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EXHIBIT 10.16
EXECUTION VERSION
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CREDIT AND SECURITY AGREEMENT
BY AND AMONG
PENTASTAR COMMUNICATIONS, INC.,
PENTASTAR ACQUISITION CORP. I,
PENTASTAR ACQUISITION CORP. II,
PENTASTAR ACQUISITION CORP. III,
PENTASTAR ACQUISITION CORP. IV,
PENTASTAR ACQUISITION CORP. VI,
PENTASTAR INTERNET, INC.,
PENTASTAR HOLDING CORPORATION,
PENTASTAR TELEMARKETING, INC.
AND
PENTASTAR CORPORATION,
AS BORROWERS
AND
WELLS FARGO BANK WEST, N.A.
Dated as of: July 10, 2000
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Table of Contents
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ARTICLE I Definitions 1
Section 1.1 Definitions 1
Section 1.2 Cross References 8
ARTICLE II Amount and Terms of the Credit Facility 9
Section 2.1 Advances 9
Section 2.2 Interest; Default Interest. 9
Section 2.3 Fees 10
Section 2.4 Computation of Interest and Fees; When Interest Due and Payable 10
Section 2.5 Capital Adequacy 10
Section 2.6 Voluntary Prepayment; Reduction of the Maximum Line; Termination
of the Credit Facility by the Borrowers 11
Section 2.7 Mandatory Prepayment 11
Section 2.8 Payment on Non-Banking Days 12
Section 2.9 Use of Proceeds 12
Section 2.10 Liability Records 12
ARTICLE III Security Interest; Occupancy; Setoff 12
Section 3.1 Grant of Security Interest 12
Section 3.2 Notification of Account Debtors and Other Obligors 12
Section 3.3 Assignment of Insurance 13
Section 3.4 Occupancy 13
Section 3.5 License 14
Section 3.6 Setoff 14
ARTICLE IV Conditions of Lending 14
Section 4.1 Conditions Precedent to the Initial Advance 14
Section 4.2 Conditions Precedent to All Advances 15
ARTICLE V Representations and Warranties 16
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number 16
Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements 16
Section 5.3 Legal Agreements 16
Section 5.4 Subsidiaries 17
Section 5.5 Financial Condition; No Adverse Change 17
Section 5.6 Litigation 17
Section 5.7 Regulation U 17
Section 5.8 Taxes 17
Section 5.9 Titles and Liens 17
Section 5.10 Plans 18
Section 5.11 Default 18
Section 5.12 Environmental Matters 18
Section 5.13 Submissions to Lender 19
Section 5.14 Financing Statements 19
Section 5.15 Rights to Payment 20
Section 5.16 Financial Solvency 20
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ARTICLE VI Borrowers' Affirmative Covenants 21
Section 6.1 Reporting Requirements 21
Section 6.2 Books and Records; Inspection and Examination 24
Section 6.3 Account Verification 24
Section 6.4 Compliance with Laws 24
Section 6.5 Payment of Taxes and Other Claims 25
Section 6.6 Maintenance of Properties 25
Section 6.7 Insurance 25
Section 6.8 Preservation of Existence 26
Section 6.9 Delivery of Instruments, etc. 26
Section 6.10 Performance by the Lender 26
Section 6.11 Minimum Current Ratio 26
Section 6.12 Total Leverage Ratio 27
ARTICLE VII Negative Covenants 28
Section 7.1 Liens 28
Section 7.2 Indebtedness 29
Section 7.3 Guaranties 29
Section 7.4 Investments and Subsidiaries 29
Section 7.5 Dividends 30
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations 30
Section 7.7 Consolidation and Merger; Asset Acquisitions 30
Section 7.8 Sale and Leaseback 31
Section 7.9 Restrictions on Nature of Business 31
Section 7.10 Accounting 31
Section 7.11 Defined Benefit Pension Plans 31
Section 7.12 Other Defaults 31
Section 7.13 Place of Business; Name 31
Section 7.14 Organizational Documents 31
ARTICLE VIII Events of Default, Rights and Remedies 31
Section 8.1 Events of Default 31
Section 8.2 Rights and Remedies 33
Section 8.3 Certain Notices 34
ARTICLE IX Miscellaneous 34
Section 9.1 No Waiver; Cumulative Remedies 34
Section 9.2 Amendments, Etc. 35
Section 9.3 Addresses for Notices, Etc. 35
Section 9.4 Further Documents 36
Section 9.5 Collateral 36
Section 9.6 Costs and Expenses 36
Section 9.7 Indemnity 36
Section 9.8 Participants 37
Section 9.9 Execution in Counterparts 37
Section 9.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information 37
Section 9.11 Severability of Provisions 38
Section 9.12 Headings 38
Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial 38
Section 9.14 Joint and Several Liability 39
Section 9.15. Contribution and Indemnification among the Borrowers 40
Section 9.16 Agency of the Parent for each other Borrower 41
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CREDIT AND SECURITY AGREEMENT
Dated as of July 10, 2000
PentaStar Communications, Inc., a Delaware corporation, PentaStar
Acquisition Corp. I, a Delaware corporation, PentaStar Acquisition Corp. II, a
Delaware corporation, PentaStar Acquisition Corp. III, a Delaware corporation,
PentaStar Acquisition Corp. IV, a Delaware corporation, PentaStar Acquisition
Corp. VI, a Delaware corporation, PentaStar Internet, Inc., a Delaware
corporation, PentaStar Holding Corporation, a Delaware corporation, PentaStar
Telemarketing, Inc., a Delaware corporation, and PentaStar Corporation, a
Colorado corporation (each of the foregoing a "Borrower" and collectively the
"Borrowers"), and Wells Fargo Bank West, N.A., a national banking association
(the "Lender"), hereby agree as follows:
ARTICLE I
Definitions
(ii1 Section Definitions . For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(ii2
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrowers' accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to any
Borrower arising out of the sale or lease of goods or rendition of
services by any Borrower on an open account or deferred payment basis.
"Advance" has the meaning given in Section 2.1.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with any Borrower, including
(without limitation) any Subsidiary of any Borrower. For purposes of
this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Auditor" means Arthur Anderson, or another independent
accounting firm acceptable to the Borrowers and the Lender.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in Denver,
Colorado.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's
reasonable discretion, 75% of Eligible Accounts.
"Collateral" means all of each Borrower's Equipment, General
Intangibles, Inventory, Receivables (including without limitation all
Accounts) and Investment Property; together with (i) all substitutions
and replacements for and products of any of the foregoing; (ii)
proceeds of any and all of the foregoing; (iii) in the case of all
tangible goods, all accessions; and (iv) all accessories, attachments,
parts, equipment and
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repairs now or hereafter attached or affixed to or used in connection
with any tangible goods; provided that Collateral shall not include
property encumbered by the Merrill Lynch Lien.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrowers' account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrowers by the Lender pursuant to Article II.
"Current Ratio" as of a given date means the ratio of the
Borrowers' consolidated current assets to the Borrowers' consolidated
current liabilities (excluding the outstanding principal balance of the
Note and the Merrill Lynch Long Term Debt), each as determined in
accordance with GAAP.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" means an annual rate equal to three percent
(3%) over the otherwise applicable interest rate, which Default Rate
shall change when and as such applicable interest rate changes.
"EBITDA" for a period means the sum of (i) pretax earnings
from continuing operations, (ii) Interest Expense and (iii)
depreciation, depletion, and amortization of tangible and intangible
assets, before (a) special extraordinary gains and losses and (b)
minority interests, in each case for such period, computed and
calculated in accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Net Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) that portion of Accounts (a) relating to
which the Account debtor is refusing to pay
or is asserting is not due and payable or
(b) subject to a claim of offset or a contra
account; provided that no Account or portion
thereof shall be excluded by virtue of this
clause (i) if such Account or portion
thereof has already been discounted due to
the reserve for disputed accounts in
accordance with the definition of Net
Accounts;
(ii) that portion of Accounts not yet earned by
the final delivery of goods or rendition of
services, as applicable, by any Borrower to
the customer;
(iii) accounts due from any United States federal
governmental entity or other governmental
entity in the United States for which any
special procedures must be complied with in
order to obtain a valid perfected first
priority security interest in such Account,
which special procedures have not been
complied with;
(iv) accounts owed by an account debtor located
anywhere outside the United States,
including without limitation, any unit of
any foreign government;
(v) accounts owed by an account debtor that is
insolvent, the subject of bankruptcy
proceedings or has gone out of business;
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(vi) accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of any
Borrower;
(vii) accounts not subject to a duly perfected
security interest in the Lender's favor or
which are subject to any lien, security
interest or claim in favor of any Person
other than the Lender including without
limitation any payment or performance bond;
(viii) that portion of Accounts that constitutes
advertising, finance charges or sales or
excise taxes;
(ix) that portion of any Accounts with respect to
which any Borrower guarantees the repurchase
of the inventory or goods giving rise to
such Account;
(x) Accounts subject to the Merrill Lynch Lien;
(xi) Accounts resulting from or arising out of
any acquisition by any Borrower after the
date hereof which Accounts have not been (i)
audited by the Auditor or any national
independent accounting firm within 60 days
of the closing of such acquisition, or (ii)
if not audited by the Auditor or such
national independent accounting firm within
such 60 day period, then audited by Lender's
internal auditor if Lender so chooses in its
reasonable discretion within 30 days of the
end of such 60 day period; and
(xii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its
reasonable discretion.
"Environmental Laws" has the meaning specified in Section
5.12.
"Equipment" means all of the Borrowers' equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, office and record keeping equipment and
supplies.
"Event of Default" has the meaning specified in Section 8.1.
"Funded Debt" means, with respect to any Person or Persons at
any date, without duplication, all Debt of such Person or Persons that
constitutes (a) all obligations of such Person or Persons for borrowed
money, letters of credit (or applications for letters of credit) or
other similar instruments, (b) all obligations of such Person or
Persons evidenced by bonds, debentures, notes or other similar
instruments, excluding any surety or performance bonds, (c) all
obligations of such Person or Persons to pay the deferred purchase
price of property or services, but only if such deferral is in excess
of 90 days, (d) all obligations under capital leases of such Person or
Persons, (e) installment payment non-compete agreements for such Person
or Persons, and (f) any obligation or guaranty, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt or obligation of any other Person in any manner,
whether directly or indirectly, relating to obligations of such other
Person (other than any Borrower with respect to Debt of another
Borrower) of the type described in (a) through (e) above.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" means all of the Borrowers' general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade
names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
any Borrower's name, and the goodwill of the Borrowers' businesses.
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"Hazardous Substance" has the meaning given in Section 5.12.
"Interest Expense" means, for a fiscal year-to-date period,
the Borrowers' total gross interest expense during such period
(excluding interest income), and shall in any event include, without
limitation, (i) interest expensed (whether or not paid) on all Debt,
(ii) the amortization of debt discounts, (iii) the amortization of all
fees payable in connection with the incurrence of Debt to the extent
included in interest expense, and (iv) the portion of any capitalized
lease obligation allocable to interest expense.
"Inventory" means all of the Borrowers' inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrowers' investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Liens" shall have the meaning set forth in Section 7.1.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Maturity Date" means July 31, 2001.
"Maximum Line" means $10,000,000.00, unless said amount is
reduced pursuant to Section 2.6, in which event it means the amount to
which said amount is reduced.
"Merrill Lynch Credit Agreement" has the meaning in the
definition of "Merrill Lynch Loan Documents".
"Merrill Lynch Lien" means the lien in favor of Merrill Lynch
Business Financial Services Inc., created pursuant to the Merrill Lynch
Loan Documents, in all of the following property and interests in
property of PentaStar Corporation: all Accounts, Contract Rights and
General Intangibles due from, related to or to be collected from
Ameritech Information Systems Inc. ("Ameritech") in connection with the
Authorized Distributor Agreement between Ameritech and Telcomm
Industries, Inc. ("Telecomm") dated effective January 1, 1999 (the
"Authorized Distributor Agreement") and any other distributor
agreements between Ameritech and Telecomm (collectively "Distributor
Agreements"), which such Distributor Agreements have been or are to be
assigned by Telecomm to PentaStar Corporation in connection with
PentaStar Corporation's acquisition of some of the assets of Telecomm
in July 2000, but only to the extent that such Accounts, Contract
Rights and General Intangibles were, on or prior to June 30, 2000,
either (i) desginated by Ameritech as "Residual Payments" (which term
shall mean both "Residual Payments" as defined in the Authorized
Distributor Agreement and any other similar term used by Ameritech in a
Distributor Agreement representing the right to the same type of
payments as a "Residual Payment" under the Authorized Distributor
Agreement) or (ii) represented on the books of PentaStar Corporation as
Residual Payments due or earned from Ameritech, together with all books
and records (including computer records) directly related thereto and
all proceeds thereof; provided that, for the avoidance of doubt, the
Merrill Lynch Lien shall not encumber any Accounts, Contract Rights or
General Intangibles or any other rights related to or in connection
with any "Base Commission" or "Upfront Commission Payment" (as each
such term is defined in Exhibit C to the Authorized Distributor
Agreement).
"Merrill Lynch Long Term Debt" means the debt evidenced by the
Merrill Lynch Loan Documents.
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"Merrill Lynch Loan Documents" means the WCMA REDUCING
REVOLVER sm Loan and Security Agreement NO. 613-07E50 dated as of July
17, 2000, between PENTASTAR CORPORATION and MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC. (as such agreement exists on July 17, 2000, the
"Merrill Lynch Credit Agreement") and all related documents.
"Net Accounts" means all of the Borrowers' Accounts, less a
reserve for disputed accounts as calculated or adjusted by the
Borrowers from time to time and confirmed by the Auditor.
"Note" means the Borrowers' revolving promissory note, payable
to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, supplemented or restated
from time to time, and any note or notes issued in substitution
therefor, as the same may hereafter be amended, supplemented or
restated from time to time and any note or notes issued in substitution
therefor.
"Obligations" shall mean all obligations and liabilities of
the Borrowers under or in connection with the Loan Documents, now
existing or hereafter created, contingent or not, due or not, arising
by operation of law or otherwise.
"Parent" means PentaStar Communications, Inc.
"Permitted Acquisition" means any acquisition made by the
Parent, or a wholly owned Subsidiary of the Parent that is or becomes a
Borrower under this Agreement, of 100% of the assets or capital stock
of a Person operating in the same line of business as the Parent.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for any Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where any Borrower conducts its
business and has any rights of possession.
"Receivables" means each and every right of any Borrower to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by any Borrower or by some other person who subsequently
transfers such person's interest to any Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which any
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Security Documents" means this Agreement and any other
document delivered to the Lender from time to time to secure the
Obligations, as the same may hereafter be amended, supplemented or
restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
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"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by any Borrower, by any Borrower and
one or more other Subsidiaries, or by one or more other Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date any Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations (or such
Obligations become automatically due and payable) after an Event of
Default pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
Section 1.2 Cross References . All references in this
Agreement to Articles, Sections and subsections, shall be to Articles, Sections
and subsections of this Agreement unless otherwise explicitly specified.
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ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 Advances . The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to the Borrowers
from time to time from the date all of the conditions set forth in Section 4.1
are satisfied until the Termination Date, on the terms and subject to the
conditions herein set forth (the "Advances"). The Lender shall have no
obligation to make an Advance if, after giving effect to such requested Advance,
the sum of the outstanding and unpaid Advances would exceed the Borrowing Base.
The Borrowers' obligation to pay the Advances shall be evidenced by the Note and
shall be secured by the Collateral as provided in Article III. Within the limits
set forth in this Section 2.1, the Borrowers may borrow, prepay pursuant to
Section 2.6 and reborrow. The Borrowers agree to comply with the following
procedures in requesting Advances under this Section 2.1:
(a) The Borrowers shall make each request for an Advance to
the Lender before 11:00 a.m. (Denver time) of the day of the requested
Advance. Requests may be made in writing or by telephone, specifying
the date of the requested Advance and the amount thereof. Each request
shall be by (i) any officer of the Parent; or (ii) any person
designated as the Parent's agent by any officer of the Parent in a
writing delivered to the Lender; or (iii) any person whom the Lender
reasonably believes to be an officer of the Parent or such a designated
agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Advance by crediting the same to the Parent's demand deposit account
maintained with Lender (Account No. 1018234328) unless the Lender and
the Borrowers shall agree in writing to another manner of disbursement.
Upon the Lender's request, the Parent shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrowers shall
repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in
fact authorized to do so. Any request for an Advance, whether written
or telephonic, shall be deemed to be a representation by the Borrowers
that the conditions set forth in Section 4.2 have been satisfied as of
the time of the request.
Section 2.2 Interest; Default Interest.
(a) INTEREST. Subject to Section 2.2(b), the outstanding
principal balance of the Note shall bear interest, and such interest
shall be due and payable, as set forth in the Note. All interest due
and payable under the Note shall be debited from the Borrowers'
account.
(b) DEFAULT INTEREST RATE. At any time during which any
Default or Event of Default shall have occurred and be continuing, in
the Lender's sole discretion and without waiving any of its other
rights and remedies, the principal of the Advances outstanding from
time to time shall bear interest at the Default Rate.
Section 2.3 Fees.
(a) ORIGINATION FEE. The Borrowers hereby agree to pay the
Lender a fully earned and non-refundable origination fee of $25,000,
due and payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.3(b),
"Unused Amount" means the Maximum Line reduced by outstanding Advances.
The Borrowers agree to pay to the Lender an unused line fee at the rate
of one quarter of one percent (.25%) per annum on the average daily
Unused Amount from the date of this Agreement to and including the
Termination Date, due and payable quarterly in arrears on the first day
of the quarter and on the Termination Date. All fees due and payable
under this Section 2.3(b) shall be debited from the Borrowers' account.
(c) AUDIT FEES. The Borrowers hereby agree to pay the Lender
or the Auditor, as applicable, on demand, reasonable audit fees in
connection with any audits or inspections conducted by the Lender or
the Auditor of any Accounts, Collateral or any Borrower's operations or
business at the rates established
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from time to time by the Lender as its audit fees, together with all
actual reasonable out-of-pocket costs and expenses incurred in
conducting any such audit or inspection.
Section 2.4 Computation of Interest and Fees; When Interest
Due and Payable . Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest shall
be payable in arrears on the first day of each month and on the Termination
Date.
Section 2.5 Capital Adequacy . If any Related Lender
reasonably determines at any time that its Return has been reduced as a result
of any Rule Change, such Related Lender may require the Borrowers to pay it the
amount necessary to restore its Return to what it would have been had there been
no Rule Change. For purposes of this Section 2.5:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "Return," for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of
the Capital Adequacy Rules then in effect. Return may be calculated for
each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(c) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the Closing Date
are scheduled to take place under the existing Capital Adequacy Rules
or any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
Related Lender.
(d) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to any Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return, shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.6 Voluntary Prepayment; Reduction of the Maximum
Line; Termination of the Credit Facility by the Borrowers . Except as otherwise
provided herein and subject to all applicable provisions in the Note, the
Borrowers may prepay the Advances in whole at any time or in part from time to
time. The Borrowers may terminate the Credit Facility in whole (but not in part)
at any time and, subject to payment and performance of all the Borrowers'
obligations to the Lender (including without limitation all obligations under
the Note), may obtain any release or termination of the Security Interest to
which the Borrowers are otherwise entitled by law by giving at least 30 days'
prior written notice to the Lender of the Borrowers' intention to terminate this
Agreement. The Borrowers may not decrease the Maximum Line other than in
connection with a prepayment in full of the Advances and termination of the
Credit Facility in full, as set forth above.
Section 2.7 Mandatory Prepayment . Without notice or demand,
if the outstanding principal balance of the Advances shall at any time exceed
the Borrowing Base, the Borrowers shall immediately prepay the Advances to the
extent necessary to eliminate such excess. Any payment received by the Lender
under this
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Section 2.7 or under Section 2.6 may be applied to the Obligations, in such
order and in such amounts as the Lender, in its discretion, may from time to
time determine.
Section 2.8 Payment on Non-Banking Days . Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.9 Use of Proceeds . The Borrowers shall use the
proceeds of Advances to finance future acquisitions, purchases of fixed assets
and for ordinary working capital purposes.
Section 2.10 Liability Records . The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until any Borrower
establishes the contrary. Upon the Lender's demand, each Borrower will admit and
certify in writing the exact principal balance of the Obligations that such
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrowers
unless the Borrowers give the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
Section 3.1 Grant of Security Interest . Each of the Borrowers
hereby pledges, assigns and grants to the Lender a security interest
(collectively referred to as the "Security Interest") in the Collateral, as
security for the payment and performance of the Obligations.
Section 3.2 Notification of Account Debtors and Other
Obligors. Upon the occurrence of an Event of Default, the Lender may at any time
(whether or not a Default or Event of Default then exists) notify any account
debtor or other person obligated to pay the amount due that such right to
payment has been assigned or transferred to the Lender for security and shall be
paid directly to the Lender. The Borrowers will join in giving such notice if
the Lender so requests. At any time after any Borrower or the Lender gives such
notice to an account debtor or other obligor, the Lender may, but need not, in
the Lender's name or in the relevant Borrower's name, (a) demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify,
amend or change the obligations (including collateral obligations) of any such
account debtor or other obligor; and (b) as each Borrower's agent and
attorney-in-fact, notify the United States Postal Service to change the address
for delivery of each Borrower's mail to any address designated by the Lender,
otherwise intercept each Borrower's mail, and receive, open and dispose of each
Borrower's mail, applying all Collateral as permitted under this Agreement and
holding all other mail for each Borrower's account or forwarding such mail to
each Borrower's last known address.
Section 3.3 Assignment of Insurance . As additional security
for the payment and performance of the Obligations, each of the Borrowers hereby
assigns to the Lender any and all monies (including, without limitation,
proceeds of insurance and refunds of unearned premiums) due or to become due
under, and all other rights of the Borrowers with respect to, any and all
policies of insurance now or at any time hereafter covering the Collateral or
any evidence thereof or any business records or valuable papers pertaining
thereto, and each of the Borrowers hereby directs the issuer of any such policy
to pay all such monies directly to the Lender. Upon the occurrence of an Event
of Default, the Lender may (but need not), in the Lender's name or in any
Borrower's name, execute and deliver proof of claim, receive all such monies,
endorse checks and other instruments representing payment of such monies, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.
Section 3.4 Occupancy .
(a) Each Borrower hereby irrevocably grants to the Lender the
right to enter and occupy the Premises at any time after the occurrence
and during the continuance of an Event of Default.
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(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good faith deem to be related or incidental purposes.
(c) The Lender's right to occupy the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers, and (iii) the termination or cure of such
Event of Default giving rise to such right.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrowers shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrowers will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License . The Borrowers hereby grant to the Lender
a non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of any Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral after the occurrence of a Default or Event of Default.
Section 3.6 Setoff . The Borrowers hereby confirm the Lender's
rights (and the rights of each other Person holding a participating interest in
any Obligations) of banker's lien and setoff and nothing in this Agreement, or
any other Loan Document shall be deemed a waiver, limitation or prohibition of
such right of banker's lien or setoff.
ARTICLE IV
Conditions of Lending
Section 4.1 Conditions Precedent to the Initial Advance . The
Lender's obligation to make the initial Advance hereunder shall be subject to
the condition precedent that the Lender shall have received all of the
following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrowers.
(b) The Note, properly executed by the Borrowers.
(c) A true and correct copy of any and all leases pursuant to
which any Borrower is leasing any Premises at such Borrower's principal
place of business as set forth on Schedule 5.1, together with a
landlord's disclaimer and consent with respect to the Parent's lease of
the Premises located at 1522 Blake Street, Denver, CO.
(d) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against any Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against any Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(e) A certificate of each Borrower's Secretary or Assistant
Secretary attaching and certifying as to (i) the resolutions of such
Borrower's directors and, if required, shareholders, authorizing the
execution, delivery and performance of the Loan Documents, (ii) such
Borrower's articles of incorporation
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and bylaws, and (iii) the signatures of such Borrower's officers or
agents authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests,
on such Borrower's behalf.
(f) A current certificate issued by the Secretary of State of
each Borrower's jurisdiction of incorporation, certifying that each
Borrower is in compliance with all applicable organizational
requirements of such jurisdiction.
(g) Evidence that each Borrower is duly licensed or qualified
to transact business in the jurisdictions indicated on Schedule 5.1.
(h) An opinion of counsel to the Borrowers, addressed to the
Lender and relating to issues as reasonably required by the Lender.
(i) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(j) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.3 and expenses incurred by the
Lender through such date and required to be paid by the Borrowers under
Section 9.6, including all legal expenses incurred through the date of
this Agreement.
(k) Copies of the Merrill Lynch Loan Documents and all related
documents, in form and substance reasonably satisfactory to the Lender,
certified as being true, correct and complete by the Chief Executive
Officer or Chief Financial Officer of the Parent.
(l) The conditions set forth in Section 4.2 shall have been
satisfied.
(m) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances . The
Lender's obligation to make each Advance shall be subject to the further
conditions precedent that on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
Each Borrower represents and warrants to the Lender as
follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number .
Each Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the state of its incorporation as set forth on
Schedule 5.1 and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. Each Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under, the Loan Documents. During
its existence, each Borrower has done business solely under the names set forth
in Schedule 5.1 hereto. Each Borrower's chief executive office and principal
place of business is located at the address set forth in Schedule 5.1 hereto,
and all of each Borrower's records relating to its business or the Collateral
are kept at that location. All Inventory and Equipment is located at that
location or at one of the other locations set forth in Schedule 5.1 hereto. Each
Borrower's tax identification number is correctly set forth in Schedule 5.1
hereto.
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Section 5.2 Authorization of Borrowing; No Conflict as to Law
or Agreements . The execution, delivery and performance by each Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of any Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System) or
of any order, writ, injunction or decree presently in effect having
applicability to any Borrower or of any Borrower's articles of incorporation or
bylaws; (iv) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other material agreement, lease or instrument
to which any Borrower is a party or by which it or its properties may be bound
or affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by any
Borrower.
Section 5.3 Legal Agreements . This Agreement constitutes and,
upon due execution by each Borrower, the other Loan Documents will constitute
the legal, valid and binding obligations of each Borrower, enforceable against
each Borrower in accordance with their respective terms.
Section 5.4 Subsidiaries . Except as set forth in Schedule
5.4, no Borrower has any Subsidiaries.
Section 5.5 Financial Condition; No Adverse Change . The
Parent has heretofore furnished to the Lender audited financial statements of
the Parent for its fiscal year ended December 31, 1999 and unaudited financial
statements of the Parent for the fiscal year-to-date period ended March 31,
2000, and those statements fairly present the Parent's financial condition on a
consolidated basis on the dates thereof and the results of its operations and
cash flows for the periods then ended and were prepared in accordance with
generally accepted accounting principles. Since the date of the most recent
financial statements, there has been no material adverse change in the
Borrowers' business, properties or condition (financial or otherwise).
Section 5.6 Litigation . There are no actions, suits or
proceedings pending or, to any Borrower's knowledge, threatened against or
affecting the Borrowers or the properties of the Borrowers before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to the Borrowers, would have
a material adverse effect on the financial condition, properties or operations
of the Borrowers.
Section 5.7 Regulation U . No Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes . Each Borrower has paid or caused to be
paid to the proper authorities when due all federal, state and local taxes
required to be withheld by it. Each Borrower has filed all federal, state and
local tax returns which to the knowledge of the officers of any Borrower are
required to be filed, and each Borrower has paid or caused to be paid to the
respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.
Section 5.9 Titles and Liens . Each Borrower has good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets reflected in the
latest financial statements referred to in Section 5.5 and all proceeds thereof,
free and clear of all mortgages, security interests, liens and encumbrances,
except for Permitted Liens. No financing statement naming any Borrower as debtor
is on file in any office except to perfect only Permitted Liens.
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Section 5.10 Plans . Except as disclosed to the Lender in
writing prior to the date hereof, no Borrower nor any of its Affiliates
maintains or has maintained or has contributed to any Plan or any
"multi-employer plan" as defined in ERISA. No Borrower nor any Affiliate has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. No Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 Default . Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could reasonably be expected to have a material adverse effect on the
Borrowers' financial condition, properties or operations.
Section 5.12 Environmental Matters .
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To each Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for any Borrower or
the Lender under common law of any jurisdiction or under any
Environmental Law, and no Borrower has any knowledge that any Hazardous
Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to
create any such liability.
(c) To each Borrower's best knowledge, no Borrower has
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) To each Borrower's knowledge, there are not and there
never have been any requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation, relating in any way
to the Premises or any Borrower, alleging liability under, violation
of, or noncompliance with any Environmental Law or any license, permit
or other authorization issued pursuant thereto. To each Borrower's best
knowledge, no such matter is threatened or impending.
(e) To each Borrower's best knowledge, each Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
relevant Borrower's possession and are in full force and effect. No
permit required under any Environmental Law is scheduled to expire
within 12 months and there is no threat that any such permit will be
withdrawn, terminated, limited or materially changed.
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(f) To each Borrower's best knowledge, the Premises are not
and never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) Each Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents of
which such Borrower is aware describing or relating in any way to the
Premises or such Borrower's businesses.
Section 5.13 Submissions to Lender . All financial and other
information provided to the Lender by or on behalf of the Borrowers in
connection with the Borrowers' request for the Credit Facility contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or pro forma financial statements, presents a good faith opinion as
to such projections, valuations and pro forma condition and results.
Section 5.14 Financing Statements . Each Borrower has provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest created by the Security Documents. When such financing
statements are filed in the offices noted therein, the Lender will have a valid
and perfected security interest in the Collateral that is capable of being
perfected by filing financing statements. None of the Collateral covered by the
Security Documents is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect thereto.
Section 5.15 Rights to Payment . Each right to payment and
each instrument, document, chattel paper and other agreement constituting or
evidencing Collateral covered by the Security Documents is (or, in the case of
all future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, and to the best knowledge of each Borrower,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in any Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 Financial Solvency . Both before and after giving
effect to the transactions contemplated in the Loan Documents, no Borrower:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of
any Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to, nor believes
that it will, incur debts beyond its ability to pay them as they
mature;
(d) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to hinder, delay or
defraud either its present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy
or for an arrangement or reorganization or similar proceeding under any
law any jurisdiction, nor, to the best knowledge of each Borrower, is
the subject of any actual, pending or threatened bankruptcy, insolvency
or similar proceedings under any law of any jurisdiction.
Section 5.17 Acquisitions. All of any Borrower's acquisitions
of all or substantially of the assets or stock of another entity since the
formation of such Borrower are as set forth on Schedule 5.17. Each of such
entities acquired in a stock acquisition, as set forth on Schedule 5.17, was
acquired by the relevant Borrower, was merged into such Borrower and no longer
exists as a legal entity.
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Section 5.18 Merrill Lynch Loan Documents. Neither Parent nor
PentaStar Corporation recognizes, for GAAP reporting purposes, revenues on
payments from, or rights to, the Residual Pool (as defined in the Merril Lynch
Credit Agreement) until such revenues have been received from Ameritech. Neither
Parent nor PentaStar Corporation does or will account for such Residual Pool
receivables or rights on its balance sheet as Accounts or Receivables. No
Borrower (i) has any account with, (ii) has given, or has instructed any other
person to give, any cash, credit, deposits, accounts, financial assets,
investment property, securities or any other property of any Borrower to, or
(iii) is aware that any such cash, credit, deposits, accounts, financial assets,
investment property, securities or any other property of any Borrower is in
transit to or in the possession, custody or control of, MLBFS, MLPF&S or any
agent, bailee, or affiliate of MLBFS or MLPF&S (as such terms are defined in the
Merrill Lynch Credit Agreement), other than the establishment of the WCMA
Account (as defined in the Merrill Lynch Credit Agreement) in existence on the
date hereof and any payments to such WCMA Account that are permitted by Section
6.14 hereof. The only service that any Borrower has applied for in connection
with such WCMA Account is the "WCMA Commercial Line of Credit," as described in
the WCMA Agreement (which term is defined in the Merrill Lynch Credit
Agreement), applied for by PentaStar Corporation. For the avoidance of doubt, no
Borrower has established or has any "Securities Account", as described in such
WCMA Agreement.
ARTICLE VI
Borrowers' Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, each Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements . Parent will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event before the earlier
of (i) 90 days after the end of each fiscal year of the Parent and (ii)
the date of the filing of the Parent's Annual Report on Form 10-K with
the Securities and Exchange Commission, Parent's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by the Parent and reasonably acceptable to the
Lender, which annual financial statements shall include Parent's
balance sheet as at the end of such fiscal year and the related
statements of Parent's income, retained earnings and cash flows for the
fiscal year then ended, prepared on a consolidated basis, and, if
Lender so requests in writing, on a consolidating basis, to include all
Subsidiaries of the Parent, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management
letters prepared by such accountants; (ii) a report signed by such
accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated,
of any Default or Event of Default hereunder; and (iii) a certificate
(substantially in the form of Exhibit B hereto) from Parent's chief
financial officer stating that such financial statements have been
prepared in accordance with GAAP (or how such financial statements vary
from GAAP) and whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto, together
with all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Parent is in compliance with the
requirements set forth in Sections 6.11 and 6.12, with all such details
and calculations as the Lender may require in connection therewith.
(b) as soon as available, and in any event before the earlier
of (i) 45 days after the end of each quarter (except the last quarter)
of the Parent and (ii) the date of the filing of the Parent's 10-Q with
the Securities and Exchange Commission, the Parent's unaudited
financial statements, which quarterly financial statements shall
include the Parent's balance sheet as at the end of such quarter and
the related statements of Parent's income, retained earnings and cash
flows for the quarter then ended, prepared on a consolidated basis,
and, if Lender so requests in writing, on a consolidating basis, to
include all Subsidiaries of Parent, all in reasonable detail and
prepared in accordance with GAAP, together with a certificate
(substantially in the form of Exhibit B hereto) from Parent's chief
financial officer stating that such financial statements have been
prepared in accordance with GAAP (or how such financial statements vary
from GAAP) and whether or not such officer has knowledge of the
occurrence of any Default or Event
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of Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto, together with all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Parent is in compliance with the requirements set forth in Sections
6.11 and 6.12, with all such details and calculations as the Lender may
require in connection therewith;
(c) as soon as available and in any event within 30 days after
the end of each month, an unaudited/internal balance sheet and
statements of income and retained earnings of the Parent as at the end
of and for such month and for the year to date period then ended,
prepared on a consolidated basis, and, if Lender so requests in
writing, on a consolidating basis, in reasonable detail and, beginning
in November 2000, stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in
accordance with GAAP, subject to year-end audit adjustments;
(d) within 30 days after the end of each month or more
frequently if the Lender so requires, agings of the Parent's
consolidated Receivables (broken down by Borrower) and a calculation of
each Borrower's Accounts, Net Accounts and Eligible Accounts as at the
end of such month or shorter time period;
(e) at least 30 days before the beginning of each fiscal year
of the Parent, the projected balance sheets and income statements for
each month of such year, each in reasonable detail, representing the
Parent's good faith projections and certified by the Parent's chief
financial officer as being the most accurate projections available and
identical to the projections used by the Parent for internal planning
purposes, together with such supporting schedules and information as
the Lender may in its reasonable discretion require;
(f) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any Borrower of the type
described in Section 5.12 or which seek a monetary recovery against any
Borrower in excess of $100,000;
(g) as promptly as practicable (but in any event not later
than five business days) after an officer of any Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Parent of the steps
being taken by the Parent to cure the effect of such breach, default or
event;
(h) as soon as possible and in any event within 30 days after
any Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Parent's chief
financial officer setting forth details as to such Reportable Event and
the action which the Parent proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(i) as soon as possible, and in any event within 10 days after
any Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Parent's chief financial
officer setting forth details as to such failure and the action which
the Parent proposes to take with respect thereto, together with a copy
of any notice of such failure required to be provided to the Pension
Benefit Guaranty Corporation;
(j) promptly upon knowledge thereof, notice of (i) any
disputes or claims by any Borrower's customers exceeding $100,000
individually or $500,000 in the aggregate during any fiscal year, (ii)
any change in the persons constituting the Parent's Chief Executive
Officer or Chief Operating Officer or (iii) either Craig Zoellner or
Richard Tyler ceasing to be on the Parent's board of directors or
submitting a letter of resignation therefrom;
(k) promptly upon any Borrower's knowledge thereof, notice of
any material loss of or material damage to any material item of
Collateral or of any substantial adverse change in any material item of
Collateral or the prospect of payment of any material Receivable;
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(l) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Parent shall have
sent to its stockholders;
(m) promptly after the sending or filing thereof, copies of
all regular and periodic reports which the Parent shall file with the
Securities and Exchange Commission or any national securities exchange;
(n) promptly upon any Borrower's knowledge thereof, notice of
any Borrower's violation of any law, rule or regulation, the
non-compliance with which could reasonably be expected to materially
and adversely affect the Borrowers' business or its financial
condition; and
(o) a monthly updated Borrowing Base reconciliation report.
Section 6.2 Books and Records; Inspection and Examination .
Each Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to such Borrower's business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender's request, will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from or copy any and
all corporate and financial books and records of the Borrowers at all times
during ordinary business hours, to send and discuss with account debtors and
other obligors requests for verification of amounts owed to the Borrowers, and
to discuss the Borrowers' affairs with any of the Borrowers' directors,
officers, employees or agents. The Borrowers will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral or any other property of any Borrower at any time during ordinary
business hours. Without limiting the generality of the foregoing, Borrowers
shall cooperate with the Auditor in connection with the Auditor's audits of the
Borrowers' Accounts from time to time.
Section 6.3 Account Verification . The Lender may at any time
and from time to time send or require the Borrowers to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws .
(a) Each Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect the Borrowers' business or the
Borrowers' financial condition and (ii) use and keep the Collateral,
and require that others use and keep the Collateral, only for lawful
purposes, without violation of any federal, state or local law, statute
or ordinance.
(b) Without limiting the foregoing undertakings, each Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5 Payment of Taxes and Other Claims . Each Borrower
will pay or discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits, upon any
properties belonging to it (including, without limitation, the Collateral) or
upon or against the creation, perfection or continuance of the Security
Interest, prior to the date on which penalties attach thereto, (b) all federal,
state and local taxes required to be withheld by it, and (c) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of any Borrower; provided, that no Borrower shall
be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings diligently pursued and for which proper reserves have been made in
accordance with GAAP and so long as no Lien shall result therefrom.
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Section 6.6 Maintenance of Properties .
(a) Each Borrower will keep and maintain the Collateral and
all of its other properties necessary or useful in its business in
reasonably good condition, repair and working order (normal wear and
tear excepted) and will from time to time replace or repair any worn,
defective or broken parts; provided, however, that nothing in this
Section 6.6 shall prevent any Borrower from discontinuing the operation
and maintenance of any of its properties if such discontinuance is
desirable in the conduct of the Borrowers' businesses and not
disadvantageous in any material respect to the Lender.
(b) Each Borrower will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) Each Borrower will keep all Collateral free and clear of
all Liens except Permitted Liens.
Section 6.7 Insurance . Each Borrower will obtain and at all
times maintain insurance with insurers believed by the Borrowers to be
responsible and reputable, in such amounts and against such risks as may from
time to time reasonably be required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar properties in the same general areas in
which the Borrowers operate. Without limiting the generality of the foregoing,
each Borrower will at all times keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit reasonably
acceptable to the Lender. All policies of liability insurance required hereunder
shall name the Lender as an additional insured.
Section 6.8 Preservation of Existence . Each Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, each Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrowers.
Section 6.10 Performance by the Lender . If any Borrower at
any time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives any Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5and 6.7,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrowers (or, at the Lender's option,
in the Lender's name) and may, but need not, take any and all other actions
which the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon pay to the Lender on demand the amount of all monies expended and all
reasonable costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
then current rate of interest applicable to the Note. To facilitate the Lender's
performance or observance of such covenants of the Borrowers, the Borrowers
hereby irrevocably appoints the Lender, or the Lender's delegate, acting alone,
as the Borrowers' attorney in fact (which appointment is coupled with an
interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrowers any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrowers under this Section 6.10.
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Section 6.11 Minimum Current Ratio . Parent will maintain its
Current Ratio on a consolidated basis, determined as at the end of each quarter,
at or above 1.5 to 1.00.
Section 6.12 Total Leverage Ratio . The Parent shall not
permit the Total Leverage Ratio, determined quarterly, to exceed 1.5. For this
purpose, "Total Leverage Ratio" means, on any date of determination, the ratio
of (a) Parent's consolidated total Funded Debt on such date (excluding the
Merrill Lynch Long Term Debt) to (b) Parent's consolidated EBITDA for the most
recently completed four fiscal quarters, provided that for purposes of this
calculation, EBITDA (i) shall be calculated as if all assets acquired (including
without limitation acquisitions of stock) on any date during the twelve month
period of determination were acquired on the first day in such twelve month
period of determination, and all assets sold (including without limitation
dispositions of stock) on any date during the twelve month period of
determination were sold on the first day in such twelve month period of
determination, in each case with costs adjusted to the levels that any Borrower
will incur, and (ii) shall include corporate overhead annualized based on the
level incurred in the most recent quarter.
Section 6.13 Lien Releases. The Borrowers shall, within 30
days of the date hereof, cause to be terminated all Liens and all financial
statements that do not constitute or represent Liens permitted by Section 7.1.
Section 6.14 Merrill Lynch Loan Documents. (a) Each Borrower
agrees that no Borrower (i) will establish or permit to exist any account with,
(ii) will give, or will instruct any other person to give, any cash, credit,
deposits, accounts, financial assets, investment property, securities or any
other property of any Borrower to, or (iii) will permit any such cash, credit,
deposits, accounts, financial assets, investment property, securities or any
other property of any Borrower to be in transit to or in the possession, custody
or control of, MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or
MLPF&S (as such terms are defined in the Merrill Lynch Credit Agreement), other
than the establishment of the WCMA Account (as defined in the Merrill Lynch
Credit Agreement) in existence on the date hereof and any payments to such WCMA
Account that are permitted by clause (b) of this Section 6.14.
(b) PentaStar Corporation further agrees that it shall not pay
any amounts under or pursuant to the Merrill Lynch Credit Agreement, including
without limitation any payments into the WCMA Account, except for regularly
scheduled payments of principal and interest thereunder pursuant to Section 3.5
and 3.6 thereof and fees, costs and expenses specifically required to be paid
thereunder. PentaStar Corporation shall not prepay any amounts under the Merrill
Lynch Credit Agreement (including without limitation pursuant to Section 3.11
thereof) nor request Subsequent WCMA Loans (as defined in the Merrill Lynch
Credit Agreement) unless in either case (i) the Lender has given its prior
written consent thereto or (ii) the outstanding balance of this Credit Facility
at the time of such prepayment or request is zero and no request for an Advance
hereunder is currently pending (other than such Subsequent WCMA Loans made
automatically to pay accrued interest in accordance with the terms of the
Merrill Lynch Credit Agreement).
(c) PentaStar Corporation further agrees that, upon written
request of Lender, it shall provide the Lender with (i) copies of all
information relating to the Residual Pool that it has provided to Merrill Lynch
Business Financial Services Inc. pursuant to Section 4.2(a)(iii) of the Merrill
Lynch Credit Agreement and (ii) notice of any additional contribution of
collateral to Merrill Lunch Business Financial Services Inc. pursuant to Section
4.3(i)(ii) of the Merrill Lynch Credit Agreement.
(d) Other than the WCMA Commercial Line of Credit referred to
in Section 5.18, which is evidenced by the Merrill Lynch Loan Documents, no
Borrower will apply for or establish any other financial service or other
arrangement with MLBFS or MLPF&S (as such terms are defined in the Merrill Lynch
Credit Agreement) or any affiliate thereof.
Section 6.15 Lock Box Arrangement. Upon request of the Lender,
Borrowers agree that they shall enter into a lockbox arrangement with Lender in
accordance with Lenders' customary procedures and documentation, in a manner
acceptable to the Lender.
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ARTICLE VII
Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, each Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 Liens . No Borrower will create, incur or suffer
to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets (collectively, "Liens"), now
owned or hereafter acquired, to secure any indebtedness; excluding, however,
from the operation of the foregoing, the following (collectively, "Permitted
Liens"):
(a) in the case of any Borrower's property which is not
Collateral, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with the
Borrowers' businesses or operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents;
(d) the Merrill Lynch Lien; and
(e) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the lesser of cost or fair market value thereof, not exceeding $100,000
in the aggregate during the period beginning on the date hereof until
payment in full of the Obligations and so long as no Default or Event
of Default is then in existence and none would exist immediately after
such acquisition.
Section 7.2 Indebtedness . No Borrower will incur, create,
assume or permit to exist any Debt, except:
(a) indebtedness arising hereunder;
(b) indebtedness of any Borrower in existence on the date
hereof, as described in, and in amounts no greater than as listed in,
Schedule 7.2 hereto;
(c) the Merrill Lynch Long Term Debt; and
(d) indebtedness relating to liens permitted in accordance
with Section 7.1(d).
Section 7.3 Guaranties . No Borrower will assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by any Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
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Section 7.4 Investments and Subsidiaries .
(a) No Borrower will purchase or hold beneficially any stock
or other securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any
interest whatsoever in, any other Person, including specifically but
without limitation any partnership or joint venture, except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Moody's Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation); and
(ii) investments constituting "Permitted
Acquisitions" permitted by Section 7.7.
(iii) investments made by the Parent, or a wholly
owned Subsidiary of the Parent that is or becomes a Borrower
under this Agreement, in Persons operating in the same line of
business as the Parent, the sum of which investments in the
aggregate for all Borrowers does not exceed $500,000 at any
time outstanding.
(b) No Borrower will create or permit to exist any Subsidiary
other than (i) the Subsidiaries in existence on the date hereof and
listed on Schedule 5.4 and (ii) Subsidiaries constituting "Permitted
Acquisitions" permitted by Section 7.7.
Section 7.5 Dividends . Except as set forth below, no Borrower
will declare or pay any dividends (other than dividends payable solely in such
Borrower's capital stock) on any class of its stock or make any payment on
account of the purchase, redemption or other retirement of any shares of such
stock or make any distribution in respect thereof, either directly or
indirectly.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations . No Borrower will sell, lease, assign, transfer or otherwise dispose
of (i) the stock of any Subsidiary, (ii) all or a substantial part of its
assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. No Borrower will in any manner transfer
any property without prior or present receipt of full and adequate
consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions . No
Borrower will consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire all or substantially all the assets of any
other Person except with Lender's prior written approval, except that (a) the
Parent may consummate Permitted Acquisitions so long as in each case (1) there
exists no Default or Event of Default both before and after giving effect to any
such acquisition, (2) the Lender shall have received prior written notice
thereof and (3) the Parent shall have confirmed in writing to the Lender that
(I) the proposed acquisition conforms to the definition of Permitted Acquisition
and (II) the Parent's projections made in good faith after giving effect to the
proposed acquisition evidence pro forma compliance with the terms of Sections
6.11 and 6.12 and (b) any Borrower may merge with and into the Parent so long as
the Parent is the surviving entity.
Section 7.8 Sale and Leaseback . No Borrower will enter into
any arrangement, directly or indirectly, with any other Person whereby any
Borrower shall sell or transfer any real or personal property, whether now owned
or hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property which such Borrower intends
to use for substantially the same purpose or purposes as the property being sold
or transferred.
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Section 7.9 Restrictions on Nature of Business . No Borrower
will engage in any line of business materially different from that presently
engaged in by the Borrowers and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 Accounting . No Borrower will adopt any material
change in accounting principles other than as required by GAAP. No Borrower will
adopt, permit or consent to any change in its fiscal year.
Section 7.11 Defined Benefit Pension Plans . No Borrower will
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.12 Other Defaults . No Borrower will permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon any Borrower except for any such breach,
default or event of default which would not reasonably be expected to have a
material adverse effect on the Borrowers' business or the Borrowers' financial
condition.
Section 7.13 Place of Business; Name . No Borrower will
transfer its chief executive office or principal place of business. No Borrower
will move, relocate, close or sell any other material business location without
providing Lender prior written notice thereof. No Borrower will permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. No Borrower will change its
name.
Section 7.14 Organizational Documents . No Borrower will amend
its certificate of incorporation, articles of incorporation or bylaws.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 Events of Default . "Event of Default", wherever
used herein, means any one of the following events:
(a) default in the payment of the Obligations when they become
due and payable;
(b) default in the payment of any fees, commissions, costs or
expenses required to be paid by any Borrower under this Agreement;
(c) default in the performance, or breach, of any covenant or
agreement of any Borrower contained in this Agreement;
(d) any Borrower shall be or become insolvent, or admit in
writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or any Borrower shall apply
for or consent to the appointment of any receiver, trustee, or similar
officer for it or for all or any substantial part of its or his
property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of any Borrower, as the
case may be; or any Borrower shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against any Borrower; or any judgment, writ,
warrant of attachment or execution or similar process shall be issued
or levied against a substantial part of the property of any Borrower;
(e) a petition shall be filed by or against any Borrower under
the United States Bankruptcy Code naming any Borrower as debtor;
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(f) any representation or warranty made by any Borrower in
this Agreement, or by any Borrower (or any of its officers) in any
agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(g) the rendering against any Borrower of a final judgment,
decree or order for the payment of money in excess of $100,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(h) any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
any Borrower by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or any Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or any Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a Lien on
any Borrower's assets in favor of the Plan;
(i) an event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing the
obligations of any Borrower hereunder or under the Note;
(j) any Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets (except for a sale or transfer of such assets to the
Parent), without the Lender's prior written consent;
(k) any Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings diligently pursued and for which it shall have set aside on
its books adequate reserves therefor in accordance with GAAP, provided
that no Lien shall result therefrom) or notice of any state or federal
tax liens shall be filed or issued against such Borrower's property;
(l) default in the payment of any amount owed by any Borrower
to the Lender other than any indebtedness arising hereunder; or
(m) Bace Investment LLC shall sell more than 50% of the stock
it owns in the Parent as of the date hereof (such stock on the date
hereof consisting of 1,674,800 shares of stock representing 33% of the
issued and outstanding shares of stock of the Parent immediately prior
to the acquisition by PentaStar Corporation of Telecomm Industries,
Inc.), provided that in no event shall Bace Investment LLC cease to be
the largest shareholder of the Parent.
Section 8.2 Rights and Remedies . Upon the occurrence and
during the continuance of an Event of Default, the Lender may exercise any or
all of the following rights and remedies:
(a) the Lender may, by notice to Parent, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to Parent, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrowers hereby expressly waive;
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(c) the Lender may, without notice to any Borrower and without
further action, apply any and all money owing by the Lender to the
Borrowers to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrowers hereby expressly waive) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrowers will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices . If notice to any Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.3) at least ten
calendar days before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 No Waiver; Cumulative Remedies . No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.2 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by any Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on any Borrower
in any case shall entitle any Borrower to any other or further notice or demand
in similar or other circumstances.
Section 9.3 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
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If to any Borrower:
C/o PentaStar Communications, Inc.
1522 Blake Street, Denver, CO 80202
Telecopier: 303-825-4402
Telephone: 303-825-4400
Attn: David L. Dunham
If to the Lender:
Wells Fargo Bank West, N.A.
1740 Broadway
Denver, Colorado 80274
MAC #C7301-031
Telecopier: 303/863-6670
Attention: Lynn N. Hout
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.4 Further Documents . Each Borrower will from time
to time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that any Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 9.5 Collateral . The Lender shall not be obligated to
preserve any rights any Borrower may have against prior parties, to realize on
the Collateral at all or in any particular manner or order or to apply any cash
proceeds of the Collateral in any particular order of application, except as
required by law.
Section 9.6 Costs and Expenses . The Borrowers agree to pay on
demand all costs and expenses, including (without limitation) reasonable
attorneys' fees, incurred by the Lender in connection with the Obligations, the
Loan Documents, and any other document or agreement related hereto or thereto,
and the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.7 Indemnity . In addition to the payment of expenses
pursuant to Section 9.6, the Borrowers shall indemnify and hold harmless the
Lender and persons or entities owned or controlled by or affiliated with the
Lender and its directors, officers, shareholders, partners, employees,
consultants and agents (herein individually called an "Indemnified Party," and
collectively called "Indemnified Parties") from and against, and reimburse and
pay Indemnified Parties with respect to, any and all claims, demands,
liabilities, losses, damages, causes of action, judgments, penalties, fees,
costs and expenses (including, without limitation, reasonable attorneys' fees,
court costs and legal expenses and reasonable consultants' and experts' fees and
expenses), of any and every kind or character, known or unknown, fixed or
contingent, that may be imposed upon, asserted against or incurred or paid by or
on behalf of any Indemnified Party on account of, in connection with, or arising
out of (a) any act performed or omitted to be performed by any Borrower
hereunder or the breach by any Borrower of, or failure by any Borrower to
perform any, warranty, representation, indemnity, covenant, agreement or
condition contained in
25
<PAGE> 29
any of the Loan Documents, (b) any transaction, act, omission, event or
circumstance arising out of or in any way connected with the Collateral or any
Borrower's performance or obligation under any of the Loan Documents (to the
extent not arising out of any gross negligence or wilful misconduct of Lender),
(c) any Borrower's violation of or failure to comply with any statute, law,
rule, regulation or order now existing or hereafter occurring, including,
without limitation, environmental laws and statutes, laws, rules, regulations
and orders relating to pollutants, contaminants, wastes or hazardous, dangerous
or toxic substances, and (d) any Borrower's failure to pay any expense
associated with the Credit Facility. Any amount to be paid hereunder by any
Borrower to the Lender or for which any Borrower has indemnified an Indemnified
Party shall be a demand obligation owing by the Borrowers to the Lender and
shall bear interest at the Default Rate until paid, and shall constitute a part
of the Obligations and be indebtedness secured and evidenced by the Loan
Documents. If any investigative, judicial or administrative proceeding arising
from any of the foregoing is brought against any Indemnitee, upon such
Indemnitee's request, the Borrowers, or counsel designated by the Borrowers and
reasonably satisfactory to the Indemnitee, will resist and defend such action,
suit or proceeding to the extent and in the manner reasonably directed by the
Indemnitee, at the Borrowers' sole costs and expense. Each Indemnitee will use
its best efforts to cooperate in the defense of any such action, suit or
proceeding. If the foregoing undertaking to indemnify, defend and hold harmless
may be held to be unenforceable because it violates any law or public policy,
the Borrowers shall nevertheless make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The Borrowers' obligation under this Section 9.7 shall
survive the termination of this Agreement, any foreclosure of the liens and
security interests created by the Loan Documents or conveyance in lieu of
foreclosure, the repayment and performance of the Loan, the discharge of the
Borrowers' other obligations hereunder and the discharge and release of the
liens and security interest created by the other Loan Documents.
Section 9.8 Participants . The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.9 Execution in Counterparts . This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.10 Binding Effect; Assignment; Complete Agreement;
Exchanging Information . The Loan Documents shall be binding upon and inure to
the benefit of the Borrowers and the Lender and their respective successors and
assigns, except that no Borrower shall have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrowers and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender and all direct and indirect subsidiaries of Lender may
exchange any and all information they may have in their possession regarding the
Borrowers and its Affiliates, and the Borrowers waive any right of
confidentiality it may have with respect to such exchange of such information.
Section 9.11 Severability of Provisions . Any provision of
this Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12 Headings . Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial .
(a) The Loan Documents shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of
Colorado. This Agreement shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Colorado.
26
<PAGE> 30
(b) Except for "Core Proceedings" under the United States
Bankruptcy Code, Lender and Borrowers agree to submit to binding arbitration all
claims, disputes and controversies between or among them, whether in tort,
contract or otherwise (and their respective employees, officers, directors,
attorneys and other agents) arising out of or relating in any way to the Credit
Facility or the Loan Documents or the negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination thereof. Any arbitration
proceeding will (i) be conducted in Denver, Colorado, (ii) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), and (iii) be
conducted in accordance with the Commercial Arbitration rules of the American
Arbitration Association ("AAA"). The arbitration requirement does not limit the
right of any party to (1) foreclose against any collateral, (2) exercise
self-help remedies relating to any collateral or the proceeds thereof such as
setoff or repossession, or (3) obtain provisional ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver,
before, during or after the pendency of any arbitration proceeding. This
exclusion does not constitute a waiver of the right or obligation of either
party to submit any dispute to arbitration, including those arising from the
exercise of the actions detailed in clauses (1), (2) or (3) above. Any
arbitration proceeding will be before a single arbitrator selected according to
the Commercial Arbitration Rules of the AAA. The arbitrator will be a neutral
attorney who has practiced in the area of commercial law for a minimum of 10
years. The arbitrator will determine whether or not an issue is arbitratable and
will give effect to the statutes of limitation in determining any claim.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
(c) In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication.
(d) In any arbitration proceeding, discovery will be permitted
and will be governed by Colorado Rules of Civil Procedure. All discovery must be
completed no later than 20 days before the hearing date and within 180 days of
the commencement of arbitration proceedings. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(e) The arbitrator shall award costs and expenses of the
arbitration proceeding in accordance with the provisions of the Loan Documents.
(f) THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
Section 9.14 Joint and Several Liability . (a) Each Borrower
shall be liable for all amounts due to the Lender under this Agreement,
regardless of which Borrower actually receives loans or other extensions of
credit hereunder or the amount of such loans received or the manner in which the
Lender accounts for such loans or other extensions of credit on its books and
records. Each Borrower's Obligations with respect to loans made to it, and each
Borrower's Obligations arising as a result of the joint and several liability of
such Borrower hereunder, with respect to loans made to the other Borrowers
hereunder, shall be separate and distinct obligations, but all such Obligations
shall be primary obligations of such Borrower.
(b) Each Borrower's Obligations arising as a result of the
joint and several liability of such Borrower hereunder with respect to loans or
other extensions of credit made to the other Borrowers hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (i) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (ii) the absence of any
attempt to collect the Obligations from the other Borrowers, any other
guarantor, or any other security therefor, or the absence of any other action to
enforce the same, (iii) the waiver, consent, extension, forbearance or granting
of any indulgence by the Lender with respect to any provision of any instrument
evidencing the Obligations of the other Borrowers, or any part thereof, or any
other agreement now or hereafter executed by the other Borrowers and delivered
to the Lender, (iv) the failure by the Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations of the other Borrowers, (v) the Lender's
election, in any proceeding instituted under the
27
<PAGE> 31
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by the other Borrowers,
as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Lender's claim(s) for the repayment of
the Obligations of the other Borrowers under Section 502 of the Bankruptcy Code,
or (viii) any other circumstances which might constitute a legal or equitable
discharge or defense of a guarantor or of the other Borrowers. With respect to
each Borrower's obligations arising as a result of the joint and several
liability of such Borrower hereunder with respect to loans or other extensions
of credit made to any other Borrower hereunder, each Borrower waives, until the
Obligations shall have been paid in full and this Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which
the Lender now has or may hereafter have against the other Borrowers, any
endorser or any guarantor of all or any part of the Obligations, and any benefit
of, and any right to participate in, any security or collateral given to the
Lender to secure payment of the Obligations or any other liability of the other
Borrowers to the Lender.
(c) Upon any Event of Default, the Lender may proceed directly
and at once, without notice, against each Borrower to collect and recover the
full amount, or any portion of the Obligations, without first proceeding against
the other Borrowers or any other Person, or against any security or collateral
for the Obligations. Each Borrower consents and agrees that the Lender shall be
under no obligation to marshal any assets in favor of such Borrower or against
or in payment of any or all of the Obligations.
Section 9.15. Contribution and Indemnification among the
Borrowers . Each Borrower is obligated to repay the Obligations as joint and
several obligors under this Agreement. To the extent that any Borrower shall,
under this Agreement as a joint and several obligor, repay any of the
Obligations constituting Advances made to another Borrower hereunder or other
Obligations incurred directly and primarily by any other Borrower (an
"Accommodation Payment"), then the Borrower making such Accommodation Payment
shall be entitled to contribution and indemnification from, and be reimbursed
by, each of the other Borrowers in an amount, for each of such other Borrowers,
equal to a fraction of such Accommodation Payment, the numerator of which
fraction is such other Borrower's "Allocable Amount" (as defined below) and the
denominator of which is the sum of the Allocable Amounts of all of the
Borrowers. As of any date of determination, the "Allocable Amount" of each
Borrower shall be equal to the maximum amount of liability for Accommodation
Payments which could be asserted against such Borrower hereunder without (a)
rendering such Borrower "insolvent" within the meaning of Section 101 (31) of
the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act ("UFTA")
or Section 2 of the Uniform Fraudulent Conveyance Act ("UFCA"), (ii) leaving
such Borrower with unreasonably small capital or assets, within the meaning of
Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the
UFCA, or (iii) leaving such Borrower unable to pay its debts as they become due
within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the
UFTA, or Section 5 of the UFCA. All rights and claims of contribution,
indemnification and reimbursement under this Section shall be subordinate in
right of payment to the prior payment in full of the Obligations. The provisions
of this Section shall, to the extent expressly inconsistent with any provision
in any Loan Document, supersede such inconsistent provision.
Section 9.16 Agency of the Parent for each other Borrower .
Each Borrower (other than the Parent) appoints the Parent as its agent for all
purposes relevant to this Agreement, including the giving and receipt of notices
and execution and delivery of all documents, instruments and certificates
contemplated herein and all modifications hereto. Any acknowledgment, consent,
direction, certification or other action which might otherwise be valid or
effective only if given or taken by all of the Borrowers or acting singly, shall
be valid and effective if given or taken only by the Parent, whether or not any
of the other Borrowers joins therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
WELLS FARGO BANK WEST, N.A.
By /s/ Lynn Hout
-------------------------------
Name: Lynn Hout
----------------------------
Its Vice President
-----------------------------
PENTASTAR COMMUNICATIONS, INC.
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR ACQUISITION CORP. I
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR ACQUISITION CORP. II
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR ACQUISITION CORP. III
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
29
<PAGE> 33
PENTASTAR ACQUISITION CORP. IV
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR ACQUISITION CORP. VI
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR INTERNET, INC.
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR HOLDING CORPORATION
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR TELEMARKETING, INC.
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
PENTASTAR CORPORATION
By /s/ David L. Dunham
-------------------------------
Name: David L. Dunham
----------------------------
Its Chief Financial Officer
-----------------------------
30
<PAGE> 34
Table of Exhibits and Schedules
Exhibit A Form of Note
Exhibit B Compliance Certificate
-------------------
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and
Locations of Collateral
Schedule 5.4 Existing Subsidiaries
Schedule 5.17 Recent Acquisitions
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
<PAGE> 35
Exhibit A to Credit and
Security Agreement
NOTE
[SEE ATTACHED]
<PAGE> 36
PROMISSORY NOTE
$10,000,000.00 July 10, 2000
FOR VALUE RECEIVED EACH OF PENTASTAR COMMUNICATIONS, INC., PENTASTAR
ACQUISITION CORP. I, PENTASTAR ACQUISITION CORP. II, PENTASTAR ACQUISITION CORP.
III, PENTASTAR ACQUISITION CORP. IV, PENTASTAR ACQUISITION CORP. VI, PENTASTAR
INTERNET, INC., PENTASTAR HOLDING CORPORATION, PENTASTAR TELEMARKETING, INC.
(each a Delaware corporation) and PENTASTAR CORPORATION, (a Colorado
corporation) (collectively, the "Maker"), promises to pay to the order of WELLS
FARGO BANK WEST, N.A. (the "Bank"), or its order, on or before July 31, 2001,
the principal sum of TEN MILLION DOLLARS ($10,000,000.00) or so much as may be
advanced and outstanding from time to time (the "Principal Amount") pursuant to
the Credit and Security Agreement of even date herewith between Bank and Maker
(as it may be amended, restated or supplemented from time to time, the "Loan
Agreement") together with interest on the Principal Amount at a rate equal to
the Interest Rate (as defined below).
This Note is issued to evidence a revolving line of credit from Bank to
Maker made pursuant to the terms of the Loan Agreement, together with all other
amounts due pursuant to the Loan Agreement and the Loan Documents. This Note is
issued pursuant, and is subject, to the Credit Agreement, which provides, among
other things, for acceleration hereof. This Note is the Note referred to in the
Credit Agreement. Bank is entitled to the benefits of certain Security Documents
executed in connection with the Loan Agreement. All capitalized terms used
herein and not defined shall have the meaning given to them in the Loan
Agreement.
Interest, based upon a three hundred sixty (360) day year and the
actual number of days elapsed, shall accrue daily, and is payable on each
Interest Payment Date (as defined below), and all accrued and unpaid interest
plus the outstanding Principal Amount shall be due on the Termination Date.
For purposes of this Note, the following terms shall have the meanings
indicated:
Interest Payment Date. (A) with respect to amounts outstanding
hereunder that bear interest at the LIBOR Based Rate, on the last day of the
relevant Interest Rate Period for all interest accrued through and including
such last day of such Interest Rate Period, and (B) with respect to amounts
outstanding hereunder that bear interest at the Prime Rate, monthly on the last
day of each month for all interest accrued through the last day of such month.
Interest Rate Period. With respect to amounts outstanding hereunder
that bear interest at the LIBOR Based Rate, a period of one, two or three
months, such period to be determined at the option of Makers in accordance with
the provisions of this Note. The Interest Rate Period selected by Maker must end
prior to the Maturity Date.
LIBOR Business Day. Any Banking Day on which commercial banks are open
for international business (including dealings in U.S. Dollar deposits) in
London, England.
LIBOR Based Rate. For any Interest Rate Period, the per annum rate of
interest equal to the sum of (a) the applicable LIBOR Rate in effect on the
first day of such Interest Rate Period, plus (b) two and one-half percent (2
1/2%).
LIBOR Rate. Shall mean the rate at which U.S. Dollar deposits are
offered by the principal office of designated banks chosen by the British
Banker's Association in London, England to prime banks in the London Interbank
Market at 11:00 A.M. local London time on the first day of each Interest Rate
Period, which rate is displayed on page 3750 of the Telerate Monitor. All
computations of interest shall be calculated on the basis of a 360-day year and
the actual number of days elapsed. Bank's determination of the LIBOR Rate shall
be deemed conclusive absent manifest error.
<PAGE> 37
(i) Interest Rate. The entire outstanding Principal Amount of the Note
shall accrue interest at the rate provided in clause (A) below, except during
such time periods as the rate provided in clause (B) shall apply.
(A) interest shall accrue on the Principal Amount outstanding
under this note from time to time at the prime rate of Bank (which is the
interest rate publicly announced or published from time to time as the prime
rate of Bank and may not be the lowest interest rate charged by Bank) (the
"Prime Rate") in effect on any given day. The Prime Rate applicable hereunder is
adjustable on any date that the Prime Rate changes, regardless of whether Maker
has notice of such change.
(B) Maker may, by 11:00 am on any LIBOR Banking Day, request
that Bank convert the interest rate then accruing on any portion of the
Principal Amount to the applicable LIBOR Based Rate in effect on such day, or
that Bank make an Advance at the LIBOR Based Rate as more fully set forth below.
If Maker elects the LIBOR Based Rate as provided herein, the LIBOR Based Rate
will apply to the portion of the Principal Amount designated by Maker for the
Interest Rate Period elected by Maker. Any such election must be made by written
notice to Bank, provided that (i) such notice is irrevocable, (ii) the Interest
Rate Period selected by Maker ends prior to the Maturity Date, (iii) there
exists no Default or Event of Default under the Note or the other Loan Documents
and (iv) Bank has not given Maker any notice of demand, acceleration or other
similar notice in connection with this Note. The Principal Amount shall not be
subject to more than five (5) Interest Rate Periods.
On the day following the last day of each Interest Rate
Period, the LIBOR Based Interest Rate applicable to the Principal Amount shall
automatically convert to the Prime Rate unless Maker has (i) given the notice
required above prior to 11:00 a.m. of such day, and (ii) the conditions to
Maker's option to convert the interest rate to the LIBOR Based Rate as set forth
above have been met.
Except as specifically provided herein to the contrary, the
portion of the Principal Amount specified in the notice provided pursuant to the
provisions set forth above shall bear interest at the LIBOR Based Rate so
determined from and including the first day of such partial Interest Rate Period
to, but not including, the day immediately following the last day of such
Interest Rate Period.
(ii) Unavailability of LIBOR Rate. If at any time Bank determines in
good faith that it is not possible to determine the LIBOR Rate, then the Prime
Rate shall be used for determining the Interest Rate.
(iii) LIBOR Rate Unlawful. If it shall be unlawful or impossible for
Bank to continue maintaining loans bearing interest at the LIBOR Based Rate,
then Bank shall promptly give written notice thereof to Maker (including a
description of the circumstances giving rise to such determination), whereupon
Bank's obligation to permit the Principal Amount to accrue interest at the LIBOR
Based Rate under the Note shall be suspended and interest payable hereunder
shall be payable at the Prime Rate, unless Bank may lawfully continue to
maintain the Principal Amount at the LIBOR Based Rate until the end of the then
current Interest Rate Period, at which time the interest rate shall revert to
the Prime Rate. If at any time subsequent to the giving of such notice the Bank
determines that, because of a change in circumstances, the LIBOR Based Rate is
again available to Maker hereunder, Bank will so advise Maker, and the Principal
Amount shall, if Maker so elects, again accrue interest at the LIBOR Based Rate
(if applicable pursuant to subsection (i) above) on the first day of the
applicable Interest Rate Period.
(iv) Prepayment:
(A) All or any portion of the Principal Amount accruing interest
at the Prime Rate may be prepaid without penalty at any time.
(B) All or any portion of the Principal Balance accruing interest
at the LIBOR Based Rate may be prepaid at any time, subject to payment of a
prepayment premium if the date of prepayment is a date other than the end of an
Interest Rate Period, as described in the following paragraph.
Maker shall give at least ten (10) Banking Days' prior written
irrevocable notice to Bank specifying the amount to be prepaid and the intended
date of prepayment, which date of prepayment must not be more than forty-five
(45) days after the date of such notice. The portion of the Principal Balance
specified in any such irrevocable notice of prepayment shall, notwithstanding
anything to the contrary contained in this Note, be
2
<PAGE> 38
absolutely and unconditionally due and payable on the date specified in such
notice. No prepayment premium is payable if prepayment occurs on the last day of
an Interest Rate Period. If prepayment does not occur on the last day of an
Interest Rate Period, Maker shall pay to Bank, contemporaneously with such
prepayment, a prepayment premium equal to the amount of any and all losses,
costs and expenses, as well as any loss of anticipated, expected or projected
revenues and profits, incurred or suffered by the Bank as a result of such
prepayment being made prior to the end of an Interest Rate Period. Bank shall
deliver to Maker a statement setting forth the amount and basis of determination
of the prepayment premium, if any, due in connection with a prepayment of the
Principal Balance in accordance with the provisions of this paragraph. Bank
shall make such calculation based upon its reasonable judgment, which
calculation shall be binding absent manifest error. No prepayment premium
payable under this paragraph shall in any event or under any circumstances be
deemed or construed to be a penalty. Any payment of the Principal Amount after
Bank has declared the Principal Amount immediately due and payable in accordance
with the terms of this Note or the Loan Documents shall be deemed to be a
voluntary prepayment for all purposes of this paragraph, and a prepayment
premium calculated pursuant to the provisions of this paragraph shall be payable
with respect to the portion thereof bearing interest at the applicable LIBOR
Based Rate immediately prior to such declaration. Maker and Bank agree that Bank
shall not be obligated or required to have actually reinvested the prepaid
portion of the Principal Balance in any U.S. Government Treasury Obligations or
any other investment as a condition precedent to Maker being obligated to pay a
prepayment premium calculated in accordance with the provisions of this
paragraph. Maker shall, upon receipt of such statement and contemporaneously
with any such prepayment of the Principal Balance, remit to Bank the prepayment
premium, if any, due in connection therewith, as calculated pursuant to the
provisions of this paragraph. Bank shall not be obligated to accept any
prepayment of the Principal Balance unless it is accompanied by the prepayment
premium, if any, due in connection therewith as calculated pursuant to the
provisions of this paragraph.
(C) All sums that become due and payable by Maker in accordance
with the above provisions shall be and shall under all circumstances be deemed
to constitute additional interest on, and shall be evidenced by, this Note.
(D) All payments hereunder shall be applied in the manner set
forth in the Loan Agreement.
At the Bank's discretion overdue principal and (to the extent permitted
under applicable law) interest not paid within ten days after notice to the
Maker that the same is due, whether caused by acceleration of maturity or
otherwise, shall bear interest until paid at a fluctuating annual rate equal to
three (3) percentage points above the Prime Rate.
It is not intended hereby to charge interest at a rate in excess of the
maximum rate of interest permitted to be charged to the Maker under applicable
law, but if, notwithstanding, interest in excess of such maximum rate shall be
paid hereunder, the excess shall be retained by the holder of this Note as
additional cash collateral for the payment of the Loan, unless such retention is
not permitted by law, in which case the interest rate on this Note shall be
adjusted to the maximum permitted under applicable law during the period or
periods that the interest rate otherwise provided herein would exceed such rate.
All payments of this Note shall be made in lawful money of the United
States of America at the Bank's offices at MAC # C7301-031, 1740 Broadway,
Denver, Colorado 80274, or at such other place as the Bank may designate to the
Maker in writing.
Time is of the essence hereof. In the event of (i) any default in the
payment of principal or interest when due and payable under the terms of this
Note, (ii) any Event of Default under the Loan Agreement, or (iii) any default
under any other Loan Document, then the whole principal sum plus accrued
interest and all other obligations of the Maker to holder, direct or indirect,
absolute or contingent, now existing or hereafter arising, shall, at the option
of the holder of this Note, become immediately due and payable without notice or
demand, and the holder of this Note shall have and may exercise any or all of
the rights and remedies provided herein and in the Loan Agreement, and the other
Loan Documents, as they may be amended, modified or supplemented from time to
time.
If the Maker fails to pay any amount due under this Note and the Bank
has to take any action to collect the amount due or to exercise its rights under
the Loan Agreement or the Loan Documents, including without limitation,
retaining attorneys for collection of this Note, or if any suit or proceeding is
brought for the recovery of all or any
3
<PAGE> 39
part of or for protection of the indebtedness or to foreclose the Loan Documents
or to enforce the Bank's rights under the Loan Agreement, or the Loan Documents,
then the Maker agrees to pay on demand all costs and expenses of any such action
to collect, suit or proceeding, and any appeal of any such action, suit or
proceeding, incurred by the Bank, including but not limited to the reasonable
fees and disbursements of the Bank's attorneys and their staff.
The Maker and any endorser hereof waive presentment for payment,
protest, notice of dishonor and protest, and consent to any extension of time
with respect to any payment due under this Note, to any substitution or release
of collateral pursuant to the Loan Agreement, and to the addition or release of
any party. No waiver of any payment under this Note shall operate as a waiver of
any other payment.
If any provision in this Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability of
any defective provision shall not be in any way affected or impaired in any
other jurisdiction.
No delay or failure of the holder of this Note in the exercise of any
right or remedy provided for hereunder shall be deemed a waiver of such right by
the holder hereof, and no exercise of any right or remedy shall be deemed a
waiver of any other right or remedy which the holder may have.
All notices given hereunder shall be given in accordance with the
notice provisions of the Loan Agreement.
At the option of the holder hereof, an action may be brought to enforce
this Note in the manner set forth in the Loan Agreement.
This Note is to be governed by and construed according to the laws of
the State of Colorado.
4
<PAGE> 40
DATED as of the day and year first set forth above.
MAKER:
PENTASTAR COMMUNICATIONS, INC.
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR ACQUISITION CORP. I
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR ACQUISITION CORP. II
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR ACQUISITION CORP. III
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR ACQUISITION CORP. IV
By
----------------------------------
Name:
--------------------------------
Name:
--------------------------------
Its
----------------------------------
5
<PAGE> 41
PENTASTAR ACQUISITION CORP. VI
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR INTERNET, INC.
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR HOLDING CORPORATION
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR TELEMARKETING, INC.
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
PENTASTAR CORPORATION
By
----------------------------------
Name:
--------------------------------
Its
----------------------------------
<PAGE> 42
RECEIPT
I hereby state that on _________, 2000, I received the original
Promissory Note, dated __________, 2000, payable to the order of Wells Fargo
Bank West, N. A. in the principal amount of $10,000,000 from Pentastar
Communications, Inc., Pentastar Acquisition Corp. I, Pentastar Acquisition Corp.
II, Pentastar Acquisition Corp. III, Pentastar Acquisition Corp. IV, Pentastar
Acquisition Corp. VI, Pentastar Internet, Inc., Pentastar Holding Corporation,
Pentastar Telemarketing, Inc. and Pentastar Corporation.
WELLS FARGO BANK WEST, N. A.
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 43
Exhibit B to Credit and Security Agreement
COMPLIANCE CERTIFICATE
[SEE ATTACHED]
<PAGE> 44
Exhibit B to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: Lynn N. Hout, Wells Fargo Bank West, N.A.
Date: ______________________________________
Subject: PentaStar Financial Statements
In accordance with our Credit and Security Agreement dated as of
July 10, 2000 (the "Credit Agreement"), attached are the financial statements
(the "Current Financials") of Pentastar Communications, Inc. (the "Parent") as
of and for the [quarter]/[fiscal year] ended ______________, ___ (the "Reporting
Date"). All terms used in this certificate have the meanings given in the Credit
Agreement.
The undersigned hereby certifies that the Current Financials have
been prepared in accordance with GAAP, subject to year-end audit adjustments,
and fairly present Parent's financial condition and the results of its
operations as of the date thereof.
Events of Default. (Check one):
o The undersigned has no knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement.
o The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto is a
statement of the facts with respect to thereto.
Financial Covenants. The undersigned hereby certifies as follows:
1. Minimum Current Ratio. Pursuant to Section 6.11 of the Credit
Agreement, as of the Reporting Date, the Parent's consolidated Current Ratio was
_____ to 1.00 which [ ] satisfies [ ] does not satisfy the requirement that such
ratio be no less than 1.5 to 1.00 on the Reporting Date. For purposes hereof:
a. Parent's consolidated current assets equals $____________; and
b. Parent's consolidated current liabilities (excluding the
outstanding principal balance of the Note and the Merrill Lynch Long
Term Debt) equals $__________.
<PAGE> 45
2. Total Leverage Ratio. Pursuant to Section 6.12 of the Credit
Agreement, as of the Reporting Date, the Total Leverage Ratio was _____ to 1.00
which [ ] satisfies [ ] does not satisfy the requirement that such ratio not
exceed 1.5 to 1.00 on the Reporting Date. For purposes hereof(1):
1. Parent's total consolidated Funded Debt equals: $__________;
2. Parent's consolidated EBITDA equals $__________, consisting of
(i) pretax earnings from continuing operations ($__________), (ii)
Interest Expense ($__________) and (iii) depreciation, depletion,
and amortization of tangible and intangible assets ($__________),
before (a) special extraordinary gains ($__________) and losses
($__________) and (b) minority interests ($__________), plus
corporate overhead annualized based on the level incurred in the
most recent quarter ($__________).
3. For each Borrower, the calculations set forth in the following
table are true:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
SPECIAL SPECIAL MINORITY ANNUALIZED
PRETAX INTEREST DEPRECIATION EXTRA-ORDINARY EXTRA-ORDINARY INTERESTS* CORP
BORROWER EBITDA* EARNINGS* EXPENSE* ETC.* GAINS* GAINS* OVERHEAD*
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Communications, Inc.
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Acquisition Corp. I
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Acquisition Corp. II
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Acquisition Corp. III
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Acquisition Corp. IV
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Acquisition Corp. VI
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar Internet, $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Inc.
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar Holding $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Corporation
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
Telemarketing, Inc.
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
Pentastar Corporation $_____ $_____ $_____ $_____ $_____ $____ $_____ $_____
---------------------- ----------- ----------- ---------- -------------- -------------- -------------- -------------- -------------
</TABLE>
* FOR THE MOST RECENTLY COMPLETED FOUR FISCAL QUARTERS.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These and all other computations made in connection herewith were made in
accordance with GAAP.
----------------
(1) For purposes of all calculations below, EBITDA shall be calculated as if all
assets acquired (including without limitation acquisitions of stock) on any date
during the period of determination were acquired on the first day in such period
of determination, and all assets sold (including without limitation dispositions
of stock) on any date during the period of determination were sold on the first
day in such period of determination, in each case with costs adjusted to the
levels that any Borrower will incur.
<PAGE> 46
PENTASTAR COMMUNICATIONS, INC.
By
---------------------------------
Its Chief Financial Officer
<PAGE> 47
Schedule 5.1 to Credit and Security Agreement
[SEE ATTACHED]
<PAGE> 48
EXHIBIT 5.1
<TABLE>
<CAPTION>
PRINCIPAL PLACE
BORROWER OF BUSINESS OTHER LOCATIONS OTHER BUSINESS NAMES
<S> <C> <C> <C>
PentaStar Communications, Inc. 4640 E. Elwood St. 1522 Blake Street Optimal Communications, Inc.
EIN 84-1502003 Suite #16 Denver, CO 80202 ParTel, Inc
Jurisdiction of Incorp: DE Phoenix, AZ 85040
(ParTel Division)
PentaStar Internet, Inc. 1522 Blake Street N/A N/A
EIN 84-1518608 Denver, CO 80202
Jurisdiction of Incorp: DE
PentaStar Corporation 1743 W. Quincy Ave. 8455 Highway 261 Telecomm Industries Corp.
EIN 84-1542925 Suite 143 Newburgh, IN 47630
Jurisdiction of Incorp: CO Naperville, IL 60540
806 Cedar Parkway
Schererville, IN 46375
401 Colfax Avenue
Suite 308
South Bend, IN 46617
2508 N. Richmond St.
Appleton, WI 54911
311 West Superior
Suite 402
Chicago, IL 60610
6631 Commerce Pkwy.
Suite L
Dublin, OH 43017
(Franklin County)
741 Congress Park Drive
Dayton, OH 45459
(Montgomery County)
941 Ashwaubenon Street
Suite D
Green Bay, WI 54307
1200 Resource Drive
Brooklyn Heights, OH 44131
(Cuyahoga County)
8450 Westfield Blvd.
Suite 100
Indianapolis, IN 46240
11838 Capital Way
Louisville, KY 40299
9310 Progress Parkway
Mentor, OH 44060
(Lake County)
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
PRINCIPAL PLACE
BORROWER OF BUSINESS OTHER LOCATIONS OTHER BUSINESS NAMES
<S> <C> <C> <C>
PentaStar Acquisition Corp. I 7076 S. Alton Way 6th South Tejon DMA Ventures, Inc. dba Access
EIN 84-1518609 Bldg. A Suite 680 Communications
Jurisdiction of Incorp: DE Englewood, CO 80112 Colorado Springs,OC Mergerco 1, Inc.
CO 80903
PentaStar Acquisition Corp. II 4122 128th Ave. SE 12300 S E Mallard Way ICM Communications
EIN 84-1518610 Suite 300 Suite 250 Integration, Inc.
Jurisdiction of Incorp: DE Bellevue, WA 98006 Milwaukie, OR 97222 OC Mergerco 2, Inc.
PentaStar Acquisition Corp. III 4122 128th Ave. SE N/A Network Communications, Inc.
EIN 84-1525015 Suite 300 OC Mergerco 3, Inc.
Jurisdiction of Incorp: DE Bellevue, WA 98006
PentaStar Acquisition Corp. IV 745 Atlantic Ave. 300 Metrocenter Blvd. US TeleCenters, Inc.
EIN 84-1534698 Boston, MA 02111 Warwick, RI 02886 Vermont Network Services Corp.
Jurisdiction of Incorp: DE VSI Network Solutions, Inc.
233 Stevens Street Eastern Telecom, Inc.
Hyannis, MA 02601 OC Mergerco 4, Inc.
(Barnstable County)
60 K Street South
Boston, MA 02127
(Suffolk County)
803 Summer St.
South Boston, MA 02110
(Suffolk County)
270 Bridge Street
Suite 304
Dedham, MA 02026
(Norfolk County)
230 Washington Avenue
Extension
Albany, NY 12203
(Albany County)
22 Scaled Avenue
Rutland, VT 05701
13 Kilburn Street
Burlington, VT 05401
142 Boynton Avenue
Plattsburgh, NY 12901
(Clinton County)
PentaStar Acquisition Corp. VI 7950 Dublin Blvd., N/A Resource Communications, Inc.
EIN 84-1539525 Suite 101
Jurisdiction of Incorp: DE Dublin, CA 94568
PentaStar Telemarketing, Inc. 745 Atlantic Ave. 233 Stevens Street US TeleCenters, Inc.
EIN 84-1534696 Boston, MA 02111 Hyannis, MA 02601
Jurisdiction of Incorp: DE
PentaStar Holding Corp. 1522 Blake Street N/A N/A
EIN 84-1524727 Denver, CO 80202
Jurisdiction of Incorp: DE
</TABLE>
10
<PAGE> 50
Schedule 5.4 to Credit and Security Agreement
[SEE ATTACHED]
<PAGE> 51
Exhibit 5.4
Subsidiaries
PentaStar Communications, Inc.
o PentaStar Acquisition Corp. I
o PentaStar Acquisition Corp. II
o PentaStar Acquisition Corp. III
o PentaStar Acquisition Corp. IV
o PentaStar Acquisition Corp. VI
o PentaStar Internet, Inc.
o PentaStar Holding Corporation
o PentaStar Telemarketing, Inc.
o PentaStar Corporation
PentaStar Acquisition Corp. I - None
PentaStar Acquisition Corp. II - None
PentaStar Acquisition Corp. III - None
PentaStar Acquisition Corp. IV - None
PentaStar Acquisition Corp. VI - None
PentaStar Internet, Inc. - None
PentaStar Holding Corporation - None
PentaStar Telemarketing Inc. - None
PentaStar Corporation - None
<PAGE> 52
Schedule 5.17 to Credit and Security Agreement
Recent Acquisitions
[SEE ATTACHED]
<PAGE> 53
Exhibit 5.17
Acquisitions
1. DMA Ventures, Inc., dba Access Communications
a. Acquired by PentaStar Acquisition Corp. I, fka OC Mergerco 1, Inc.
b. Acquired by merger. Closed on October 26, 1999.
2. ICM Communications Integration, Inc.
a. Acquired by PentaStar Acquisition Corp. II, fka OC Mergerco 2, Inc.
b. Acquired by merger. Closed on October 26, 1999.
3. NCI Communications, Inc.
a. Acquired by PentaStar Acquisition Corp. III, fka OC Mergerco 3, Inc.
b. Acquired by asset purchase. Closed on February 22, 2000.
4. USTeleCenters, Inc. and Vermont Network Services Corporation
a. Acquired by PentaStar Acquisition Corp. IV, fka OC Mergerco 4, Inc.
b. Acquired by asset purchase. Closed on February 18, 2000.
5. ParTel, Inc.
a. Acquired by PentaStar Communications, Inc.
b. Acquired by merger. Closed on March 17, 2000.
6. Resource Communications, Inc.
a. Acquired by PentaStar Acquisition Corp. VI
b. Acquired by merger. Closed on March 31, 2000.
7. VSI Network Solutions, Inc. dba Eastern Telecom, Inc.
a. Acquired by PentaStar Acquisition Corp. IV, fka OC Mergerco 4, Inc.
b. Acquired by asset purchase. Closed on May 18, 2000.
8. Telecomm Industries, Inc. (closing to be completed)
a. Acquired by PentaStar Corporation.
b. Acquired by asset purchase.
<PAGE> 54
Schedule 7.1 to Credit and Security Agreement
[SEE ATTACHED]
<PAGE> 55
Exhibit 7.1
Existing Security Interests
1. BancBoston Leasing, Inc. as secured party under lease agreement with US
TeleCenters, Inc. nka PentaStar Acquisition Corp. IV for office equipment as
scheduled on Exhibit 7.2.
2. Rockford Industries, Inc. as secured party under lease agreement with US
TeleCenters, Inc. nka PentaStar Acquisition Corp. IV for office equipment as
scheduled on Exhibit 7.2.
3. Newcourt Communications Finance Corporation as secured party under lease
agreement with US TeleCenters, Inc. nka PentaStar Acquisition Corp. IV for
computer equipment as scheduled on Exhibit 7.2.
4. Imperial Business Credit, Inc. (assignee of lessor) as secured party under
lease agreement with ParTel, Inc. nka PentaStar Communications, Inc. for
computer equipment as scheduled on Exhibit 7.2.
<PAGE> 56
Schedule 7.2 to Credit and Security Agreement
[SEE ATTACHED]
<PAGE> 57
Exhibit 7.2
Indebtedness
<TABLE>
<S> <C>
1. Capital Lease Agreement with BancBoston Leasing, Inc. $32,168
2. Capital Lease Agreement with Rockford Industries, Inc. $75,497
3. Capital Lease Agreement with Newcourt Communications $31,159
Finance Corporation
4. Capital Lease Agreement with Alliance Capital Funding $10,604
Corporation
</TABLE>
