to the fiscal period
ending  December 31, 1995.  The text of Section 12.8 of the Credit  Agreement is
hereby amended to read as follows:

                  "Permit the ratio of (a) Consolidated  Net Earnings  Available
                  for Interest Charges for any period of four consecutive fiscal
                  quarters  (a  "Rolling  Period")  to  (b)  aggregate  Interest
                  Charges for such Rolling  Period,  to be less than (a) 2 to 1,
                  for  the Rolling Period ended December 31, 1995, (b) 2.5 to 1,
                  for the  Rolling  Period ending March 31, 1996, or (c) 3 to 1,
                  for any Rolling Period ending after March 31, 1996."

         ss. 2.  Representations and Warranties.  The Companies hereby represent
and warrant to the Bank as follows:

         (a)      Representations and Warranties in Credit  Agreement. Except as
                  specified in writing by the Companies to the Bank with respect
                  to the subject matter of this Amendment prior to the execution
                  and  delivery  hereof  by the  Bank  and  the  Companies,  the
                  representations  and warranties of the Companies  contained in
                  the Credit  Agreement  were true and  correct in all  material
                  respects  when made and continue to be true and correct in all
                  material respects on the date hereof,

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                  except,  in each case to the extent of changes  resulting from
                  transactions  contemplated  or permitted by the Loan Documents
                  and this  Amendment,  and changes  occurring  in the  ordinary
                  course of business  which singly or in the  aggregate  are not
                  materially   adverse,    and   to   the   extent   that   such
                  representations  and warranties relate expressly to an earlier
                  date.

         (b)      Authority, No Conflicts,  Enforceability of Obligations.  Etc.
                  Each of the Companies hereby confirms that the representations
                  and  warranties of the Companies  contained in ss. 8.1 and ss.
                  8.2 of the Credit  Agreement are true and correct on and as of
                  the date hereof as if made on the date hereof,  treating  this
                  Amendment,  the Credit  Agreement as amended  hereby,  and the
                  other Loan Documents as amended  hereby,  as "Loan  Documents"
                  for  the   purposes   of  making  said   representations   and
                  warranties.

         ss. 3. Conditions to Effectiveness. The effectiveness of this Amendment
shall be subject to the  delivery  to  the Bank by (or on behalf of) each of the
Companies,  as the case may be,  contemporaneously with the execution hereof, of
the following, in form and substance satisfactory to the Bank:

         (a)  this Amendment signed by each of the Companies and the Bank; and

         (b)  any  other   confirmatory  or  corporate   authority  document  or
              instrument the Bank may reasonably request.

         ss. 4. Miscellaneous Provisions. Except as otherwise expressly provided
by this  Amendment,  all of the terms,  conditions  and provisions of the Credit
Agreement  and the other Loan  Documents  shall remain in full force and effect.
Each of the Companies confirms and agrees that the joint and several Obligations
of the Companies to the Bank, as amended and supplemented  hereby,  are entitled
to the benefits of the Loan Documents. The parties hereto hereby acknowledge and
agree that all references to the Credit Agreement and the Obligations thereunder
contained  in any of the  Loan  Documents  shall  be  references  to the  Credit
Agreement and the Obligations, as amended hereby and as the same may be amended,
modified,  supplemented,  or restated from time to time.  This  Amendment may be
executed in any number of counterparts, but all such counterparts shall together
constitute but one instrument. In making proof of this Amendment it shall not be
necessary  to produce or account  for more than one  counterpart  signed by each
party hereto by and against which  enforcement  hereof is sought.  The Companies
hereby  jointly and  severally  confirm their  obligations  to pay promptly upon
request all reasonable out-of-pocket costs and expenses incurred or sustained by
the Bank in connection  with this  Amendment,  including the reasonable fees and
expenses of the Bank's Special Counsel.

         ss. 5. Governing Law. This  Amendment  shall be construed  according to
and governed by the internal laws of the Commonwealth of  Massachusetts  without
reference to principles of conflicts of law.

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        IN WITNESS WHEREOF,  the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized.

                              SIGNAL TECHNOLOGY CORPORATION,
                              ST OLEKTRON CORP., and each of the other
                              Companies that are parties to the Credit Agreement


                               By:  /s/ Dale L. Peterson
                                    ------------------------------
                               Name: Dale L. Peterson
                                    ------------------------------
                               Title: CEO
                                    ------------------------------

                               THE FIRST NATIONAL BANK OF BOSTON

                               By:  /s/ Amy B. Lyons
                                    ------------------------------
                               Name: Amy B. Lyons
                                    ------------------------------
                               Title: Vice President
                                    ------------------------------