Exhibit 10.1


                                        March 11, 1996


Affiliated Business Credit Corporation
72 Queen Street
Southington, CT 06489


Gentlemen:

      This letter sets forth our agreements with respect to the 
obligations described below of Farmstead Telephone Group, Inc. (the 
"Borrower") to Affiliated Business Credit Corporation ("ABCC").

      The Borrower acknowledges that it is unconditionally indebted to 
ABCC with respect to the demand revolving loan (the "Revolving Loan") 
extended by ABCC to Borrower in the original principal amount of 
$1,500,000 which is evidenced by, among other things, a Commercial 
Revolving Loan and Security Agreement (the "Loan Agreement") and a 
$1,500,000 Revolving Promissory Note, each dated June 5, 1995 (the 
"Revolving Promissory Note"), the current principal balance of which as of 
March 1, 1996 is $1,361,138.28, plus interest accrued and accruing thereon 
and costs and expenses of collection, including without limitation, 
attorneys' fees (collectively, the "Indebtedness"). Additionally, the 
Borrower acknowledges that it has no defense, offset or counterclaim to 
its obligations with respect to the Indebtedness and further that it has 
no other claim whatsoever against ABCC (whether arising in contract, tort 
or otherwise) with respect to the Indebtedness or any other matter 
whatsoever.

      The Borrower has requested that ABCC: (i) increase the maximum 
aggregate amount of advances permitted to be outstanding at any one time 
under the Revolving Loan from $1,500,000 to $2,000,000; (ii) extend the 
Term to May 31, 1997; (iii) temporarily increase the percentage of 
Eligible Inventory included in the Borrowing Base from 25% to 40%, 
followed by a gradual reduction back to 25%; and (iv) consent to the 
investment of $250,000 by the Borrower in a new limited liability company 
owned by the Borrower (the "LLC"), which investment was used by the LLC to 
purchase from AT&T Systems Leasing Corporation ("AT&T") assets located at 
AT&T's facility in Piscataway, New Jersey (collectively, the 
"Accommodations"). Capitalized terms used herein that are not defined 
herein have the meanings ascribed to them in the Loan Agreement.

      ABCC has agreed to extend the Accommodations but only on the 
following terms and conditions:

      1.  As an inducement to and in consideration of ABCC's agreements 
contained herein, the Borrower represents, warrants and acknowledges to 
ABCC that (a) all representations and warranties contained in the Loan 
Agreement and in the other documents executed in connection with the 
Indebtedness (collectively, including the Loan Agreement, the "Loan 
Documents") are true and correct on and as of the date hereof (except as 
set forth on revised schedules to the Loan Agreement to be delivered by 
the Borrower to ABCC within seven (7) days of the date hereof) and are 
incorporated herein by reference and hereby remade; (b) the resolutions 
previously adopted by the Board of Directors of the Borrower and provided 
to ABCC have not in any way been rescinded or modified and are now in full 
force and effect, except to the extent that they have been modified or 
supplemented to authorize this Agreement and the transactions described 
herein; (c) no event of default has occurred or is continuing under any of 
the Loan Documents and no condition exists which would constitute an event 
of default thereunder but for the giving of notice or passage of time, or 
both; and (d) the consummation of the transactions contemplated hereby is 
not prevented or limited by, nor does it conflict with or result in a 
breach of the terms, conditions or provisions of, any evidence of 
indebtedness, agreement or instrument of whatever nature to which the 
Borrower is a party or by which it is bound, does not constitute a default 
under any of the foregoing, and does not violate any federal, state or 
local law, regulation or order of any court or agency which is binding 
upon the Borrower.

      2.  The Loan Agreement is hereby amended as follows:

            (a)  by deleting all references in the Loan Agreement to 
      "$1,500,000" in their entirety and substituting "$2,000,000" 
      therefor;

            (b)  by deleting the definition of Borrowing Base and 
      substituting therefor the following definition: "Borrowing Base" 
      shall mean an amount equal to the lesser of: (i) TWO MILLION DOLLARS 
      ($2,000,000), or (ii) an amount equal to the aggregate of (1) 
      seventy-five percent (75%) of Eligible Accounts and (2) the lesser 
      of (A) the Inventory Advance Percentage of Eligible Inventory, or 
      (B) Maximum Inventory Advance Amount.

            (c)  by adding the following definitions:

      "Inventory Advance Percentage" shall mean 40% during March, April 
and May, 1996; 38% during June, 1996; 37% during July, 1996; 35% during 
August, 1996; 34% during September, 1996; 32% during October, 1996; 31% 
during November, 1996; 29% during December, 1996; 28% during January, 
1997; and 25% from and at all times after February 1, 1997.

      "Maximum Inventory Advance Amount" shall mean $425,000 during March, 
April and May, 1996; $412,500 during June, 1996; $400,000 during July, 
1996; $387,500 during August, 1996; $375,000 during September, 1996; 
$362,500 during October, 1996; $350,000 during November, 1996; $337,500 
during December, 1996; $325,000 during January, 1997; and $300,000 from 
and at all times after February 1, 1997.

            (d)  by deleting clause (ii) of Section 3.1(a) and 
      substituting the following clause (ii): "(ii) a minimum assumed 
      monthly loan balance of (A) prior to May 31, 1996, $600,000, and (B) 
      on and after May 31, 1996, $700,000 (the "Minimum Balance").". 
      Lender agrees that it will consider a modification of the Minimum 
      Balance. Any such reduction in the Minimum Balance will be at the 
      Lender's discretion and shall be based, upon other things, Lender's 
      receipt of evidence that Borrower has raised additional equity;

            (e)  by deleting the reference to "May 31, 1996" in Section 
      12.1(a) and substituting "May 31, 1997" therefor;

            (f)  by adding the following Section 13.14 to the end of the 
      Loan Agreement:

            "Section 13.14 Provisions Relating to Investment in LLC. 
      Notwithstanding any other provision hereof, the Borrower may invest 
      up to $450,000 in Farmstead Asset Management Services, LLC, a 
      Delaware limited liability company (the "LLC"). The Borrower hereby 
      covenants and agrees that (a) the Borrower and its affiliates will 
      continue at all times until the termination of this Agreement to own 
      100% of the equity interests in the LLC; (b) the inventory of the 
      LLC shall be maintained separate from any inventory of the Borrower; 
      (c) all accounts receivable of the LLC will be billed and invoiced 
      under the LLC's name, and there will be no reference to the Borrower 
      in such bills or invoices unless such bills or invoices clearly 
      state that the Borrower and the LLC are separate and distinct 
      corporations; (d) no borrowing certificate, report or other 
      information provided by the Borrower to Lender will list or include 
      any inventory or accounts receivable of the LLC; and (e) the 
      Borrower will not transfer any asset to the LLC or make any loan to 
      or investment in the LLC, except for an investment of $450,000 in 
      the LLC in connection with its purchase of assets from AT&T as 
      referred to above and except for purchases by the Borrower, for fair 
      consideration, of inventory from the LLC in the ordinary course of 
      the LLC's business (it being expressly agreed and understood that, 
      without limiting Lender's discretion, no such inventory shall be 
      Eligible Inventory unless Borrower provides to Lender evidence 
      satisfactory to Lender that (1) Borrower has (A) filed a Notice of 
      Business Activities Report with the appropriate office or agency for 
      New Jersey in the then current year, or (B) received a Certificate 
      of Authority to do business and is in good standing in New Jersey, 
      (2) title to such inventory is held by Borrower, and (3) such 
      inventory is subject to Lender's perfected first security interest 
      and to no other lien or security interest)."

      3.  Contemporaneously herewith, the Borrower shall execute and 
deliver to ABCC: (i) a $2,000,000 Amended and Restated Revolving 
Promissory Note in form and content satisfactory to ABCC (the "Amended and 
Restated Revolving Promissory Note"), which shall supersede and replace 
the Revolving Promissory Note.

      4.  All references in the Loan Agreement to the Revolving Promissory 
Note are hereby deleted and replaced with "Amended and Restated Revolving 
Promissory Note". The copy of the Revolving Promissory Note attached to 
the Loan Agreement as Exhibit A is hereby deleted and a copy of the 
Amended and Restated Revolving Promissory Note attached hereto is attached 
in lieu thereof.

      5.  Contemporaneously herewith, the Borrower shall pay to ABCC a 
commitment fee of $15,000 in consideration of the amendments set forth 
herein.

      6.  Contemporaneously herewith, the LLC shall execute (a) an 
unconditional guaranty, in form and substance acceptable ABCC, of all 
indebtedness of the Borrower to ABCC, now existing or hereafter arising, 
(b) a security agreement, in form and substance acceptable to ABCC, 
pursuant to which the LLC shall grant a lien to ABCC on all of its assets 
as collateral for such guaranty, and (c) financing statements for filing 
in New Jersey and Connecticut.

      7.  Contemporaneously herewith, the Borrower shall execute financing 
statements for filing in New Jersey and Connecticut.

      8.  The Borrower acknowledges and agrees that all indebtedness, 
liabilities and obligations of the Borrower to ABCC, including without 
limitation, the Indebtedness evidenced by the Amended and Restated 
Revolving Promissory Note shall continue to be secured by a first lien on 
and security interest in all of the Borrower's assets.

      9.  This Agreement and the other Loan Documents constitute the 
entire understanding and agreement among the parties hereto and supersede 
any prior or contemporaneous oral understanding with respect to the 
subject matter hereof. Except as expressly modified herein, the Loan 
Documents remain unmodified and in full force and effect in accordance 
with their terms. To the extent that there is a conflict between this 
Agreement and the Loan Documents, the terms of this Agreement shall 
prevail.

      If the foregoing is in accordance with your agreement, please
indicate the same by signing below.



WITNESSED:                              Very truly yours,

__________________________________      FARMSTEAD TELEPHONE GROUP, INC.


__________________________________      By: /s/ Robert G. LaVigne
                                        Its Vice Predident-Finance & Admin.


Reviewed and Agreed to:

AFFILIATED BUSINESS CREDIT CORPORATION


By: /s/ Paul F. Buzzelli
    Its Vice President