EXHIBIT 10(aa)

                             THIS MODIFICATION AGREEMENT, dated as of
                             February 19, 2004, by and between BUSINESS
                             ALLIANCE CAPITAL CORP., a Delaware Corporation,
                             with a place of business at 214 Carnegie
                             Center, Suite 302, Princeton, New Jersey 08540,
                             hereinafter called "BACC," and FARMSTEAD
                             TELEPHONE GROUP, INC., a Delaware corporation,
                             ("Borrower"), with its chief executive offices
                             at 22 Prestige Park Circle, East Hartford, CT
                             06108.

                                  RECITALS
                                  --------
      WHEREAS, BACC and Borrower entered into a Loan and Security Agreement
dated as of February 19, 2003 (said agreement as amended, modified or
extended from time to time the "Loan Agreement") which sets forth the terms
and conditions of One Million Five Hundred Thousand Dollar ($1,500,000.00)
revolving credit facility by BACC to Borrower; and

      WHEREAS, the Initial Term of the Loan Agreement expires on the date
hereof; and

      WHEREAS, Borrower has applied to BACC for a Renewal to February 19,
2005 of the Term of said revolving credit facility, for an increase in the
maximum amount of the revolving credit facility to One Million Seven Hundred
Thousand Dollars ($1,700,000.00), and for other modifications to the terms
and conditions set forth in the Loan Agreement and other Loan Documents; and

      WHEREAS, BACC has approved the application of the Borrower on the
terms and condition set forth herein.

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

1.    Capitalized terms not defined herein but defined in the Loan Agreement
shall have the same meanings ascribed to such terms in the Loan Agreement.

2.    The definition of Termination Date in section 1.1 of the Loan
Agreement is hereby modified to read as follows:

            Termination Date means (a) February 19, 2005 unless such date is
            extended pursuant to section 3.1 hereof, and if so extended on
            one or more occasions the last date of the last such extension,
            or (b) if earlier terminated by BACC pursuant to section 9.1
            hereof, the date of such termination.

3.    Sections 2.1, and 2.9 of the Loan Agreement are hereby modified to
read as follows:

            2.1 Revolving Advances; Advance Limit. Upon the request of
            Borrower, made at any time from and after the date hereof until
            the Termination Date, and so long as no Event of Default has
            occurred and is continuing, BACC may, in its sole and absolute
            discretion, make Advances in an amount up to (a) seventy five
            percent (75%) of the aggregate outstanding amount of Eligible

<PAGE>

            Accounts, plus (b) the lesser of (1) twenty five percent (25%)
            of the aggregate value of the Eligible Inventory or (2) Four
            Hundred Thousand Dollars ($400.000.00) (such lesser of (1) or
            (2) is hereinafter the "Inventory Advance Rate") or (3) thirty
            percent (30%) of the aggregate outstanding principal amount of
            Advances under this Section 2.1; including the Advance in
            question if made, provided, however, that in no event shall the
            aggregate amount of the outstanding Advances under the Revolving
            Credit Facility be greater than, at any time, the amount of One
            Million Seven Hundred Thousand Dollars ($1,700,000.00) (said
            dollar limit the Advance Limit). BACC may create reserves
            against, or reduce its advance percentages based on Eligible
            Accounts or Eligible Inventory without declaring an Event of
            Default if it determines, in its good faith discretion, that
            such reserves or reduction is necessary, including, without
            limitation, to protect its interest in the Collateral and/or
            against diminution in the value of any Collateral, and/or to
            insure the prospect of payment or performance by Borrower of its
            Obligations to BACC are not impaired.

            2.9     Field Examination Fee. Borrower shall pay BACC a fee
            (the Field Examination Fee) in an amount equal to Seven Hundred
            Fifty Dollars ($750.00) per day per examiner, plus out-of-pocket
            expenses for each examination of Borrower's Books or the other
            Collateral performed by BACC or its designee. Notwithstanding
            the foregoing, provided no Event of Default exists or Borrower
            has not made any requests for Advances beyond the lending
            parameters set forth herein, or other requests outside of the
            ordinary course of business, Borrower shall not be obligated in
            any year of the Term to pay more than Nine Thousand Dollars
            ($9,000.00), plus out of pocket expenses, for such examinations.

4.    In accordance with Section 2.7 of the Loan Agreement, contemporaneous
with the execution hereof, Borrower shall pay to BACC a Facility Fee of one
percent (1%) of the Advance Limit (said Facility Fee being Seventeen
Thousand Dollars ($17,000.00)).

5.    Borrower represents that:

      (a)   each and every representation heretofore made by Borrower in the
Loan Agreement is true and correct as of the date of this Modification
Agreement,
      (b)   no consent or approval of, or exemption by any Person is
required to authorize, or is otherwise required in connection with the
execution and delivery of this Modification Agreement and the other Loan
Documents provided for herein, which has not been obtained and which remains
in full force and effect,
      (c)   Borrower has the power to execute, deliver and carry out this
Modification Agreement and all documents executed in connection herewith,
and this Modification Agreement and such other documents are valid, binding
and enforceable as against Borrower in accordance with their terms,
      (d)   no material adverse change in the financial condition of
Borrower has occurred since the date of the most recent financial statements
of Borrower submitted to BACC, and the information contained in said
statements and reports is true and correctly reflects the financial
condition of Borrower as of the dates of the statements and reports, and
such statements and reports have been prepared in accordance with GAAP and
do not contain any material misstatement of fact or omit to state any facts
necessary to make the statements contained therein not misleading, and
      (e)   No default or Event of Default exists under the Loan Agreement.

<PAGE>

6.    Borrower hereby confirms the security interests and liens granted by
Borrower to BACC in and to the Collateral in accordance with the Loan
Agreement and other Loan Documents as security for its Obligations to BACC.
Borrower represents and warrants to BACC, and acknowledges that, as of the
date on which this modification agreement takes effect, it does not have any
claim or offset against, or defense or counterclaim to, BACC, the Loan
Agreement or any other Loan Documents, the indebtedness evidenced by the
Loan Documents, or the liens securing any Obligations, including, without
limitation, any defense or offset resulting from or arising out of breach of
contract or duty, the amount of interest charges, collected, or received on
any Note, or breach of any commitment or promise of any type.

7.    Borrower agrees to pay any and all expenses, including reasonable
counsel fees, including allocated fees of in-house counsel, and
disbursements, incurred by BACC in connection with the preparation and
execution of this Modification Agreement and all other documents executed in
connection herewith.

8.    As set forth in Section 4.6 of the Loan Agreement, as additional
security for the Obligations of Borrower to BACC, Borrower has caused a
standby Letter of Credit in the amount of Three Hundred Thousand Dollars
($300,000.00), to be issued in favor of BACC. BACC hereby agrees to re-
deliver the Letter of Credit for cancellation, and to delete all references
in the Loan Agreement to the Letter of Credit provided that:

      A.    No Event of Default exists, nor does any event exist which with
            the giving of notice or passage of time or both would become an
            Event of Default, if by May 31, 2004 Borrower causes to be
            collaterally assigned to BACC, as additional security for all
            Obligations of Borrower to BACC, a life insurance policy or
            policies on the lives of officers of Borrower, having a cash
            surrender value, net of all loans and other charges, of at least
            Three Hundred Thousand Dollars ($300,000.00), said collateral
            assignment to be, in the sole opinion of BACC, validity
            perfected and superior to the lien or other interest of any
            other party, and with such opinions of counsel and other
            documents and materials as BACC may require, as to the validity
            and enforceability of said collateral assignment, and
      B.    Borrower pays all costs and expenses relative to the foregoing.

9.    This Modification Agreement is intended to supplement and modify the
Loan and Security Agreement dated as of February 19, 2003 between BACC and
Borrower, as heretofore amended or modified, and the rights and obligations
of the parties under said Loan and Security Agreement shall not in any way
be vacated, modified or terminated except as herein provided. All terms and
conditions contained in each and every agreement or promissory note or other
evidence of indebtedness of Borrower to BACC are incorporated herein by
reference. If there is a conflict between any of the provisions heretofore
entered into and the provisions of this Modification Agreement, then the
provisions of this Modification Agreement shall govern.

<PAGE>

10.   This Modification Agreement shall be construed in accordance with the
substantive laws of the State of New Jersey without regard to conflict of
laws.

      IN WITNESS WHEREOF, the parties hereto have caused this Modification
Agreement to be executed and delivered as of the day and year first above
written.

                                  FARMSTEAD TELEPHONE GROUP, INC.


                                  By: /s/ Robert G. LaVigne
                                      ---------------------
                                      name: Robert G. LaVigne
                                      title: Executive Vice President & CFO


                                  BUSINESS ALLIANCE CAPITAL CORP.


                                  By:
                                      ------------------------------
                                      name:
                                      title: