Exhibit 10.1

                THIRD AMENDMENT TO AMENDED AND RESTATED FINANCING
                             AGREEMENT AND GUARANTY

     THIRD  AMENDMENT TO AMENDED AND RESTATED  FINANCING  AGREEMENT AND GUARANTY
dated as of December 29, 1997 ("Third  Amendment")  among DEVLIEG BULLARD,  INC.
(the Borrower"),  THE CIT GROUP/BUSINESS  CREDIT, INC. ("CITBC"),  BNY FINANCIAL
CORPORATION  ("BNYFC")  (each of CITBC and BNYFC  referred to as a "Lender"  and
collectively,  the "Lenders") and THE CIT GROUP/BUSINESS  CREDIT, INC., as agent
for the  Lenders  (in  such  capacity,  together  with  its  successors  in such
capacity, the "Lenders Agent").

     PRELIMINARY  STATEMENT.  Reference  is made  to the  Amended  and  Restated
Financing  and  Security  Agreement  dated as of  January  17,  1997  among  the
Borrower,  CITBC, each other lender which may thereafter  execute and deliver an
instrument of assignment under the Financing Agreement pursuant to Section 9(18)
(each a "Lender" and  collectively,  the "Lenders")  and the Lenders  Agent,  as
amended by a First  Amendment  to Amended and  Restated  Financing  and Security
Agreement dated as of April 1, 1997 and as further amended by a Second Amendment
to Amended and Restated  Financing and Security  Agreement dated as of September
17, 1997 (as it may be further  amended,  supplemented  or modified from time to
time, the "Financing Agreement").  Any term used in this Third Amendment and not
otherwise  defined in this Third Amendment shall have the meaning  assigned such
term in the Financing Agreement.

     Each of the parties  hereto has agreed to amend the Financing  Agreement as
hereinafter set forth.

     SECTION 1. Amendments to Financing  Agreement.  The financing Agreement is,
effective  as of  the  date  hereof  and  subject  to  the  satisfaction  of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:

     (a) The definition of "Availability" included in Section 1 "Definitions" is
amended in full to read as follows:

          Availability  shall  mean at any time the  excess,  as  determined  by
     Lenders Agent based upon the most recently  delivered  Weekly  Availability
     Report of (A) the sum of a) Eligible Accounts Receivable  multiplied by the
     percentage  provided for in clause (b)(i) of the third  sentence of Section
     3(1)(a) of this  Financing  Agreement  plus b) Eligible  Unbilled  Accounts
     Receivable  multiplied by the percentage  provided for In clause (b)(ii) of
     the third sentence of Section 3(1)((a) of this Financing  Agreement but not
     to exceed the  limitation  set forth  therein,  plus c) Eligible  Inventory
     multiplied by the percentage  provided for in clause  (b)(iii) of the third
     sentence of Section  3(1)(a) of this Financing  Agreement but not to exceed
     the limitation set forth therein, over (B) the

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     Sum of y) the  outstanding  aggregate  amount of all Revolving Loans of the
     Borrower plus z) the maximum amount drawable under the Letters of Credit of
     the Borrower and the maximum  amount  guaranteed  under the  guaranties  of
     CITBC issued pursuant to the Letter of Guaranty Agreement.

     (b)  Each  of  the  following  definitions  will  be  added  to  Section  1
"Definitions" in proper alphabetical order:

          Eligible  Unbilled  Accounts  Receivable  shall mean the then  current
     amount of the Borrower's  Unbilled Accounts Receivable where in the case of
     each Unbilled Accounts  Receivable at least sixty-five percent (65%) of the
     work  required to complete the  manufacture  of the machine upon which such
     Unbilled  Accounts  Receivable  is based is  completed,  less any  Unbilled
     Accounts  Receivable that either are not acceptable to the Required Lenders
     in the exercise of their reasonable  business  judgment,  less any Unbilled
     Account  Receivable  that  upon  completion  of the sale of the  particular
     machine  creating the Unbilled  Account  Receivable such sale will not, for
     any reason,  result in the creation of an Eligible  Account  Receivable and
     less any Unbilled Account Receivable where for any reason the Borrower will
     be unable to complete the manufacture and delivery of the machine  creating
     such  Unbilled  Account  Receivable  in  accordance  with the  terms of the
     purchase order for such machine.

          Unbilled Account  Receivable means, once at least twenty-five  percent
     (25%) of the work required to complete the manufacture of a machine subject
     to a specific purchase order for such machine has been completed, an amount
     equal  to  the  gross  account  receivable  that  will  be  generated  upon
     completion  of  such  particular  machine  multiplied  by  a  fraction  the
     numerator of which is a percentage  (expressed  as a decimal)  equal to the
     percentage  of work that has been  completed on such machine at the time of
     determining such Unbilled  Account  Receivable and the denominator of which
     is one, less any offsetting account or liability.

          (c)  The third  sentence of Section  3(1)(a) of  "Revolving  Loans" is
               amended in full to read as follows:

     Such  loans  and  advances  shall be in  amounts  up to the  lesser  of (a)
     $30,000,000  less the aggregate face amount of all  outstanding  Letters of
     Credit  Guaranties or (b) the sum of the following  less the aggregate face
     amount of all  outstanding  Letters of Credit  Guaranties  (i)  eighty-five
     percent  (85%)  of the  outstanding  Eligible  Accounts  Receivable  of the
     Borrower,  plus (ii) forty percent (40%) of the Existing  Eligible Unbilled
     Accounts Receivable, provided, however, that the amount calculated pursuant
     to this clause  (ii) shall not exceed  $3,000,000  at any time,  plus (iii)
     fifty  percent (50%) of the  aggregate  value of Eligible  Inventory of the
     Borrower,  provided,  however,  that the amount calculated pursuant to this
     clause (iii) shall not exceed $20,000,000 at any time.

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     SECTION 2. Conditions of  Effectiveness.  This Third Amendment shall become
effective  as of the date on which each of the  following  conditions  have been
fulfilled:

          (1) This Third Amendment. The Borrower, CITBC, BNYFC and Lenders Agent
     shall each have executed and delivered this Third Amendment;

          (2) Officer's  Certificate.  The following statement shall be true and
     Lenders Agent shall have received a certificate signed by a duly authorized
     officer of Borrower dated the date hereof stating that, after giving effect
     to this Third Amendment and the transactions contemplated hereby;

               (a) The representations and warranties contained in the Financing
          Agreement  and each of the other Loan  Documents are correct on and as
          to the Date hereof as though made on and as of such date; and

               (b)  No  Default  or  Event  of  Default  has   occurred  and  is
          continuing; and

          (3)   Additional   Documentation.   CITBC  shall  receive  such  other
     approvals, opinions or documents as CITBC may reasonably request.

     SECTION  3.  Reference  to and Effect on the Loan  Documents.  (a) Upon the
effectiveness  of Section 1 hereof,  on and after the date hereof each reference
in the Financing Agreement to "this Agreement",  "hereunder", "hereof", "herein"
or words of like import,  and each  reference in the other Loan Documents to the
Financing Agreement, shall mean and be a reference to the Financing Agreement as
amended hereby.

     (b)The execution,  delivery and effectiveness of this Third Amendment shall
not operate as a waiver of any right,  power or remedy of CITBC under any of the
Loan  Documents,  nor  constitute  a waiver of any  provision of any of the Loan
Documents,  and, except as specifically provided herein, the Financing Agreement
and each  other  Loan  Document  shall  remain in full  force and effect and are
hereby ratified and confirmed.

     SECTION 4. Costs,  Expenses  and Taxes.  The  Borrower  agrees to reimburse
CITBC on demand for all out-of-pocket  costs,  expenses and charges  (including,
without  limitation,  all fees and charges of external  legal counsel for CITBC)
incurred by CITBC in connection with the  preparation,  reproduction,  execution
and delivery of the Third  Amendment  and any  instruments  and  documents to be
delivered hereunder. In addition, the Borrower shall be obligated to pay any and
all stamp and other  taxes and fees  payable  or  determined  to be  payable  in
connection  with the execution  and delivery,  filing or recording of this Third
Amendment and the other instruments and documents to be delivered hereunder, and
agree to save CITBC  harmless  from and  against  any and all  liabilities  with
respect or  resulting  from any delay in paying or omission to pay such taxes or
fees.

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     SECTION 5.  Governing  Law. This Third  Amendment  shall be governed by and
construed in accordance with the laws of the State of New York.

     SECTION 6. Headings.  Section headings in this Third Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Third Amendment for any other purpose.

     SECTION 7. Counterparts. This Third Amendment may be executed in any number
of  counterparts,  all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Third Amendment by signing any
such counterpart.


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     IN WITNESS WHEREOF,  the parties hereto have caused this Third Amendment bo
be duly executed as of the day and year first above written.

     
                                      DeVLIEG-BULLARD, INC.,
                                         as Borrower


                                      By /s/ L. M. Murray
                                         ---------------------------------
                                          Name
                                          Title


                                      THE CIT GROUP/BUSINESS CREDIT, INC.,
                                        as Lender


                                      By /s/ Edward Hirshfield
                                         ---------------------------------
                                            Name  Edward Hirshfield
                                            Title  Assistant Secretary


                                      BNY FINANCIAL CORPORATION,
                                        As Lender


                                      By  /s/ Anthony P. Vassallo
                                         ---------------------------------
                                            Name  Anthony P. Vassallo
                                            Title  Assistant Vice President


                                      THE CIT GROUP/BUSINESS CREDIT, INC.,
                                        as Lenders Agent


                                      By
                                         ---------------------------------
                                        Name
                                        Title