FIRST AMENDMENT
                                TO LOAN AGREEMENT

                  FIRST   AMENDMENT,   dated  as  of  September  30,  1999  (the
"Amendment"),  to the Loan Agreement referred to below, by and among (i) GENERAL
DATACOMM INDUSTRIES,  INC., a Delaware  corporation,  GENERAL DATACOMM,  INC., a
Delaware   corporation  ("GDC"),   DATACOMM  LEASING  CORPORATION,   a  Delaware
corporation,  VITAL  NETWORK  SERVICES,  L.L.C.,  a Delaware  limited  liability
company, GDC NAUGATUCK, INC., a Delaware corporation, GDC FEDERAL SYSTEMS, INC.,
a Delaware  corporation (each, a "Borrower" and collectively,  the "Borrowers"),
(ii)  FOOTHILL  CAPITAL  CORPORATION,  as a lender  ("Foothill"),  (iii)  ABLECO
FINANCE  LLC,  as a  lender  ("Ableco"),  (iv)  MADELEINE  L.L.C.,  as a  lender
("Madeleine"  and together with  Foothill and Ableco,  the  "Lenders"),  and (v)
FOOTHILL CAPITAL CORPORATION, as agent for the Lenders (the "Agent").

                  WHEREAS, the Borrowers,  the Agent and the Lenders are parties
to the  Loan  and  Security  Agreement  dated  as of May  14,  1999  (the  "Loan
Agreement"),  pursuant to which the Lenders have agreed to make certain loans to
the Borrowers secured by the Collateral (as defined in the Loan Agreement);

                  WHEREAS,  GDC has  requested  that the Agent (on behalf of the
Lenders)  release  its  lien on  certain  equipment  (the  "Subject  Equipment")
identified in the Outsource  Manufacturing  and Purchase  Agreement  dated as of
September  30,  1999  (the  "Purchase  Agreement"),  between  GDC and The  Matco
Electronics Group, Inc. (the  "Purchaser"),  pursuant to which GDC will sell the
Subject Equipment to the Purchaser;

                  WHEREAS,  the  Agent is  willing  to  release  its lien on the
Subject  Equipment,  subject to (i) the execution and delivery of this Amendment
by the  Borrowers,  and (ii) the other  terms and  conditions  set forth in this
Amendment; and

                  WHEREAS,  each  Borrower has  determined  that its  execution,
delivery and performance of this Amendment directly benefit,  and are within the
corporate purposes and in the best interests of, such Borrower;

                  NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the parties hereto hereby agree as follows:

         1.1      Definitions in Amendment.  Any capitalized term used herein
and not defined shall have the meaning assigned to it in the Loan Agreement.

         1.2      First Amendment Effective Date.  Section 1.1 of the Loan
Agreement is hereby amended by inserting, in appropriate alphabetical order, a
definition of the term "First Amendment Effective Date" to read in its entirety
as follows:

<PAGE>

                  "'First Amendment  Effective Date' means the date on which all
         of the conditions precedent to the effectiveness of the First Amendment
         to Loan  Agreement  dated as of September  30,  1999,  by and among the
         Borrowers, the Lenders and the Agent, have been fulfilled or waived."

         1.3      Disposal of Assets.  Section of 7.4 of the Loan Agreement is
hereby amended to read in its entirety as follows:

                  "Sell, lease, assign, transfer, or otherwise dispose of any of
         such Borrower's properties or assets other than, (i) sales of Inventory
         to  buyers  in the  ordinary  course  of such  Borrower's  business  as
         currently  conducted,  (ii) the sale of ARC,  or (iii)  the sale of the
         Middlebury Real Property."

         1.4.     Conditions Subsequent.  Section 3.3 of the Loan Agreement is
hereby  amended by inserting a new  paragraph  (f) at the end of such Section to
read as follows:

                  "(f) within 60 days after the First Amendment  Effective Date,
         Agent shall have  received  appraisals of the  Borrowers'  asynchronous
         transfer  mode  technology  and of Vital's  business,  from  appraisers
         acceptable to the Agent, satisfactory in form and substance to Agent."

         2.       Conditions.       The effectiveness of this Amendment is
subject to the  fulfillment,  in a manner  satisfactory to the Agent, of each of
the following  conditions  precedent (the date such  conditions are fulfilled or
waived by the Lender is  hereinafter  referred  to as the  "Amendment  Effective
Date"):

                  (a) Representations and Warranties;  No Event of Default.  The
representations  and  warranties  contained  herein,  in  Section  5 of the Loan
Agreement  and in each other Loan  Document  and  certificate  or other  writing
delivered  to the  Agent  or any  Lender  pursuant  hereto  on or  prior  to the
Amendment  Effective Date shall be correct on and as of the Amendment  Effective
Date as  though  made on and as of such  date,  except to the  extent  that such
representations  and warranties  (or any schedules  related  thereto)  expressly
relate  solely to an  earlier  date (in  which  case  such  representations  and
warranties  shall be true and correct on and as of such date); and no Default or
Event  of  Default  shall  have  occurred  and be  continuing  on the  Amendment
Effective  Date or would  result  from  this  Amendment  becoming  effective  in
accordance with its terms.

                  (b) Delivery of  Documents.  The Lender shall have received on
or before the Amendment Effective Date the following, each in form and substance
satisfactory to the Agent and, unless indicated  otherwise,  dated the Amendment
Effective Date:

                           (i)      the Agent shall have received a true and
correct copy of the Purchase  Agreement,  certified by an authorized  officer of
the Administrative Borrower; and

                           (ii)     such other agreements, instruments,
approvals, opinions and other documents as the Agent may reasonably request.

                                        2

<PAGE>

                  (c)  Proceedings.  All  proceedings  in  connection  with  the
transactions  contemplated  by  this  Amendment,  and all  documents  incidental
thereto,  shall be  satisfactory to the Agent and its special  counsel,  and the
Agent and such special counsel shall have received all such information and such
counterpart  originals  or  certified  copies  of  documents,   and  such  other
agreements,  instruments,  approvals, opinions and other documents, as the Agent
or such special counsel may reasonably request.

         5.       Representations and Warranties.  Each Borrower hereby
represents and warrants to the Agent and the Lenders as follows:

                  (a) Representations and Warranties;  No Event of Default.  The
representations and warranties herein, in Section 5 of the Loan Agreement and in
each other Loan Document and certificate or other writing delivered to the Agent
or any Lender  pursuant  hereto on or prior to the Amendment  Effective Date are
correct on and as of the  Amendment  Effective  Date as though made on and as of
such date, except to the extent that such representations and warranties (or any
schedules related thereto)  expressly relate solely to an earlier date (in which
case such  representations and warranties are true and correct on and as of such
date);  and no Default or Event of Default has occurred and is continuing on the
Effective  Date or would  result  from  this  Amendment  becoming  effective  in
accordance with its terms.

                  (b) Organization, Good Standing, Etc. Such Loan Party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization,  (ii) has all requisite power and authority to
execute,  deliver and perform  this  Amendment  and the other Loan  Documents to
which it is a party being  executed in connection  with this  Amendment,  and to
perform the Loan Agreement, as amended hereby, and (iii) is duly qualified to do
business and is in good standing in each  jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such  qualification  necessary except where the failure to be so qualified
reasonably could not be expected to have a Material Adverse Change.

                  (c)   Authorization,   Etc.   The   execution,   delivery  and
performance by such Loan Party of this Amendment and each other Loan Document to
which it is a party being executed in connection  with this  Amendment,  and the
performance by such Loan Party of the Loan  Agreement,  as amended  hereby,  (i)
have been duly  authorized  by all  necessary  action,  (ii) do not and will not
contravene  such Loan  Party's  charter or by-laws,  any  applicable  law or any
contractual  restriction  binding  on or  otherwise  affecting  it or any of its
properties,  (iii) do not and will not result in or require the  creation of any
Lien (other than pursuant to any Loan  Document)  upon or with respect to any of
its  properties,  and  (iv)  do not  and  will  not  result  in any  suspension,
revocation,  impairment,  forfeiture  or  nonrenewal  of  any  permit,  license,
authorization or approval applicable to its operations or any of its properties.

         6.       Consent.  By executing this Amendment, each Lender hereby
consents  to (i)  the  sale of the  Subject  Equipment  by GDC to the  Purchaser
pursuant to the Purchase  Agreement  and (ii) the release of the Agent's lien on
the Subject Equipment.

                                        3

<PAGE>

         7.       Miscellaneous.

                  (a) Continued  Effectiveness of the Loan Agreement.  Except as
otherwise  expressly  provided  herein,  the Loan  Agreement  and the other Loan
Documents are, and shall continue to be, in full force and effect and are hereby
ratified and confirmed in all  respects,  except that on and after the Amendment
Effective  Date (i) all  references in the Loan  Agreement to "this  Agreement",
"hereto",  "hereof",  "hereunder" or words of like import  referring to the Loan
Agreement shall mean the Loan Agreement as amended by this  Amendment,  and (ii)
all  references in the other Loan  Documents to which any Borrower is a party to
the "Loan Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment.  Except as expressly  provided  herein,  the execution,  delivery and
effectiveness  of this Amendment shall not operate as an amendment of any right,
power or  remedy  of the  Lender  under the Loan  Agreement  or any  other  Loan
Document,  nor constitute an amendment of any provision of the Loan Agreement or
any other Loan Document.

                  (b) Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate  counterparts,  each
of which  shall be deemed to be an  original,  but all of which  taken  together
shall constitute one and the same agreement.

                  (c)      Headings.  Section headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

                  (d)      Governing Law.  This Amendment shall be governed by,
and construed in accordance with, the law of the State of New York.

                  (e) Costs and Expenses.  The  Borrowers  jointly and severally
agree to pay on demand all fees, costs and expenses of the Agent and each Lender
in connection with the preparation, execution and delivery of this Amendment and
the other related agreements, instruments and documents.

                  (f)  Amendment  as  Loan   Document.   Each  Borrower   hereby
acknowledges and agrees that this Amendment  constitutes a "Loan Document" under
the Loan Agreement.  Accordingly, it shall be an Event of Default under the Loan
Agreement if (i) any  representation  or warranty made by a Borrower under or in
connection  with this Amendment  shall have been untrue,  false or misleading in
any  material  respect  when made,  or (ii) a Borrower  shall fail to perform or
observe any term, covenant or agreement contained in this Amendment.

                  (g) Waiver of Jury  Trial.  EACH  BORROWER,  THE AGENT AND THE
LENDER EACH HEREBY  IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED ON  CONTRACT,  TORT OR  OTHERWISE)
ARISING OUT OF OR RELATING TO THIS  AMENDMENT OR THE ACTIONS OF THE AGENT OR ANY
LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

                                        4

<PAGE>

              IN WITNESS WHEREOF,  the parties hereto have caused this Amendment
to be executed and delivered as of the date first above written.

                                            Borrowers:

                                            GENERAL DATACOMM INDUSTRIES, INC.,
                                            a Delaware corporation

                                            By  /S/ DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

                                            GENERAL DATACOMM, INC.,
                                            a Delaware corporation

                                            By  /S/  DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

                                            DATACOMM LEASING CORPORATION,
                                            a Delaware corporation

                                            By /S/ DENNIS J. NESLER
                                            Title: V.P. & Treasurer

                                            VITAL NETWORK SERVICES, L.L.C.,
                                            a Delaware limited liability company

                                            By /S/  DENNIS J. NESLER
                                            Title: V.P. & Treasurer

                                            GDC FEDERAL SYSTEMS, INC.,
                                            a Delaware corporation

                                            By /S/ DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

<PAGE>

                                            GDC NAUGATUCK, INC.,
                                            a Delaware Corporation

                                            By  /S/ DENNIS J. NESLER
                                            Title:  V.P. & TREASURER

                                            Agent and Lender:

                                            FOOTHILL CAPITAL CORPORATION,
                                            a California corporation

                                            By /S/ PETER DROOFF
                                            Title: Vice President

                                            Lenders:

                                            ABLECO FINANCE LLC,
                                            a Delaware limited liability company

                                            By /S/
                                            Title:

                                            MADELEINE L.L.C.,
                                            a New York limited liability company

                                            By /S/
                                            Title: Vice President
<PAGE>


                            AMENDMENT NUMBER TWO TO
                           LOAN AND SECURITY AGREEMENT

                  This AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT (this
"Amendment"),  dated as of  December  30,  1999,  is  entered  into by and among
GENERAL DATACOMM INDUSTRIES,  INC., a Delaware corporation  ("Parent"),  GENERAL
DATACOMM,  INC., a Delaware corporation ("General  DataComm"),  DATACOMM LEASING
CORPORATION,  a Delaware corporation ("DataComm Leasing"),  GDC FEDERAL SYSTEMS,
INC., a Delaware corporation ("GDC Federal"),  VITAL NETWORK SERVICES, L.L.C., a
Delaware  limited  liability  company  ("Vital"),  and GDC  NAUGATUCK,  INC.,  a
Delaware  corporation  ("GDC Naugatuck",  and together with the Parent,  General
DataComm,  DataComm  Leasing,  GDC  Federal  and Vital,  each a  "Borrower"  and
collectively the "Borrowers"),  each of the financial  institutions  signatories
hereto (such financial  institutions,  together with their respective successors
and assigns,  each a "Lender" and  collectively,  the  "Lenders"),  and FOOTHILL
CAPITAL CORPORATION, a California corporation, as agent for the Lenders (in such
capacity, the "Agent").

                  WHEREAS,  the  Borrowers  have  requested  the Lender Group to
amend certain terms of that certain Loan and Security Agreement, dated as of May
14,  1999,  by and among the  Borrowers,  the  Lenders,  and Agent (as  amended,
restated,  supplemented,  or  otherwise  modified  from time to time,  the "Loan
Agreement"), and the Lender Group is willing to amend the Loan Agreement subject
to the terms and conditions of this Amendment. All capitalized terms used herein
and not  defined  herein  shall have the  meanings  ascribed to them in the Loan
Agreement, as amended hereby.

                  NOW,  THEREFORE,  in  consideration of the premises and of the
mutual covenants, agreements and conditions hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

1.       Amendments.

(a)      Section 1.1 of the Agreement is hereby amended by adding the following
definitions in alphabetical order:

                           "Applicable  Period"  shall mean (a) with  respect to
         each of the first,  second,  or third  fiscal  quarter of the  Parent's
         fiscal year, 45 days after the end of such fiscal quarter, and (b) with
         respect to the fourth  fiscal  quarter of the Parent's  fiscal year, 90
         days after the end of such fiscal quarter.

                           "Net Worth  Reserve"  shall  mean,  as of any date of
         determination,  an amount equal to: (a) $3,500,000, if the Net Worth of
         Parent is less than  $15,000,000;  (b) $1,500,000,  if the Net Worth of
         Parent  is  greater  than  or  equal  to  $15,000,000   and  less

                                      -1-
<PAGE>

        than  $18,131,000;  and (c) $-0-,  if the Net Worth of Parent is greater
        than or equal to $18,131,000.

                           "Second   Amendment"  means  that  certain  Amendment
         Number Two to Loan and  Security  Agreement,  dated as of December  30,
         1999, by and among the Borrowers and the Lender Group.

                           "Second Amendment  Closing Date" means the date that
        the Second Amendment  initially became effective by its terms.

                           "Term B Loan Conversion  Price" means $5.00 per share
         of Common Stock,  subject to adjustment as provided in Section 15.

                           "Term B Loan Lender  Registration  Rights  Agreement"
         means  that  certain  Registration  Rights  Agreement,  dated as of the
         Closing  Date,  by and between  the Parent and the Term B Loan  Lender,
         with  respect to the shares of Common Stock that Term B Loan Lender may
         acquire and certain rights associated with such shares.

                           "Term C Loan" has the  meaning  set forth in  Section
        2.4(a)(iii).

                           "Term C Loan  Commitment"  means the amount set forth
         opposite such  Lender's  name on Schedule C-1 as such Lender's  "Term C
         Loan  Commitment",  as the  same  may be  adjusted  from  time  to time
         pursuant to the terms of this Agreement.

                           "Term C Loan Conversion  Price" means $9.00 per share
         of Common  Stock,  subject to  adjustment  as  provided  in Section 15;
         provided,  however,  that,  solely in the event that any "daily closing
         price"  (as such term is  defined  below)  during  the  period  between
         December  29, 1999 and the Second  Amendment  Closing Date is $6.00 per
         share or less, then the Term C Loan Conversion Price instead shall mean
         a price per share of Common  Stock  equal to the lower of (a) $9.00 and
         (b) the product of (i) 1.35 times (ii) the "Alternate Base Price" as of
         the Second Amendment Closing Date, subject to adjustment as provided in
         Section 15. For purposes of this definition, the "Alternate Base Price"
         on any date of determination  shall be the average of the daily closing
         prices for the immediately  preceding 10 consecutive  Trading Days. For
         purposes of this  definition,  the closing price for each day (i.e.,  a
         "daily  closing  price") shall be the last reported  sales price or, in
         case no such reported sale takes place on such date, the average of the
         reported  closing  bid and asked  prices in either case on the New York
         Stock Exchange or, if Common Stock is not listed or admitted to trading
         on the New York Stock Exchange,  on the principal  national  securities
         exchange on which  Common Stock is listed or admitted to trading or, if
         not listed or admitted to trading on any national securities  exchange,
         the closing sales price of Common Stock as quoted by NASDAQ or, in case
         no reported sales takes place, the average of the closing bid and asked
         prices as quoted by NASDAQ or any comparable system or, if Common Stock
         is not quoted on NASDAQ or any  comparable  system,  the closing  sales
         price or, in case no  reported  sale takes  place,  the  average of the
         closing bid and asked  prices,  as  furnished by any two members of the
         National Association of Securities Dealers,  Inc. selected from time to
         time by the Parent for that purpose.

                                      -2-
<PAGE>

                           "Term C Loan  Lender"  has the  meaning  set forth in
        Section 15.1.

                           "Term C Loan Lender  Registration  Rights  Agreement"
         means  the  Registration  Rights  Agreement,   in  form  and  substance
         substantially  similar to the Term B Loan  Lender  Registration  Rights
         Agreement,  by and between the Parent and the Term C Loan Lender,  with
         respect  to the  shares of Common  Stock  that Term C Loan  Lender  may
         acquire and certain rights associated with such shares.

(b)      Section  1.1  of  the  Agreement  is hereby  amended by  amending  and
restating the following definitions in their respective entirety as follows:

                           "Commitment"  means, as to any Lender,  the Revolving
         Credit  Commitment of such Lender,  the Term A Loan  Commitment of such
         Lender,  the Term B Loan Commitment of such Lender, and the Term C Loan
         Commitment of such Lender,  as  applicable,  and  "Commitments"  means,
         collectively, the aggregate amount of the Commitments of the Lenders.

                           "Conversion   Price"  shall  mean,   as  the  context
         requires,  (a) the Term B Loan Conversion Price, or (b) the Term C Loan
         Conversion Price. Without limiting the generality of the foregoing, the
         term "Conversion  Price" shall mean the Term B Loan Conversion Price if
         such  term  is  used  in the  context  of  Term B Loan  (including  the
         conversion  thereof) and shall mean the Term C Loan Conversion Price if
         such  term  is  used  in the  context  of  Term C Loan  (including  the
         conversion thereof).

                           "Maximum Revolving Amount" shall mean $35,000,000.

                           "Pro  Rata  Share"  shall  mean,  with  respect  to a
         Lender, a fraction (expressed as a percentage),  the numerator of which
         is the amount of such Lender's  Commitment and the denominator of which
         is the  aggregate  amount of the  Commitments,  provided  that,  if the
         Commitments  have been  reduced  to zero,  the  numerator  shall be the
         aggregate unpaid  principal  amount of such Lender's  Advances and Term
         Loans and interest in Letter of Credit  Obligations and the denominator
         shall be the aggregate  unpaid principal amount of all of the Advances,
         the Term Loans and Letter of Credit  Obligations.  If and to the extent
         that,  pursuant to Section  16.1  hereof,  an assignor  Lender makes in
         favor  of  an  Assignee  a  non-ratable   assignment  of  100%  of  the
         Commitments in respect of the Term A Loan and the Term Loan Obligations
         with  respect to the Term A Loan,  or the Term B Loan and the Term Loan
         Obligations with respect to the Term B Loan, or the Term C Loan and the
         Term Loan Obligations  with respect to the Term C Loan, then,  anything
         in the Loan  Agreement  or the other  Loan  Documents  to the  contrary
         notwithstanding,  for purposes of  determining  "ratability"  among the
         Lenders under the Loan Agreement and the other Loan Document:  (a) when
         used in the context of a Lender's  obligation or Commitment to make the
         Term A Loan or the Term B Loan or the Term C Loan,  as the case may be,
         or a  Lender's  right to receive  payments  in respect of the Term Loan
         Obligations  with  respect to the Term A Loan or the Term B Loan or the
         Term C Loan,  as the case may be, the term "Pro Rata Share"  shall mean
         (i) 100% with  respect to such  Assignee  and (ii) -0-% with respect to
         such  assignor  Lender;  (b) when  used in the

                                      -3-

         context  of a  Lender's obligation or Commitment to make Advances or
         participate in Letters of Credit or a Lender's  right to receive
         payment in respect of the Other Obligations, the term "Pro Rata Share"
         shall mean (i) 100% with respect to the assignor Lender and (ii) -0-%
         with respect to the Assignee;  (c)from and after the Closing Date, the
         then outstanding  principal amount of the Term  Loans  shall be  deemed
         to be the  amount  of the  total Commitments  in respect of the Term
         Loans;  and (d) in all other cases, the term "Pro Rata Share" shall
         have the meaning set forth in the first sentence of this definition.

                           "Registration Rights Agreement" means,  collectively,
         the Term B Loan Lender  Registration  Rights  Agreement  and the Term C
         Loan Lender Registration Rights Agreement.

                           "Term Loans"  means,  collectively,  the Term A Loan,
        the Term B Loan, and the Term C Loan.

(c)     Clause (z) of the definition of "Borrowing Base" set forth in Section
2.1(a) of the Loan Agreement  hereby is amended and restated in its entirety to
read as follows:

                           (z)  the Net Worth Reserve and the aggregate amount
                of reserves, if any, established by Agent under Section 2.1(b).

(d)      The following hereby is added to the Loan Agreement as a new Section
2.4(a)(iii) in proper alphanumerical order:

                           (iii)  Subject  to the terms and  conditions  of this
         Agreement,  each  Lender  that has a Term C Loan  Commitment  severally
         agrees  to  make a term  loan  on the  Second  Amendment  Closing  Date
         (collectively,  the  "Term  C  Loan")  to  Borrowers  in  the  original
         aggregate   principal  amount  equal  to  such  Lender's  Term  C  Loan
         Commitment.  The outstanding principal amount of the Term C Loan (after
         giving effect to any  conversions  pursuant to Section 15 hereof) shall
         be repaid in quarterly  installments  of principal equal to $1,000,000.
         Each such installment  shall be due and payable on the last day of each
         March, June, September, and December,  commencing on March 31, 2001 and
         continuing on the last day of each succeeding March,  June,  September,
         and December  until and including the date on which the unpaid  balance
         of the Term C Loan is paid in full or has been  converted  pursuant  to
         Section 15 hereof. At the Term C Loan Lender's sole discretion and upon
         the Term C Loan  Lender's  delivery  of not less than 3  Business  Days
         prior  written  notice to Agent  and  Borrower,  one or more  scheduled
         principal  payments  due in respect of the Term C Loan may be  deferred
         until the Maturity  Date.  The  outstanding  principal  balance and all
         accrued  and  unpaid  interest  under the Term C Loan  shall be due and
         payable upon the termination of this Agreement (or all Revolving Credit
         Commitments),  whether by its terms, by prepayment, by acceleration, or
         otherwise.  If and only if the Term A Loan has been  repaid in full and
         the Term B Loan has been repaid  and/or  converted in full,  the unpaid
         principal balance of the Term C Loan may be prepaid in whole or in part
         without  penalty  or  premium  at any  time  during  the  term  of this
         Agreement upon 30 days prior written notice by Borrowers to Agent,  all
         such prepaid  amounts shall be applied to the  installments  due on the
         Term C Loan in the inverse order

                                      -4-
<PAGE>

        of their maturity; provided, however, that (A) notwithstanding anything
        herein to the contrary,  the Term C Loan Lender shall have the right to
        convert up to $4,000,000 of the outstanding  principal  amount of the
        Term C Loan into shares of Common Stock,  pursuant to Section 15 of this
        Agreement,  at any time  during the 30 day period  after the  Borrowers'
        delivery  of written notice  of the  proposed  prepayment  of the  Term
        C Loan  and  (B) no such prepayment  of the Term C Loan shall be made
        unless,  both before and after giving  effect  thereto,  availability is
        not less  than  $1,000,000.  All amounts outstanding under the Term C
        Loan shall constitute Obligations.

(e)      Section 2.5(b)(i) of the Loan Agreement hereby is amended and restated
in its entirety to read as follows:

                           (b)  Apportionment,   Application  of  Payments,  and
         Reversal of Payments.  (i) Except as otherwise provided with respect to
         Defaulting Lenders,  aggregate principal and interest payments shall be
         apportioned   ratably  among  the  Lenders  (according  to  the  unpaid
         principal  balance of each Lender's Advances and Term Loans as to which
         such  payments  relate),  and  payments  of the fees  (other  than fees
         designated for Agent's sole and separate account) shall, as applicable,
         be  apportioned  ratably  among  the  Lenders.  All  payments  shall be
         remitted to Agent and all such payments not relating to principal of or
         interest on specific  Advances or the Term Loans  (other than  payments
         constituting  payment of specific  fees) and all proceeds of Collateral
         received  by  Agent  pursuant  to  this  Agreement  or any  other  Loan
         Document, shall be applied:

                           first, to pay any fees or Lender Group Expenses then
due to Agent from Borrowers until paid in full;

                           second, to pay any fees or Lender Group Expenses then
due to Lenders from Borrowers;

                           third, to pay interest due in respect of all Foothill
Loans and Agent Advances until paid in full;

                          fourth, to pay interest due in respect of all Advances
(other than Foothill Loans and Agent Advances) until  paid in full;

                           fifth,  so long as no Event of Default  has  occurred
and is continuing  or, if an Event of Default has occurred and is continuing and
Agent agrees in its sole discretion,  to pay interest due in respect of the Term
Loans until paid in full (if an Event of Default has occurred and is  continuing
and Agent has not so agreed,  the  priority of such  amounts is deferred to item
"ninth");

                           sixth, to pay or prepay principal of Foothill Loans
and Agent Advances until paid in full;

                           seventh, ratably to pay principal of the Advances
(other than Foothill Loans and Agent Advances);

                                      -5-
<PAGE>

                           eighth,  to be held by  Agent as cash  collateral  in
accordance with Section 2.2(e) hereof with respect to  unreimbursed  obligations
in respect of Letters of Credit until paid in full;

                           ninth, to pay interest due in respect of the Term
Loans until paid in full;

                           tenth, when due and payable, to pay the principal of
the Term A Loan and the Term B Loan until paid in full;

                           eleventh, when due and payable, to pay the principal
of the Term C Loan until paid in full; and

                           twelfth, ratably to pay any other Obligations due to
Agent or any Lender by Borrowers.

                           Agent  shall  promptly  distribute  to  each  Lender,
pursuant to the applicable wire transfer  instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a Settlement
delay as provided for in Section 2.1(h).

(f)      Section 2.7(a) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:


                           (a) Interest  Rate.  Except as provided in clause (b)
         below:  (i) all Obligations  (except for the Term Loan  Obligations and
         amounts  undrawn  under Letters of Credit) shall bear interest at a per
         annum rate of 0.625 percentage point above the Reference Rate; (ii) all
         Term Loan Obligations with respect to Term A Loan and Term B Loan shall
         bear interest at a per annum rate of 12.50 percent; provided,  however,
         the interest rate on such Term Loans shall automatically increase to 13
         percent  per annum on the first  anniversary  of the  Closing  Date and
         shall  automatically  increase  to 14  percent  per annum on the second
         anniversary  of the Closing Date;  and (iii) all Term Loan  Obligations
         with respect to Term C Loan shall bear  interest at a per annum rate of
         5.00 percentage points above the Reference Rate.

(g)      Section 2.7(c) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (c) Default Rate.  Upon the occurrence and during the
         continuation of an Event of Default:  (i) all  Obligations  (except for
         the Term Loan  Obligations and amounts undrawn under Letters of Credit)
         shall  bear  interest  at a per annum  rate  equal to 2.625  percentage
         points above the Reference  Rate; (ii) all Term Loan  Obligations  with
         respect  to Term A Loan or Term B Loan  shall  bear  interest  at a per
         annum rate equal to 2.00  percentage  points  above the  interest  rate
         applicable to such Term Loans at such time;  (iii) the Letter of Credit
         fee  provided in Section  2.7(b)  shall be increased to 3.50% per annum
         times the amount of the undrawn Letters of Credit that were outstanding
         during  the  immediately  preceding  month;  and  (iv)  all  Term  Loan
         Obligations  with  respect to Term C Loan shall bear  interest at a per
         annum rate equal to 2.00  percentage  points  above the  interest  rate
         applicable to such Term Loans at such time.

                                      -6-
<PAGE>

(h)      Section 2.7(d) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (d)      Minimum  Interest.  (i) In no event shall
the rate of interest chargeable under Section  2.7(a)(i)for any day be less than
7.00% per annum. To the extent that interest  accrued  hereunder at the rate set
forth in Section  2.7(a)(i) would be less than the foregoing minimum daily rate,
the interest rate chargeable under Section  2.7(a)(i) for such day automatically
shall be deemed increased to such minimum rate.

                                    (ii) In no event shall the rate of interest
chargeable under Section  2.7(a)(iii) for any day be less than 13.50% per annum.
To the extent that interest  accrued  hereunder at the rate set forth in Section
2.7(a)(iii)  would be less than the foregoing  minimum daily rate,  the interest
rate chargeable under Section  2.7(a)(iii) for such day  automatically  shall be
deemed increased to such minimum rate.

(i)      Section 2.12(b) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (b)      Second Amendment  Closing Fees. On or before
the Second  Amendment  Closing  Date,  (i) a  supplemental  closing fee, for the
ratable benefit of the Lenders with a Revolving Credit Commitment,  of $100,000,
and (ii) a  supplemental  closing fee, for the sole and separate  account of the
Term C Loan  Lender,  of  $200,000;  (j) Section  2.12(c) of the Loan  Agreement
hereby is amended and restated in its entirety to read as follows:

                           (c)      Annual  Facility Fee. (i) On each
anniversary  of the Closing Date,  an annual  facility fee in an amount equal to
0.25% of the Maximum Revolving Amount;  (ii) on each of the first and the second
anniversaries of the Closing Date, a facility fee in an amount equal to 0.50% of
the then  outstanding  principal  amount of the Term A Loan and the Term B Loan;
and (iii) on each anniversary of the Second  Amendment  Closing Date, a facility
fee, for the sole and separate  account of the Term C Loan Lender,  in an amount
equal to 1.00% of the then outstanding  principal amount of the Term C Loan; (k)
Section  3.3(f) of the Loan  Agreement  hereby is amended  and  restated  in its
entirety to read as follows:

                           (f)  within 45 days of the Second  Amendment  Closing
         Date,  Agent and the Lenders  shall have  received an updated  business
         valuation  appraisal of Borrower's  Broadband  Systems  Division and of
         Vital  (as  previously  required  under  the  First  Amendment,   which
         authorized the Matco outsourcing  transaction  described  therein) from
         appraisers  acceptable to the Agent, which valuation appraisal shall be
         in conformity with the form and methodology  used by Arthur Andersen in
         the valuation  appraisals delivered to the Lender Group in May 1999 and
         otherwise in form and substance satisfactory to Agent.

                                      -7-
<PAGE>


(l)      The following hereby is added to the Loan Agreement as a new Section
3.3(g) in proper alphanumerical order:

                           (g) Within 15 days  following  the  Second  Amendment
         Closing Date, Agent shall have received duly executed  originals of the
         Term C Loan  Registration  Rights  Agreement,  in  form  and  substance
         satisfactory  to the Term C Loan Lender,  and the same shall be in full
         force and effect.

(m)      Section 7.11 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                  7.11  Distributions.  Make any  distribution or declare or pay
         any dividends (in cash or other property, other than capital Stock) on,
         or purchase,  acquire, redeem, or retire any of such Borrower's capital
         Stock, of any class, whether now or hereafter outstanding,  except that
         (i) a Subsidiary  of any Borrower may pay  dividends to such  Borrower,
         (ii) so long as both before and after giving effect thereto, no Default
         or Event of Default has occurred and is continuing and  Availability is
         not less than $1,000,000,  Parent may pay regularly scheduled quarterly
         dividends  on  its 9%  Cumulative  Convertible  Exchangeable  Preferred
         Stock,  (iii)  Parent  may  receive  shares  of  its  Common  Stock  in
         consideration  for  the  exercise  of  stock  options  granted  to  its
         employees and directors  (so long as no cash  consideration  is paid by
         Parent or any of its  Subsidiaries),  (iv)  Parent may cancel or retire
         options in  accordance  with its stock  option plans (so long as Parent
         does not make any cash payments in connection therewith, and (v) Parent
         may exchange its 9% Cumulative Convertible Exchangeable Preferred Stock
         for  a  corresponding   amount  of  its  9%  Convertible   Subordinated
         Debentures or its Common Stock (but not for any other consideration).

(n)      Section 7.17 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           7.17 Use of  Proceeds.  (a) Use the  proceeds  of the
         Advances  and the Term A Loan and Term B Loan  made  hereunder  for any
         purpose  other than (i) on the Closing  Date,  (y) to repay in full the
         outstanding principal,  accrued interest, and accrued fees and expenses
         owing  to  Existing  Lender,  and (z) to pay  transactional  costs  and
         expenses   incurred  in  connection  with  this  Agreement,   and  (ii)
         thereafter,  consistent with the terms and conditions  hereof,  for its
         lawful and permitted corporate purposes.

                           (b)  Use  the  proceeds  of  the  Term  C  Loan  made
         hereunder for any purpose other than (i) solely on the Second Amendment
         Closing Date, (y) to pay  transactional  costs and expenses incurred in
         connection  with the  Second  Amendment,  and (z) to repay  outstanding
         Advances, and (ii) thereafter, consistent with the terms and conditions
         hereof, for its lawful and permitted corporate purposes.

(o)      Section 7.20 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                                      -8-
<PAGE>

                           7.20 Financial  Covenant.  Fail to maintain Net Worth
         at  the  end  of  each  fiscal  quarter  of  the  Parent  of  at  least
         $10,018,000,  determined  in  accordance  with GAAP as in effect on the
         Closing  Date.  If GAAP changes  subsequent  to the Closing  Date,  the
         Parent  will  deliver to the Agent,  within the  Applicable  Period,  a
         statement  reconciling  the  calculation  of Net Worth using GAAP as it
         existed on the  Closing  Date to the Net Worth  calculation  based upon
         financial statements delivered to the Agent for such fiscal quarter.

(p)      Section 15 of the Loan Agreement hereby is amended and restated in its
entirety to read as follows:

                  15.      CONVERSION

                           15.1.   Privilege.   (a)   Subject  to  the   further
         provisions  of  this  Section  15.1,  the  holder  of  the  Term B Loan
         (individually and collectively,  the "Term B Loan Lender") may make one
         or more  elections to convert up to an aggregate of  $3,000,000  of the
         principal  amount of the Term B Loan, at any time or from  time-to-time
         outstanding, into Common Stock at a price equal to the then Term B Loan
         Conversion  Price.  The number of shares of Common Stock  issuable upon
         conversion  of the Term B Loan  shall be  determined  by  dividing  the
         amount of the Term B Loan  elected to be  converted  by the Term B Loan
         Lender by the then Term B Loan Conversion Price. The Term B Loan Lender
         shall be entitled to the rights of a holder of Common Stock only to the
         extent  that the Term B Loan  Lender has  exercised  its  privilege  to
         convert Term B Loan into Common Stock.

                                    (b)  Subject  to the  further  provisions
         of this  Section  15.1,  the  holder  of the Term C Loan
         (individually and collectively,  the "Term C Loan Lender") may make one
         or more  elections to convert up to an aggregate of  $4,000,000  of the
         principal  amount of the Term C Loan, at any time or from  time-to-time
         outstanding,  into  Common  Stock  at a price  equal to the Term C Loan
         Conversion  Price. The number of shares of Common Stock upon conversion
         of the Term C Loan shall be  determined  by dividing  the amount of the
         Term C Loan  elected to be  converted  by the Term C Loan Lender by the
         then Term C Loan  Conversion  Price.  The Term C Loan  Lender  shall be
         entitled  to the rights of a holder of Common  Stock only to the extent
         that the Term C Loan Lender has exercised its privilege to convert Term
         C Loan into Common Stock.

                           15.2.  Procedure.  To convert a portion of the Term B
         Loan or the Term C Loan,  as the case may be, the Term B Loan Lender or
         the Term C Loan  Lender,  as the case may be,  shall (a) furnish on the
         Conversion  Date a  written  notice of its  election  to  convert  such
         portion  of the Term B Loan or the Term C Loan,  as the case may be, as
         it may designate in such written  notice (the  "Conversion  Amount") to
         the Parent,  and (b) surrender the note (if any)  evidencing the Term B
         Loan or the Term C Loan,  as the case may be, to the Parent in exchange
         for a new note in an amount  equal to the  difference  between  (i) the
         then  outstanding  principal  amount  of the  Term B Loan or the Term C
         Loan,  as the case may be,  and (ii)  the  Conversion  Amount  plus the
         aggregate  amount of any prior  Conversion  Amounts  relative to Term B
         Loan or Term C Loan,  as the case may

                                      -9-
<PAGE>

         be.  The date on which the Term B Loan Lender or the Term C Loan
         Lender,  as the case may be,  satisfies such  requirements  is the
         "Conversion  Date."  Within ten days of the applicable Conversion Date,
         the Parent shall deliver to the Term B Loan Lender or the Term C Loan
         Lender, as the case may be, a certificate for the  number  of whole
         shares of the  Common  Stock  issuable  upon the conversion.  The
         person in whose  name the  certificate  is  registered shall be deemed
         to be a shareholder of record on the Conversion Date.

                           15.3.    Fractional  Shares.  The Parent will not
         issue fractional shares of Common Stock upon conversion of the Term B
         Loan or the Term C Loan.  The number of shares of Common  Stock to be
         issued  shall be rounded  down to the nearest whole number.

                           15.4. Taxes on Conversion.  If the Term B Loan Lender
         converts the Term B Loan, the Parent shall pay any  documentary,  stamp
         or similar  issue or transfer  tax due on the issue of shares of Common
         Stock upon such conversion. If the Term C Loan Lender converts the Term
         C Loan, the Parent shall pay any documentary, stamp or similar issue or
         transfer  tax due on the  issue of shares  of  Common  Stock  upon such
         conversion.

                           15.5.  Parent to Provide Stock. (a) At all times, the
         Parent  shall  from and  after  the  date  hereof  reserve,  out of its
         authorized but unissued Common Stock, a sufficient  number of shares of
         Common Stock to permit (i) the  conversion  of up to  $3,000,000 of the
         Term B Loan into shares of Common Stock,  and (ii) the conversion of up
         to $4,000,000 of the Term C Loan into shares of Common Stock.

                           (b)  All  shares  of  Common  Stock   delivered  upon
         conversion  of the Term B Loan shall be newly issued shares or treasury
         shares,  shall  be duly  authorized,  validly  issued,  fully  paid and
         nonassessable  and shall be free from preemptive rights and free of any
         lien or  adverse  claim.  All  shares of Common  Stock  delivered  upon
         conversion  of the Term C Loan shall be newly issued shares or treasury
         shares,  shall  be duly  authorized,  validly  issued,  fully  paid and
         nonassessable  and shall be free from preemptive rights and free of any
         lien or adverse claim.

                           (c) The Parent will endeavor  promptly to comply with
         all federal and state securities laws regulating the offer and delivery
         of shares of Common Stock upon  conversion,  if any, of the Term B Loan
         or the Term C Loan,  as the case may be, and will comply with the terms
         and provisions of the applicable Registration Rights Agreement.

                           15.6.    Adjustment of Conversion  Price.  The
        Conversion  Price shall be adjusted from time to time by the Parent as
        follows:

                           (a) In case the Parent  shall (i) pay a  dividend  in
         shares of Common  Stock to all  holders  of Common  Stock,  (ii) make a
         distribution  in shares of Common Stock to all holders of Common Stock,
         (iii) subdivide its  outstanding  Common Stock into a greater number of
         shares,  or (iv)  combine its  outstanding  Common Stock into a smaller
         number of shares, the applicable Conversion Price in effect immediately
         prior  thereto  shall

                                      -10-


<PAGE>

         be adjusted so that the Term B Loan Lender or the Term C Loan  Lender,
         as the case may be,  shall be entitled to receive that number of shares
         of Common Stock which it would have owned had the Term B Loan or the
         Term C Loan,  as the case  may be,  been  converted immediately  prior
         to the happening of such event.  An adjustment  made pursuant to this
         subsection  (a) shall  become  effective  immediately after  the
         record  date  in  the  case  of a  dividend  in  shares or distribution
         and shall become effective immediately after the effective date in the
         case of subdivision or combination.

                           (b) In case the Parent shall issue rights or warrants
         to all or substantially all holders of Common Stock entitling them (for
         a period commencing no earlier than the record date described below and
         expiring not more than 90 days after such record date) to subscribe for
         or purchase  shares of Common  Stock (or  securities  convertible  into
         Common  Stock) at a price per share less than the current  market price
         per share of Common Stock (as determined in accordance  with subsection
         (e) of this Section 15.6) at the record date for the  determination  of
         shareholders   entitled  to  receive  such  rights  or  warrants,   the
         applicable  Conversion Price in effect  immediately prior thereto shall
         be  adjusted  so that the same  shall  equal  the price  determined  by
         multiplying such Conversion Price in effect  immediately  prior to such
         record date by a fraction of which the numerator shall be the number of
         shares of Common Stock outstanding on such record date, plus the number
         of shares  which the  aggregate  offering  price of the total number of
         shares  of  Common  Stock  so  offered  (or  the  aggregate  applicable
         Conversion  Price  of the  convertible  securities  so  offered)  would
         purchase at such current  market  price,  and of which the  denominator
         shall be the  number  of shares of  Common  Stock  outstanding  on such
         record  date plus the  number  of  additional  shares  of Common  Stock
         offered  (or into  which the  convertible  securities  so  offered  are
         convertible).  Such adjustment shall be made successively  whenever any
         such  rights  or  warrants  are  issued,  and  shall  become  effective
         immediately  after such record date. If at the end of the period during
         which  such  rights  or  warrants  are  exercisable  not all  rights or
         warrants shall have been exercised,  the applicable adjusted Conversion
         Price shall be immediately  readjusted to what it would have been based
         upon the number of additional  shares of Common Stock  actually  issued
         (or the number of shares of Common Stock  issuable  upon  conversion of
         convertible securities actually issued).

                           (c) In case the  Parent  shall  distribute  to all or
         substantially  all holders of Common Stock any shares of capital  stock
         (other than Common Stock) of the Parent  evidences of  indebtedness  or
         other non-cash assets  (including  securities of any company other than
         the Parent), or shall distribute to all or substantially all holders of
         Common Stock rights or warrants to subscribe for or purchase any of its
         securities  (excluding  those  referred  to in  subsection  (b) of this
         Section  15.6)  ("Rights"),  then  in each  such  case  the  applicable
         Conversion  Price  shall be  adjusted  so that the same shall equal the
         price  determined  by  multiplying  such  Conversion  Price  in  effect
         immediately  prior to the date of such  distribution  by a fraction  of
         which the  numerator  shall be the current  market  price per share (as
         defined in subsection  (e) of this Section 15.6) of Common Stock on the
         record date  mentioned  below less the fair market value on such record
         date (as  determined  by the Board of  Directors  of the Parent,  whose
         determination  shall be conclusive  evidence of such fair market value)
         of the  portion  of  the  capital  stock  or  assets  or  evidences  of


                                      -11-

<PAGE>
         indebtedness so distributed or of such rights or warrants applicable to
         one share of Common  Stock  (determined  on the basis of the  number of
         shares of Common Stock  outstanding  on the record date),  and of which
         the denominator shall be the current market price per share (as defined
         in subsection  (e) of this Section 15.6) of Common Stock on such record
         date.  Such adjustment  shall become  effective  immediately  after the
         record date for the  determination of shareholders  entitled to receive
         such distribution. Notwithstanding the foregoing, in the event that the
         Parent  shall  distribute  Rights  (other  than  those  referred  to in
         subsection  (b) of this  Section  15.6) pro rata to  holders  of Common
         Stock,  the Parent  may, in lieu of making any  adjustment  pursuant to
         this Section 15.6, make proper provision so that the Term B Loan Lender
         or the Term C Loan Lender,  as the case may be, upon  conversion of the
         Term B Loan or the Term C Loan,  as the case may be,  after the  record
         date for such distribution and prior to the expiration or redemption of
         the Rights  shall be  entitled  to  receive  upon such  conversion,  in
         addition to the shares of Common Stock  issuable  upon such  conversion
         (the  "Conversion  Shares"),  a number of Rights  to be  determined  as
         follows:  (i) if such conversion occurs on or prior to the date for the
         distribution  to  the  holders  of  Rights  of  separate   certificates
         evidencing such Rights (the  "Distribution  Date"),  the same number of
         Rights to which the Term B Loan  Lender or the Term C Loan  Lender,  as
         the case may be, of a number of  shares  of Common  Stock  equal to the
         number of Conversion  Shares is entitled at the time of such conversion
         in accordance  with the terms and  provisions of and  applicable to the
         Rights and (ii) if such conversion occurs after the Distribution  Date,
         the same number of Rights to which the Term B Loan Lender or the Term C
         Loan  Lender,  as the case may be,  of the  number  of shares of Common
         Stock into which the outstanding principal amount of the Term B Loan or
         the Term C Loan,  as the case may be,  together  with all  accrued  and
         unpaid interest thereon so converted was convertible  immediately prior
         to the  Distribution  Date would have been entitled on the Distribution
         Date in accordance  with the terms and  provisions of and applicable to
         the Rights.

                           (d)  In  case  the  Parent  shall,   by  dividend  or
         otherwise, at any time distribute (a "Triggering  Distribution") to all
         or  substantially  all  holders of Common  Stock  cash in an  aggregate
         amount  that,  together  with the  aggregate  amount of any other  cash
         distributions to all or substantially  all holders of Common Stock made
         within the 12 months  preceding  the date of payment of the  Triggering
         Distribution  and in respect of which no  applicable  Conversion  Price
         adjustment  pursuant to this Section 15.6 has been made, exceeds 50% of
         the product of the current  market  price per share of Common Stock (as
         determined in accordance  with  subsection (e) of this Section 15.6) on
         the Business Day (the "Determination  Date") immediately  preceding the
         day on which such  Triggering  Distribution  is declared by the Parent,
         multiplied by the number of shares of Common Stock outstanding on such
         date  (excluding  shares  held  in  the  treasury  of the  Parent), the
         applicable  Conversion  Price  shall be  reduced so that the same shall
         equal the price  determined by  multiplying  such  Conversion  Price in
         effect  immediately  prior to the  Determination  Date by a fraction of
         which the  numerator  shall be the  current  market  price per share of
         Common Stock (as determined in accordance  with  subsection (e) of this
         Section  15.6) on the  Determination  Date  less the  amount of cash so
         distributed within such 12 months (including,  without limitation,  the
         Triggering  Distribution)  applicable  to

                                      -12-

<PAGE>

         one  share  of  Common  Stock (determined  on the basis of the  number
         of  shares  of  Common  Stock outstanding on the  Determination  Date)
         and the  denominator  shall be such current  market price per share of
         Common Stock (as  determined in accordance   with   subsection   (e)
         of  this  Section  15.6)  on  the Determination  Date,  such  reduction
         to become  effective  immediately prior to the opening of business on
         the day following the date on which the Triggering Distribution is
         paid.

                           (e)  For  the  purpose  of  any   computation   under
         subsections  (b), (c) and (d) of this Section 15.6,  the current market
         price per share of Common  Stock on any date  shall be deemed to be the
         average of the daily closing prices for the 30 consecutive Trading Days
         commencing  35  Trading  Days  before (i) the  Determination  Date with
         respect to  distributions  under subsection (d) of this Section 15.6 or
         (ii) the record date with respect to distributions,  issuances or other
         events requiring such  computation  under subsection (b) or (c) of this
         Section 15.6. The closing price for each day shall be the last reported
         sales price or, in case no such reported sale takes place on such date,
         the average of the reported closing bid and asked prices in either case
         on the New York  Stock  Exchange  or, if Common  Stock is not listed or
         admitted to trading on the New York Stock  Exchange,  on the  principal
         national  securities  exchange  on  which  Common  Stock is  listed  or
         admitted  to trading  or, if not listed or  admitted  to trading on any
         national securities  exchange,  the closing sales price of Common Stock
         as quoted by NASDAQ or, in case no  reported  sales  takes  place,  the
         average of the closing bid and asked  prices as quoted by NASDAQ or any
         comparable  system  or, if Common  Stock is not quoted on NASDAQ or any
         comparable system, the closing sales price or, in case no reported sale
         takes  place,  the  average of the  closing  bid and asked  prices,  as
         furnished by any two members of the National  Association of Securities
         Dealers,  Inc.  selected  from  time  to time by the  Parent  for  that
         purpose. If no such prices are available,  the current market price per
         share shall be the fair value of a share of Common Stock as  determined
         by the Board of Directors of the Parent.

                           15.7. Notice of Adjustment.  Whenever the Term B Loan
         Conversion  Price is adjusted,  the Parent shall  promptly  mail to the
         Term B Loan Lender a notice of the adjustment briefly stating the facts
         requiring the adjustment  and the manner of computing it.  Whenever the
         Term C Loan  Conversion  Price is adjusted,  the Parent shall  promptly
         mail to the  Term C Loan  Lender  a notice  of the  adjustment  briefly
         stating the facts  requiring the adjustment and the manner of computing
         it.

                           15.8     Notice of Certain Transactions.  In the
        event that:

                           (1)      the Parent proposes to take any action which
         would require an adjustment in any Conversion Price;

                           (2) the  Parent  enters  into any  agreement  for its
         consolidation or merger with, or transfer of all or  substantially  all
         of its assets to, another  corporation  and  shareholders of the Parent
         must approve the transaction; or

                           (3)      there is a proposal for the dissolution or
        liquidation of the Parent;

                                      -13-
<PAGE>

         then,  in each case,  the Parent  shall at least ten days  before  such
         date, mail to the Term B Loan Lender or the Term C Loan Lender,  as the
         case may be, a notice stating the proposed effective date.

                           15.9.  Effect  of  Reclassification,   Consolidation,
         Merger or Sale on Conversion Privilege.  If any of the following events
         shall   occur   with   respect   to  the   Parent,   namely:   (a)  any
         reclassification  or change of shares  of Common  Stock  (other  than a
         change in par value,  or from par value to no par value, or from no par
         value to par value, or as a result of a subdivision or combination,  or
         any other change for which an  adjustment is  specifically  provided in
         Section 15.6); (b) any consolidation or merger to which the Parent is a
         party  other  than a  merger  in which  the  Parent  is the  continuing
         corporation   or  other  entity  and  which  does  not  result  in  any
         reclassification  of, or change (other than a change in name, or in par
         value,  or from par value to no par value,  or from no par value to par
         value, or as a result of a subdivision or combination) in,  outstanding
         shares  of  Common  Stock;  or (c)  any  sale or  conveyance  of all or
         substantially all of the assets of the Parent, as an entirety, then the
         Parent or such successor or purchasing  corporation or other entity, as
         the  case  may  be,   shall,   as  a   condition   precedent   to  such
         reclassification,  change,  consolidation,  merger, sale or conveyance,
         execute  and  deliver  to the  Term B Loan  Lender  or the  Term C Loan
         Lender, as the case may be, an agreement providing that the Term B Loan
         Lender or the Term C Loan  Lender,  as the case may be,  shall have the
         right to  convert  the Term B Loan or the Term C Loan,  as the case may
         be,  into the kind and  amount of shares of stock and other  securities
         and property  (including cash)  receivable upon such  reclassification,
         change,  consolidation,  merger,  sale or conveyance by a holder of the
         number of shares of Common Stock issuable upon conversion of the Term B
         Loan or the Term C Loan, as the case may be,  immediately prior to such
         reclassification,  change,  consolidation,  merger, sale or conveyance.
         Such agreement  shall provide for  adjustments of the Conversion  Price
         which  shall  be as  nearly  equivalent  as may be  practicable  to the
         adjustments  of the  Conversion  Price provided for in this Section 15,
         mutatis mutandis.  If, in the case of any such  consolidation,  merger,
         sale  or  conveyance,  the  stock  or  other  securities  and  property
         (including  cash)  receivable  thereupon  by a holder of  Common  Stock
         include shares of stock,  membership interests, or other securities and
         property of a  corporation  or other entity other than the successor or
         purchasing  corporation  or other  entity,  as the case may be, in such
         consolidation,  merger,  sale or conveyance,  then such agreement shall
         also be executed by such other  corporation  or other  entity and shall
         contain such additional provisions to protect the interests of the Term
         B Loan Lender or the Term C Loan  Lender,  as the case may be, that are
         comparable  to the  provisions  set forth in this  Section 15,  mutatis
         mutandis.  The provisions of this Section 15.9 shall similarly apply to
         successive  consolidations,  mergers,  sales  or  conveyances,  mutatis
         mutandis.

(q)      Schedule C-1 hereby is amended and restated in its entirety to read as
set forth in Annex I attached hereto.

2. Conditions.  This Amendment shall become effective only upon  satisfaction in
full of the following  conditions  precedent (the first date upon which all such
conditions have been satisfied being herein called the "Second Amendment Closing
Date"):

                                      -14-
<PAGE>

                           (a)      Agent shall have received on or before the
Second  Amendment  Closing  Date  the  following,  each  in form  and  substance
satisfactory to Agent (and, where indicated,  the applicable Lender) and, unless
indicated otherwise, dated as of the Second Amendment Closing Date:

                                    (i)     counterparts of this Amendment, duly
                 executed by the Borrowers and the Lenders Group;

                                    (ii) the  reaffirmation  and consent of each
                  Guarantor  attached  hereto as  Exhibit A, duly  executed  and
                  delivered by an  authorized  official of each entity  thereof;
                  and

                                    (iii)  such other  agreements,  instruments,
                  approvals, opinions and other documents as Agent or any Lender
                  may reasonably request.

                           (b)      (i) Agent shall have received,  for the
benefit of the Lenders with a Revolving Credit Commitment,  the fee described in
Section 2.12(b)(i) of the Loan Agreement;  and (ii) the Term C Loan Lender shall
have received,  for its sole and separate account,  the fee described in Section
2.12(b)(ii) of the Loan Agreement.

                           (c)      Borrowers shall have a minimum of $3,000,000
of unrestricted cash balances and Availability  after the payment of all amounts
contemplated in Section 7.17(b) of the Loan Agreement and based upon a Borrowing
Base  calculated  using  information  as of a date no earlier than  December 29,
1999,  rolled forward to a date acceptable to the Agent, and after reserving for
amounts necessary to maintain Borrowers' current  liabilities  reasonably within
terms;

                           (d)      the several counsel to the members of the
Lender Group shall have received payment, in immediately available funds, of all
accrued  and  unpaid  attorneys  fees and  expenses  constituting  Lender  Group
Expenses  incurred  in  connection  with  this  Amendment  and the  transactions
contemplated hereunder or reasonably ancillary hereto;

                           (e)      The  representations  and  warranties  in
this Amendment,  the Loan Agreement as amended by this Amendment,  and the other
Loan  Documents  shall be true and correct in all respects on and as of the date
hereof,   as  though  made  on  such  date  (except  to  the  extent  that  such
representations and warranties relate solely to an earlier date);

                           (f)      No Default or Event of Default shall have
occurred  and be  continuing  on the date  hereof,  nor  shall  result  from the
consummation of the transactions contemplated herein;

                           (g)      No injunction,  writ,  restraining  order,
or  other  order  of  any  nature  prohibiting,   directly  or  indirectly,  the
consummation of the transactions  contemplated herein shall have been issued and
remain in force by any  governmental  authority  against  Borrower or the Lender
Group; and

                                      -15-
<PAGE>

                           (h)      All other  documents and legal matters in
connection with the transactions  contemplated by this Amendment shall have been
delivered  or  executed  or  recorded  and  shall  be  in  form  and   substance
satisfactory to Agent and its counsel.

3. Representations and Warranties.  Each Borrower hereby represents and warrants
to the Lender Group that (a) the execution,  delivery,  and  performance of this
Amendment and of the Loan Agreement,  as amended by this  Amendment,  are within
its corporate or other  organizational  powers, have been duly authorized by all
necessary  corporate  action,  and are not in contravention of any law, rule, or
regulation,  or any order, judgment,  decree, writ, injunction,  or award of any
arbitrator,  court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected,  and (b) this Amendment and the Loan
Agreement,  as amended by this  Amendment,  constitute  such  Borrower's  legal,
valid, and binding  obligation,  enforceable against such Borrower in accordance
with its terms.

4.  Further  Assurances.  Borrower  shall  execute and  deliver all  agreements,
documents,  and  instruments,  in form and substance  satisfactory to Agent, and
take all  actions  as Agent may  reasonably  request  from time to time fully to
consummate  the  transactions  contemplated  under this  Amendment  and the Loan
Agreement, as amended by this Amendment.

5.       Miscellaneous.

                           (a) Upon the  effectiveness  of this  Amendment,
each reference in the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and refer
to the Loan Agreement as amended by this Amendment.

                           (b) Upon the effectiveness of this Amendment,  each
reference  in  the  Loan  Documents  to  the  "Loan  Agreement",   "thereunder",
"therein",  "thereof" or words of like import  referring  to the Loan  Agreement
shall mean and refer to the Agreement as amended by this Amendment.

                           (c) This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.

                                      -16-

<PAGE>

                           (d) This  Amendment  may be  executed in any number
of  counterparts  and by  different  parties on separate  counterparts,  each of
which, when executed and delivered,  shall be deemed to be an original,  and all
of which, when taken together,  shall constitute but one and the same Amendment.
Delivery of an executed  counterpart of this Amendment by telefacsimile shall be
equally as  effective  as delivery of a manually  executed  counterpart  of this
Amendment.  Any party  delivering an executed  counterpart  of this Amendment by
telefacsimile  also  shall  deliver  a  manually  executed  counterpart  of this
Amendment but the failure to deliver a manually  executed  counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.

                           (e) This Amendment is a Loan Document.

                [Remainder of this page intentionally left blank]

                                      -17-
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.



                                            GENERAL DATACOMM INDUSTRIES, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HERNY
                                            Title: Vice President


                                            GENERAL DATACOMM, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President


                                            DATACOMM LEASING CORPORATION,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President


                                            VITAL NETWORK SERVICES, L.L.C.,
                                            a Delaware limited liability company
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President


                                            GDC FEDERAL SYSTEMS, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President

<PAGE>


                                            GDC NAUGATUCK, INC.,
                                            a Delaware Corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            FOOTHILL CAPITAL CORPORATION,
                                            a California corporation, as Agent
                                              and a Lender
                                            By /S/ PETER DROOFF
                                            Title: Vice President


                                            ABLECO FINANCE LLC, as a Lender
                                            By /S/ KEVIN GENDA
                                            Title:  SVP & Chief Credit Officer


                                            A2 FUNDING LP, as a Lender
                                            By: A2 FUND MANAGEMENT LLC,
                                               its General Partner
                                            By /S/ ALEXANDER J. ORNSTEIN
                                            Title: Vice President


                                      -19-
<PAGE>

                                     ANNEX I

                                  Schedule C-1

                                   Commitments


Revolving Loan Commitment           Dollar Amount             Percentage
-------------------------           -------------             ----------

   Foothill                          $35,000,000                  100%
   Ableco                            $-0-                         -0-%
   A2 Funding                        $-0-                         -0-%


Term A Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $12,000,000                100%
   A2 Funding                         $-0-                       -0-%


Term B Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $-0-                       -0-%
   A2 Funding                         $3,000,000                 100%


Term C Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $10,000,000                 50%
   A2 Funding                         $10,000,000                 50%


<PAGE>

                                    EXHIBIT A

                            Reaffirmation and Consent
                            -------------------------

                  All  capitalized  terms used herein but not otherwise  defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Two to  Loan  and  Security  Agreement,  dated  as of  December  30,  1999  (the
"Amendment").  The  undersigned  hereby  jointly and severally (a) represent and
warrant to the Lender Group that the  execution,  delivery,  and  performance of
this   Reaffirmation   and  Consent  are  within  each  of  their  corporate  or
organizational  powers,  have been duly authorized by all necessary corporate or
other  organizational  action, and are not in contravention of any law, rule, or
regulation,  or any order, judgment,  decree, writ, injunction,  or award of any
arbitrator,  court, or governmental authority, or of the terms of its charter or
bylaws,  or of any contract or undertaking to which either of them is a party or
by which any of their  properties may be bound or affected;  (b) consents to the
amendment of the Loan Agreement by the Amendment; (c) acknowledges and reaffirms
its obligations owing to the Lender Group under its respective guaranty and each
of the other Loan  Documents  to which it is party;  and (d) agrees that each of
the  guaranties  and the other Loan  Documents  to which they are parties is and
shall  remain in full  force and  effect.  Although  the  undersigned  have been
informed  of the matters set forth  herein and have  acknowledged  and agreed to
same,  they  understand  that the Lender Group has no obligation to inform it of
such matters in the future or to seek its acknowledgement or agreement to future
amendments, and nothing herein shall create such a duty.

                                            GDC REALTY, INC.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            DATACOMM RENTAL CORPORATION
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            GENERAL DATACOMM INTERNATIONAL CORP.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            GENERAL DATACOMM CHINA, LTD.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            GENERAL DATACOMM LIMITED (ENGLAND)
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            VITAL NETWORK SERVICES, LTD.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President


                                            GENERAL DATACOMM LTD. (CANADA)
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President