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                                                                    Exhibit 10.1
 
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                           AMENDMENT NUMBER THREE TO
                          LOAN AND SECURITY AGREEMENT

                                BY AND BETWEEN

                          MIDCOM COMMUNICATIONS INC.,
                                 ADVAL, INC.,
                            ADVAL DATA CORPORATION,
                           ADVANCED NETWORK DESIGN,
                         CEL-TECH INTERNATIONAL CORP.,
                                     AND 
                                  PACNET INC.

                                     AND

                         FOOTHILL CAPITAL CORPORATION

                        DATED AS OF SEPTEMBER 17, 1997

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                           AMENDMENT NUMBER THREE TO
                          LOAN AND SECURITY AGREEMENT
                          ---------------------------

     THIS AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT (THIS
"AMENDMENT"), is entered into as of September 17, 1997, by and among FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles,
California 90025-33333, MIDCOM COMMUNICATIONS INC., a Washington corporation
("Midcom"), with its chief executive office located at 26899 Northwest Highway,
Suite 418, Southfield, Michigan 46034, ADVAL, INC., an Oregon corporation
("AdVal"), with its chief executive office located at 200 Galeria Office Center,
Southfield, Michigan 48034, ADVAL DATA CORPORATION, an Oregon corporation
("AdVal Data"), with its chief executive office located at 200 Galeria Office
Center, Southfield, Michigan 48034, ADVANCED NETWORK DESIGN, a California
corporation ("A.N.D."), with its chief executive office located at 14849
Firestone Boulevard, La Mirada, California 90638, CEL-TECH International Corp.,
a Washington Corporation ("Cel-Tech") with its chief executive offices located
at 12826 SE 40th Lane, Factoria, Washington 98004, and PACNET INC., a Washington
corporation ("PacNet"), with its chief executive office located at 26899
Northwest Highway, Suite 418, Southfield, Michigan 46034 (collectively, and
jointly and severally, the "Borrowers").

This Amendment is entered into with reference to the following facts:

     A.   Foothill and the Borrowers have previously entered into that certain
          Loan and Security Agreement, dated as of February 27, 1997 (the
          "Original Agreement");

     B.   Foothill and the Borrowers have previously entered into that certain
          Amendment Number One to Loan and Security Agreement (the "First
          Amendment"), dated as of April 1, 1997 and that certain Amendment
          Number Two to Loan and Security Agreement (the "Second Amendment"),
          dated as of May 29, 1997 (the Original Agreement, as amended by the
          First Amendment and the Second Amendment, is referred to herein as the
          "Agreement");

     C.   The Borrowers have requested that Foothill make certain additional
          amendments to the Agreement, inter alia, to extend additional
          financing in the amount of up to $8,000,000, as set forth in this
          Amendment;

     D.   Foothill is willing to so amend the Agreement in accordance with the 
          terms and conditions hereof; and

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     E.   All capitalized terms used herein and not defined herein shall have 
          the meanings ascribed to them in the Agreement, as amended hereby.

          NOW, THEREFORE, in consideration of the above recitals and the mutual 
promises contained herein, Foothill and the Borrowers hereby agree as follows:

          1.   Amendments to the Agreement.

               a.   Section 1.1 of the Agreement hereby is amended by adding 
the following new defined terms in alphabetical order:

               "Gross Accounts" means 100% of the gross amount of all Accounts,
     including any unbilled Accounts as calculated in accordance with generally
     accepted accounting principles, excluding, however, all credit insurance,
     guaranties, or security therefore.

               "Line Block Amount" means (a) from the date on which the Term
     Loan is first made and until such date as all amounts outstanding under the
     Term Loan are repaid in full in cash, the lesser of (i) $10,000,000 and
     (ii) the sum of $10,000,000 minus an amount, if any, equal to that portion
     of the Borrowing Base composed of Borrowers' Eligible Accounts (and only
     that portion of the Borrowing Base composed of Eligible Accounts) in excess
     of $12,000,000, and (b) from and after the date on which all amounts
     outstanding under the Term Loan are repaid in full in cash, $0.

               "Term Loan" means the term loan  made pursuant to, and defined in
     Section 2.1A hereof.

               "Term Loan Commitment Letter" means that certain letter agreement
     dated as of August 14, 1997 from Foothill to Borrower concerning the
     provision of certain additional financing to Borrower.

               "Third Amendment" means that certain Amendment Number Three to
     Loan and Security Agreement, dated as of September 17, 1997, between
     Foothill and the Borrowers.

               "Warrants" means those certain warrants, in form and substance 
     satisfactory to Foothill and its counsel in their sole discretion,
     convertible into and exercisable for 100,000 shares of Midcom's common
     stock, par value $.0001 per share, issued to Foothill by Midcom pursuant to
     the Term Loan Commitment Letter, and any related documents required by
     Foothill and its Counsel.

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               b.   The following definitions contained in Section 1.1 of the 
Agreement hereby are deleted in their entirety and the following hereby are 
substituted in lieu thereof:

               "Advances" means the advances, made pursuant to, and defined in 
     Section 2.1(a)

               "Average Unused Portion of Facility" means, as of the first day
     of any month, the non-negative amount equal to (a) the then Maximum Amount
     (giving effect to any increases thereof, if any, that have become effective
     before, or that become effective on, such day), minus (b) the sum of (x)
     the average Daily Balance of Advances that were outstanding during the
     immediately preceding month and (y) the outstanding principal amount of the
     Term Loan on such day.

               "Loan Documents" means this Agreement, the First Amendment, the
     Second Amendment, the Third Amendment, the Disbursement Letter, the Lockbox
     Agreements, the Pledge Agreement, the Trademark Security Agreement, any
     Mortgages hereafter delivered by any one or more of the Borrowers to
     Foothill, the Suretyship Agreement, the Intercreditor Agreements, the
     Control Agreements, any note or notes executed by any one or more of the
     Borrowers and payable to Foothill, the Term Loan Commitment Letter, the
     Warrants, and any other agreement entered into, now or in the future, in
     connection with this Agreement.

               "Maximum Amount" means, subject to increase as set forth below,
     $30,000,000 minus the Line Block Amount. From time to time after the date
     on which all amounts outstanding under the Term Loan are repaid in full, in
     cash, Borrower may request an increase in the Maximum Amount, on one or
     more occasions, in increments of $5,000,000 or an integral multiple
     thereof, to an amount not to exceed $50,000,000, such increases to become
     effective in each instance, prospectively, subject to the prior or
     concurrent satisfaction of the Maximum Amount Increase Conditions.

               "Maximum Foothill Amount" means that portion of the Maximum
     Amount for which Foothill shall be responsible, exclusive of any
     participations with Participants. The Maximum Foothill Amount shall be
     equal to the Maximum Amount until such time as Foothill shall obtain one or
     more Participants satisfactory to Foothill to provide commitments in
     respect hereof on terms and conditions satisfactory to Foothill, at which
     time the Maximum Foothill Amount shall be reduced Dollar-for-Dollar by the
     amount of commitments so provided by such Participants; provided, however,
     that in no event shall the Maximum Foothill Amount be less than the lower
     of $15,000,000 and 50% of the Maximum Amount.

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               "Obligations" means the Term Loan, the Advances, and all other 
     loans, debts, principal, interest (including any interest that, but for the
     provisions of the Bankruptcy Code, would have accrued), contingent
     reimbursement obligations owing to Foothill, premiums (including Early
     Termination Premiums), liabilities (including all amounts charged to the
     Loan Account pursuant hereto), obligations, fees or Foothill Expenses
     (including any fees or expenses that, but for the provisions of the
     Bankruptcy Code, would have accrued) lease payments, guaranties, covenants,
     and duties owing by Midcom or any other Borrower to Foothill of any kind
     description (whether pursuant to or evidenced by the Loan Documents or
     pursuant to any other agreement between Foothill and any Borrower, and
     irrespective of whether for the payment of money), whether direct or
     indirect, absolute or contingent, due or to become due, now existing or
     hereafter arising, and including any debt, liability, or obligation owing
     from any Borrower to others that Foothill may have obtained by assignment
     or otherwise, and further including all interest not paid when due and all
     Foothill Expenses that any Borrower is required to pay or reimburse by the
     Loan Documents, by law, or otherwise.

               c.   The following new Section 2.1A is added to the Agreement as
follows:

               2.1A TERM LOAN. Foothill has agreed to convert the Overadvance
     made pursuant to the Term Loan Commitment Letter to a term loan (the "Term
     Loan") to Borrower in the original principal amount of $8,000,000 effective
     upon the satisfaction of the conditions set forth in the Third Amendment.
     The outstanding principal balance and all accrued and unpaid interest under
     the Term Loan shall be due and payable on the earlier or (i) November 1,
     1997 or (ii) upon the termination of this Agreement, whether by its terms,
     by prepayment, by acceleration, or otherwise. The unpaid principal balance
     of the Term 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 Borrower to Foothill. Without limiting anything in the
     forgoing, there shall be no Early Termination Premium payable with respect
     to the Term Loan at any time.

               d.   Section 2.1(c) of the Agreement is hereby amended and 
restated in its entirety as follows:

                    (1)  Section 2.1(c) of the Agreement:

     (c)  Foothill shall have no obligation to make Advances hereunder to the 
     extent they would cause the outstanding Obligations to exceed the lesser of
     (i) the Maximum Amount and (ii) the Gross Accounts. In addition, Foothill
     shall have no obligation to make Advances hereunder to the extent they
     would cause the

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     outstanding Obligations to exceed the lesser of (x) the Maximum Foothill 
     Amount plus the Syndicated Amount and (y) the Gross Accounts.

               e.   Section 2.2 of the Agreement is amended and restated in its
entirety as follows:

               2.2  OVERADVANCES.

                    (a) If, at any time or for any reason, the aggregate amount
     of Obligations with respect to Advances owed by Borrower to Foothill
     pursuant to Section 2.1 is greater than either the dollar or percentage
     limitations set forth in Section 2.1 (an "Overadvance"), Borrower
     immediately shall pay to Foothill, in cash, the amount of such excess to be
     used by Foothill to repay Advances outstanding under Section 2.1.

                    (b) If, at any time or for any reason, the aggregate amount
     of all Obligations owed by Borrower to Foothill exceeds the lesser of (i)
     the Maximum Amount and (ii) the Gross Accounts, Borrower immediately shall
     pay to Foothill, in cash, the amount of such excess to be used by Foothill
     to repay Advances outstanding under Section 2.1.

               f.   Sections 2.3(a), 2.3(b), and 2.3(d) of the Agreement are
hereby amended and restated in their entirety as follows:

     (a)  Except as provided in Section 2.3(b), (i) the Term Loan shall bear
     interest at a per annum rate of 15.00 percent, and (ii) all other
     Obligations (except for the Term Loan) shall bear interest at a per annum
     rate of the Reference Rate plus 1.00 percentage points.

     (b)  Default Rate. From and after the occurrence and during the
     continuation of an Event of Default, (i) the Term Loan shall bear interest
     at a per annum rate equal to 18.00 percent, and (ii) all other Obligations
     (except for the Term Loan) shall bear interest at a per annum rate equal to
     Reference Rate plus 4.00 percentage points.

     (d)  Payments. Interest hereunder shall be due and payable, in arrears, on
     the first day of each month during the term hereof. Each Borrower hereby
     authorizes Foothill to charge, and (unless Foothill receives instructions
     from an Authorized Officer regarding alternative means of payment
     acceptable to Foothill in respect thereof), Foothill shall charge, without
     prior notice to Borrower, such interest, all Foothill Expenses (as and when
     incurred), and all installments or other payments due under the Term Loan
     or any Loan Document to the Loan Account, which amounts thereafter shall
     accrue interest at the rate then applicable to Advances

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     hereunder. Any interest not paid when due shall be compounded and shall 
     thereafter accrue interest at the rate then applicable to Advances
     hereunder.

               g.   The first sentence of Section 2.7 of the Agreement is
amended and restated in its entirety as follows:

               Foothill shall maintain an account on its books in the name of
     the Borrowers (the "Loan Account") on which the Borrowers will be charged
     with all Advances and the Term Loan made by Foothill to the Borrowers or
     for the Borrowers' account, including, accrued interest, Foothill Expenses,
     and any other payment Obligations of the Borrowers, in accordance with
     Section 2.5 and on which the Borrowers will be credited with all payments
     received by Foothill from any Borrower or for the Borrower's account,
     including all amounts received in the Foothill Account from any Lockbox
     Bank.

               h.   The following new Section 2.8(f) is added to the Agreement
as follows:

     (f)   Term Loan Commitment Fee. A one time commitment fee of One Hundred 
     Sixty Thousand Dollars ($160,000), which is earned, in full, upon
     Foothill's receipt of a duly executed counterpart to the Term Loan
     Commitment Letter.

               i.   The introductory phrase to Section 3.2 of the Agreement is
amended and restated in its entirety as follows:

               3.2  CONDITIONS PRECEDENT TO ALL ADVANCES AND THE TERM LOAN. The
     following shall be conditions precedent to all Advances and the Term Loan
     hereunder:

               j.   The introductory phrase to Article 5 of the Agreement is
amended and restated in its entirety as follows:

               In order to induce Foothill to enter into this Agreement, each
     Borrower makes the following representations and warranties with respect to
     such Borrower or its assets, which shall be true, correct, and complete in
     all respects as of the Effective Date, and at and as of the date of making
     of each Advance or the Term Loan made thereafter, as though made on and as
     of the date of such Advance or the Term Loan, (except to the extent that
     such representations and warranties relate solely to an earlier date) and
     such representations and warranties shall survive the execution and
     delivery of this Agreement:

               k.   Section 7.18 of the Agreement is hereby amended and restated
in its entirety as follows:

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          7.18 USE OF PROCEEDS. Use the proceeds of the Advances and the Term
Loan made hereunder for any purpose other than (a) to pay transactional 
costs and expenses incurred in connection with this Agreement, and (b) 
thereafter, consistent with the terms and conditions hereof, for its lawful and 
permitted corporate purposes.

          2.   REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and 
warrants to Foothill that:

               (a)  The execution, delivery, and performance of this Amendment
and of the Agreement, as amended by this Amendment, are within its corporate
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 Agreement, as amended by this
Amendment, constitute Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors
rights generally.
                
          3.   CONDITIONS PRECEDENT TO AMENDMENT.  The satisfaction of each of 
the following, on or before the Third Amendment Closing Deadline, unless waived 
or deferred by Foothill in its sole discretion, shall constitute conditions 
precedent to the effectiveness of this Amendment:

               a.   Foothill shall have received each of the following
documents, in form and substance satisfactory to Foothill and its counsel, duly
executed, and each such document shall be in full force and effect:

                    (1)  this Amendment; and

                    (2)  the Warrants.

               b.   Foothill shall have received an opinion of counsel from 
counsel to the Borrowers acceptable to Foothill and its counsel. 

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               c.   The representations and warranties in this Amendment, the
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);

               d.   No Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default shall have occurred and
be continuing on the date hereof, no shall result from the consummation of the
transactions contemplated herein;

               e.   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 the Borrowers or Foothill; and

               f.   No material adverse change shall have occurred in the
financial condition of the Borrowers, any guarantor, or in the value of the
Collateral;

               g.   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 Foothill
and its counsel.

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

          5.   PAYMENT OF TERM LOAN COMMITMENT FEE.
                         
               a.   The Borrowers and Foothill hereby acknowledge that (i) the
Borrower's have executed and delivered a counterpart of the Term Loan Commitment
Letter to Foothill on August 14, 1997, and (ii) Foothill has received such
counterpart and has charged the term loan commitment fee specified therein and
in Section 2.8(f) of the Agreement, as amended by this Amendment, to Borrower's
Loan Account on that date.

          6.   MISCELLANEOUS.

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

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of like import referring to the Agreement shall mean and refer to the Agreement 
as amended by this Amendment.

               c.   As used in this Amendment, "Third Amendment Closing
Deadline" means September 17, 1997.

               d.   This Amendment shall be governed by and construed in
accordance with the laws of the State of California.

               e.   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 an original executed counterpart of this Amendment. Any
party delivering an executed counterpart of this Amendment by telefacsimile
also shall deliver an original executed counterpart of this Amendment but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.

                 [Remainder of page intentionally left blank.]

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

                                       MIDCOM COMMUNICATIONS INC.,
                                       a Washington corporation

                                       By       
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------


                                       ADVAL, INC.,
                                       an Oregon corporation

                                       By 
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------


                                       ADVAL DATA CORPORATION,
                                       an Oregon corporation

                                       By      
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------


                                       ADVANCED NETWORK DESIGN,
                                       a California corporation

                                       By 
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------


                                       CEL-TECH INTERNATIONAL CORP.,
                                       a Washington corporation

                                       By       
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------

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                                       PACNET INC.,
                                       a Washington corporation

                                       By      
                                          ----------------------------------
                                       Title: President and CEO
                                              ------------------------------


                                       FOOTHILL CAPITAL CORPORATION,
                                       a California corporation

                                       By 
                                          ----------------------------------
                                       Title: 
                                              ------------------------------

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                                       PACNET INC.,
                                       a Washington corporation

                                       By 
                                          ----------------------------------
                                       Title: 
                                              ------------------------------


                                       FOOTHILL CAPITAL CORPORATION,
                                       a California corporation

                                       By   
                                          ----------------------------------
                                       Title: Senior Vice President
                                              ------------------------------

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