EXHIBIT 10(u)


                                                                August 24, 1998

First Union National Bank
205 Church Street
New Haven, CT 06510

Gentlemen:

      This letter sets forth our agreements with respect to the obligations 
described below of Farmstead Telephone Group, Inc. (the "Borrower") to 
First Union National Bank (successor-in-interest to Affiliated Business 
Credit Corporation) ("First Union").

      Borrower acknowledges that it is unconditionally indebted to First 
Union with respect to the revolving loan (the "Revolving Loan") extended by 
First Union to Borrower in the original principal amount of up to 
$3,500,000 which is evidenced by, among other things, a Commercial 
Revolving Loan and Security Agreement dated June 5, 1995, as amended by 
letter agreements between Borrower and First Union dated March 11, 1996, 
May 1, 1996, September 6, 1996, as of May 30, 1997, as of December 1, 1997, 
and May 6, 1998 (collectively, the "Loan Agreement") and a $3,500,000 Third 
Amended and Restated Revolving Promissory Note dated June 6, 1997 (the 
"Third Amended and Restated Revolving Promissory Note"), the current 
principal balance of which as of August 24, 1998 is $2,871,861.30 plus 
interest accrued and accruing thereon and costs and expenses of collection, 
including without limitation, attorneys' fees (collectively, the 
"Indebtedness"). Additionally, Borrower acknowledges that it has no 
defense, offset, counterclaim or right of recoupment to its obligations 
with respect to the Indebtedness and further that it has no other claim 
whatsoever against First Union (whether arising in contract, tort or 
otherwise) with respect to the Indebtedness or any other matter whatsoever.

      Borrower has requested that First Union extend to the Borrower the 
following accommodation (the "Additional Accommodation"): a temporary 
$500,000 increase in the maximum dollar amount of indebtedness that may be 
outstanding under the Loan Agreement from $3,500,000 to $4,000,000, which 
temporary increase shall be available from the date hereof through 
September 30, 1998. Capitalized terms used herein that are not defined 
herein have the meanings ascribed to them in the Loan Agreement.

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

<PAGE>  1

      1.    As an inducement to and in consideration of First Union's 
agreements contained herein, the Borrower represents, warrants and 
acknowledges to First Union that (a) all representations and warranties 
contained in the Loan Agreement and in the other documents executed in 
connection with the Indebtedness (collectively, including without 
limitation the Loan Agreement, the "Loan Documents") are true and correct 
on and as 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 First Union 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) except as expressly 
waived herein, 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 Borrower 
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 Borrower.

      2.    The Loan Agreement is hereby amended as follows:

            (a)  The definition of "Borrowing Base" is hereby deleted in 
            its entirety and the following is substituted in lieu thereof-

            ""Borrowing Base" shall mean an amount equal to the lesser of: 
            (i) (1) from August 24, 1998 through September 30, 1998, FOUR 
            MILLION DOLLARS ($4,000,000), and (2) from and after October 1, 
            1998, THREE MILLION FIVE HUNDRED THOUSAND ($3,500,000), or, in 
            either case, (ii) an amount equal to the aggregate of (1) 
            seventy-five percent (75%) of Eligible Accounts (not including 
            AT&T Coupons (as defined below)), plus (2) the lesser of (A) 
            ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000), or (B) fifty 
            percent (50%) of the amount due to Borrower from American 
            Telephone & Telegraph Company ("AT&T") in connection with the 
            coupons issued in the so-called SPIRIT Communications System 
            Class Action Settlement ("AT&T Coupons") (it being expressly 
            agreed and understood that only the amount by which AT&T's 
            obligations with respect to AT&T Coupons together with all 
            accounts due from AT&T to Borrower exceeds the then amount due 
            from Borrower to AT&T shall be eligible pursuant to this 
            subsection (2)(B)).".

<PAGE>  2

      3.    Borrower acknowledges and affirms that it shall be able to 
request the Additional Accommodation only to the extent that Borrower has 
borrowing availability pursuant to Section (ii) of the definition of 
"Borrowing Base" as currently set forth in the Loan Agreement.

      4.    Contemporaneously herewith, the Borrower shall execute and/or 
deliver to First Union a $500,000 Demand Promissory Note to evidence the 
indebtedness that may arise in connection with the Additional 
Accommodation, which Note shall be in the form of Exhibit A annexed hereto.

      5.    The Borrower acknowledges and agrees that all indebtedness, 
liabilities and obligations of the Borrower to First Union, including 
without limitation, the Indebtedness evidenced by the Third Amended and 
Restated Revolving Promissory Note, shall (except as set forth in the 
Intercreditor Agreements) continue to be secured by a first lien on and 
security interest in all of the Borrower's assets, including without 
limitation the promissory note from FAMS, LLC to Borrower dated December 1, 
1997 and all security therefor.

      6.    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.

                                       Very truly yours,

                                       FARMSTEAD TELEPHONE GROUP, INC.

                                       By: 
                                           --------------------------------
                                           Robert G. LaVigne
                                           Its  Executive Vice President & CFO

Reviewed and Agreed to:

FIRST UNION NATIONAL BANK

By:  
    -------------------------------
    Its

<PAGE>  3

STATE OF CONNECTICUT 
                                       ss:    East Hartford
COUNTY OF HARTFORD
      On this the 24th day of August, 1998 before me, the undersigned 
      officer, personally appeared Robert G. LaVigne who acknowledged that 
      he is the Executive Vice President and CFO of Farmstead  Telephone 
      Group, Inc., a Delaware corporation, and that he as such officer, 
      being authorized so to do, executed the foregoing instrument for the 
      purposes therein contained, as his and its free act and deed.

      IN WITNESS WHEREOF, I hereunto set my hand.

                                           Notary Public 
                                           My Commission Expires  4/30/2003


<PAGE>  4

                                                                      Exhibit A

REVOLVING PROMISSORY NOTE

$500,000                                                        August 24, 1998

      For value received, the undersigned, FARMSTEAD TELEPHONE GROUP, INC., 
a Delaware corporation ("Maker"), promises to pay to FIRST UNION BANK OF 
CONNECTICUT (SUCCESSOR-IN-INTEREST TO AFFILIATED BUSINESS CREDIT 
CORPORATION), or order ("Lender") at its office at 205 Church Street, New 
Haven, Connecticut 06510, or at such other place as the holder hereof 
(including Lender, hereinafter referred to as "Holder") may designate, the 
sum of up to FIVE HUNDRED THOUSAND DOLLARS ($500,000), together with 
interest on the unpaid balance of this Note, beginning as of the date 
hereof, before or after maturity or judgment, at the rate of one half of 
one percentage point (.5%) per annum above the Prime Rate on a floating 
basis, which rate shall be computed daily and payable monthly in arrears on 
the basis of a Three Hundred Sixty (360) day year and actual days elapsed, 
together with all taxes levied or assessed on this Note or the debt 
evidenced hereby against the Holder, and together with all costs, expenses 
and attorneys' and other professional fees incurred in any action to 
collect this Note or to enforce, preserve, realize or foreclose any 
mortgage, security agreement or other agreement securing this Note or to 
preserve, enforce, protect or sustain the lien of said mortgage, security 
agreement or other agreement or in any litigation or controversy arising 
from or connected with said mortgage, security agreement or other agreement 
or this Note. The term "Prime Rate" as used herein shall mean that rate 
announced by the Lender from time to time as its Prime Rate and is one of 
several interest rate bases used by Lender. Lender lends at rates both 
above and below Lender's Prime Rate, and Maker acknowledges that Lender's 
Prime Rate is not represented or intended to be the lowest or most 
favorable rate of interest offered by Lender. Any change in the interest 
rate because of a change in the Prime Rate shall become effective, without 
notice or demand, immediately following any change in the Prime Rate.

      The principal amount of this Note shall be advanced, at the sole 
discretion of Holder, pursuant to a Commercial Revolving Loan and Security 
Agreement between Maker and Lender dated June 5, 1995, as amended by 
various letter agreements between Maker and Lender, the most recent of 
which is dated as of the date hereof (collectively, the "CRLSA") and is 
subject in all respects to the terms and conditions of the CRLSA, 
including, but not limited to, the repayment terms and the termination date 
set forth in the CRLSA. Advances and payments on this Note may be evidenced 
by borrowing certificates, a grid (if any) attached to this Note or similar 
certificates or documents, or by an internal 

<PAGE>  5

ledger account of Lender which shall set forth, among other things, the 
principal amount of any advances and payments thereof. Interest shall be 
paid on the first business day of each and every month commencing on 
September 1, 1998. Holder may, in its sole discretion, charge any amounts 
due hereunder to Maker's revolving loan account maintained with Holder 
pursuant to the CRLSA.

      Maker agrees that (i) if any installment of interest, principal or 
other sum due hereunder is not paid when it is due under this Note, the 
CRLSA or under any instrument evidencing any other obligation of Maker to 
Holder; or (ii) if Maker or Holder shall terminate the CRLSA; or (iii) if 
Maker or any guarantor of any obligation of Maker hereunder shall make an 
assignment for the benefit of creditors or suffer or permit the appointment 
of a receiver for any part of its property or suffer or permit the filing 
by or against it of any petition for adjudication, arrangement, 
reorganization or the like under any bankruptcy or insolvency law; or (iv) 
if an Event of Default shall occur under the CRLSA or any mortgage, 
security agreement or any other agreement securing this Note, any other 
note by Maker to Holder, or in the performance of any other obligation to 
Holder or any other entity or person; or (v) if there shall be any material 
adverse change from the present condition or affairs (financial or 
otherwise) of Maker or any of the guarantors of the obligations of Maker, 
that in Holder's reasonable opinion materially impairs its security or 
increases its risk; then an Event of Default shall have occurred hereunder 
and, upon the happening of any such event, the entire indebtedness with 
accrued interest thereon due under this Note shall, at the option of 
Holder, be immediately due and payable without notice. Failure to exercise 
such option shall not constitute a waiver of the right to exercise the same 
in the event of any subsequent default. Upon the occurrence and during the 
continuance of such an Event of Default, the interest rate on this Note 
shall automatically increase without notice to a floating per annum rate 
equal to two percentage points (2.0%) above the rate otherwise in effect 
hereunder.

      In the event of Maker's failure to pay any installment of interest, 
and/or to pay any other sum due hereunder or under the CRLSA for more than 
ten (10) days after the date it is due and payable, without in any way 
affecting Holder's right to declare an event of default to have occurred, a 
late charge equal to five percent (5%) of such late payment shall be 
assessed against Maker and shall be due and payable immediately.

      Notwithstanding any provisions of this Note, it is the understanding 
and agreement of Maker and Holder (and any guarantors of Maker's 
liabilities) that the maximum rate of interest to be paid by Maker (or 
guarantors of Maker's liabilities) to Holder shall not exceed the highest 
or the maximum rate of interest permissible to be charged by a commercial 
lender such as Lender to a commercial borrower such as Maker under the laws 
of the State of Connecticut.  Any amount paid in excess of such rate shall 
be considered to have been payments in reduction of principal.

      Maker, and each and all guarantors of this Note hereby give Holder a 
lien and right of setoff for all Maker's liabilities upon and against all 
the deposits, credits, collateral and property of Maker and guarantors, now 
or hereafter in the possession or control of Holder or in transit to it. 
Holder may, upon the occurrence of an event of default hereunder or upon 
demand for payment of any demand indebtedness owing from Maker to Holder, 
apply or set off the same, or any part thereof, to any liability of Maker 
even though unmatured.

      Failure by Holder to insist upon the strict performance by Maker of 
any terms and provisions herein shall not be deemed to be a waiver of any 
terms and provisions herein, and Holder shall retain the right thereafter 
to insist upon strict performance by Maker of any and all terms and 
provisions of this Note or any document securing the repayment of this 
Note.

      MAKER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, 
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY 
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR 
THE ENFORCEMENT OF ANY OF HOLDER'S RIGHTS AND REMEDIES, INCLUDING WITHOUT 
LIMITATION, TORT CLAIMS.

      MAKER AND EACH AND ALL GUARANTORS OF THIS NOTE ACKNOWLEDGE THAT THE 
LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS 
RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL 
STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT 
TO ANY PREJUDGMENT REMEDY WHICH HOLDER MAY DESIRE TO USE, AND FURTHER 
WAIVES ITS RIGHTS TO REQUEST THAT HOLDER POST A BOND, WITH OR WITHOUT 
SURETY, TO PROTECT SAID MAKER AGAINST DAMAGES THAT MAY BE CAUSED BY ANY 
PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY HOLDER. Maker further, waive 
diligence, demand, presentment for payment, notice of nonpayment, protest 
and notice of protest, and notice of any renewals or extensions of this 
Note, and all rights under any statute of limitations, and all guarantors 
agree that the time for payment of this Note may be extended at Holder's 
sole discretion, without impairing their liability thereon, and further 
consent to the release of all or any part of the security for the payment 
hereof, at the discretion of Holder, or the release of any party liable for 
this obligation without affecting the liability of the other parties 
hereto.

      MAKER ACKNOWLEDGES THAT IT MAKES THE WAIVERS SET FORTH IN THE TWO 
PRECEDING PARAGRAPHS KNOWINGLY,

<PAGE>  6

VOLUNTARILY AND WITHOUT DURESS AND ONLY AFTER CONSIDERATION OF THE 
RAMIFICATIONS OF SUCH WAIVERS WITH ITS ATTORNEYS. MAKER FURTHER 
ACKNOWLEDGES THAT LENDER HAS NOT AGREED WITH OR REPRESENTED TO MAKER THAT 
THE PROVISIONS OF THE TWO PRECEDING PARAGRAPHS WILL NOT BE FULLY ENFORCED 
IN ALL INSTANCES.

      This Note shall be governed by and construed in accordance with the 
laws of the State of Connecticut (but not its conflicts of law provisions).
FARMSTEAD TELEPHONE GROUP, INC.

                                       By:  
                                           --------------------------------
                                           Its


<PAGE>  7

STATE OF CONNECTICUT )
                                       ss:    East Hartford
COUNTY OF HARTFORD   )

On this the 24th day of August, 1998 before me, the undersigned officer, 
personally appeared Robert G. LaVigne who acknowledged that he is the 
Executive Vice President and CFO of Farmstead Telephone Group, Inc., a 
Delaware corporation, and that he as such officer, being authorized so to 
do, executed the foregoing instrument for the purposes therein contained, 
as his and its free act and deed.  

      IN WITNESS WHEREOF, I hereunto set my hand.

                                       Notary Public
                                       My Commission Expires:  April 30, 2003

<PAGE>  8