AMENDMENT AGREEMENT NO. 5 TO SECOND AMENDED
                          AND RESTATED CREDIT AGREEMENT


        This AMENDMENT AGREEMENT NO. 5 (this "Amendment"),  dated as of December
15, 1997, by and among SIGNAL  TECHNOLOGY  CORPORATION,  a Delaware  corporation
("STC"),   SIGNAL  TECHNOLOGY  SALES  CORP.,  a  United  States  Virgin  Islands
corporation  ("Sales" and, together with STC, the "Companies"),  and BankBoston,
N.A., a national banking  association  formerly known as The First National Bank
of Boston (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; and

        WHEREAS, subject to the terms and provisions hereof, the Bank is willing
to so amend the Credit Agreement;

        NOW, THEREFORE, the parties hereto hereby agree as follows:

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

               1.1     Amendments to Certain Definitions.

               (a) The following defined terms are hereby deleted from Section 1
of the Credit  Agreement:  (i) "Arizona  Term Loan",  (ii) "Fixed  Rate",  (iii)
"Fixed Rate Amount", (iv) "Fixed Rate Prepayment Penalty", and (v) "Florida Term
Loan".

               (b) The  definition  of the term  "Base  Rate  Loans"  is  hereby
amended by deleting therefrom the words "Revolving Credit".

               (c) The  definition of the term  "Companies" is hereby amended to
refer to "Signal  Technology  Corporation,  a Delaware  corporation,  and Signal
Technology Sales Corp., a United States Virgin Islands Corporation".

               (d) The defined term  "Consolidated  Net Earnings  Available  for
Interest   Charges"  is  hereby   deleted  and  the  following  is  inserted  in
substitution therefor:

               "Consolidated  Net Earnings  Available for Debt Service - for any
          period, (a) Consolidated Net Income


<PAGE>
                                      -2-


          for such  period,  plus (b)  interest  paid or  accrued by STC and its
          Subsidiaries   with  respect  to  all  Indebtedness  for  such  period
          (excluding  any  interest  taken into  account in the  computation  of
          Consolidated  Net  Earnings  Available  for Debt  Service in any prior
          period),  plus (c) all taxes for such  period  which are imposed on or
          measured  by income  after  deduction  of Interest  Changes,  plus (d)
          depreciation and amortization  (determined with respect to STC and its
          Subsidiaries  on a  consolidated  basis in accordance  with  generally
          accepted  accounting  principles),  minus  (e) the sum of (i)  Capital
          Expenditures  and (ii) federal and state income taxes actually paid in
          cash during such period."

Each reference in the Credit Agreement to "Consolidated  Net Earnings  Available
for Interest  Charges" is hereby amended to refer to "Consolidated  Net Earnings
Available for Debt Service".

               (e) The following new defined term is hereby  inserted in Section
1 of the Credit Agreement,  immediately following the defined term "Consolidated
Tangible Net Worth":

               "Debt Service - for any period,  the sum of (i) Interest  Charges
          for such  period,  plus (iii) the  aggregate  amount of all  principal
          payments  made,  accrued or becoming due during such period in respect
          of the Real Estate Term Loans."

               (f) The definition of the term "Drawdown  Date" is hereby amended
to read in its entirety as follows:

               "Drawdown  Date - the date on which  any Loan is made or is to be
          made,  and the date on which any Loan is  converted  or  converted  or
          continued in accordance with ss.2.9 or ss.3.4."

               (g) The  definition  of the  term  "Eurodollar  Rate"  is  hereby
amended  by  inserting  the phrase "or Term Loan  Interest  Period"  immediately
following  the term  "Interest  Period" in each place that such term  appears in
said definition.

               (h) The definition of the term  "Eurodollar Rate Loans" is hereby
amended by deleting therefrom the words "Revolving Credit".

               (i) The definitions of the terms "FNBB" and "the Bank" are hereby
amended to refer to "BankBoston,  N.A., a national banking association  formerly
known as The First National Bank of Boston".

               (j) The definition of the term "Interest Payment Date"  is hereby
amended  by  inserting  the phrase "or Term Loan  Interest  Period"  immediately
following  the term  "Interest  Period" in each place that such term  appears in
said definition.


<PAGE>
                                       -3-


               (k) The following new defined term is hereby  inserted in Section
1 of the Credit Agreement, immediately following the term "Proprietary Rights":

               "Real Estate Term Loan Maturity Date - January 31, 2003".

               (1) The definition of the term "Real Estate Term Loans" is hereby
amended to read "see ss.3.1".

               (m) The following new defined term is hereby  inserted in Section
1 of the Credit Agreement, immediately following the defined term "Subsidiary":

               "Term Loan  Interest  Period - with respect to any portion of the
          Real Estate Term Loans,  (a) initially,  the period  commencing on the
          Drawdown Date of such portion of the Real Estate Term Loans and ending
          on the last day of one of the periods set forth below,  as selected by
          the  Companies  when  borrowing  such  portion of the Real Estate Term
          Loans:  (i) for any Base Rate Loan, the applicable  calendar  quarter;
          and (ii) for any  Eurodollar  Rate  Loan,  1, 2 or 3  months;  and (b)
          thereafter,  each  period  commencing  on the  last  day  of the  next
          preceding  Interest  Period  applicable  to such  portion  of the Real
          Estate Term Loans and ending on the last day of one of the periods set
          forth  above,   as  selected  by  the  Companies  when  converting  or
          continuing  the Type of such  portion of the Real  Estate  Term Loans;
          provided  that all of the foregoing  provisions  relating to Term Loan
          Interest Periods are subject to the following:

                   (A) if any  Term  Loan  Interest  Period  with  respect  to a
          Eurodollar  Rate  Loan  would  otherwise  end on a day  that  is not a
          Eurodollar  Business  Day,  that Term Loan  Interest  Period  shall be
          extended to the next  succeeding  Eurodollar  Business  Day unless the
          result of such  extension  would be to carry  such Term Loan  Interest
          Period  into  another  calendar  month,  in which event such Term Loan
          Interest  Period  shall end on the  immediately  preceding  Eurodollar
          Business Day;

                   (B) if any Term Loan  Interest  Period with respect to a Base
          Rate Loan  would end on a day that is not a  Business  Day,  that Term
          Loan Interest Period shall end on the next succeeding Business Day;

                   (C) if the Companies shall fail to give notice as provided in
          ss.3.4,  the Companies  shall be deemed to have requested a conversion
          of the affected  Eurodollar  Rate Loan to a Base Rate Loan on the last
          day of the  then  current  Term  Loan  Interest  Period  with  respect
          thereto;


<PAGE>
                                      -4-

                   (D) any Term Loan  Interest  Period  that  begins on the last
          Eurodollar  Business  Day of a  calendar  month (or on a day for which
          there is no numerically corresponding day in the calendar month at the
          end of  such  Term  Loan  Interest  Period)  shall  end  on  the  last
          Eurodollar Business Day of a calendar month; and

                   (E) any Term Loan Interest  Period relating to any Eurodollar
          Rate Loan that would otherwise extend beyond the Real Estate Term Loan
          Maturity Date shall end on the Real Estate Term Loan Maturity Date."

               (n) The  definition of the term "Type" is hereby  amended to read
in its entirety as follows:

               "Type - as to any Loan or  portion  thereof  its nature as a Base
          Rate Loan or a Eurodollar Rate Loan."

               1.2  Amendment  of Section  2.8.  Sections  2.8(a) and (b) of the
Credit Agreement are hereby amended to read in their entirety as follows:

               "(a) Except as provided in ss.5.1 hereof,  each Revolving  Credit
          Loan that is a Base  Rate Loan  shall  bear  interest  at the rate per
          annum equal to the Base Rate.

               (b) Except as provided in ss.5.1 hereof,  each  Revolving  Credit
          Loan that is a 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  with  respect  thereto at the rate per annum
          equal to the Eurodollar  Rate determined for such Interest Period plus
          1.75% per annum."

               1.3 Amendment of Section 3. Section 3 of the Credit  Agreement is
hereby amended to read in its entirety as follows:

          "3. THE REAL ESTATE TERM LOANS.

               ss.3.1   Making  of  the  Loans.   The  Companies  and  the  Bank
          acknowledge  and agree that the Bank (a) on March 31,  1993,  advanced
          funds to the  Companies on a joint and several  basis for the purposes
          of funding the  acquisition  of the Arizona  Real  Estate,  and (b) on
          April 14, 1992 advanced  funds to the Companies on a joint and several
          basis for the  purpose of funding the  acquisition  of the Fort Walton
          Real  Estate.  The Bank  agrees to make an  additional  advance to the
          Companies,  on a joint and several basis,  on December 15, 1997, in an
          amount equal to the sum of (i)  $6,000,000,  minus (ii) the  aggregate
          outstanding  principal  amount  of  the  advances  referred  to in the
          immediately  preceding  sentence  (such  previous  advances  and  such
          additional


<PAGE>
                                       -5-

          advances are herein collectively  referred to as the "Real Estate Term
          Loans"). The  proceeds of such additional advance shall be used solely
          to (i) repay Revolving  Credit Loans that were incurred to finance the
          acquisition of the Companies'  facility in Beverly,  Massachusetts and
          (ii) pay costs and expenses  incurred by the  Companies in  connection
          with such  acquisition  and the  amendment  of the Loan  Documents  to
          reflect such additional advance.

               ss.3.2 Repayment of Real Estate Term Loans. The Companies jointly
          and severally and irrevocably and unconditionally  promise to repay to
          the Bank the Real  Estate  Term  Loans in  twenty-two  (22)  remaining
          installments  due  and  payable  on the  first  Business  Day of  each
          January,  April, July and October of each year,  commencing January 1,
          1998,  and with the  final  installment  due and  payable  on the Real
          Estate Term Loan Maturity Date; each of the first twenty-one (21) such
          installments  shall be in an  amount  equal to  $100,000  and the last
          installment  shall  be in an  aggregate  amount  equal  to the  unpaid
          balance of the Real Estate Term Loans.

               ss.3.3 Interest on Real Estate Term Loans.

                   (a) Unless and until  converted to a different  Type pursuant
          to ss.3.4, the Real Estate Term Loans shall be Base Rate Loans.

                   (b) Except as provided in ss.5.1  hereof,  any portion of the
          Real Estate Term Loans that is a Base Rate Loan shall bear interest at
          the Base Rate.

                   (c) Except as provided in ss.5.1  hereof,  any portion of the
          Real  Estate  Term  Loans  that is a  Eurodollar  Rate Loan shall bear
          interest  for each  Term Loan  Interest  Period at the rate of one and
          three-quarters  percent  (1.75%) per annum above the  Eurodollar  Rate
          determined for each such Term Loan Interest Period.

                   (d)  The  Companies  jointly  and  severally  promise  to pay
          interest  on each Real  Estate  Term Loan in arrears on each  Interest
          Payment Date with respect thereto and at the stated or any accelerated
          maturity of the Real Estate Term Loans.

               ss.3.4 Conversion Options.

                   (a) The  Companies may elect from time to time to convert any
          portion of the outstanding  Real Estate Term Loans to Real Estate Term
          Loans of  another  Type,  provided  that (i) with  respect to any such
          conversion of a Eurodollar Rate Loan into Real Estate


<PAGE>
                                       -6-

          Term Loans of another Type, such conversion  shall only be made on the
          last day of the Term Loan Interest Period with respect  thereto;  (ii)
          with  respect  to  any  such  conversion  of a  Base  Rate  Loan  to a
          Eurodollar Rate Loan, the Companies shall give the Bank at least three
          (3)  Eurodollar  Business Days' prior written notice of such election;
          and (iii) no Loan may be converted  into a  Eurodollar  Rate Loan when
          any Default or Event of Default has occurred and is continuing. All or
          any part of  outstanding  Real  Estate  Term  Loans of any Type may be
          converted as provided herein,  provided that partial conversions shall
          be in an aggregate  principal  amount of $500,000 or a larger integral
          multiple of $100,000.  Each request  relating to the conversion of any
          portion of the Revolving  Credit Loans to a Eurodollar Rate Loan shall
          be irrevocable by the Companies.

                   (b) Real  Estate Term Loans of any Type may be  continued  as
          such upon the  expiration of a Term Loan Interest  Period with respect
          thereto by  compliance  by the  Companies  with the notice  provisions
          contained in ss.3.4(a);  provided that no Eurodollar  Rate Loan may be
          continued  as such when any Default or Event of Default  has  occurred
          and is continuing, but shall be automatically converted to a Base Rate
          Loan on the last day of the first Term Loan Interest  Period  relating
          thereto  ending  during  the  continuance  of any  Default or Event of
          Default of which the  officers of the Bank active upon the  Companies'
          account have actual knowledge.

                   (c) Any conversion to or from Real Estate Term Loans that are
          Eurodollar Rate Loans shall be in such amounts and be made pursuant to
          such  elections so that,  after giving effect  thereto,  the aggregate
          principal amount of all Eurodollar Rate Loans having the same Interest
          Period shall not be less than $500,000 or a larger  integral  multiple
          of $100,000 in excess thereof.

               ss.3.5  Prepayment.  Subject to the  provisions  of ss.5.13,  the
          Companies  shall have the right at any time to prepay the Real  Estate
          Term Loans as a whole or in part, with accrued interest to the date of
          prepayment  on  the  amount   prepaid;   provided  that  each  partial
          prepayment  thereof shall be in the aggregate  amount of $50,000 or an
          integral multiple thereof.  The Companies shall give the Bank at least
          three (3) Business  Days' prior  written  notice of any such  proposed
          prepayment   pursuant  to  this  ss.3.5  of  Eurodollar   Rate  Loans,
          specifying  the proposed  date of such  prepayment  and the  principal
          amount to be prepaid.  Each partial prepayment shall be applied to the
          then last maturing installment or installments of principal in inverse


<PAGE>

                                       -7-

          order of their  maturity.  Whenever any interest on, and any principal
          of the Real Estate Term Loans are paid simultaneously  hereunder,  the
          whole  amount  paid shall be applied  first to  interest  accrued  and
          unpaid on the Real Estate Term Loan and then to principal."

               1.4 Amendment of Section 5.1. Section 5.1 of the Credit Agreement
is hereby  amended by  deleting  therefrom  the phrase "or, in the case of Fixed
Rate Amounts, two percent (2%) above the applicable Fixed Rate,".

               1.5 Amendment of Section 5.2. Section 5.2 of the Credit Agreement
is hereby  amended by  inserting  the phrase  "or "Term Loan  Interest  Period""
immediately  following  the term  "Interest  Period"  in the sixth  line of said
Section 5.2.

               1.6 Deletion of Sections 5.7 and 5.8. Sections 5.7 and 5.8 of the
Credit  Agreement  are hereby  deleted in their  entirety  and the  following is
hereby inserted in substitution therefor:

               "ss.5.7 [INTENTIONALLY DELETED].

               ss.5.8 [INTENTIONALLY DELETED]".

               1.7 Amendment of Section 5.9. Section 5.9 of the Credit Agreement
is hereby amended by deleting therefrom the phrase "any Fixed Rate Amounts",  in
each place such phrase appears in said Section 5.9.

               1.8  Amendment  of  Section  5.11.  Section  5.11  of the  Credit
Agreement is hereby  amended by inserting  the phrase "or any Term Loan Interest
Period"  immediately  following the phrase "Interest  Period" in each place such
phrase appears in said Section 5.11.

               1.9  Amendment  of  Section  5.12.  Section  5.12  of the  Credit
Agreement is hereby amended by (a) deleting the term "Revolving  Credit" in each
place such phrase appears in said Section 5.12, and (b) inserting the phrase "or
any Term Loan Interest Period" immediately  following the term "Interest Period"
in the eighth line of said Section 5.12.

               1.10  Amendment  of  Section  5.13.  Section  5.13 of the  Credit
Agreement is hereby amended by (a) inserting the phrase "or ss.3.4"  immediately
following  the  term  "ss.2.9"  in  clause  (a) of said  Section  5.13,  and (b)
inserting the phrase "or any Term Loan Interest  Period"  immediately  following
the term "Interest Period" in clause (c) of said Section 5.13.

               1.11  Amendment  of  Section  12.7.  Section  12.7 of the  Credit
Agreement is hereby amended to read in its entirety as follows:


<PAGE>

                                      -8-

               "ss.12.7 Net Worth. Permit at any time Consolidated  Tangible Net
          Worth to be less than the amount equal to the sum of $32,000,000 plus,
          on a cumulative basis, 50% of positive Consolidated Net Income for the
          fiscal quarter ending December 31, 1997 and each fiscal quarter ending
          thereafter."

               1.12  Amendment  of  Section  12.8.  Section  12.8 of the  Credit
Agreement is hereby deleted and the following is hereby inserted in substitution
therefor:

               "ss.12.8  Debt  Service   Coverage.   Permit  the  ratio  of  (a)
          Consolidated  Net Earnings  Available  for Debt Service for any fiscal
          quarter to (b) aggregate Debt Service for such fiscal  quarter,  to be
          less than 3 to 1."

               1.13 Amendment of Section 23. Subsection (b) of Section 23 of the
Credit Agreement is hereby amended to read in its entirety as follows:

               "(b) if to the  Bank, at 100 Federal  Street,  01-07-07,  Boston,
          Massachusetts  02110,  Attn:  Carlton F. Williams,  Director,  or such
          other  address  for notice as the Bank shall  have last  furnished  in
          writing to the Person  giving such  notice;  with a copy to William A.
          Levine,  Esq.,  Sullivan &  Worcester  LLP,  One Post  Office  Square,
          Boston, Massachusetts 02109."

        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  continued  to be true and  correct  in all  material  respects  on the date
hereof,   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 Sections 8.1 and 8.3 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


<PAGE>

                                      -9-

Documents" for the purposes of making said representations and warranties.

          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;

               (b) an interest  rate swap  agreement  with the Bank covering the
entire  outstanding  principal  balance of the Real Estate Loans  (after  giving
effect to additional  advances  contemplated by this Amendment) having terms and
conditions acceptable to the Bank;

               (c) a legal opinion  letter from the Companies'  outside  counsel
with respect to the organization,  continued existence, good standing, corporate
power and corporate authorization of STC and as to the due execution,  delivery,
legality,  validity, binding effect and enforceability of this Amendment and the
Credit Agreement as amended hereby;

               (d) payment of an amendment fee of $40,000; and

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

          4. Title Insurance  Endorsements and Good Standing  Certificates.  Not
later than by January 9, 1998,  the Companies  shall:  (a) execute,  deliver and
cause  to be  recorded  amendments  to  each  of the  Mortgages  (the  "Mortgage
Amendments"),  dated as of the date of this Amendment, which Mortgage Amendments
shall  provide,  among  other  things,  that (i) the Credit  Agreement  has been
amended through and including this Amendment and (ii) the obligations  under the
Credit Agreement (as amended) that are secured by the Mortgages shall be limited
to the  Secured  Obligations,  and which  Mortgage  Amendments  shall be in form
satisfactory  to the Bank in its sole  discretion  and shall be  prepared by the
Bank at the  Companies'  expense;  (b) deliver to the Bank  endorsements  to the
existing  title  insurance  policies  issued  to the Bank  with  respect  to the
Mortgages,  amending such  policies so that (i) the insured  amount of each such
policy is no less  than the  current  appraised  value of the  property  covered
thereby,  (ii) the  effective  date of each  such  policy  (as  affected  by the
endorsements)  is no earlier than the effective date of this Amendment and (iii)
the  mortgage  insured by each such policy shall be the  applicable  Mortgage as
amended by the applicable Mortgage  Amendment,  without exception for any liens,
encumbrances  or other matters  affecting title to or possession of the property
not disclosed in the existing title insurance  policies,  except for real estate
taxes not yet due and payable at the time the Mortgage Amendments are effective,
provided, however, that if the


<PAGE>

                                      -10-

endorsements  are not able to be issued  without  taking any such exception then
the Companies  shall have an additional  forty-five  (45) days (i.e. to February
23,  1998) in which to  remove  all such  exceptions  from  title  and cause the
endorsements  to be issued without any such  exceptions;  and (c) deliver to the
Bank  a  certificate  from  the  appropriate  governmental  authority  as to the
continued  existence  and good  standing  of Sales  under the laws of the United
States  Virgin  Islands.  Failure of the Companies to comply with this Section 4
shall constitute an Event of Default.

      5. Waiver of  Noncompliance  with  Interest  Coverage  Covenant.  The Bank
hereby  waives the  Companies'  noncompliance  with  Section  12.8 of the Credit
Agreement (as in effect prior to giving effect to this Amendment) for the period
ended September 30, 1997.

      6.  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 Sullivan & Worcester LLP.

      7.  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.


<PAGE>

                                      -11-


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

                                            SIGNAL TECHNOLOGY CORPORATION

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


                                            SIGNAL TECHNOLOGY SALES CORP.


                                            By:  /s/ Edward G. Rockwell
                                               --------------------------------
                                            Name:    Edward G. Rockwell
                                            Title:   Secretary


                                            BANKBOSTON, N.A.


                                            By: /s/ Carlton F. Williams
                                               --------------------------------
                                            Name    Carlton F. Williams
                                            Title:  Director