Document:

FIRST AMENDMENT
                                TO LOAN AGREEMENT

                  FIRST   AMENDMENT,   dated  as  of  September  30,  1999  (the
"Amendment"),  to the Loan Agreement referred to below, by and among (i) GENERAL
DATACOMM INDUSTRIES,  INC., a Delaware  corporation,  GENERAL DATACOMM,  INC., a
Delaware   corporation  ("GDC"),   DATACOMM  LEASING  CORPORATION,   a  Delaware
corporation,  VITAL  NETWORK  SERVICES,  L.L.C.,  a Delaware  limited  liability
company, GDC NAUGATUCK, INC., a Delaware corporation, GDC FEDERAL SYSTEMS, INC.,
a Delaware  corporation (each, a "Borrower" and collectively,  the "Borrowers"),
(ii)  FOOTHILL  CAPITAL  CORPORATION,  as a lender  ("Foothill"),  (iii)  ABLECO
FINANCE  LLC,  as a  lender  ("Ableco"),  (iv)  MADELEINE  L.L.C.,  as a  lender
("Madeleine"  and together with  Foothill and Ableco,  the  "Lenders"),  and (v)
FOOTHILL CAPITAL CORPORATION, as agent for the Lenders (the "Agent").

                  WHEREAS, the Borrowers,  the Agent and the Lenders are parties
to the  Loan  and  Security  Agreement  dated  as of May  14,  1999  (the  "Loan
Agreement"),  pursuant to which the Lenders have agreed to make certain loans to
the Borrowers secured by the Collateral (as defined in the Loan Agreement);

                  WHEREAS,  GDC has  requested  that the Agent (on behalf of the
Lenders)  release  its  lien on  certain  equipment  (the  "Subject  Equipment")
identified in the Outsource  Manufacturing  and Purchase  Agreement  dated as of
September  30,  1999  (the  "Purchase  Agreement"),  between  GDC and The  Matco
Electronics Group, Inc. (the  "Purchaser"),  pursuant to which GDC will sell the
Subject Equipment to the Purchaser;

                  WHEREAS,  the  Agent is  willing  to  release  its lien on the
Subject  Equipment,  subject to (i) the execution and delivery of this Amendment
by the  Borrowers,  and (ii) the other  terms and  conditions  set forth in this
Amendment; and

                  WHEREAS,  each  Borrower has  determined  that its  execution,
delivery and performance of this Amendment directly benefit,  and are within the
corporate purposes and in the best interests of, such Borrower;

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

         1.1      Definitions in Amendment.  Any capitalized term used herein
and not defined shall have the meaning assigned to it in the Loan Agreement.

         1.2      First Amendment Effective Date.  Section 1.1 of the Loan
Agreement is hereby amended by inserting, in appropriate alphabetical order, a
definition of the term "First Amendment Effective Date" to read in its entirety
as follows:

<PAGE>

                  "'First Amendment  Effective Date' means the date on which all
         of the conditions precedent to the effectiveness of the First Amendment
         to Loan  Agreement  dated as of September  30,  1999,  by and among the
         Borrowers, the Lenders and the Agent, have been fulfilled or waived."

         1.3      Disposal of Assets.  Section of 7.4 of the Loan Agreement is
hereby amended to read in its entirety as follows:

                  "Sell, lease, assign, transfer, or otherwise dispose of any of
         such Borrower's properties or assets other than, (i) sales of Inventory
         to  buyers  in the  ordinary  course  of such  Borrower's  business  as
         currently  conducted,  (ii) the sale of ARC,  or (iii)  the sale of the
         Middlebury Real Property."

         1.4.     Conditions Subsequent.  Section 3.3 of the Loan Agreement is
hereby  amended by inserting a new  paragraph  (f) at the end of such Section to
read as follows:

                  "(f) within 60 days after the First Amendment  Effective Date,
         Agent shall have  received  appraisals of the  Borrowers'  asynchronous
         transfer  mode  technology  and of Vital's  business,  from  appraisers
         acceptable to the Agent, satisfactory in form and substance to Agent."

         2.       Conditions.       The effectiveness of this Amendment is
subject to the  fulfillment,  in a manner  satisfactory to the Agent, of each of
the following  conditions  precedent (the date such  conditions are fulfilled or
waived by the Lender is  hereinafter  referred  to as the  "Amendment  Effective
Date"):

                  (a) Representations and Warranties;  No Event of Default.  The
representations  and  warranties  contained  herein,  in  Section  5 of the Loan
Agreement  and in each other Loan  Document  and  certificate  or other  writing
delivered  to the  Agent  or any  Lender  pursuant  hereto  on or  prior  to the
Amendment  Effective Date shall be correct on and as of the Amendment  Effective
Date as  though  made on and as of such  date,  except to the  extent  that such
representations  and warranties  (or any schedules  related  thereto)  expressly
relate  solely to an  earlier  date (in  which  case  such  representations  and
warranties  shall be true and correct on and as of such date); and no Default or
Event  of  Default  shall  have  occurred  and be  continuing  on the  Amendment
Effective  Date or would  result  from  this  Amendment  becoming  effective  in
accordance with its terms.

                  (b) Delivery of  Documents.  The Lender shall have received on
or before the Amendment Effective Date the following, each in form and substance
satisfactory to the Agent and, unless indicated  otherwise,  dated the Amendment
Effective Date:

                           (i)      the Agent shall have received a true and
correct copy of the Purchase  Agreement,  certified by an authorized  officer of
the Administrative Borrower; and

                           (ii)     such other agreements, instruments,
approvals, opinions and other documents as the Agent may reasonably request.

                                        2

<PAGE>

                  (c)  Proceedings.  All  proceedings  in  connection  with  the
transactions  contemplated  by  this  Amendment,  and all  documents  incidental
thereto,  shall be  satisfactory to the Agent and its special  counsel,  and the
Agent and such special counsel shall have received all such information and such
counterpart  originals  or  certified  copies  of  documents,   and  such  other
agreements,  instruments,  approvals, opinions and other documents, as the Agent
or such special counsel may reasonably request.

         5.       Representations and Warranties.  Each Borrower hereby
represents and warrants to the Agent and the Lenders as follows:

                  (a) Representations and Warranties;  No Event of Default.  The
representations and warranties herein, in Section 5 of the Loan Agreement and in
each other Loan Document and certificate or other writing delivered to the Agent
or any Lender  pursuant  hereto on or prior to the Amendment  Effective Date are
correct on and as of the  Amendment  Effective  Date as though made on and as of
such date, except to the extent that such representations and warranties (or any
schedules related thereto)  expressly relate solely to an earlier date (in which
case such  representations and warranties are true and correct on and as of such
date);  and no Default or Event of Default has occurred and is continuing on the
Effective  Date or would  result  from  this  Amendment  becoming  effective  in
accordance with its terms.

                  (b) Organization, Good Standing, Etc. Such Loan Party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization,  (ii) has all requisite power and authority to
execute,  deliver and perform  this  Amendment  and the other Loan  Documents to
which it is a party being  executed in connection  with this  Amendment,  and to
perform the Loan Agreement, as amended hereby, and (iii) is duly qualified to do
business and is in good standing in each  jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such  qualification  necessary except where the failure to be so qualified
reasonably could not be expected to have a Material Adverse Change.

                  (c)   Authorization,   Etc.   The   execution,   delivery  and
performance by such Loan Party of this Amendment and each other Loan Document to
which it is a party being executed in connection  with this  Amendment,  and the
performance by such Loan Party of the Loan  Agreement,  as amended  hereby,  (i)
have been duly  authorized  by all  necessary  action,  (ii) do not and will not
contravene  such Loan  Party's  charter or by-laws,  any  applicable  law or any
contractual  restriction  binding  on or  otherwise  affecting  it or any of its
properties,  (iii) do not and will not result in or require the  creation of any
Lien (other than pursuant to any Loan  Document)  upon or with respect to any of
its  properties,  and  (iv)  do not  and  will  not  result  in any  suspension,
revocation,  impairment,  forfeiture  or  nonrenewal  of  any  permit,  license,
authorization or approval applicable to its operations or any of its properties.

         6.       Consent.  By executing this Amendment, each Lender hereby
consents  to (i)  the  sale of the  Subject  Equipment  by GDC to the  Purchaser
pursuant to the Purchase  Agreement  and (ii) the release of the Agent's lien on
the Subject Equipment.

                                        3

<PAGE>

         7.       Miscellaneous.

                  (a) Continued  Effectiveness of the Loan Agreement.  Except as
otherwise  expressly  provided  herein,  the Loan  Agreement  and the other Loan
Documents are, and shall continue to be, in full force and effect and are hereby
ratified and confirmed in all  respects,  except that on and after the Amendment
Effective  Date (i) all  references in the Loan  Agreement to "this  Agreement",
"hereto",  "hereof",  "hereunder" or words of like import  referring to the Loan
Agreement shall mean the Loan Agreement as amended by this  Amendment,  and (ii)
all  references in the other Loan  Documents to which any Borrower is a party to
the "Loan Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment.  Except as expressly  provided  herein,  the execution,  delivery and
effectiveness  of this Amendment shall not operate as an amendment of any right,
power or  remedy  of the  Lender  under the Loan  Agreement  or any  other  Loan
Document,  nor constitute an amendment of any provision of the Loan Agreement or
any other Loan Document.

                  (b) Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate  counterparts,  each
of which  shall be deemed to be an  original,  but all of which  taken  together
shall constitute one and the same agreement.

                  (c)      Headings.  Section headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

                  (d)      Governing Law.  This Amendment shall be governed by,
and construed in accordance with, the law of the State of New York.

                  (e) Costs and Expenses.  The  Borrowers  jointly and severally
agree to pay on demand all fees, costs and expenses of the Agent and each Lender
in connection with the preparation, execution and delivery of this Amendment and
the other related agreements, instruments and documents.

                  (f)  Amendment  as  Loan   Document.   Each  Borrower   hereby
acknowledges and agrees that this Amendment  constitutes a "Loan Document" under
the Loan Agreement.  Accordingly, it shall be an Event of Default under the Loan
Agreement if (i) any  representation  or warranty made by a Borrower under or in
connection  with this Amendment  shall have been untrue,  false or misleading in
any  material  respect  when made,  or (ii) a Borrower  shall fail to perform or
observe any term, covenant or agreement contained in this Amendment.

                  (g) Waiver of Jury  Trial.  EACH  BORROWER,  THE AGENT AND THE
LENDER EACH HEREBY  IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED ON  CONTRACT,  TORT OR  OTHERWISE)
ARISING OUT OF OR RELATING TO THIS  AMENDMENT OR THE ACTIONS OF THE AGENT OR ANY
LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

                                        4

<PAGE>

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

                                            Borrowers:

                                            GENERAL DATACOMM INDUSTRIES, INC.,
                                            a Delaware corporation

                                            By  /S/ DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

                                            GENERAL DATACOMM, INC.,
                                            a Delaware corporation

                                            By  /S/  DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

                                            DATACOMM LEASING CORPORATION,
                                            a Delaware corporation

                                            By /S/ DENNIS J. NESLER
                                            Title: V.P. & Treasurer

                                            VITAL NETWORK SERVICES, L.L.C.,
                                            a Delaware limited liability company

                                            By /S/  DENNIS J. NESLER
                                            Title: V.P. & Treasurer

                                            GDC FEDERAL SYSTEMS, INC.,
                                            a Delaware corporation

                                            By /S/ DENNIS J. NESLER
                                            Title:  V.P. & Treasurer

<PAGE>

                                            GDC NAUGATUCK, INC.,
                                            a Delaware Corporation

                                            By  /S/ DENNIS J. NESLER
                                            Title:  V.P. & TREASURER

                                            Agent and Lender:

                                            FOOTHILL CAPITAL CORPORATION,
                                            a California corporation

                                            By /S/ PETER DROOFF
                                            Title: Vice President

                                            Lenders:

                                            ABLECO FINANCE LLC,
                                            a Delaware limited liability company

                                            By /S/
                                            Title:

                                            MADELEINE L.L.C.,
                                            a New York limited liability company

                                            By /S/
                                            Title: Vice President
<PAGE>

                            AMENDMENT NUMBER TWO TO
                           LOAN AND SECURITY AGREEMENT

                  This AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT (this
"Amendment"),  dated as of  December  30,  1999,  is  entered  into by and among
GENERAL DATACOMM INDUSTRIES,  INC., a Delaware corporation  ("Parent"),  GENERAL
DATACOMM,  INC., a Delaware corporation ("General  DataComm"),  DATACOMM LEASING
CORPORATION,  a Delaware corporation ("DataComm Leasing"),  GDC FEDERAL SYSTEMS,
INC., a Delaware corporation ("GDC Federal"),  VITAL NETWORK SERVICES, L.L.C., a
Delaware  limited  liability  company  ("Vital"),  and GDC  NAUGATUCK,  INC.,  a
Delaware  corporation  ("GDC Naugatuck",  and together with the Parent,  General
DataComm,  DataComm  Leasing,  GDC  Federal  and Vital,  each a  "Borrower"  and
collectively the "Borrowers"),  each of the financial  institutions  signatories
hereto (such financial  institutions,  together with their respective successors
and assigns,  each a "Lender" and  collectively,  the  "Lenders"),  and FOOTHILL
CAPITAL CORPORATION, a California corporation, as agent for the Lenders (in such
capacity, the "Agent").

                  WHEREAS,  the  Borrowers  have  requested  the Lender Group to
amend certain terms of that certain Loan and Security Agreement, dated as of May
14,  1999,  by and among the  Borrowers,  the  Lenders,  and Agent (as  amended,
restated,  supplemented,  or  otherwise  modified  from time to time,  the "Loan
Agreement"), and the Lender Group is willing to amend the Loan Agreement subject
to the terms and conditions of this Amendment. All capitalized terms used herein
and not  defined  herein  shall have the  meanings  ascribed to them in the Loan
Agreement, as amended hereby.

                  NOW,  THEREFORE,  in  consideration of the premises and of the
mutual covenants, agreements and conditions hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

1.       Amendments.

(a)      Section 1.1 of the Agreement is hereby amended by adding the following
definitions in alphabetical order:

                           "Applicable  Period"  shall mean (a) with  respect to
         each of the first,  second,  or third  fiscal  quarter of the  Parent's
         fiscal year, 45 days after the end of such fiscal quarter, and (b) with
         respect to the fourth  fiscal  quarter of the Parent's  fiscal year, 90
         days after the end of such fiscal quarter.

                           "Net Worth  Reserve"  shall  mean,  as of any date of
         determination,  an amount equal to: (a) $3,500,000, if the Net Worth of
         Parent is less than  $15,000,000;  (b) $1,500,000,  if the Net Worth of
         Parent  is  greater  than  or  equal  to  $15,000,000   and  less

                                      -1-
<PAGE>

        than  $18,131,000;  and (c) $-0-,  if the Net Worth of Parent is greater
        than or equal to $18,131,000.

                           "Second   Amendment"  means  that  certain  Amendment
         Number Two to Loan and  Security  Agreement,  dated as of December  30,
         1999, by and among the Borrowers and the Lender Group.

                           "Second Amendment  Closing Date" means the date that
        the Second Amendment  initially became effective by its terms.

                           "Term B Loan Conversion  Price" means $5.00 per share
         of Common Stock,  subject to adjustment as provided in Section 15.

                           "Term B Loan Lender  Registration  Rights  Agreement"
         means  that  certain  Registration  Rights  Agreement,  dated as of the
         Closing  Date,  by and between  the Parent and the Term B Loan  Lender,
         with  respect to the shares of Common Stock that Term B Loan Lender may
         acquire and certain rights associated with such shares.

                           "Term C Loan" has the  meaning  set forth in  Section
        2.4(a)(iii).

                           "Term C Loan  Commitment"  means the amount set forth
         opposite such  Lender's  name on Schedule C-1 as such Lender's  "Term C
         Loan  Commitment",  as the  same  may be  adjusted  from  time  to time
         pursuant to the terms of this Agreement.

                           "Term C Loan Conversion  Price" means $9.00 per share
         of Common  Stock,  subject to  adjustment  as  provided  in Section 15;
         provided,  however,  that,  solely in the event that any "daily closing
         price"  (as such term is  defined  below)  during  the  period  between
         December  29, 1999 and the Second  Amendment  Closing Date is $6.00 per
         share or less, then the Term C Loan Conversion Price instead shall mean
         a price per share of Common  Stock  equal to the lower of (a) $9.00 and
         (b) the product of (i) 1.35 times (ii) the "Alternate Base Price" as of
         the Second Amendment Closing Date, subject to adjustment as provided in
         Section 15. For purposes of this definition, the "Alternate Base Price"
         on any date of determination  shall be the average of the daily closing
         prices for the immediately  preceding 10 consecutive  Trading Days. For
         purposes of this  definition,  the closing price for each day (i.e.,  a
         "daily  closing  price") shall be the last reported  sales price or, in
         case no such reported sale takes place on such date, the average of the
         reported  closing  bid and asked  prices in either case on the New York
         Stock Exchange or, if Common Stock is not listed or admitted to trading
         on the New York Stock Exchange,  on the principal  national  securities
         exchange on which  Common Stock is listed or admitted to trading or, if
         not listed or admitted to trading on any national securities  exchange,
         the closing sales price of Common Stock as quoted by NASDAQ or, in case
         no reported sales takes place, the average of the closing bid and asked
         prices as quoted by NASDAQ or any comparable system or, if Common Stock
         is not quoted on NASDAQ or any  comparable  system,  the closing  sales
         price or, in case no  reported  sale takes  place,  the  average of the
         closing bid and asked  prices,  as  furnished by any two members of the
         National Association of Securities Dealers,  Inc. selected from time to
         time by the Parent for that purpose.

                                      -2-
<PAGE>

                           "Term C Loan  Lender"  has the  meaning  set forth in
        Section 15.1.

                           "Term C Loan Lender  Registration  Rights  Agreement"
         means  the  Registration  Rights  Agreement,   in  form  and  substance
         substantially  similar to the Term B Loan  Lender  Registration  Rights
         Agreement,  by and between the Parent and the Term C Loan Lender,  with
         respect  to the  shares of Common  Stock  that Term C Loan  Lender  may
         acquire and certain rights associated with such shares.

(b)      Section  1.1  of  the  Agreement  is hereby  amended by  amending  and
restating the following definitions in their respective entirety as follows:

                           "Commitment"  means, as to any Lender,  the Revolving
         Credit  Commitment of such Lender,  the Term A Loan  Commitment of such
         Lender,  the Term B Loan Commitment of such Lender, and the Term C Loan
         Commitment of such Lender,  as  applicable,  and  "Commitments"  means,
         collectively, the aggregate amount of the Commitments of the Lenders.

                           "Conversion   Price"  shall  mean,   as  the  context
         requires,  (a) the Term B Loan Conversion Price, or (b) the Term C Loan
         Conversion Price. Without limiting the generality of the foregoing, the
         term "Conversion  Price" shall mean the Term B Loan Conversion Price if
         such  term  is  used  in the  context  of  Term B Loan  (including  the
         conversion  thereof) and shall mean the Term C Loan Conversion Price if
         such  term  is  used  in the  context  of  Term C Loan  (including  the
         conversion thereof).

                           "Maximum Revolving Amount" shall mean $35,000,000.

                           "Pro  Rata  Share"  shall  mean,  with  respect  to a
         Lender, a fraction (expressed as a percentage),  the numerator of which
         is the amount of such Lender's  Commitment and the denominator of which
         is the  aggregate  amount of the  Commitments,  provided  that,  if the
         Commitments  have been  reduced  to zero,  the  numerator  shall be the
         aggregate unpaid  principal  amount of such Lender's  Advances and Term
         Loans and interest in Letter of Credit  Obligations and the denominator
         shall be the aggregate  unpaid principal amount of all of the Advances,
         the Term Loans and Letter of Credit  Obligations.  If and to the extent
         that,  pursuant to Section  16.1  hereof,  an assignor  Lender makes in
         favor  of  an  Assignee  a  non-ratable   assignment  of  100%  of  the
         Commitments in respect of the Term A Loan and the Term Loan Obligations
         with  respect to the Term A Loan,  or the Term B Loan and the Term Loan
         Obligations with respect to the Term B Loan, or the Term C Loan and the
         Term Loan Obligations  with respect to the Term C Loan, then,  anything
         in the Loan  Agreement  or the other  Loan  Documents  to the  contrary
         notwithstanding,  for purposes of  determining  "ratability"  among the
         Lenders under the Loan Agreement and the other Loan Document:  (a) when
         used in the context of a Lender's  obligation or Commitment to make the
         Term A Loan or the Term B Loan or the Term C Loan,  as the case may be,
         or a  Lender's  right to receive  payments  in respect of the Term Loan
         Obligations  with  respect to the Term A Loan or the Term B Loan or the
         Term C Loan,  as the case may be, the term "Pro Rata Share"  shall mean
         (i) 100% with  respect to such  Assignee  and (ii) -0-% with respect to
         such  assignor  Lender;  (b) when  used in the

                                      -3-

         context  of a  Lender's obligation or Commitment to make Advances or
         participate in Letters of Credit or a Lender's  right to receive
         payment in respect of the Other Obligations, the term "Pro Rata Share"
         shall mean (i) 100% with respect to the assignor Lender and (ii) -0-%
         with respect to the Assignee;  (c)from and after the Closing Date, the
         then outstanding  principal amount of the Term  Loans  shall be  deemed
         to be the  amount  of the  total Commitments  in respect of the Term
         Loans;  and (d) in all other cases, the term "Pro Rata Share" shall
         have the meaning set forth in the first sentence of this definition.

                           "Registration Rights Agreement" means,  collectively,
         the Term B Loan Lender  Registration  Rights  Agreement  and the Term C
         Loan Lender Registration Rights Agreement.

                           "Term Loans"  means,  collectively,  the Term A Loan,
        the Term B Loan, and the Term C Loan.

(c)     Clause (z) of the definition of "Borrowing Base" set forth in Section
2.1(a) of the Loan Agreement  hereby is amended and restated in its entirety to
read as follows:

                           (z)  the Net Worth Reserve and the aggregate amount
                of reserves, if any, established by Agent under Section 2.1(b).

(d)      The following hereby is added to the Loan Agreement as a new Section
2.4(a)(iii) in proper alphanumerical order:

                           (iii)  Subject  to the terms and  conditions  of this
         Agreement,  each  Lender  that has a Term C Loan  Commitment  severally
         agrees  to  make a term  loan  on the  Second  Amendment  Closing  Date
         (collectively,  the  "Term  C  Loan")  to  Borrowers  in  the  original
         aggregate   principal  amount  equal  to  such  Lender's  Term  C  Loan
         Commitment.  The outstanding principal amount of the Term C Loan (after
         giving effect to any  conversions  pursuant to Section 15 hereof) shall
         be repaid in quarterly  installments  of principal equal to $1,000,000.
         Each such installment  shall be due and payable on the last day of each
         March, June, September, and December,  commencing on March 31, 2001 and
         continuing on the last day of each succeeding March,  June,  September,
         and December  until and including the date on which the unpaid  balance
         of the Term C Loan is paid in full or has been  converted  pursuant  to
         Section 15 hereof. At the Term C Loan Lender's sole discretion and upon
         the Term C Loan  Lender's  delivery  of not less than 3  Business  Days
         prior  written  notice to Agent  and  Borrower,  one or more  scheduled
         principal  payments  due in respect of the Term C Loan may be  deferred
         until the Maturity  Date.  The  outstanding  principal  balance and all
         accrued  and  unpaid  interest  under the Term C Loan  shall be due and
         payable upon the termination of this Agreement (or all Revolving Credit
         Commitments),  whether by its terms, by prepayment, by acceleration, or
         otherwise.  If and only if the Term A Loan has been  repaid in full and
         the Term B Loan has been repaid  and/or  converted in full,  the unpaid
         principal balance of the Term C 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 Borrowers to Agent,  all
         such prepaid  amounts shall be applied to the  installments  due on the
         Term C Loan in the inverse order

                                      -4-
<PAGE>

        of their maturity; provided, however, that (A) notwithstanding anything
        herein to the contrary,  the Term C Loan Lender shall have the right to
        convert up to $4,000,000 of the outstanding  principal  amount of the
        Term C Loan into shares of Common Stock,  pursuant to Section 15 of this
        Agreement,  at any time  during the 30 day period  after the  Borrowers'
        delivery  of written notice  of the  proposed  prepayment  of the  Term
        C Loan  and  (B) no such prepayment  of the Term C Loan shall be made
        unless,  both before and after giving  effect  thereto,  availability is
        not less  than  $1,000,000.  All amounts outstanding under the Term C
        Loan shall constitute Obligations.

(e)      Section 2.5(b)(i) of the Loan Agreement hereby is amended and restated
in its entirety to read as follows:

                           (b)  Apportionment,   Application  of  Payments,  and
         Reversal of Payments.  (i) Except as otherwise provided with respect to
         Defaulting Lenders,  aggregate principal and interest payments shall be
         apportioned   ratably  among  the  Lenders  (according  to  the  unpaid
         principal  balance of each Lender's Advances and Term Loans as to which
         such  payments  relate),  and  payments  of the fees  (other  than fees
         designated for Agent's sole and separate account) shall, as applicable,
         be  apportioned  ratably  among  the  Lenders.  All  payments  shall be
         remitted to Agent and all such payments not relating to principal of or
         interest on specific  Advances or the Term Loans  (other than  payments
         constituting  payment of specific  fees) and all proceeds of Collateral
         received  by  Agent  pursuant  to  this  Agreement  or any  other  Loan
         Document, shall be applied:

                           first, to pay any fees or Lender Group Expenses then
due to Agent from Borrowers until paid in full;

                           second, to pay any fees or Lender Group Expenses then
due to Lenders from Borrowers;

                           third, to pay interest due in respect of all Foothill
Loans and Agent Advances until paid in full;

                          fourth, to pay interest due in respect of all Advances
(other than Foothill Loans and Agent Advances) until  paid in full;

                           fifth,  so long as no Event of Default  has  occurred
and is continuing  or, if an Event of Default has occurred and is continuing and
Agent agrees in its sole discretion,  to pay interest due in respect of the Term
Loans until paid in full (if an Event of Default has occurred and is  continuing
and Agent has not so agreed,  the  priority of such  amounts is deferred to item
"ninth");

                           sixth, to pay or prepay principal of Foothill Loans
and Agent Advances until paid in full;

                           seventh, ratably to pay principal of the Advances
(other than Foothill Loans and Agent Advances);

                                      -5-
<PAGE>

                           eighth,  to be held by  Agent as cash  collateral  in
accordance with Section 2.2(e) hereof with respect to  unreimbursed  obligations
in respect of Letters of Credit until paid in full;

                           ninth, to pay interest due in respect of the Term
Loans until paid in full;

                           tenth, when due and payable, to pay the principal of
the Term A Loan and the Term B Loan until paid in full;

                           eleventh, when due and payable, to pay the principal
of the Term C Loan until paid in full; and

                           twelfth, ratably to pay any other Obligations due to
Agent or any Lender by Borrowers.

                           Agent  shall  promptly  distribute  to  each  Lender,
pursuant to the applicable wire transfer  instructions received from each Lender
in writing, such funds as it may be entitled to receive, subject to a Settlement
delay as provided for in Section 2.1(h).

(f)      Section 2.7(a) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (a) Interest  Rate.  Except as provided in clause (b)
         below:  (i) all Obligations  (except for the Term Loan  Obligations and
         amounts  undrawn  under Letters of Credit) shall bear interest at a per
         annum rate of 0.625 percentage point above the Reference Rate; (ii) all
         Term Loan Obligations with respect to Term A Loan and Term B Loan shall
         bear interest at a per annum rate of 12.50 percent; provided,  however,
         the interest rate on such Term Loans shall automatically increase to 13
         percent  per annum on the first  anniversary  of the  Closing  Date and
         shall  automatically  increase  to 14  percent  per annum on the second
         anniversary  of the Closing Date;  and (iii) all Term Loan  Obligations
         with respect to Term C Loan shall bear  interest at a per annum rate of
         5.00 percentage points above the Reference Rate.

(g)      Section 2.7(c) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (c) Default Rate.  Upon the occurrence and during the
         continuation of an Event of Default:  (i) all  Obligations  (except for
         the Term Loan  Obligations and amounts undrawn under Letters of Credit)
         shall  bear  interest  at a per annum  rate  equal to 2.625  percentage
         points above the Reference  Rate; (ii) all Term Loan  Obligations  with
         respect  to Term A Loan or Term B Loan  shall  bear  interest  at a per
         annum rate equal to 2.00  percentage  points  above the  interest  rate
         applicable to such Term Loans at such time;  (iii) the Letter of Credit
         fee  provided in Section  2.7(b)  shall be increased to 3.50% per annum
         times the amount of the undrawn Letters of Credit that were outstanding
         during  the  immediately  preceding  month;  and  (iv)  all  Term  Loan
         Obligations  with  respect to Term C Loan shall bear  interest at a per
         annum rate equal to 2.00  percentage  points  above the  interest  rate
         applicable to such Term Loans at such time.

                                      -6-
<PAGE>

(h)      Section 2.7(d) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (d)      Minimum  Interest.  (i) In no event shall
the rate of interest chargeable under Section  2.7(a)(i)for any day be less than
7.00% per annum. To the extent that interest  accrued  hereunder at the rate set
forth in Section  2.7(a)(i) would be less than the foregoing minimum daily rate,
the interest rate chargeable under Section  2.7(a)(i) for such day automatically
shall be deemed increased to such minimum rate.

                                    (ii) In no event shall the rate of interest
chargeable under Section  2.7(a)(iii) for any day be less than 13.50% per annum.
To the extent that interest  accrued  hereunder at the rate set forth in Section
2.7(a)(iii)  would be less than the foregoing  minimum daily rate,  the interest
rate chargeable under Section  2.7(a)(iii) for such day  automatically  shall be
deemed increased to such minimum rate.

(i)      Section 2.12(b) of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           (b)      Second Amendment  Closing Fees. On or before
the Second  Amendment  Closing  Date,  (i) a  supplemental  closing fee, for the
ratable benefit of the Lenders with a Revolving Credit Commitment,  of $100,000,
and (ii) a  supplemental  closing fee, for the sole and separate  account of the
Term C Loan  Lender,  of  $200,000;  (j) Section  2.12(c) of the Loan  Agreement
hereby is amended and restated in its entirety to read as follows:

                           (c)      Annual  Facility Fee. (i) On each
anniversary  of the Closing Date,  an annual  facility fee in an amount equal to
0.25% of the Maximum Revolving Amount;  (ii) on each of the first and the second
anniversaries of the Closing Date, a facility fee in an amount equal to 0.50% of
the then  outstanding  principal  amount of the Term A Loan and the Term B Loan;
and (iii) on each anniversary of the Second  Amendment  Closing Date, a facility
fee, for the sole and separate  account of the Term C Loan Lender,  in an amount
equal to 1.00% of the then outstanding  principal amount of the Term C Loan; (k)
Section  3.3(f) of the Loan  Agreement  hereby is amended  and  restated  in its
entirety to read as follows:

                           (f)  within 45 days of the Second  Amendment  Closing
         Date,  Agent and the Lenders  shall have  received an updated  business
         valuation  appraisal of Borrower's  Broadband  Systems  Division and of
         Vital  (as  previously  required  under  the  First  Amendment,   which
         authorized the Matco outsourcing  transaction  described  therein) from
         appraisers  acceptable to the Agent, which valuation appraisal shall be
         in conformity with the form and methodology  used by Arthur Andersen in
         the valuation  appraisals delivered to the Lender Group in May 1999 and
         otherwise in form and substance satisfactory to Agent.

                                      -7-
<PAGE>

(l)      The following hereby is added to the Loan Agreement as a new Section
3.3(g) in proper alphanumerical order:

                           (g) Within 15 days  following  the  Second  Amendment
         Closing Date, Agent shall have received duly executed  originals of the
         Term C Loan  Registration  Rights  Agreement,  in  form  and  substance
         satisfactory  to the Term C Loan Lender,  and the same shall be in full
         force and effect.

(m)      Section 7.11 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                  7.11  Distributions.  Make any  distribution or declare or pay
         any dividends (in cash or other property, other than capital Stock) on,
         or purchase,  acquire, redeem, or retire any of such Borrower's capital
         Stock, of any class, whether now or hereafter outstanding,  except that
         (i) a Subsidiary  of any Borrower may pay  dividends to such  Borrower,
         (ii) so long as both before and after giving effect thereto, no Default
         or Event of Default has occurred and is continuing and  Availability is
         not less than $1,000,000,  Parent may pay regularly scheduled quarterly
         dividends  on  its 9%  Cumulative  Convertible  Exchangeable  Preferred
         Stock,  (iii)  Parent  may  receive  shares  of  its  Common  Stock  in
         consideration  for  the  exercise  of  stock  options  granted  to  its
         employees and directors  (so long as no cash  consideration  is paid by
         Parent or any of its  Subsidiaries),  (iv)  Parent may cancel or retire
         options in  accordance  with its stock  option plans (so long as Parent
         does not make any cash payments in connection therewith, and (v) Parent
         may exchange its 9% Cumulative Convertible Exchangeable Preferred Stock
         for  a  corresponding   amount  of  its  9%  Convertible   Subordinated
         Debentures or its Common Stock (but not for any other consideration).

(n)      Section 7.17 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                           7.17 Use of  Proceeds.  (a) Use the  proceeds  of the
         Advances  and the Term A Loan and Term B Loan  made  hereunder  for any
         purpose  other than (i) on the Closing  Date,  (y) to repay in full the
         outstanding principal,  accrued interest, and accrued fees and expenses
         owing  to  Existing  Lender,  and (z) to pay  transactional  costs  and
         expenses   incurred  in  connection  with  this  Agreement,   and  (ii)
         thereafter,  consistent with the terms and conditions  hereof,  for its
         lawful and permitted corporate purposes.

                           (b)  Use  the  proceeds  of  the  Term  C  Loan  made
         hereunder for any purpose other than (i) solely on the Second Amendment
         Closing Date, (y) to pay  transactional  costs and expenses incurred in
         connection  with the  Second  Amendment,  and (z) to repay  outstanding
         Advances, and (ii) thereafter, consistent with the terms and conditions
         hereof, for its lawful and permitted corporate purposes.

(o)      Section 7.20 of the Loan Agreement hereby is amended and restated in
its entirety to read as follows:

                                      -8-
<PAGE>

                           7.20 Financial  Covenant.  Fail to maintain Net Worth
         at  the  end  of  each  fiscal  quarter  of  the  Parent  of  at  least
         $10,018,000,  determined  in  accordance  with GAAP as in effect on the
         Closing  Date.  If GAAP changes  subsequent  to the Closing  Date,  the
         Parent  will  deliver to the Agent,  within the  Applicable  Period,  a
         statement  reconciling  the  calculation  of Net Worth using GAAP as it
         existed on the  Closing  Date to the Net Worth  calculation  based upon
         financial statements delivered to the Agent for such fiscal quarter.

(p)      Section 15 of the Loan Agreement hereby is amended and restated in its
entirety to read as follows:

                  15.      CONVERSION

                           15.1.   Privilege.   (a)   Subject  to  the   further
         provisions  of  this  Section  15.1,  the  holder  of  the  Term B Loan
         (individually and collectively,  the "Term B Loan Lender") may make one
         or more  elections to convert up to an aggregate of  $3,000,000  of the
         principal  amount of the Term B Loan, at any time or from  time-to-time
         outstanding, into Common Stock at a price equal to the then Term B Loan
         Conversion  Price.  The number of shares of Common Stock  issuable upon
         conversion  of the Term B Loan  shall be  determined  by  dividing  the
         amount of the Term B Loan  elected to be  converted  by the Term B Loan
         Lender by the then Term B Loan Conversion Price. The Term B Loan Lender
         shall be entitled to the rights of a holder of Common Stock only to the
         extent  that the Term B Loan  Lender has  exercised  its  privilege  to
         convert Term B Loan into Common Stock.

                                    (b)  Subject  to the  further  provisions
         of this  Section  15.1,  the  holder  of the Term C Loan
         (individually and collectively,  the "Term C Loan Lender") may make one
         or more  elections to convert up to an aggregate of  $4,000,000  of the
         principal  amount of the Term C Loan, at any time or from  time-to-time
         outstanding,  into  Common  Stock  at a price  equal to the Term C Loan
         Conversion  Price. The number of shares of Common Stock upon conversion
         of the Term C Loan shall be  determined  by dividing  the amount of the
         Term C Loan  elected to be  converted  by the Term C Loan Lender by the
         then Term C Loan  Conversion  Price.  The Term C Loan  Lender  shall be
         entitled  to the rights of a holder of Common  Stock only to the extent
         that the Term C Loan Lender has exercised its privilege to convert Term
         C Loan into Common Stock.

                           15.2.  Procedure.  To convert a portion of the Term B
         Loan or the Term C Loan,  as the case may be, the Term B Loan Lender or
         the Term C Loan  Lender,  as the case may be,  shall (a) furnish on the
         Conversion  Date a  written  notice of its  election  to  convert  such
         portion  of the Term B Loan or the Term C Loan,  as the case may be, as
         it may designate in such written  notice (the  "Conversion  Amount") to
         the Parent,  and (b) surrender the note (if any)  evidencing the Term B
         Loan or the Term C Loan,  as the case may be, to the Parent in exchange
         for a new note in an amount  equal to the  difference  between  (i) the
         then  outstanding  principal  amount  of the  Term B Loan or the Term C
         Loan,  as the case may be,  and (ii)  the  Conversion  Amount  plus the
         aggregate  amount of any prior  Conversion  Amounts  relative to Term B
         Loan or Term C Loan,  as the case may

                                      -9-
<PAGE>

         be.  The date on which the Term B Loan Lender or the Term C Loan
         Lender,  as the case may be,  satisfies such  requirements  is the
         "Conversion  Date."  Within ten days of the applicable Conversion Date,
         the Parent shall deliver to the Term B Loan Lender or the Term C Loan
         Lender, as the case may be, a certificate for the  number  of whole
         shares of the  Common  Stock  issuable  upon the conversion.  The
         person in whose  name the  certificate  is  registered shall be deemed
         to be a shareholder of record on the Conversion Date.

                           15.3.    Fractional  Shares.  The Parent will not
         issue fractional shares of Common Stock upon conversion of the Term B
         Loan or the Term C Loan.  The number of shares of Common  Stock to be
         issued  shall be rounded  down to the nearest whole number.

                           15.4. Taxes on Conversion.  If the Term B Loan Lender
         converts the Term B Loan, the Parent shall pay any  documentary,  stamp
         or similar  issue or transfer  tax due on the issue of shares of Common
         Stock upon such conversion. If the Term C Loan Lender converts the Term
         C Loan, the Parent shall pay any documentary, stamp or similar issue or
         transfer  tax due on the  issue of shares  of  Common  Stock  upon such
         conversion.

                           15.5.  Parent to Provide Stock. (a) At all times, the
         Parent  shall  from and  after  the  date  hereof  reserve,  out of its
         authorized but unissued Common Stock, a sufficient  number of shares of
         Common Stock to permit (i) the  conversion  of up to  $3,000,000 of the
         Term B Loan into shares of Common Stock,  and (ii) the conversion of up
         to $4,000,000 of the Term C Loan into shares of Common Stock.

                           (b)  All  shares  of  Common  Stock   delivered  upon
         conversion  of the Term B Loan shall be newly issued shares or treasury
         shares,  shall  be duly  authorized,  validly  issued,  fully  paid and
         nonassessable  and shall be free from preemptive rights and free of any
         lien or  adverse  claim.  All  shares of Common  Stock  delivered  upon
         conversion  of the Term C Loan shall be newly issued shares or treasury
         shares,  shall  be duly  authorized,  validly  issued,  fully  paid and
         nonassessable  and shall be free from preemptive rights and free of any
         lien or adverse claim.

                           (c) The Parent will endeavor  promptly to comply with
         all federal and state securities laws regulating the offer and delivery
         of shares of Common Stock upon  conversion,  if any, of the Term B Loan
         or the Term C Loan,  as the case may be, and will comply with the terms
         and provisions of the applicable Registration Rights Agreement.

                           15.6.    Adjustment of Conversion  Price.  The
        Conversion  Price shall be adjusted from time to time by the Parent as
        follows:

                           (a) In case the Parent  shall (i) pay a  dividend  in
         shares of Common  Stock to all  holders  of Common  Stock,  (ii) make a
         distribution  in shares of Common Stock to all holders of Common Stock,
         (iii) subdivide its  outstanding  Common Stock into a greater number of
         shares,  or (iv)  combine its  outstanding  Common Stock into a smaller
         number of shares, the applicable Conversion Price in effect immediately
         prior  thereto  shall

                                      -10-

<PAGE>

         be adjusted so that the Term B Loan Lender or the Term C Loan  Lender,
         as the case may be,  shall be entitled to receive that number of shares
         of Common Stock which it would have owned had the Term B Loan or the
         Term C Loan,  as the case  may be,  been  converted immediately  prior
         to the happening of such event.  An adjustment  made pursuant to this
         subsection  (a) shall  become  effective  immediately after  the
         record  date  in  the  case  of a  dividend  in  shares or distribution
         and shall become effective immediately after the effective date in the
         case of subdivision or combination.

                           (b) In case the Parent shall issue rights or warrants
         to all or substantially all holders of Common Stock entitling them (for
         a period commencing no earlier than the record date described below and
         expiring not more than 90 days after such record date) to subscribe for
         or purchase  shares of Common  Stock (or  securities  convertible  into
         Common  Stock) at a price per share less than the current  market price
         per share of Common Stock (as determined in accordance  with subsection
         (e) of this Section 15.6) at the record date for the  determination  of
         shareholders   entitled  to  receive  such  rights  or  warrants,   the
         applicable  Conversion Price in effect  immediately prior thereto shall
         be  adjusted  so that the same  shall  equal  the price  determined  by
         multiplying such Conversion Price in effect  immediately  prior to such
         record date by a fraction of which the numerator shall be the number of
         shares of Common Stock outstanding on such record date, plus the number
         of shares  which the  aggregate  offering  price of the total number of
         shares  of  Common  Stock  so  offered  (or  the  aggregate  applicable
         Conversion  Price  of the  convertible  securities  so  offered)  would
         purchase at such current  market  price,  and of which the  denominator
         shall be the  number  of shares of  Common  Stock  outstanding  on such
         record  date plus the  number  of  additional  shares  of Common  Stock
         offered  (or into  which the  convertible  securities  so  offered  are
         convertible).  Such adjustment shall be made successively  whenever any
         such  rights  or  warrants  are  issued,  and  shall  become  effective
         immediately  after such record date. If at the end of the period during
         which  such  rights  or  warrants  are  exercisable  not all  rights or
         warrants shall have been exercised,  the applicable adjusted Conversion
         Price shall be immediately  readjusted to what it would have been based
         upon the number of additional  shares of Common Stock  actually  issued
         (or the number of shares of Common Stock  issuable  upon  conversion of
         convertible securities actually issued).

                           (c) In case the  Parent  shall  distribute  to all or
         substantially  all holders of Common Stock any shares of capital  stock
         (other than Common Stock) of the Parent  evidences of  indebtedness  or
         other non-cash assets  (including  securities of any company other than
         the Parent), or shall distribute to all or substantially all holders of
         Common Stock rights or warrants to subscribe for or purchase any of its
         securities  (excluding  those  referred  to in  subsection  (b) of this
         Section  15.6)  ("Rights"),  then  in each  such  case  the  applicable
         Conversion  Price  shall be  adjusted  so that the same shall equal the
         price  determined  by  multiplying  such  Conversion  Price  in  effect
         immediately  prior to the date of such  distribution  by a fraction  of
         which the  numerator  shall be the current  market  price per share (as
         defined in subsection  (e) of this Section 15.6) of Common Stock on the
         record date  mentioned  below less the fair market value on such record
         date (as  determined  by the Board of  Directors  of the Parent,  whose
         determination  shall be conclusive  evidence of such fair market value)
         of the  portion  of  the  capital  stock  or  assets  or  evidences  of

                                      -11-

<PAGE>
         indebtedness so distributed or of such rights or warrants applicable to
         one share of Common  Stock  (determined  on the basis of the  number of
         shares of Common Stock  outstanding  on the record date),  and of which
         the denominator shall be the current market price per share (as defined
         in subsection  (e) of this Section 15.6) of Common Stock on such record
         date.  Such adjustment  shall become  effective  immediately  after the
         record date for the  determination of shareholders  entitled to receive
         such distribution. Notwithstanding the foregoing, in the event that the
         Parent  shall  distribute  Rights  (other  than  those  referred  to in
         subsection  (b) of this  Section  15.6) pro rata to  holders  of Common
         Stock,  the Parent  may, in lieu of making any  adjustment  pursuant to
         this Section 15.6, make proper provision so that the Term B Loan Lender
         or the Term C Loan Lender,  as the case may be, upon  conversion of the
         Term B Loan or the Term C Loan,  as the case may be,  after the  record
         date for such distribution and prior to the expiration or redemption of
         the Rights  shall be  entitled  to  receive  upon such  conversion,  in
         addition to the shares of Common Stock  issuable  upon such  conversion
         (the  "Conversion  Shares"),  a number of Rights  to be  determined  as
         follows:  (i) if such conversion occurs on or prior to the date for the
         distribution  to  the  holders  of  Rights  of  separate   certificates
         evidencing such Rights (the  "Distribution  Date"),  the same number of
         Rights to which the Term B Loan  Lender or the Term C Loan  Lender,  as
         the case may be, of a number of  shares  of Common  Stock  equal to the
         number of Conversion  Shares is entitled at the time of such conversion
         in accordance  with the terms and  provisions of and  applicable to the
         Rights and (ii) if such conversion occurs after the Distribution  Date,
         the same number of Rights to which the Term B Loan Lender or the Term C
         Loan  Lender,  as the case may be,  of the  number  of shares of Common
         Stock into which the outstanding principal amount of the Term B Loan or
         the Term C Loan,  as the case may be,  together  with all  accrued  and
         unpaid interest thereon so converted was convertible  immediately prior
         to the  Distribution  Date would have been entitled on the Distribution
         Date in accordance  with the terms and  provisions of and applicable to
         the Rights.

                           (d)  In  case  the  Parent  shall,   by  dividend  or
         otherwise, at any time distribute (a "Triggering  Distribution") to all
         or  substantially  all  holders of Common  Stock  cash in an  aggregate
         amount  that,  together  with the  aggregate  amount of any other  cash
         distributions to all or substantially  all holders of Common Stock made
         within the 12 months  preceding  the date of payment of the  Triggering
         Distribution  and in respect of which no  applicable  Conversion  Price
         adjustment  pursuant to this Section 15.6 has been made, exceeds 50% of
         the product of the current  market  price per share of Common Stock (as
         determined in accordance  with  subsection (e) of this Section 15.6) on
         the Business Day (the "Determination  Date") immediately  preceding the
         day on which such  Triggering  Distribution  is declared by the Parent,
         multiplied by the number of shares of Common Stock outstanding on such
         date  (excluding  shares  held  in  the  treasury  of the  Parent), the
         applicable  Conversion  Price  shall be  reduced so that the same shall
         equal the price  determined by  multiplying  such  Conversion  Price in
         effect  immediately  prior to the  Determination  Date by a fraction of
         which the  numerator  shall be the  current  market  price per share of
         Common Stock (as determined in accordance  with  subsection (e) of this
         Section  15.6) on the  Determination  Date  less the  amount of cash so
         distributed within such 12 months (including,  without limitation,  the
         Triggering  Distribution)  applicable  to

                                      -12-

<PAGE>

         one  share  of  Common  Stock (determined  on the basis of the  number
         of  shares  of  Common  Stock outstanding on the  Determination  Date)
         and the  denominator  shall be such current  market price per share of
         Common Stock (as  determined in accordance   with   subsection   (e)
         of  this  Section  15.6)  on  the Determination  Date,  such  reduction
         to become  effective  immediately prior to the opening of business on
         the day following the date on which the Triggering Distribution is
         paid.

                           (e)  For  the  purpose  of  any   computation   under
         subsections  (b), (c) and (d) of this Section 15.6,  the current market
         price per share of Common  Stock on any date  shall be deemed to be the
         average of the daily closing prices for the 30 consecutive Trading Days
         commencing  35  Trading  Days  before (i) the  Determination  Date with
         respect to  distributions  under subsection (d) of this Section 15.6 or
         (ii) the record date with respect to distributions,  issuances or other
         events requiring such  computation  under subsection (b) or (c) of this
         Section 15.6. The closing price for each day shall be the last reported
         sales price or, in case no such reported sale takes place on such date,
         the average of the reported closing bid and asked prices in either case
         on the New York  Stock  Exchange  or, if Common  Stock is not listed or
         admitted to trading on the New York Stock  Exchange,  on the  principal
         national  securities  exchange  on  which  Common  Stock is  listed  or
         admitted  to trading  or, if not listed or  admitted  to trading on any
         national securities  exchange,  the closing sales price of Common Stock
         as quoted by NASDAQ or, in case no  reported  sales  takes  place,  the
         average of the closing bid and asked  prices as quoted by NASDAQ or any
         comparable  system  or, if Common  Stock is not quoted on NASDAQ or any
         comparable system, the closing sales price or, in case no reported sale
         takes  place,  the  average of the  closing  bid and asked  prices,  as
         furnished by any two members of the National  Association of Securities
         Dealers,  Inc.  selected  from  time  to time by the  Parent  for  that
         purpose. If no such prices are available,  the current market price per
         share shall be the fair value of a share of Common Stock as  determined
         by the Board of Directors of the Parent.

                           15.7. Notice of Adjustment.  Whenever the Term B Loan
         Conversion  Price is adjusted,  the Parent shall  promptly  mail to the
         Term B Loan Lender a notice of the adjustment briefly stating the facts
         requiring the adjustment  and the manner of computing it.  Whenever the
         Term C Loan  Conversion  Price is adjusted,  the Parent shall  promptly
         mail to the  Term C Loan  Lender  a notice  of the  adjustment  briefly
         stating the facts  requiring the adjustment and the manner of computing
         it.

                           15.8     Notice of Certain Transactions.  In the
        event that:

                           (1)      the Parent proposes to take any action which
         would require an adjustment in any Conversion Price;

                           (2) the  Parent  enters  into any  agreement  for its
         consolidation or merger with, or transfer of all or  substantially  all
         of its assets to, another  corporation  and  shareholders of the Parent
         must approve the transaction; or

                           (3)      there is a proposal for the dissolution or
        liquidation of the Parent;

                                      -13-
<PAGE>

         then,  in each case,  the Parent  shall at least ten days  before  such
         date, mail to the Term B Loan Lender or the Term C Loan Lender,  as the
         case may be, a notice stating the proposed effective date.

                           15.9.  Effect  of  Reclassification,   Consolidation,
         Merger or Sale on Conversion Privilege.  If any of the following events
         shall   occur   with   respect   to  the   Parent,   namely:   (a)  any
         reclassification  or change of shares  of Common  Stock  (other  than a
         change in par value,  or from par value to no par value, or from no par
         value to par value, or as a result of a subdivision or combination,  or
         any other change for which an  adjustment is  specifically  provided in
         Section 15.6); (b) any consolidation or merger to which the Parent is a
         party  other  than a  merger  in which  the  Parent  is the  continuing
         corporation   or  other  entity  and  which  does  not  result  in  any
         reclassification  of, or change (other than a change in name, or in par
         value,  or from par value to no par value,  or from no par value to par
         value, or as a result of a subdivision or combination) in,  outstanding
         shares  of  Common  Stock;  or (c)  any  sale or  conveyance  of all or
         substantially all of the assets of the Parent, as an entirety, then the
         Parent or such successor or purchasing  corporation or other entity, as
         the  case  may  be,   shall,   as  a   condition   precedent   to  such
         reclassification,  change,  consolidation,  merger, sale or conveyance,
         execute  and  deliver  to the  Term B Loan  Lender  or the  Term C Loan
         Lender, as the case may be, an agreement providing that the Term B Loan
         Lender or the Term C Loan  Lender,  as the case may be,  shall have the
         right to  convert  the Term B Loan or the Term C Loan,  as the case may
         be,  into the kind and  amount of shares of stock and other  securities
         and property  (including cash)  receivable upon such  reclassification,
         change,  consolidation,  merger,  sale or conveyance by a holder of the
         number of shares of Common Stock issuable upon conversion of the Term B
         Loan or the Term C Loan, as the case may be,  immediately prior to such
         reclassification,  change,  consolidation,  merger, sale or conveyance.
         Such agreement  shall provide for  adjustments of the Conversion  Price
         which  shall  be as  nearly  equivalent  as may be  practicable  to the
         adjustments  of the  Conversion  Price provided for in this Section 15,
         mutatis mutandis.  If, in the case of any such  consolidation,  merger,
         sale  or  conveyance,  the  stock  or  other  securities  and  property
         (including  cash)  receivable  thereupon  by a holder of  Common  Stock
         include shares of stock,  membership interests, or other securities and
         property of a  corporation  or other entity other than the successor or
         purchasing  corporation  or other  entity,  as the case may be, in such
         consolidation,  merger,  sale or conveyance,  then such agreement shall
         also be executed by such other  corporation  or other  entity and shall
         contain such additional provisions to protect the interests of the Term
         B Loan Lender or the Term C Loan  Lender,  as the case may be, that are
         comparable  to the  provisions  set forth in this  Section 15,  mutatis
         mutandis.  The provisions of this Section 15.9 shall similarly apply to
         successive  consolidations,  mergers,  sales  or  conveyances,  mutatis
         mutandis.

(q)      Schedule C-1 hereby is amended and restated in its entirety to read as
set forth in Annex I attached hereto.

2. Conditions.  This Amendment shall become effective only upon  satisfaction in
full of the following  conditions  precedent (the first date upon which all such
conditions have been satisfied being herein called the "Second Amendment Closing
Date"):

                                      -14-
<PAGE>

                           (a)      Agent shall have received on or before the
Second  Amendment  Closing  Date  the  following,  each  in form  and  substance
satisfactory to Agent (and, where indicated,  the applicable Lender) and, unless
indicated otherwise, dated as of the Second Amendment Closing Date:

                                    (i)     counterparts of this Amendment, duly
                 executed by the Borrowers and the Lenders Group;

                                    (ii) the  reaffirmation  and consent of each
                  Guarantor  attached  hereto as  Exhibit A, duly  executed  and
                  delivered by an  authorized  official of each entity  thereof;
                  and

                                    (iii)  such other  agreements,  instruments,
                  approvals, opinions and other documents as Agent or any Lender
                  may reasonably request.

                           (b)      (i) Agent shall have received,  for the
benefit of the Lenders with a Revolving Credit Commitment,  the fee described in
Section 2.12(b)(i) of the Loan Agreement;  and (ii) the Term C Loan Lender shall
have received,  for its sole and separate account,  the fee described in Section
2.12(b)(ii) of the Loan Agreement.

                           (c)      Borrowers shall have a minimum of $3,000,000
of unrestricted cash balances and Availability  after the payment of all amounts
contemplated in Section 7.17(b) of the Loan Agreement and based upon a Borrowing
Base  calculated  using  information  as of a date no earlier than  December 29,
1999,  rolled forward to a date acceptable to the Agent, and after reserving for
amounts necessary to maintain Borrowers' current  liabilities  reasonably within
terms;

                           (d)      the several counsel to the members of the
Lender Group shall have received payment, in immediately available funds, of all
accrued  and  unpaid  attorneys  fees and  expenses  constituting  Lender  Group
Expenses  incurred  in  connection  with  this  Amendment  and the  transactions
contemplated hereunder or reasonably ancillary hereto;

                           (e)      The  representations  and  warranties  in
this Amendment,  the Loan 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);

                           (f)      No Default or Event of Default shall have
occurred  and be  continuing  on the date  hereof,  nor  shall  result  from the
consummation of the transactions contemplated herein;

                           (g)      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  Borrower or the Lender
Group; and

                                      -15-
<PAGE>

                           (h)      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 Agent and its counsel.

3. Representations and Warranties.  Each Borrower hereby represents and warrants
to the Lender Group that (a) the execution,  delivery,  and  performance of this
Amendment and of the Loan Agreement,  as amended by this  Amendment,  are within
its corporate or other  organizational  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 Loan
Agreement,  as amended by this  Amendment,  constitute  such  Borrower's  legal,
valid, and binding  obligation,  enforceable against such Borrower in accordance
with its terms.

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

5.       Miscellaneous.

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

                           (c) This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.

                                      -16-

<PAGE>

                           (d) 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 a manually  executed  counterpart  of this
Amendment.  Any party  delivering an executed  counterpart  of this Amendment by
telefacsimile  also  shall  deliver  a  manually  executed  counterpart  of this
Amendment but the failure to deliver a manually  executed  counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.

                           (e) This Amendment is a Loan Document.

                [Remainder of this page intentionally left blank]

                                      -17-
<PAGE>

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

                                            GENERAL DATACOMM INDUSTRIES, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HERNY
                                            Title: Vice President

                                            GENERAL DATACOMM, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President

                                            DATACOMM LEASING CORPORATION,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President

                                            VITAL NETWORK SERVICES, L.L.C.,
                                            a Delaware limited liability company
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President

                                            GDC FEDERAL SYSTEMS, INC.,
                                            a Delaware corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title:  Vice President

<PAGE>

                                            GDC NAUGATUCK, INC.,
                                            a Delaware Corporation
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            FOOTHILL CAPITAL CORPORATION,
                                            a California corporation, as Agent
                                              and a Lender
                                            By /S/ PETER DROOFF
                                            Title: Vice President

                                            ABLECO FINANCE LLC, as a Lender
                                            By /S/ KEVIN GENDA
                                            Title:  SVP & Chief Credit Officer

                                            A2 FUNDING LP, as a Lender
                                            By: A2 FUND MANAGEMENT LLC,
                                               its General Partner
                                            By /S/ ALEXANDER J. ORNSTEIN
                                            Title: Vice President

                                      -19-
<PAGE>

                                     ANNEX I

                                  Schedule C-1

                                   Commitments

Revolving Loan Commitment           Dollar Amount             Percentage
-------------------------           -------------             ----------

   Foothill                          $35,000,000                  100%
   Ableco                            $-0-                         -0-%
   A2 Funding                        $-0-                         -0-%

Term A Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $12,000,000                100%
   A2 Funding                         $-0-                       -0-%

Term B Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $-0-                       -0-%
   A2 Funding                         $3,000,000                 100%

Term C Loan Commitment              Dollar Amount             Percentage
----------------------              -------------             ----------

   Foothill                           $-0-                       -0-%
   Ableco                             $10,000,000                 50%
   A2 Funding                         $10,000,000                 50%

<PAGE>

                                    EXHIBIT A

                            Reaffirmation and Consent
                            -------------------------

                  All  capitalized  terms used herein but not otherwise  defined
herein shall have the meanings ascribed to them in that certain Amendment Number
Two to  Loan  and  Security  Agreement,  dated  as of  December  30,  1999  (the
"Amendment").  The  undersigned  hereby  jointly and severally (a) represent and
warrant to the Lender Group that the  execution,  delivery,  and  performance of
this   Reaffirmation   and  Consent  are  within  each  of  their  corporate  or
organizational  powers,  have been duly authorized by all necessary corporate or
other  organizational  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 either of them is a party or
by which any of their  properties may be bound or affected;  (b) consents to the
amendment of the Loan Agreement by the Amendment; (c) acknowledges and reaffirms
its obligations owing to the Lender Group under its respective guaranty and each
of the other Loan  Documents  to which it is party;  and (d) agrees that each of
the  guaranties  and the other Loan  Documents  to which they are parties is and
shall  remain in full  force and  effect.  Although  the  undersigned  have been
informed  of the matters set forth  herein and have  acknowledged  and agreed to
same,  they  understand  that the Lender Group has no obligation to inform it of
such matters in the future or to seek its acknowledgement or agreement to future
amendments, and nothing herein shall create such a duty.

                                            GDC REALTY, INC.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            DATACOMM RENTAL CORPORATION
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            GENERAL DATACOMM INTERNATIONAL CORP.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            GENERAL DATACOMM CHINA, LTD.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            GENERAL DATACOMM LIMITED (ENGLAND)
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            VITAL NETWORK SERVICES, LTD.
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice President

                                            GENERAL DATACOMM LTD. (CANADA)
                                            By /S/ WILLIAM G. HENRY
                                            Title: Vice PresidentOUTSOURCE MANUFACTURING AND PURCHASE AGREEMENT

AGREEMENT  made  this  30th day of  September,  1999 by and  between  The  Matco
Electronics  Group,  Inc.,  with  principal  offices at 320 North  Jensen  Road,
Vestal,  NY 13850 on behalf of itself and its Affiliates  (collectively  "MEG"),
and General  DataComm,  Inc.,  with  principal  offices at Park Road  Extension,
Middlebury, CT 06762 ("GDC").

RECITALS:

A. GDC designs,  manufactures and markets voice and data communications products
for the carrier, corporate and government markets, and MEG is in the business of
contract electronics  manufacturing,  with specific emphasis on and expertise in
communications  products,  with core  competency in the areas of printed circuit
board  fabrication,  cable  manufacture,  raw  card  manufacture,   through-hole
production,  surface mount technology,  plastic injection molding,  power supply
manufacture and system level configuration;

B. The parties  desire to  establish a business  relationship  whereby GDC shall
appoint MEG its primary  manufacturing  vendor, and divest and outsource certain
portions of its manufacturing  operations to MEG, which will then through one or
more of its Affiliates (as defined below) and upon the prior written  permission
of  GDC,  which  permission  shall  not be  unreasonably  withheld,  as to  such
Affiliate and the specific  manufacturing facility to be used,  manufacture,  as
required by GDC,  certain GDC Products (as defined  below) for exclusive sale to
GDC;

C. As part of such outsourcing of the GDC manufacturing operations,  the parties
shall initially  perform joint  activities to assemble and test the GDC Products
at the GDC Naugatuck, CT facility and at MEG facilities.  MEG shall complete the
transition  of such  operations  to a MEG  manufacturing  facility or facilities
within one hundred  twenty (120) days and shall  Manufacture  (as defined below)
the GDC Products. In addition, MEG shall purchase from GDC certain manufacturing
equipment, work in process and raw material inventory at the Closing (as defined
below);

NOW,  THEREFORE in consideration of the mutual promises  contained  herein,  and
other good and valuable  consideration,  the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:

1.0      DEFINITIONS AND SCHEDULES

1.1 "Affiliate" means those  corporations,  companies or other entities directly
or indirectly  controlled,  controlled  by or under common  control with or by a
party hereto.  "Control"  means  ownership or control of more than fifty percent
(50%) of the

                                        1

<PAGE>

outstanding  shares  or  securities  (representing  the  right  to vote  for the
election of directors or other managing  authority) of an entity.  Such entities
shall be deemed  to be  Affiliates  only so long as such  ownership  or  control
exists.  The MEG Electronics  Group,  Inc. shall be responsible for the acts and
omissions of its Affiliates hereunder.

1.2      "GDC Product(s)" means those products to be Manufactured by MEG
hereunder as set forth in Schedule 1.

1.3 "Technical  Information" means (i) two (2) sets of applicable  manufacturing
drawings and  documents as shown below and provided by GDC for each GDC Product;
and (ii) such other related design and technical documents  reasonably available
at GDC and necessary to enable MEG to Manufacture  the GDC Products  (Electronic
data/information will be provided if available):

          1.       Specification of GDC Product;
          2.       Assembly Drawings and Parts Drawings;
          3.       Purchase Specifications of Parts and Components;
          4.       Bill of Materials;
          5.       Assembly Instructions;
          6.       Manufacturing Instructions;
          7.       Test Instructions;
          8.       Test and Inspection Standards;
          9.       Test and Operational Software (including both object and
                   source code);
         10.       Part and Component Sourcing; and
         11.       Die and Tool Drawings.

1.4  "Intellectual  Property  Rights"  means all  current  and future  worldwide
patents,  copyrights,  mask work rights,  trade secrets,  and other intellectual
property rights and the documentation or other tangible expression thereof.

1.5 "Transition  Period" means,  with regard to each GDC Product,  the period of
time that the GDC Product is manufactured  at the GDC Naugatuck,  CT facility or
is in process of transition to production at MEG facilities.

1.6 "Post-Transition  Period" means, with regard to each GDC Product, the period
of time that the GDC Product is Manufactured by MEG at a MEG facility.

1.7 The  following  Schedules  are  attached  hereto,  an integral  part of this
Agreement and incorporated by this reference:

         Schedule 1 -      GDC Product(s) Specifications
         Schedule 2 -      Purchase Prices
         Schedule 3 -      Delivery Performance Requirements
         Schedule 4 -      Quality Requirements
         Schedule 5 -      (Deleted)
         Schedule 6 -      Manufacturing Specifications

                                        2

<PAGE>

         Schedule 7  -     Manufacturing Equipment
         Schedule 8  -     Initial Six Month Forecast (By Quarter)
         Schedule 9  -     Raw Material Inventory
         Schedule 10 -     Work in Process Inventory

1.8 "Manufacture",  "Manufactured" or "Manufacturing"  means, with regard to the
performance  of by MEG of its  obligations  hereunder,  the  performance  of the
following operations in the order as set forth below:

         1.       SMT (Surface Mount Technology) Assembly;
         2.       PTH (Pin Through Hole) Assembly;
         3.       In-Circuit Testing;
         4.       Functional Testing;
         5.       Environmental Stress Screening;

1.9      The "Recitals" above are an integral part of this Agreement as if fully
set forth in the body hereto.

2.0       TERM

2.1 "Term" shall mean the period commencing on the Closing Date and ending three
(3) years thereafter.  The Term may be renewed upon the written agreement of the
parties.

3.0       SCOPE

3.1 MEG shall be GDC's primary  outsource  manufacturing  vendor for (i) the GDC
surface mount technology  manufacturing ("SMT") and (ii) all other manufacturing
currently outsourced by GDC to third parties (the "Third Party Outsource"), both
subject to the following conditions:

          3.1.1  MEG  is not in  breach  of any of its  material  obligations
                 hereunder;

          3.1.2  GDC shall at all times  have the  right to  outsource  to third
                 parties up to fifteen  percent (15%) of the total dollar volume
                 of its manufacturing  requirements in any manner and proportion
                 of GDC  Products  and Third  Party  Outsource  products  of its
                 choosing;

          3.1.3  MEG must  qualify  for each  product of Third  Party  Outsource
                 prior to the  commencement  of the Manufacture of such product.
                 "Qualify" means that (i) the Third Party Outsource product must
                 be within the specific MEG core  competencies of either printed
                 circuit board fabrication,  cable  manufacturing,  through-hole
                 production,  SMT or plastic  injection  molding,  (ii) MEG must
                 build a specific  number of each such  products (as  reasonably
                 determined by GDC)for  inspection by GDC with regard to quality
                 and conformance to specifications,

                                        3

<PAGE>

                (iii)  GDC  must  approve  such   products  as  to  quality  and
                conformance   to   technical    specifications    and   delivery
                requirements in writing,  (iv) the MEG quoted Purchase Price for
                such  products  must be no more  than  the  then  current  price
                charged  GDC by the third party  manufacturer,  and (v) MEG must
                comply with any unique, mandatory requirements for such products
                (see subsection 3.1.4 below).

          3.1.4  In the  event a  product  of  Third  Party  Outsource  or a GDC
                 Product  has or  subsequently  develops  a unique or  mandatory
                 requirement  and MEG cannot  meet such  requirement,  GDC shall
                 have the right to  continue  to  outsource  (or to  award)  the
                 manufacture  of  such  product  to  third  parties,   and  such
                 production shall not be included in the GDC total dollar volume
                 manufacturing  requirements for purposes of calculating the 15%
                 threshold  above.  By way of example  and not  limitation,  the
                 obligation  to   manufacture  a  product  within  a  particular
                 country,  or to  provide a  product  within a  particular  high
                 tariff  country  at a  specific  low  price  are  both  unique,
                 mandatory requirements.

          3.1.5  In the event GDC  terminates  this Agreement in part for breach
                 of MEG with regard to a specific GDC Product in accordance with
                 Section  22.3.2  below,  then GDC shall have the right to award
                 the manufacture of such GDC product to any third party and such
                 production shall not be included in the GDC total dollar volume
                 manufacturing  requirements for purposes of calculating the 15%
                 threshold above.

          3.1.6  MEG shall  purchase from each  manufacturer  of the Third Party
                 Outsource products that MEG has qualified for, all raw material
                 inventory and WIP of such  manufacturer that can be used in the
                 Manufacture by MEG of the qualified  product.  Excess material,
                 outside of  component  lead time,  will be  reviewed by MEG and
                 procured as required to support GDC's forecast.

3.2 The initial price quoted by MEG for each Third Party Outsource product shall
be reviewed in  accordance  with the Purchase  Price  formula set forth below in
Section 12.1, at the point which is six (6) months after MEG is Manufacturing at
least eighty five percent (85%) of the GDC requirement for such product,  not to
exceed  twelve  (12)  months  from the date GDC  provided  to MEG the  Technical
Information for such product for  qualification  purposes.  Except to the extent
caused by unusual or unexpected  market price  fluctuations,  and then only upon
the mutual  agreement  of the parties,  any revised  price  resulting  from such
review  shall not exceed the price  paid by GDC to the former  manufacturer  for
such  product.  The "price paid by GDC" shall be the contract  price between GDC
and the former  manufacturer  at the time of the  commencement of Manufacture by
MEG.

3.3 To the extent in the possession of GDC, GDC shall provide to MEG, as soon as
practical after the Closing Date, all Technical Information and the current turn
key price,  material and labor with regard to each Third Party Outsource product
reasonably required by MEG in order to qualify for such products;  however,  MEG
acknowledges that GDC

                                        4

<PAGE>

requires  that  such  requests  do not pose a burden  to its  staff  during  the
Transition  Period,  nor provide any advance  notice to its current  Third Party
Outsource  manufacturers of the relationship hereof, and both factors can affect
the time required by GDC to gather and deliver such Technical  Information.  MEG
also  acknowledges  that it is the requirement of GDC that the MEG qualification
of Third Party  Outsource  products does not cause either party to be distracted
from the initial  goal of  transitioning  the SMT  production  to MEG during the
Transition  Period.  It is  the  intention  of the  parties  that  MEG  commence
production of those qualified Third Party Outsource  Products  approximately six
(6) months after the Closing Date,  and the parties will work  together  towards
such  goal;  however,  the actual  commencement  date may be earlier or later as
agreed by the parties.

3A.0     CLOSING

3A.1 The closing (the "Closing") under this Agreement shall be held on September
30, 1999 (the "Closing Date").  The Closing shall take place at the headquarters
of GDC in Middlebury, CT or at such other place as the parties may agree. At the
Closing,  (i) GDC shall  deliver to MEG such  documentation  as is  necessary to
transfer title, (including releases of all liens, encumbrances, and all required
consents),  to the  Manufacturing  Equipment and that certain portion of the GDC
raw material  inventory and Work In Process  Inventory from GDC to MEG, and (ii)
MEG shall pay and  deliver  to GDC the  purchase  price for such  equipment  and
inventory in the amount and form as specified below.

3A.2 The obligation of GDC to close is conditional subject to the receipt by GDC
of the consent to this Agreement by its lenders.

4.0      REPRESENTATIONS, WARRANTIES, AND COVENANTS OF MEG

MEG represents and warrants to GDC as follows:

4.1 MEG has the  requisite  expertise  to perform the  Manufacturing  of the GDC
products  and  shall  commit  sufficient   resources  to  meet  its  obligations
hereunder.

4.2 The MEG  Electronics  Group Inc. is a corporation  duly  organized,  validly
existing and in good  standing  under the laws of the State of Delaware and each
Affiliate performing  Manufacturing  hereunder shall be duly organized,  validly
existing,  and in good standing under the laws of the state of its incorporation
or organization,  and MEG and each Affiliate shall be duly qualified and in good
standing to perform such  Manufacturing in the  jurisdiction  where GDC Products
shall be Manufactured.

4.3 MEG shall at all times  comply  with all  federal,  state and local laws and
regulations  applicable  to  and  in  connection  with  the  performance  of its
obligations hereunder.

4.4 All MEG  facilities  used to  Manufacture  GDC Products are and shall at all
times be ISO 9002 certified.

                                        5

<PAGE>

4.5 The financial  statements of the MEG Electronics  Group Inc.,  including its
Affiliates,  dated  December 31, 1998  delivered to GDC on September 8, 1999 are
correct and complete and accurately present the financial  condition and results
of  operations  of MEG and its  Affiliates  as of and for  the  year  ending  on
December 31, 1998,  and were  prepared in  accordance  with  generally  accepted
accounting  principles.  Since  December  31,  1998  there has been no  material
adverse  change to the  financial  condition  of MEG.  MEG shall  deliver to GDC
within ninety (90) days following the closing of each MEG fiscal year, financial
statements (audited, if available) for such fiscal year.

4.6 There are no actions or proceedings pending or threatened against MEG or its
Affiliates  and MEG has no  knowledge or belief of any  pending,  threatened  or
imminent litigation,  governmental investigations or claims, complaints, actions
or  prosecutions  involving MEG or any Affiliate  which if adversely  determined
would impair their ability to perform hereunder.

4.7  MEG is not a  party  to any  collective  bargaining  agreement  at any  MEG
facility that will be used to Manufacture GDC Products.  MEG's relationship with
its employees at all such facilities is excellent and there are and have been no
strikes, lockouts, other work stoppages,  picketing or labor disputes during the
past  five (5)  years in which  MEG or any of its  Affiliates  or  manufacturing
facilities are or were involved,  and no event has transpired or is contemplated
which has had or will have a material adverse effect on the relationship between
MEG and its employees.

4.8 There  shall be no liens  pending or  threatened  against  the GDC  Products
Manufactured  hereunder  by MEG and all shall be delivered to GDC free and clear
of all liens, claims and encumbrances.

4.9 The representations,  warranties, and covenants of MEG above are in addition
to and not in lieu of any other  representations,  warranties,  and covenants of
MEG set forth elsewhere in this Agreement.

5.0      PURCHASE AND SALE OF MANUFACTURING EQUIPMENT

5.1 GDC agrees to sell to and transfer to MEG,  and MEG agrees to purchase  from
GDC  at  the  Closing,   subject  to  the  terms  and  conditions   herein,  the
manufacturing equipment set forth in Schedule 7 (the "Manufacturing Equipment").

5.2 As the purchase price for the Manufacturing  Equipment, MEG shall pay to GDC
at the  Closing  the  amount  of Three  Million  One  Hundred  Thousand  Dollars
($3,100,000.00)  in cash  payable  by wire  transfer  in  accordance  with  wire
transfer instructions provided MEG prior to the Closing.

5.3  Solely  with  regard  to the  Manufacturing  Equipment,  GDC  warrants  and
represents to MEG to the best of GDC's knowledge:

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<PAGE>

         5.3.1    The  Manufacturing  Equipment that is currently used by GDC in
                  the  Manufacture  of the  GDC  Products  is in a  commercially
                  reasonable state of repair and operating  condition,  ordinary
                  wear and tear and obsolescence excepted and;

         5.3.2    GDC will  transfer  to MEG at the  Closing  good  title to the
                  Manufacturing Equipment, free and clear of security interests,
                  mortgages, liens, attachments and encumbrances;

         5.3.3    GDC  will   maintain   the   Manufacturing   Equipment   in  a
                  commercially   reasonable   state  of  repair  and   operating
                  condition,  ordinary wear and tear and obsolescence  excepted,
                  until the  Manufacturing  Equipment is  physically  shipped to
                  MEG;

         5.3.4    GDC will be responsible  for  dismantling  and safe loading of
                  all manufacturing equipment purchased by MEG. MEG will pay for
                  transportation   and   set-up  of  the   equipment   at  MEG's
                  manufacturing facilities.

5.4 GDC makes no other warranties or  representations of any kind with regard to
the  Manufacturing  Equipment,  either  express  or implied  including,  but not
limited to, the  implied  warranties  of  noninfringement,  merchantability  and
fitness for a particular  purpose.  Except to the extent caused by MEG, the risk
of loss of or damage to the Manufacturing  Equipment shall be borne by GDC while
such equipment is at the GDC Naugatuck facility.

5A.0       PURCHASE AND SALE OF GDC RAW MATERIAL INVENTORY

5A.1 MEG shall  purchase from GDC as needed,  raw material from GDC's  inventory
that meets MEG's production requirements hereunder. A listing of that portion of
GDC's raw material  inventory  to be consumed  during the three (3) month period
after the Closing  Date  (determined  as of the last Friday prior to the Closing
Date) is set forth in Schedule 9 and shall be  purchased  by MEG from GDC at the
Closing.  The purchase and  utilization  of such GDC raw material by MEG for the
Manufacture  of GDC Products  shall at all times have priority over the purchase
and utilization by MEG of raw material supplied by third parties. MEG's purchase
from GDC during the Term of raw material in excess of or different  from the raw
material set forth in Schedule 9, MEG shall purchase such material from GDC at a
price that is competitive with the best price MEG sources of supply for the same
material.

5A.2 "As needed" above means that MEG, in addition to purchasing from GDC at the
Closing, such raw material set forth in Schedule 9, shall purchase from GDC such
additional raw material as requirements are identified.

5A.3 As the  purchase  price for the raw  material  set forth in Schedule 9, MEG
shall pay to GDC at the  Closing the amount of Four  Million  Six Hundred  Fifty
Thousand  Seven Hundred Eighty Four Dollars  ($4,650,784.00)  in cash payable by
wire transfer in accordance with wire transfer  instructions  provided MEG prior
the Closing.

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<PAGE>

5A.4 To the extent  provided to GDC by the suppliers of the raw material  above,
and  assignable  by GDC,  GDC  shall  pass  through  to MEG  such  raw  material
warranties.  GDC makes no other warranties or  representations  of any kind with
regard to the raw material, either express or implied including, but not limited
to, the implied warranties of noninfringement, merchantability and fitness for a
particular purpose.

5A.5 No  later  than  January  31,  2000,  the  parties  shall  agree  upon  any
post-Closing operating adjustments to be made to the initial purchase of the raw
material set forth in Schedule 9 by MEG. Such adjustment  shall be determined by
comparing the actual amount of the raw material inventory as of the Closing Date
to the amount of the raw  material  inventory  as set forth in  Schedule  9. The
adjustment will be made as a debit or credit adjustment between GDC and MEG.

5A.6 In the  event  that MEG has  material  requirements  in other  areas of its
business that can be satisfied (as reasonably determined by MEG) by the purchase
from GDC of excess raw material not purchased above, MEG shall purchase such raw
material  from GDC at a price  that is  competitive  with  other MEG  sources of
supply.  MEG shall  assist GDC with the  disposal of any obsolete and excess raw
material not purchased by MEG.

6.0      PURCHASE AND SALE OF WORK IN PROCESS

6.1 GDC agrees to sell to and transfer to MEG,  and MEG agrees to purchase  from
GDC at the Closing,  subject to the terms and  conditions  herein,  the material
component of the Work in Process ("WIP").  Set forth in Schedule 10 is a listing
of WIP as of June 30, 1999.

6.2 As the purchase price for the WIP set forth in Schedule 10, MEG shall pay to
GDC at the Closing the amount of One  Million  One Hundred  Thirty Six  Thousand
Nine Hundred Eighteen Dollars  ($1,136,918.00)  in cash payable by wire transfer
in accordance with wire transfer instructions provided MEG prior the Closing.

6.3 To the extent  provided to GDC by the  suppliers  of the raw material in the
WIP above, GDC shall pass through to MEG such raw material warranties. GDC makes
no other  warranties  or  representations  of any kind  with  regard  to the raw
material in the WIP,  either express or implied  including,  but not limited to,
the implied  warranties of  noninfringement,  merchantability  and fitness for a
particular purpose.

6.4  No  later  than  January  31,  2000,  the  parties  shall  agree  upon  the
post-Closing  operating  adjustments  to be made to the  purchase of WIP by MEG.
Such adjustment  shall be determined by comparing the actual amount of WIP as of
the  Closing  Date  to the  amount  of WIP as set  forth  in  Schedule  10.  The
adjustment will be made as a debit or credit adjustment between GDC and MEG.

6A.0     START UP FEES

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<PAGE>

6A.1 GDC shall pay to MEG at the  Closing  the amount of One Million One Hundred
Thousand Dollars  ($1,100,000.00)  as an outsourcing start up and administration
fee. The amount of this fee shall be offset by and deducted from the amounts due
GDC at Closing.

7.0      OPEN PURCHASE ORDERS

7.1 GDC shall retain  responsibility for all purchase orders issued to suppliers
for the  procurement  of raw material,  that are executory in part or full as of
the Closing Date (the "Open POs"). In the event,  during the Transition  Period,
there are production requirements that cannot be satisfied by the Open POs or by
inventory  purchased  by MEG as set forth in  Schedules 9 and 10, then GDC shall
issue new purchase orders to MEG for such raw material requirements; however GDC
reserves the right to issue such purchase  orders to other vendors if MEG cannot
meet the  requirements  of the  purchase  order.  The  price to GDC for such MEG
material shall be as set forth at Section 12.1 (i) below. MEG will work with GDC
personnel  to  manage  the  transition  of  future  requirements  to  MEG at MEG
facilities.

8.0       TRANSITION PERIOD AND EMPLOYEES

8.1 During the Transition  Period,  GDC Products will be manufactured at the GDC
Naugatuck, CT facility and be in transition to MEG facilities. The GDC employees
utilized by GDC to manufacture  the GDC Products prior to the Closing Date ("GDC
Employees")  shall be retained  by GDC and shall  manufacture  the GDC  Products
under the direction of GDC. MEG and GDC shall work together in good faith during
the Transition  Period to determine the scope and duration of the services to be
provided by the GDC Employees.  As GDC Products move from the Transition  period
to the Post-Transition Period, it shall be the responsibility of GDC at its sole
expense and discretion to either terminate the GDC Employees or transfer them to
other duties as it so determines.

8.2 There shall be no labor charge to MEG for the services of the GDC  Employees
during the  Transition  Period,  as the GDC  Products  manufactured  during this
period shall be priced to GDC in accordance  with the formula set forth below at
Section 12.2.

8.3 The following Sections of this Agreement do not apply to GDC Products within
the Transition Period:  Section 15.1,  Product Warranties and Remedies;  Section
16.0, Inspection; Section 19.0, Rescheduling and Cancellation; and Section 21.0,
Changes To The GDC Products.

9.0       MANUFACTURING LICENSE

9.1  GDC  hereby  grants  to  MEG a  nonexclusive,  worldwide,  nontransferable,
royalty-free license under all of GDC's Intellectual Property Rights, to use the
GDC  Technical  Information  for  the  sole  purpose  of  Manufacturing  the GDC
Products, or mutually agreed-upon successor or additional products,  for sale to
and purchase by GDC hereunder. MEG acknowledges and agrees that all Intellectual
Property Rights in the

                                        9

<PAGE>

GDC Products Manufactured hereunder by MEG are and shall remain at all times the
exclusive  property of GDC or its vendors and  licensors  and may be used by MEG
solely pursuant to this Agreement, and that MEG shall not become entitled to any
Intellectual Property Rights in any such products. MEG shall take all reasonable
measures to ensure that all Intellectual  Property Rights of GDC in the products
remain with GDC.

9.2 All  inventions  and  discoveries  and other  intellectual  property  rights
specifically  with  regard to the design and  development  of the GDC  Products,
created  and/or  developed  pursuant to or as a result of this Agreement by MEG,
shall be the sole and exclusive property of GDC. MEG hereby assigns and conveys,
and shall cause its  employees and agents to assign and convey to GDC the entire
right,  title and  interest in and to the  aforesaid,  and shall  deliver to GDC
signed instruments that may be required to vest in GDC the foregoing.

10.0      MANUFACTURING GOALS AND COST SAVINGS

10.1 MEG shall utilize its core competencies (printed circuit board fabrication,
cable manufacture, raw card manufacture,  through-hole production, surface mount
technology, plastic injection molding, power supply manufacture and system level
configuration)  as applicable in the performance of its  obligations  under this
Agreement,  and acknowledges  that the primary goals of GDC hereunder are to (i)
lower GDC's cost of  acquiring  GDC  Products as set forth below at Section 10.3
and (ii) increase  GDC's and GDC's  customers'  satisfaction  with regard to the
quality and timeliness of the  Manufacture  of such products.  MEG shall use its
best efforts at all times in the  performance of this Agreement to achieve these
goals.

10.2 During the Post-Transition  Period, fifty percent (50%) of all cost savings
created by MEG attributed to GDC Product-specific value added engineering design
changes shall be retained by MEG subject to the following: First, (i) the change
must be initially identified by MEG and subject to approval by GDC; and (ii) the
cost  savings  retained  by MEG shall only be for the twelve  (12) month  period
following  the date of MEG's  initial  shipment to GDC of such changed  product.
Thereafter,  these  specific cost savings shall be retained by GDC. That portion
of the cost  savings not retained by MEG shall be passed back to GDC in the form
of reduced Purchase Prices.

10.3 The parties  acknowledge and agree that the primary goal of GDC in entering
into this Agreement is an overall  reduction of its present costs to manufacture
the GDC Products. The initial cost reduction provided by MEG is evidenced by the
Purchase Prices set forth in Schedule 2. MEG's volume  purchase  capability with
regard to components  and other raw material  shall provide best market  pricing
available;  this best  market  pricing of  components  and raw  material  is the
primary  element of the pricing  formula  described  in Section  12.1 for future
pricing of GDC Products.

10.4  MEG  agrees  to  allocate  and  reserve   3,000  cubic  feet  of  secured,
environmentally  controlled space for GDC finished goods inventory, at no charge
to GDC. MEG shall  retain  title to and risk of loss or damage to such  finished
products until such time as they

                                       10

<PAGE>

are shipped to GDC and GDC is invoiced  for them.  Upon  shipment  and  invoice,
title shall  transfer  to GDC,  and GDC shall have the risk of loss or damage to
such products.

11.0     PURCHASE VOLUME

11.1  So  long  as  MEG  is not in  breach  of any of its  material  obligations
hereunder,  and subject to the terms and  conditions  of Section 3.0 above,  GDC
shall  purchase  from MEG no less than  eighty five  percent  (85%) of the total
dollar volume of its manufacturing  requirements for the GDC Products during the
Term.  This total dollar  volume,  based upon GDC's  current  forecast as of the
Closing  Date,  is  anticipated  to  be  approximately  Thirty  Million  Dollars
($30,000,000) per year.

12.0     PURCHASE PRICE OF GDC PRODUCTS

12.1  "Purchase  Price"  means  the net  price  that GDC  Products  Manufactured
hereunder are sold to and purchased by GDC and, for the Post-Transition  Period,
are set forth in Schedule 2. The listing of GDC Products and associated Purchase
Prices set forth in Schedule 2 as of the Closing  Date (the  "Initial  List") is
not a complete listing,  and represents a level of savings to GDC with regard to
the GDC cost of  manufacture  of the same GDC  Products.  MEG  shall  provide  a
complete  Purchase  Price  listing  for the balance of the GDC  Products  within
thirty  (30)  days  following  the  date  that GDC  provides  to MEG the bill of
materials for each such product (the "Complete List").  Such additional Purchase
Prices as set forth in the  Complete  List shall  provide to GDC  representative
savings as compared to the  Initial  List.  Such  listed  Purchase  Prices,  all
subsequent revisions to Purchase Prices as allowed hereunder and Purchase Prices
for new GDC  Products,  are and shall be calculated by MEG for each GDC Product,
subject to the review and  approval of GDC,  in  accordance  with the  following
model:

         i.    Material cost shall be calculated at MEG actual material cost
               plus nine percent (9%);
         ii.   Labor cost for each GDC Product shall be calculated at the rate
               of Twenty Five Dollars  ($25.00) per hour;  However,  the number
               of labor hours used to calculate  the labor cost for each GDC
               Product shall be the lower of (i) the number of hours as set
               forth in GDC's  current  labor  process  routers as provided to
               MEG,  and (ii) the number of hours as determined by MEG as a
               result of its own time and motion  studies.  GDC represents that
               to the best of its knowledge, the data in labor process  routers
               provided to MEG are the result of time and motion studies and are
               accurate in all material aspects, and to the extent the preceding
               representation is not true with regard to any specific GDC
               Product, then GDC shall not be in breach  with  regard to such
               representation;  however,  the number of labor hours determined
               by MEG as a result of its own studies  shall then be used to
               determine  the  Purchase  Price for such GDC Product.  In such
               event, MEG shall represent to GDC that to the best of its
               knowledge,  the labor hours so determined are the result of time
               and motion studies and are accurate in all material aspects.

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<PAGE>

         iii.  MEG shall add a five percent (5%) mark-up to the costs above.

12.2 Purchase Prices for any GDC Product Manufactured at the GDC facility during
the  Transition  Period shall be priced to GDC in accordance  with the following
model:

         (i)      If the GDC Product contains raw material purchased from GDC in
                  Schedules 9 and 10 and such  material was used to  Manufacture
                  the GDC Product at the GDC Naugatuck facility, the GDC Product
                  shall be priced to GDC at the price set forth in Schedule 9 or
                  10 as applicable.

         (ii)     If the GDC Product  contains any raw material  supplied by MEG
                  (other than material  purchased from GDC in Schedules 9 an 10)
                  and such material was used to Manufacture  the GDC Products at
                  the GDC Naugatuck facility, the GDC Product shall be priced to
                  GDC in accordance with Section 12.1 (i) only;

         (iii)    If the raw material was used to  Manufacture  the GDC Products
                  at a MEG  facility,  the GDC Product shall be priced to GDC in
                  accordance with Sections 12.1(i) through 12.1(iii).

12.3 GDC and MEG will work together in good faith to effectively manage, measure
and reconcile all inventory  consumption and purchase of GDC Products  occurring
during the Transition Period. No later than January 31, 2000 such reconciliation
shall be completed and settled. While the foregoing reconciliation is in process
during the month of January  2000,  GDC will make a payment to MEG equal to Five
Million Two Hundred Six Thousand Five Hundred Dollars ($5,206,500.00) on January
3, 2000 to be applied by MEG towards the final  reconciliation  settlement.  Any
raw  material  inventory  which GDC  purchased  from MEG during the three  month
period ended  December 31, 1999,  and which remains in GDC inventory on December
31, 1999,  will be repurchased  from GDC by MEG at the same price GDC originally
purchased such material from MEG.

12.4 MEG shall at all times  maintain  an "Open Book  Policy"  meaning  that MEG
shall make available to GDC on a physical or electronic  basis, all its business
records with regard to its  performance of the Agreement as reasonably  required
by GDC including,  by way of example and not limitation,  records with regard to
(i) calculation of all Purchase  Prices,  (ii) the cost of materials,  labor and
administration and (iii) quality assurance and (iv)  Manufacturing  performance.
Such records shall be available  during normal  business  hours upon  reasonable
advance notice.

12.5 The parties shall meet and review the Purchase  Prices six (6) months after
the Closing  Date and twelve (12) months  after the Closing  Date.  The Purchase
Prices shall be reviewed with regard to the Purchase Price calculations included
above. Adjustments shall be by mutual agreement,  shall be prospective only, and
shall  provide be  effective  no less than  thirty  (30) days  following  mutual
agreement.  After the two  adjustment  periods above,  Purchase  Prices shall be
reviewed and fixed on and for consecutive twelve (12)

                                       12

<PAGE>

month  periods in accordance  with this Section  12.5.  Only in the event of any
industry-wide or sole source shortages of components affecting price or delivery
schedules,  will  GDC  agree to  negotiate  with  MEG any  equitable,  temporary
adjustments to the Purchase Prices contrary to the above.

13.0     GDC PURCHASE ORDERS/SCHEDULE.

13.1 The manufacture and shipment of GDC Products will be in accordance with GDC
Purchase  Orders  ("Purchase  Order(s)").  Purchase Orders may be issued in hard
copy or  electronically  ("EDI")  and will be issued at  intervals  as  mutually
agreed. Issued Purchase Orders are firm (subject to the adjustment provisions at
Section 19 below)  and will  cover GDC  requirements  for GDC  Products  for the
subsequent ninety (90) days. Purchase Orders will state the quantity of and part
numbers for the GDC Products to be  manufactured  and shipped  during the period
covered by the Purchase Order, as well as the GDC required  delivery dates,  and
Purchase  Price.  MEG will be measured for on time deliveries and therefore must
deliver GDC Product to GDC on the required  delivery date, or within a window of
three (3) days  early,  zero (0) days late.  MEG will  confirm  Purchase  Orders
within 5 days of receipt.  Delivery of the GDC Products in  accordance  with the
GDC required delivery dates as set forth in Schedule 3 or as otherwise agreed to
by MEG is a material obligation of MEG.

13.2 GDC shall  provide to MEG,  no less than once each  month,  a six (6) month
rolling  forecast  of GDC  Product  purchases.  GDC  forecasts  of  GDC  Product
purchases beyond ninety (90) days (or some other mutually agreed period) are for
planning  purposes  only,  are not  firm,  and will be issued  at  intervals  as
mutually  agreed.  All  forecasts  provided  by GDC  shall be  deemed  to be GDC
Confidential  Information  regardless  of whether  marked as such,  and shall be
treated by MEG in accordance with Section 27 below.

13.3 MEG will purchase only that material  required for  manufacturing  Products
according to the quantity and delivery  schedules  set forth in Purchase  Orders
issued by GDC during the term of this Agreement.  MEG will purchase material for
the Products  according to GDC Approved Vendor List ("AVL"),  and subject to the
terms of Section 5A.0,  Purchase and Sale of GDC Raw Material  Inventory  above.
The AVL is specific  to the  component  manufacturer  only and not the source of
supply.  MEG reserves the right to procure  components and material  direct from
the manufacturer or through MEG's preferred distribution partners.

13.4 With GDC's prior written  consent,  which consent will not be  unreasonably
withheld,  MEG may purchase  material in excess of Purchase Order  requirements,
such as long lead-time components or components which can be purchased in volume
at a lower price.  These instances  (including the terms of disposal of any such
material) will be discussed and agreed to in writing by the parties prior to any
actual purchase.

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<PAGE>

13.5  Material  shortages.  In the  event of an  industry  shortage  of  certain
material to be used by MEG hereunder,  which results in a temporary  increase in
the cost of such  material  and/or an imposed  allocation  of  supply,  then MEG
agrees as follows:

         i. GDC must  approve  the payment by MEG of any  premium  pricing  with
         regard to the material prior to its purchase by MEG, and MEG shall only
         charge GDC for the material in accordance  with the applicable  pricing
         formula  set forth in  Section 12 above,  excluding  any  premium.  The
         amount of any premium paid by MEG shall be invoiced to GDC separately.

         ii. In the event of any  allocation  of supply  imposed upon MEG by its
         supplier(s),  then the amount to be utilized by MEG for the Manufacture
         of the  GDC  Products  hereunder  shall  be a pro  rata  percentage  as
         follows:  For  example,  if the  forecast  for the  Manufacture  of GDC
         Products  (provided by GDC to MEG hereunder) is to consume seventy five
         percent  (75%)  of the  MEG  overall  requirements  for  the  allocated
         material  for the same  period,  then MEG shall  utilize  seventy  five
         percent (75%) of it supply for the  Manufacture  of the GDC Products in
         such period.

13.6 GDC warrants,  as of the Closing Date, that to the best of its knowledge it
is not in  material  breach  with  regard  to  delivery  of GDC  Product  to its
customers  in any  material  aspect.  GDC  warrants  that the  Initial  Forecast
provided in Schedule 8, to the best of its  knowledge,  reflects  the demand for
GDC Products based upon the data available to GDC as of the Closing Date.

14.0     PAYMENT TERMS.

14.1 Payment  terms are net thirty (30) days from invoice date in United  States
dollars.  The invoice date shall be no earlier than the ship date.  Payments are
not subject to offset or setoff.  Invoices not paid within thirty (30) days will
carry an interest  charge of 1-1/2% per month.  Acceptance of a partial  payment
will not be a waiver of the right to be paid the remainder due.

15.0     PRODUCT WARRANTIES, TESTING, AND REMEDIES.

15.1 MEG warrants to GDC that each GDC Product  manufactured  hereunder shall be
(i) free from defects in material and  workmanship and (ii) meet the GDC Quality
Requirements as set forth in Schedule 4 for twelve (12) months from the date GDC
ships the GDC Product to its  customer,  not to exceed  fifteen (15) months from
the  date  of  original  shipment  by MEG to GDC  (the  "Warranty  Period").  In
addition,  MEG warrants and represents that all GDC Product  delivered to GDC by
MEG shall be Manufactured in accordance  with the  Manufacturing  Specifications
set forth in Schedule 6 and, unless  otherwise  agreed to by GDC, shall meet the
Delivery  Performance  Requirements  as set forth in  Schedule  3 (the  "Product
Warranty").  Repair made by MEG to GDC Products are warranted against defects in
material and workmanship for a period equal to the

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<PAGE>

greater of ninety (90) days  following  the return of such  product(s) to GDC or
the remaining term of the Warranty  Period.  GDC Product returns that are due to
either DOA (dead on arrival)  or OOB (out of box  failure)  causes  shall not be
deemed to be repairs and subject to the preceding  sentence.  Such product shall
be promptly  replaced by MEG and a new Warranty  Period shall then commence upon
shipment of the GDC Product to GDC.

15.2 The Product  Warranty  shall not apply to (i) GDC  Product  that is abused,
damaged,  misused  or  altered  other than by MEG,  or (ii)  Product  damaged by
shipping or other external causes not directly contributed to by MEG.

15.3 GDC Products shall be deemed  accepted by GDC if they are  manufactured  in
accordance  with  MEG's  manufacturing  workmanship  standards,  conform  to the
applicable  requirements of all Schedules hereto, and successfully  complete any
mutually  agreed upon GDC Product  Acceptance  Tests.  These Product  Acceptance
Tests will be  provided by GDC at closing  utilizing  GDC's test  equipment  and
subject to GDC's test procedures,  standards, and referenced by GDC's historical
test yields (ICT,  Functional)  and all other  supporting  data. GDC may perform
acceptance testing which measures a different array of performance  criteria but
the parties agree that the mutually agreed upon GDC Product Acceptance Test will
be  the   measurement   standard  to   determine   if  the  GDC  Product   meets
specifications.  GDC  acceptance  of GDC  Products  shall not relieve MEG of its
Product Warranty obligations hereunder.

All claims for breach of warranty must be received by MEG from GDC no later than
thirty  (30) days  after  the  expiration  of the  Warranty  Period  for the GDC
Product.

15.4  Except  as may be  expressly  set  forth in this  Agreement,  the  Product
Warranty is the only warranty given by MEG with regard to the GDC Products.  MEG
makes  no  other  warranty  either  expressed  or  implied.  All  warranties  of
merchantability  or  fitness  for a  particular  purpose  or use  are  expressly
disclaimed and excluded herefrom.

15.5 MEG shall, upon notification of a warranty claim and at its option,  repair
the defective GDC Product at a MEG facility of its choice, replace the defective
GDC Product with another such GDC Product,  or return the Purchase Price. In the
case of  repair,  all  repairs  will be made and MEG will  return  the  repaired
product  to GDC  within  ten (10) days of  receipt.  This 10 day  return,  under
warranty, will be treated as a "zero" dollar transaction, and will not involve a
debit or credit between the parties.

15.6 GDC will consign to MEG all required  test  fixtures to support the quality
production  of GDC  products,  including  but not  limited to,  In-Circuit  Test
Fixtures (ICT) and  Functional  Test Fixtures all of which are believed to be in
good working  order and capable of qualifying  product to GDC's  specifications.
The parties will enter into a written Consignment  Agreement at a future date to
be determined  and containing  customary  terms and  conditions.  Such agreement
shall provide at a minimum that (i) MEG will have the  opportunity to review all
test fixtures  during the first piece  production at MEG's  facility and will be
given the right to determine the "acceptance quality" of

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<PAGE>

said equipment.  If the test fixtures are deemed to be inadequate to perform the
required test per  reasonable  standards and as agreed by the parties,  then GDC
will be responsible for correction of the fixtures;  (ii) Risk of loss or damage
to and  maintenance of the test fixtures will be the  responsibility  of MEG and
(iii) Engineering changes directed by GDC, may affect the functionality of GDC's
test fixtures and will therefore be the sole financial  responsibility of GDC if
fixtures  are to be  reworked.  MEG  will  submit  pricing  to GDC  for  fixture
modification as required.

15.7 Unless  expressly  agreed to by MEG in writing,  MEG makes no warranty that
the products will (i) meet any specification not made, known to and agreed to by
MEG, or (ii) receive the approval of or be certified by Underwriters Laboratory,
any Federal,  State,  Local, or Foreign  Government  Agency  (including  without
limitation the Federal Communications Commission) or any other person or entity.
MEG assumes no responsibility for obtaining such approvals or certifications, or
meeting such specifications.

15.8 MEG  Quality  Complaints.  - In the event GDC  determines  that GDC Product
furnished   hereunder  does  not  perform  in  a   satisfactory   manner  or  is
unsatisfactory in other respects, GDC shall issue a Quality Complaint in writing
to MEG specifying in detail the nature of the defect or problem (the "QC").  MEG
shall  provide an  acknowledgement  in  writing to GDC within  three (3) days of
receipt.  Within twenty (20) days thereafter,  MEG shall provide a comprehensive
report to GDC specifying,  as required,  the change in the manufacturing process
required to address the GDC concern in the QC. The report will  include,  by way
of example and not limitation,  the root cause of the QC, condition and plan for
immediate  corrective  action to remedy  the QC,  and a long term plan to ensure
that continued quality GDC Products are delivered by MEG.

15.9  GDC  warrants  to MEG  that to the  best of its  knowledge  any  Technical
Information  including but not limited to test fixtures,  standards,  historical
test yields  (ICT,  Functional  Test) and all other data is accurate  and may be
used  by  MEG to  meet  GDC's  product  requirements,  unless  GDC  informs  MEG
otherwise.

15.10 Any  agreement to modify  standards or  procedures  must be in writing and
agreed to by both parties.

15.11 MEG will repair and/or upgrade GDC Products which are outside the warranty
period on mutually  agreed  prices and terms and  conditions to be negotiated by
the parties on a per product basis.  MEG shall at all times use its best efforts
to maximize efficiencies in labor and cost with regard to such repair.

15.12 Any  warranties  contained in this  agreement will inure to the benefit of
MEG and GDC and  permitted  assigns,  and may not be the  basis for any claim or
cause of action of parties other than MEG or GDC or such assigns.

16.0     INSPECTION

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<PAGE>

16.1 Subject to Section 16.2 below, GDC may inspect incoming GDC Products at all
times and places and may base acceptance or rejection of any or all GDC Products
on generally accepted sampling techniques. MEG, without additional charge, shall
provide all reasonable  facilities  and  assistance.  GDC  inspection  shall not
relieve MEG from performing full and adequate test and inspection.

16.2 GDC shall inspect each shipment of GDC Products and give MEG written notice
of any  defects  or count or other  discrepancies  within  fifteen  (15) days of
receipt. If GDC does not inspect Products within fifteen (15) days, the Products
will be considered  accepted by GDC; any Product defects  reported after fifteen
(15) days will be covered by the warranty provisions of this Agreement. GDC will
follow MEG's RMA procedure for return of Products.

17.0     OWNERSHIP OF PRODUCT

17.1 GDC shall retain sole and exclusive  ownership rights to the GDC Product(s)
Manufactured by MEG (and all Technical  Information) and, except for the limited
rights  provided  MEG in  Section  24,  Bankruptcy  of GDC,  GDC shall  have the
exclusive right to purchase and market the GDC Products.

18.0     PRIMARY CONTACT PERSONS

18.1 Each party shall assign one individual to act as primary contact person for
business  issues,  one individual to act as primary  contact person for contract
issues,  and one  individual  to act as primary  contact  person  for  technical
issues,  however, it is MEG's intent to have a "Customer  Executive" assigned as
the "prime" contact for all initial communications.

19.0     RESCHEDULING AND CANCELLATION.

19.1 Unless  otherwise  agreed by both parties on a case by case basis,  GDC may
reschedule Purchase Order deliveries without charge per the following schedule:

                                                RESCHEDULE %
              DAYS' PRIOR NOTICE               Purchase Order

                    0-30 days                      25%
                   31-90 days                      50%
                 over 90 days                     100%

19.2 GDC may cancel  Purchase Orders at any time subject to the terms of Section
22.0 or as otherwise agreed to by the parties in writing.

19.3     Any schedule acceleration requested by GDC will be subject to component
availability.

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<PAGE>

20.0     NON-RECURRING ENGINEERING CHARGES.

20.1 With regard to any special  design or engineering  change  requests made by
GDC, the parties will mutually agree on MEG provided non-recurring  engineering,
set  up and  tooling  charges  ("NRE")  required  to  Manufacture  such  special
products.  NRE, set-up,  and tooling charges may be amortized for payment by GDC
over the first  twelve (12) months of  prototype,  pilot,  and product  delivery
under this  agreement,  however,  this process is subject to review based on the
size and nature of the investment.

21.0     CHANGES TO THE GDC PRODUCTS

21.1 MEG will not make any changes to the GDC Products without GDC prior written
authorization.  MEG will make GDC requested  engineering changes ("EC's") to the
Products  as  required  by the GDC EC. An EC  request  will  include  sufficient
information for evaluation of its feasibility and cost impact.  MEG will respond
to EC requests in writing and provide cost and other relevant data within a time
period that is reasonable  considering the magnitude of the EC, but in any event
not later than thirty (30) days after receipt of the EC. This process may change
GDC's Purchase Price of Product listed in Schedule 2.

21.2 GDC may from time to time change the specifications for the Products or the
work  required of MEG hereunder and MEG agrees to implement the change per GDC's
reasonable  requested schedule.  If changes result in a change in MEG's costs or
in the time for performance,  an adjustment will be made. Any adjustment must be
in writing  and MEG shall not be  required to  implement  such change  until the
Parties have mutually  agreed upon the  adjustment to the Purchase Price if any.
In the event of a change  necessitated  by safety  requirements  or by law,  MEG
agrees to use its best efforts to implement said change as soon as possible.

21.3 MEG  agrees  not to make any  changes  in its  processes  or  manufacturing
standards which would affect form, fit, or function of the GDC Product,  without
first  obtaining  written  agreement  from  GDC,  which  permission  will not be
unreasonably  withheld. MEG will notify GDC at least ninety (90) days in advance
of any such changes.

22.0     TERMINATION/DEFAULT

22.1     Obligations of GDC

22.1.1 Upon  termination of a Purchase Order by GDC, or upon  expiration of this
Agreement without renewal or termination of this Agreement by MEG for default of
GDC, GDC shall reimburse MEG for:

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<PAGE>

(i)      All finished GDC Products  (specifically for the Purchase Orders in the
         case of a cancelled  Purchase  Order(s) ) and for all finished product,
         in the case of the termination of the Agreement, scheduled for shipment
         within ninety (90) days immediately following the date of MEG's receipt
         of the  cancellation  or the effective date of the  termination  notice
         (the "Notice  Date");  and all  additional  finished  goods as mutually
         agreed to in writing;

(ii)     all Work-In-Process as of the Notice Date and;

(iii)    All  components,  subassemblies  and other  material  purchased by MEG
         to fill a Purchase  Order or  authorized  by GDC to be purchased by MEG
         which are on hand or on non cancelable  orders as of the Notice Date.
         Without  limitation  this includes raw  material  inventory  made
         obsolete  or in excess due to GDC's  changes to the  specifications or
         GDC  Products,  minimum buy quantities,  and reel  quantities.  Items
         (i)-(iii) above are referred to as the "Termination  Inventory".  In
         calculating the quantity of finished GDC Products under (i) above, GDC
         Products  rescheduled  for  manufacture and shipment during the ninety
         (90) days immediately prior to  the Notice Date may be counted by MEG.

22.1.2 MEG will make every reasonable effort to use the Termination Inventory on
other current  programs at the facility where the GDC Products are  manufactured
and at other MEG  facilities,  will make every  reasonable  effort to cancel all
outstanding  material  orders  with  vendors,  and will  attempt  to return  raw
material inventory to vendors. GDC will be responsible only for costs,  charges,
and fees  actually  incurred  by MEG to  cancel  or return  any  portion  of the
Termination Inventory to vendors and, upon mutual agreement,  the cost to modify
portions of the Termination Inventory for other MEG programs.

22.1.3  Within  thirty  (30) days from  termination  or  cancellation,  MEG will
invoice, and GDC will purchase, the Termination Inventory remaining after vendor
cancellations  and returns and after other program use, as follows:  (i) for Raw
Material  Inventory and authorized long lead time components,  at MEG's purchase
price plus overhead as  calculated  in Section  12.1.  MEG will provide GDC with
evidence of purchase price upon request;  (ii) For WIP, at a reasonable pro rata
percentage of the finished GDC Product  Purchase  Price;  and (iii) for Finished
GDC Product, at the Purchase Price in effect at termination or cancellation. GDC
will be responsible for any negative price  differentials  between the price MEG
paid for the raw material Inventory and authorized long lead time components and
the price at which MEG was able to return the items.  MEG will  credit or refund
to GDC at GDC's option any positive  price  differentials  after  application of
Section 12.1 pricing model.

22.1.4 In the event that this Agreement is terminated by MEG for default of GDC,
GDC shall pay to MEG,  upon written  notice given to GDC and within  thirty days
following the effective date of  termination,  in addition to the above payments
for inventory and finished  product,  the depreciated value of the Manufacturing
Equipment as of the date of

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<PAGE>

default.  The  Manufacturing  Equipment  will be  depreciated on a straight line
basis by MEG over a thirty six (36) month  period  (decremented  monthly)  based
upon a purchase price of Two Million  Dollars  ($2,000,000.00).  Upon payment to
MEG of such  depreciated  amount,  MEG shall transfer title to and possession of
such  Manufacturing  Equipment  to GDC free and clear of all  liens,  claims and
encumbrances.  MEG shall have the option to retain the Manufacturing  Equipment,
and in such event GDC shall have no liability to MEG for any payment  whatsoever
with regard to the Manufacturing  Equipment.  The depreciation  period starts on
the Closing Date.

22.2     Obligations of MEG

22.2.1 Upon the termination of this Agreement or any outstanding  Purchase Order
by GDC for default of MEG, MEG shall reimburse GDC for:

         (i) all costs, expenses, disbursements,  direct damages and liabilities
(including  reasonable  legal fees) incurred and paid by GDC as a result of such
default and arising from (a) the  transitioning by GDC of the Manufacture of the
GDC  Products  to a third  party  manufacturer  or back  to a GDC  facility  for
manufacture  by GDC, and (b)  penalties and damages paid by GDC to its customers
for  failure  to  deliver  GDC  Products  in  accordance  with the  terms of the
contracts  with  such  customers.  In the  event  GDC  must  pay a  third  party
manufacturer to manufacture the GDC Products at prices that are in excess of the
Purchase  Prices herein,  then MEG shall pay to GDC the  difference  between the
third  party  prices  and the  Purchase  Prices  herein  for  each  GDC  Product
manufactured by such third party during the remainder of the Term herein.

22.3     Termination in General

22.3.1 This  agreement may be terminated  by expressed  written  consent by both
parties, having the expressed purpose of terminating this agreement.

22.3.2  Termination for Cause. This Agreement or any outstanding  Purchase Order
may be terminated by either party in whole or in part via written  notice to the
other party following the failure by either party to perform any of its material
performance  obligations  under this  Agreement and to cure such failure  within
thirty  (30) days after  receipt of written  notice  describing  the  failure in
sufficient  detail,  or if the failure cannot be completely  cured within thirty
(30) days, failure to make substantial progress towards a cure within the thirty
(30) day period.

22.3.3   Default

In the event of material default by either party,  and, written  notification of
said default to the defaulting  party, the defaulting party shall have,  subject
to the substantial progress exception above, (30) days to cure said default.

         (i)      In the event of an uncured default, after written notification
                  for nonpayment of a sum certain due,  following a thirty (30)
                  day cure period,

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<PAGE>

                  then the non defaulting party may upon written notice, declare
                  this Agreement to be terminated.

         (ii)     For  material  breach,  other than non  payment and failure in
                  delivery  (see below),  then upon written  notice  default and
                  intent to terminate this Agreement, the defaulting party shall
                  have an  additional  fifteen  (15)  day  period  to cure  such
                  default.

         (iii)    This additional notice and period to cure shall not affect the
                  non defaulting parties' right to damages,  expenses, and costs
                  within the initial (30) day period after notice.

         (iv)     In the event  that  after  notification,  said  default is not
                  cured  within  thirty (30) days or the forty five (45) days as
                  applicable,  then in  addition  to any  other  rights  the non
                  defaulting  party may have hereunder,  or at law or equity for
                  such  default,  defaulting  party  shall  be  liable  for  all
                  reasonable  costs,  expenses,  direct damages,  and reasonable
                  legal fees occasioned to the non defaulting party thereby.

         (v)      Notwithstanding  anything  to the  contrary  above,  MEG shall
                  continue to accept  orders from GDC for the GDC Products for a
                  period not to exceed one hundred  twenty (120) days  following
                  the  termination or expiration of this  Agreement,  so long as
                  GDC is current on all payment obligations to MEG.

22.4  Failure in delivery by MEG occurs when the MEG  delivery  rate to GDC in a
thirty  (30) day  period  falls  below  ninety  percent  (90%) of the  scheduled
commitment for such thirty (30) day period.  MEG shall have the next thirty (30)
days to cure such failure by achieving a delivery  rate equal to or greater than
ninety  percent (90%) of the scheduled  commitment for such next thirty (30) day
period. No additional cure period shall be available to MEG.

22.4.1   In the event a failure in delivery above,  (or any individual  instance
         of a failure by MEG to meet the delivery  requirements  of a particular
         order),  causes  a GDC  customer  to  cancel  its  order to GDC for the
         delayed GDC  Products,  then GDC shall have the right to return the GDC
         Products to MEG without penalty for a refund or credit at GDC's option.

22.4.2   In the event GDC is subject to liquidated damages for failure to timely
         deliver GDC Products to its customer, and GDC gives MEG notice of such
         liquidated  damages and the required  delivery  dates and makes the
         acceptance  of same by MEG a condition of the order, and MEG accepts
         such conditions and the order from GDC, then, MEG shall reimburse GDC
         to the extent that GDC has paid liquidated  damages to its customer as
         a result of a late delivery of GDC Products caused by MEG late delivery
         to GDC. The prior notice  provisions  of this Section 22.4.2 shall

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<PAGE>

         not apply to MEG  obligations  under Section  22.2.1(i)(b)  above as it
         relates to termination for default.

22.4.3   The only  exception  to the MEG  obligations  above is a force  majeure
         condition as set forth in Section 29.8 below;  however,  in such event,
         MEG  shall  work in good  faith  with GDC to find a fair and  equitable
         resolution to the specific failure to deliver matter.

22.5 Additional Rights Upon Expiration/Termination. Upon the termination of this
Agreement  for default of MEG,  MEG shall,  upon  request of GDC,  provide at no
charge  reasonable  training for GDC personnel  and/or any third party personnel
with  regard to the goal of  continued  performance  of the  services  set forth
herein by such  personnel.  The dates,  location,  and  duration of the training
shall be as reasonably  required in order to achieve the goal above,  but in any
event shall be  completed no later than the  effective  date of  termination  or
expiration. In the event of the termination of this Agreement for the default of
GDC, or the expiration of this Agreement  without renewal,  GDC shall pay MEG at
the rate of $100.00 per trainer hour for such  training plus  reasonable  travel
and living expenses.

22.6  Termination  Fee. In the event that this  Agreement is  terminated  by MEG
during the first  twelve (12) month  period  following  the Closing Date for the
default of GDC,  then, in addition to any other rights or remedies  available to
MEG for such default  hereunder,  GDC shall pay to MEG a termination  fee in the
amount of Two Hundred Fifty Thousand Dollars ($250,000.00).

22.7 Return of Documents.  Upon the  expiration or termination of this Agreement
for any reason,  and upon the request of GDC, MEG shall return to GDC,  prior to
the effective date of such termination or expiration,  all Technical Information
and Confidential Information in its possession without retaining any copies.

23.0     DISPUTE RESOLUTION BY THE PARTIES

23.1 Dispute  Resolution.  A designated  representative  of GDC and a designated
representative of MEG shall meet as often as requested by either party to review
the  performance  of MEG  hereunder.  In the event of any dispute that cannot be
resolved by such representatives,  then upon the written notice of either party,
each party  shall  appoint a  designated  officer  whose task will be to meet to
resolve  such  dispute  within  five (5)  days  after  receipt  of  notice.  The
designated officers shall meet as often as the parties reasonably deem necessary
during such period in order to gather and review all information with respect to
the disputed  matter.  Such  officers  will discuss the problem and negotiate in
good faith without the necessity of any formal proceeding. No formal proceedings
for the judicial  resolution of such dispute shall be commenced by a party,  nor
any action  taken to  terminate  this  Agreement  for cause,  until that party's
designated  officer has  concluded  in good faith that a  reasonable  resolution
through  continued  negotiation  of the  matter at issue  does not  appear to be
imminent or likely. The

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<PAGE>

procedures  above shall apply to the resolution of performance  issues and shall
not prevent a party from seeking injunctive relief at any time.

IN THE EVENT OF BANKRUPTCY OF GDC

24.1 In the event that GDC files a petition under Chapter 7 or Chapter 11 of the
US Bankruptcy Code where (a) this agreement is not assumed without modification;
(b) a liquidation plan is filed that involves the dissolution of that portion of
GDC's business related to the GDC Products; or (c) the bankruptcy trustee or GDC
rejects this Agreement, (each a "Bankruptcy Event") then MEG is hereby granted a
non-exclusive,  royalty-free  (except for any royalties payable to third parties
which shall be paid by MEG),  limited term and  restricted  right and license to
use the Technical Information in its possession with regard to the GDC Products,
any  licensed  tool,  jigs,  gages,  fixtures  and  equipment,  the  proprietary
specifications  and all other GDC  manufacturing  documents  related  to the GDC
Products  and  all  other  manufacturing  level  documents  related  to the  GDC
Products,  together with all other documents and intellectual property above the
manufacturing  level as may be  reasonably  necessary  to modify or correct  the
manufacturing  process,  including  without  limitation  software and the source
codes  therein  which GDC owns or is  otherwise  authorized  to license to third
parties,  for the sole and limited purpose of Manufacturing the GDC Products and
selling such Manufactured units subject to the following conditions:

         24.1.1 The license above shall only apply to the  utilization by MEG of
such GDC Product raw material inventory, WIP and finished product on hand at MEG
facilities as of the date of the Bankruptcy  Event.  The license shall terminate
upon the first to occur of (i)  consumption  of all the raw material and WIP and
disposal of all the resulting  finished  product,  or (ii)  expiration of ninety
(90) days after the Bankruptcy Event.

         24.1.2 GDC shall, to the extent it is able,  assist MEG in the disposal
of the GDC  Product  Manufactured  above;  however,  in the event MEG sells such
products to any entity other than GDC or independent of any coordinating efforts
GDC,  then MEG  shall  remove  and shall  not sell  such  products  with the GDC
trademarks,  logos and  markings,  and shall not  advertise  nor  identify  such
products in any publication or posting as a GDC Product.

         24.1.3 Solely with regard to this Section 24.1,  and solely with regard
to the  sale by MEG of GDC  Products  marked  with GDC  identification  marks or
logos,  MEG shall not sell any GDC Products (except to GDC) for less than ninety
percent  (90%)  of the GDC  average  invoice  price  for such  GDC  Products  as
calculated for the prior six (6) month period.

         24.1.4 GDC shall have no obligation or liability whatsoever for any GDC
Products sold by MEG to third  parties  hereunder,  and MEG shall  indemnify and
hold GDC harmless  from and against any and all third party claims  arising from
or related to the sale by MEG of such GDC Products.

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<PAGE>

24.2 Upon the  termination  of the license  under this Section 24, all Technical
Information  and  any  other  GDC  Confidential   Information  provided  to  MEG
(including  all copies)  will be returned to GDC at MEG's sole cost and expense.
The obligations contained in this paragraph shall be binding upon GDC regardless
of the  rejection  of this  agreement  in the  context  of a pending  bankruptcy
proceeding.

25.0     INFRINGEMENT/INDEMNIFICATION/INSURANCE

25.1 MEG shall,  upon written  demand,  defend,  indemnify and hold GDC harmless
against and reimburse  GDC on demand for any claims,  loss,  damage,  liability,
cost and expense  (each a "Claim")  including,  without  limitation,  reasonable
attorney's fees, to the extent incurred by GDC by reason of:

         (i)      Any breach by MEG of its representations as set forth in
                  Section 4.0 above;
         (ii)     The negligence of MEG, its employees,  agents,  or the
                  employees and agents of its Affiliates in connection with the
                  Manufacture of the GDC Products; or
         (iii)    The use or disclosure of Confidential Information in violation
                  of the terms of this Agreement by MEG, its  employees,  agents
                  or the employees,  agents of its Affiliates,  or others acting
                  on its behalf.

25.2 Except for the GDC  Products or portions of the GDC  Products  that are the
other party's design,  each party is responsible for their portion of the design
of the GDC Products. Upon demand, that party will promptly defend, indemnify and
hold the other party, its officers, directors, employees, agents, successors and
assigns,  harmless  from  and  against  every  kind  of  cost,  expense  or loss
(including  attorneys' fees and legal costs)  directly  relating to any claim or
threatened  claim: (a) that any GDC Product or portion of a GDC Product violates
the  intellectual  property  rights of a third party (foreign or domestic);  (b)
that the Product has a design defect; or, (c) and except to the extent caused by
the other party, arising from or related to the distribution, sale or use of any
GDC Product or portion of a GDC Product. The immediately preceding sentence will
apply whether the claim is based upon contract, tort or any other legal theory.

25.3 GDC is solely  responsible  for any claim that the  Manufacture  of any GDC
Products by MEG in accordance with the terms of this Agreement infringes a third
party's U.S. patent, copyright,  trade secret and/or other proprietary rights in
the United States. GDC will pay any costs,  damages, and attorneys' fees for any
such  infringement,  provided that (i) MEG notifies GDC in writing,  immediately
upon MEG's  receipt of any such claim;  (ii) GDC has sole control of the defense
of, and all related  settlement  negotiations for, any such claim; and (iii) MEG
cooperates fully, and furnishes all related evidence in its control relating to,
any such claim.

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25.4 GDC shall have no  obligation  or liability to MEG for any claim under this
Section  25  if  such  claim  is  caused  by  any  alteration,   Manufacture  or
modification  of any GDC Product(s) by MEG not authorized by GDC. In such events
MEG shall defend, hold harmless, and indemnify GDC.

25.5 Each party's  obligation to defend and indemnify  hereunder is  conditioned
upon (i) receipt by the indemnifying party of timely written notice of the Claim
from the other party, (ii) the continuing full cooperation of the other party in
the defense of the Claim and the  disclosure  to the  indemnifying  party or its
attorneys of all evidence related to the Claim, and (iii) the indemnifying party
having the sole control of the defense and settlement of the Claim.

25.6  INSURANCE  At all times  during  the Term,  MEG  shall  maintain  in force
comprehensive  general  liability  insurance in the amounts of not less than Two
Million  Dollars   ($2,000,000)   per  occurrence  and  Twenty  Million  Dollars
($20,000,000)  in the  aggregate.  MEG shall  provide  to GDC a  Certificate  of
Insurance in a form  reasonably  acceptable  to GDC for each policy of insurance
required  by  this  Section  25.6.   Such   Certificate  of  Insurance  and  all
subsequently  issued  Certificates  of Insurance  shall  provide that the policy
shall not be canceled,  changed or non renewed without at least thirty (30) days
prior written notice. Each Certificate of Insurance shall be delivered to GDC no
later than  twenty  (20) days after the  Closing  Date or date of renewal of the
policy as  applicable.  In  addition,  MEG shall at all  times  during  the Term
maintain in force "all risk" property  insurance for 100% replacement value, and
business interruption  insurance in an amount equal to no less than 80% of MEG's
gross earnings,  and shall provide to GDC  Certificates of Insurance  evidencing
such coverage.

26.0     TRADEMARKS AND PUBLIC ANNOUNCEMENTS

26.1 Except as expressly  provided herein,  this Agreement shall not include any
license or right for  either  party to use any  trademark  or trade name used or
claimed by the other (the  "Trademarks").  All  permitted  uses of Trademarks by
each party in connection with the GDC Products or the packaging thereof shall be
in strict compliance with any conventions of the other concerning the same.

26.2 Neither GDC nor MEG shall,  without first  obtaining the written consent of
the other party hereto,  in any manner,  (i) advertise or publish or release for
publication any statement  (including verbal  information)  mentioning the other
party or the fact that this  Agreement has been entered  into,  (ii) release any
information  concerning  its  relationship  with the other party  (including all
terms and conditions of this Agreement), or (iii) indicate any information about
the other party that is not already available as public information,  except GDC
may do the foregoing in compliance with SEC regulations or as otherwise required
by law.

27.0     CONFIDENTIAL INFORMATION

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<PAGE>

27.1 As used in this Agreement, "Confidential Information" means any business or
technical  information  disclosed,  either orally or in writing, by one party to
the other under this Agreement provided, that if the information is disclosed in
writing,  it must be clearly labeled as "Confidential",  "Proprietary" or with a
similar  legend,  and if the  information  is disclosed  orally,  it must be (i)
identified  as  Confidential  Information  at  the  time  of  disclosure  by the
disclosing party and (ii) summarized in a writing  confirming it is Confidential
Information  and sent to the  receiving  party  within  fifteen  (15) days after
disclosure. Notwithstanding the above, all Technical Information shall be deemed
to be Confidential Information regardless of marking.

27.2  Confidential  Information does not include  information that the receiving
party can demonstrate (i) is now, or hereafter becomes,  through no fault of the
receiving party,  generally known or available to the public;  (ii) was known by
the receiving party before receiving such information from the disclosing party;
(iii) is  hereafter  rightfully  obtained  by the  receiving  party from a third
party,  without  breach of any obligation to the  disclosing  party;  or (iv) is
independently  developed by the  receiving  party without use of or reference to
the  Confidential  Information by persons who had no access to the  Confidential
Information.

27.3 Each party agrees to hold the other  party's  Confidential  Information  in
strict confidence and not to disclose such Confidential Information to any third
party except as specifically  authorized by this Agreement or by the other party
in writing. Each party may disclose the other's Confidential  Information to its
employees with a bona fide need to know such Confidential Information,  but only
to the extent necessary to carry out the purposes of this Agreement.

27.4 All Confidential  Information  disclosed  hereunder is and shall remain the
property of the disclosing  party.  No right or license is granted other than as
expressly set forth in this Agreement.

27.5 Upon the disclosing  party's  request or upon the termination or expiration
of this  Agreement,  the receiving party shall promptly return to the disclosing
party all  copies of the  Confidential  Information,  will  destroy  all  notes,
abstracts,  or other documents that contain Confidential  Information,  and will
provide to the  disclosing  party a written  certification  of an officer of the
receiving party that it has done so.

27.6 These Section 27.0 obligations  shall survive the expiration or termination
of this Agreement for a period of five (5) years.

28.0     USE OF SUBCONTRACTORS

28.1 MEG agrees that it will not use any third party  subcontractors  to provide
services  with  regard to the  manufacture  of GDC Product  without  GDC's prior
written consent, which consent will not be unreasonably withheld.

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<PAGE>

28.2 MEG  agrees to provide  GDC with no less than  thirty  (30)  days'  written
notice in the event of a change of location of the MEG  manufacturing  site. GDC
shall have the right of approval of such new site,  which  approval  will not be
unreasonably withheld.

29.0     GENERAL.

29.1 This Agreement and its Schedules make up the entire  agreement  between the
parties regarding the Manufacture of the GDC Products. This Agreement supersedes
all prior oral and written  agreements  and  understandings  between the parties
relating  to the  Manufacture  of the GDC  Products,  and may only be amended or
modified in writing signed by an authorized  representative  of each party. This
Agreement  supersedes  and  replaces  any terms and  conditions  of any Purchase
Order,  Acknowledgment,  Schedule, or other standard form of commercial document
of either party exchanged between the parties during the Term.

29.2 Unless  otherwise  agreed,  GDC shall be (i) the exporter of record for any
GDC Products and/or GDC Product  documentation  exported from the United States,
and  shall  comply  with  all  applicable  U.S.  export  control   statutes  and
regulations,  and (ii) the importer of record for all GDC Products exported from
the U.S. and later  imported  and returned to GDC or to MEG. MEG will  cooperate
with GDC in obtaining any export or import licenses for the Products.

29.3 EXCEPT AS EXPRESSLY  PROVIDED IN THIS  AGREEMENT,  IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR A THIRD PARTY FOR ANY SPECIAL, INCIDENTAL,
PUNITIVE OR  CONSEQUENTIAL  DAMAGES,  WHETHER BASED UPON CONTRACT,  TORT, OR ANY
OTHER  LEGAL   THEORY   (INCLUDING,   WITHOUT   LIMITATION,   LOST  PROFITS  AND
OPPORTUNITY).

29.4 This Agreement is intended solely for the benefit of the executing  parties
and their permitted successors and assigns. Except as otherwise agreed, no other
person  or  entity  shall  have any  rights  under or in  connection  with  this
Agreement. The parties hereto are independent  contractors,  one with the other,
and  nothing   herein  shall   constitute   either  party  the  agent  or  legal
representative  of the other for any purpose  whatsoever  except as specifically
set forth in this Agreement.

29.5  The  parties  agree  that  transmission  of data by EDI  (electronic  data
interchange)  will not occur  until a separate  agreement  between  the  parties
governing such  transmissions  is executed.  Upon execution,  such EDI agreement
will become by addendum an attachment to this Agreement.

29.6 Any notice  required or permitted to be given hereunder shall be in writing
and shall be  deemed  to have been  given  and  received  in all  respects  when
personally  delivered,  received by courier,  or sent by certified mail,  return
receipt requested,  postage prepaid, addressed and delivered in all cases to the
following:

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<PAGE>

If to GDC:                                  Ross A. Belson
                                            Chief Operating Officer
                                            General DataComm, Inc.
                                            Park Road Extension
                                            Middlebury, CT 06762

                                            With a copy to:

                                            Bruce L. Galaro, Esq.
                                            Corporate Counsel
                                            (at the same address above)

If to MEG:                                  Dana M. Pittman
                                            Chief Operating Officer
                                            Matco Electronics Group, Inc.
                                            320 North Jensen Road
                                            Vestal, NY 13850

                                            With a copy to:

                                            G. Peter Van Zandt, Esq.
                                            507 Press Building
                                            19 Chenango Street
                                            Binghamton, NY 13901

29.7 Neither  party may sell,  transfer or assign any right,  duty or obligation
granted  or imposed  upon it under  this  Agreement  without  the prior  written
consent of the other party;  however,  GDC may assign this Agreement in whole or
in part without such consent to (i) any entity that acquires  substantially  all
its capital stock or assets, (ii) any entity that acquires substantially all the
assets of any business unit of GDC whose  business is part of the subject matter
hereof, or (iii) to any Affiliate.

29.8  Neither  party  shall be liable for  damages  and costs to the other party
arising out of delays or failures to perform under this Agreement if such delays
or failures result from causes beyond the reasonable control of a party, and are
not caused by an act or  omission  of such  party.  Notice of any such delays or
failures and explanation of their causes must be given to the other party within
five (5) days of the  occurrence.  In the event  occurrence  will likely cause a
delay of more than ten (10) days with regard to MEG performance,  GDC shall have
the right to terminate the affected  installments  under any Purchase  Order. In
the event the occurrence will likely cause a delay of more than thirty (30) days
with regard to MEG  performance,  GDC shall have the right to have the  affected
GDC Products  manufactured  by a third party for the duration of the occurrence,
and MEG shall  reimburse  GDC for any amounts paid to such third party in excess
of the Purchase  Price herein for such GDC Product.  In the event the occurrence
will  likely  cause a delay of more than  sixty  (60)  days  with  regard to MEG
performance, GDC shall have the right to

                                       28

<PAGE>

terminate the affected Purchase Order without further liability or penalty. This
force  majeure  provision  may not be invoked for failure or inability to make a
payment under this Agreement.

29.9 Each party certifies that the  individuals  executing this Agreement on its
behalf have the legal authority to bind that party.

29.10  This  Agreement  shall be deemed to have been  entered  into and shall be
construed and enforced in accordance  with the laws of the State of New York. In
the event of any legal  action by either  party  arising from or related to this
Agreement, both parties consent to exclusive venue and jurisdiction of the state
courts of New York State or federal  courts  situated  in the State of New York.
Both  parties  agree to  comply  with all  local,  state,  and  federal  laws in
connection with their efforts pursuant to this agreement; and agree to indemnify
and hold harmless the other from and against all costs,  damages, and reasonable
legal fees arising from failure to so comply.

29.11  For a period  of three (3) years  from the date  hereof,  MEG shall  not,
directly or indirectly, either solicit for employment, offer employment, hire or
use the services of any employee of GDC so long as such  employee is employed in
any  GDC  organization  and  for a  period  of one  hundred  eighty  (180)  days
thereafter, without first receiving the written consent of GDC.

29.12     Any waiver of a breach of this Agreement shall not be a waiver of any
other or subsequent breach.

29.13 Any  indemnification  obligations  of a party  hereto  shall  survive  the
termination  or expiration of this  Agreement for a period of one (1) year.  Any
other  Section or the specific  provisions  of any other  Section which by their
nature are clearly  intended to survive the  expiration or  termination  of this
Agreement, shall survive any expiration or termination of this Agreement.

IN WITNESS  WHEREOF,  each party represents that it has caused this Agreement to
be executed on its behalf on the date first  above  written by a  representative
empowered to bind that party with respect to the  undertakings  and  obligations
contained herein.

GENERAL DATACOMM, INC                  MATCO ELECTRONICS GROUP, INC.

BY:  /S/WILLIAM G. HENRY               BY /S/ DANA PITTMAN
TITLE: Vice President                  TITLE: Chief Operating Officer

                                       29

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