PENTASTAR COMMUNICATIONS INC, 10KSB40, 2000-03-30

PENTASTAR COMMUNICATIONS INC
10KSB40, 2000-03-30
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

Previous: EQUITY FOCUS TRUSTS GLOBAL RESEARCH SELECTIONS, 24F-2NT, 2000-03-30

Next: MAGNA ENTERTAINMENT CORP, 10-K, 2000-03-30

<PAGE> 1

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE PERIOD FROM INCEPTION (MARCH 15, 1999) THROUGH DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-27709

---------------------

PENTASTAR COMMUNICATIONS, INC.
(Name of Small Business Issuer as Specified in Its Charter)

<TABLE>
<S> <C>
DELAWARE 84-1502003
(State of Incorporation) (I.R.S. Employer Identification No.)

1522 BLAKE STREET, DENVER, CO 80202
(Address of Principal Executive Offices) (Zip Code)
</TABLE>

(303) 825-4400
(Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.0001 par value
---------------------

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definite proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

The issuer's revenues were $694,000 for the period from inception (March
15, 1999) through December 31, 1999

As of March 24, 2000, the aggregate market value of the voting and
non-voting common equity held by non-affiliates was $46,735,848

The number of shares outstanding of the issuer's Common Stock, $.0001 par
value, as of March 24, 2000 was 4,834,132

Transitional Small Business Disclosure Format (check one): Yes No [X]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

PENTASTAR COMMUNICATIONS, INC.

INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Description of Business..................................... 1
Item 2. Description of Property..................................... 14
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14

PART II
Item 5. Market for Common Equity and Related Stockholder Matters.... 15
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15
Item 7. Financial Statements........................................ 23
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 23

PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange
Act......................................................... 24
Item 10. Executive Compensation...................................... 24
Item 11. Security Ownership of Certain Beneficial Owners and
Management.................................................. 24
Item 12. Certain Relationships and Related Transactions.............. 24
Item 13. Exhibits and Reports on Form 8-K............................ 24
</TABLE>
<PAGE> 3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this Annual Report on Form 10-KSB are
"forward-looking statements," intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement includes words such as "anticipates," "expects,"
"estimates," "plans," "believes" and "intends" or other similar words.
Similarly, statements that describe the Company's future plans, objectives or
goals are also forward-looking statements. All forward-looking statements are
subject to certain risks and uncertainties that could cause actual results or
outcomes to differ materially from those currently anticipated. Factors that
could affect actual results or outcomes are described in detail in Item 1 of
this Form 10-KSB and the Company's Registration Statement on Form SB-2
(Registration No. 333-85281) under the heading "Risk Factors" and include:

- The Company's lack of combined operating history and its untested
business model.

- The Company's success in carrying out its acquisition strategy.

- The Company's reliance on regional bell operating companies and other
service providers for communications services.

- The Company's ability to increase revenues from service providers other
than local access service providers.

Shareholders, potential investors and other readers are urged to consider
these factors in evaluating the forward-looking statements and are cautioned not
to place undue reliance on such forward-looking statements. The forward-looking
statements included herein are only made as of the date hereof and the Company
undertakes no obligations to publicly update such forward-looking statements to
reflect subsequent events or circumstances.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

PentaStar Communications, Inc., a Delaware corporation, was founded on
March 15, 1999, to become a multi-regional communications services agent for
small to medium-size business customers. Prior to October 26, 1999, PentaStar
had not conducted any operations, and all of our activities were related to the
organization of PentaStar, the acquisitions described below and our initial
public offering of common stock (the Offering). On October 26, 1999, PentaStar,
through wholly-owned subsidiaries, acquired DMA Ventures, Inc., dba Access
Communications (Access) and ICM Communications Integration, Inc. (ICM)
(together, the Acquired Companies) and completed the Offering. References in
this annual report on Form 10-KSB to "PentaStar," the "Company," "we," "us," and
"our" refer to PentaStar, ICM and Access on a combined basis, unless the context
otherwise indicates.

On October 26, 1999, PentaStar commenced business operations as a
communications services agent. PentaStar designs, procures and facilitates the
installation and use of communications and Internet services for small to
medium-size businesses that generally cannot afford in-house communications
management resources. Our goal is to provide our customers with a comprehensive
communications solution, utilizing the infrastructure of existing communications
service providers. By analyzing and selecting from a variety of available
communications service providers and technologies, other than for local access
where we primarily offer regional bell operating company (RBOC) service, we
provide our customers with a custom-designed, cost-effective solution for local
access, long distance, wireless and Internet services for voice and data
communications services. As the communications industry becomes increasingly
complex, we believe our services will become more valuable to our customers.

1
<PAGE> 4

PentaStar has and will continue to enter into agent relationships with long
distance, wireless and Internet service providers that will expand the available
services offered by agents acquired by PentaStar.

We service customers in a broad range of industries, including retail,
wholesale, manufacturing, service, distribution and professional services. Some
of the major benefits we provide our customers are:

- assistance in sorting through the abundance of confusing technology
options;

- management of the ordering and installation of communications services;

- more effective and timely responses to problems encountered with
communications service providers than can generally be obtained by an
individual customer;

- ongoing evaluation of new solutions that could better suit the future
communications needs of our customers;

- development and maintenance of customer-specific databases that allow us
to better apply our knowledge and experience to each customer's
communications needs; and

- payment of most of our fees by the communications service provider.

We believe that we offer compelling reasons for communications service providers
to view us as a strategic partner. Those reasons are as follows:

- we are an effective sales force for our service providers, with a
competitive, cost effective and variable cost solution for them;

- we provide the ability to retain customers and increase revenues from
customers;

- we provide a professional staff to handle the installation of services
and ongoing interface between the customer and the service provider;

- we can sell into markets that may not be economical for the service
providers to support directly; and

- we can act as a sales agent for communications services that some service
providers, the RBOCs in particular, are prohibited by law from offering.
This provides their customers with a complete communications solution.

ICM was formed in 1990 as a division of International Communications
Management, Inc., a corporation that provided training for communications
service providers. ICM was formed to provide communications consulting and sell
communications services to small to medium-size businesses. In January 1995, the
ICM division was spun-off into a separate corporation owned by International
Communications Management, Inc. In July 1997, ICM was spun-off as a separate
corporation to the shareholders of International Communications Management, Inc.
ICM has been a U S WEST Communications, Inc. (U S WEST) agent since 1991.
Approximately 99% of ICM's 1999 and 1998 revenues were from commissions paid by
U S WEST. The balance was comprised of revenues from the sale of long distance
and Internet services procured from a former affiliate of ICM. ICM has sold U S
WEST's local access service since 1991, and has marketed U S WEST's wireless
services since December 1998 and U S WEST's Internet services since January
1998. ICM has offered Qwest long distance services since October 1998 and AT&T
long distance services since April 1999. In June 1998, ICM began offering Epoch
Internet services.

Access was formed in 1995 by Jeffrey A. Veres. Originally, Access acted as
an agent for U S WEST and sold local area network and wide area network hardware
for computer systems in the Denver, Colorado metropolitan area. In April 1999,
Access discontinued its hardware business to focus on selling U S WEST's
communications services. Access has been a U S WEST agent since 1995. All of
Access' 1999 and 1998 agent revenues were from commissions paid by U S WEST.
Access has recently begun offering Qwest long distance services and is
developing other service provider relationships. Access has sold U S WEST's
local access services since 1995, and has marketed U S WEST's wireless services
since December 1998 and U S WEST's Internet services since January 1998. Access
has been an agent for Qwest long distance services since January 1999.

2
<PAGE> 5

We also intend to acquire additional communications services agents in
other major metropolitan areas. We have formed PentaStar Internet, Inc., a
wholly-owned subsidiary, to acquire Internet service providers, or ISPs in
small, high-growth areas. Our goal is to use the staff and customer
relationships of ISPs we may acquire to implement comprehensive local access,
long distance, wireless and Internet solutions for customers in these small
markets. Currently, we are focusing our resources on acquiring communications
services agents rather than ISPs.

RECENT DEVELOPMENTS

On February 18, 2000, the Company, through a wholly-owned subsidiary,
completed the acquisition of the assets of USTeleCenters, Inc. and Vermont
Network Services Corporation (collectively referred to as "UST"). UST, founded
in 1986 and headquartered in Boston, Massachusetts, is a full-service
communications agent focusing on small business customers located throughout
Bell Atlantic's 13 state Northeast and Mid-Atlantic region. UST has agency
agreements with service providers including Bell Atlantic, Bell South,
Southwestern Bell and Sprint. Approximately 75% and 71% of UST's revenues were
from commissions paid from Bell Atlantic, in 1999 and 1998, respectively. The
purchase price consideration consisted of $182,000 in cash paid at closing, the
issuance of 5,980 shares of the Company's common stock and the assumption of
approximately $2,500,000 of liabilities. The Company also assumed the on-going
obligations under various agreements relating to the acquired assets.

On February 18, 2000, the Company signed a definitive agreement to acquire
the assets of Eastern Telecom, Inc. ("ETI"). ETI, founded in 1992, is a
full-service communications agent based in Warwick, Rhode Island primarily
servicing customers in Boston, New York, Albany, Providence and Warwick. ETI is
an authorized agent for Bell Atlantic and Bell South. The acquisition of the
assets of ETI is contingent upon receipt of the approval of the shareholders of
VSI Enterprises, Inc., which is the parent company of ETI. Terms of the
definitive agreement provide for a purchase price for the assets to consist of
approximately $2,100,000 in cash, the issuance of the Company's common stock
with a fair market value of $950,000 and the assumption of certain liabilities
at closing. In addition, there is a potential earnout payment based upon the
combined earnings of ETI and UST for the year ending December 31, 2000.

On February 22, 2000, the Company, through a wholly-owned subsidiary,
completed the acquisition of the assets of NCI Communications, Inc. ("NCI"). NCI
is primarily a long distance communications services agent located in Seattle,
Washington. NCI has carrier agreements with Qwest, AT&T and GST Telecom. NCI is
owned by certain of the previous shareholders of ICM, who, upon the Company's
acquisition of ICM, became shareholders of the Company. The purchase price paid
for the assets consisted of cash of $10,000 and the cancellation of a $601,000
note receivable from NCI to the Company.

On March 17, 2000, the Company completed the acquisition of the assets of
ParTel Communications, Inc. (ParTel). ParTel, founded in 1982, is a full-service
communications agent based in Phoenix, Arizona primarily servicing customers in
the Phoenix and Tucson metropolitan markets. ParTel is an agent of U S WEST and
sells primarily high-end, data-oriented products. Historically, all of ParTel's
revenues have been generated from commissions paid from U S WEST. The purchase
price consideration consisted of $519,000 in cash paid at closing and the
issuance of 30,310 shares of the Company's common stock. At the time the
acquisition of ParTel was consummated, the Company loaned $500,000 (interest at
the prime rate plus 1%) to a corporation controlled by the former shareholders
of ParTel. The loan will be due not later than December 31, 2001, and is
personally guaranteed by the former shareholders. In addition, there is a
potential earnout payment based upon the adjusted earnings of ParTel for the
year ending December 31, 2000.

3
<PAGE> 6

OUR STRATEGY

Our objective is to be a leading multi-regional provider of custom-designed
communications solutions to small and medium-size businesses. Our strategy to
achieve this objective is to:

Provide Comprehensive Communications Solutions

We offer comprehensive communications solutions by providing customers with
the benefit of our independent analysis of multiple technologies and pricing
plans, except in local access where we work primarily with RBOCs with whom we
have or may establish agency relationships. In addition to selling basic
communications services, our focus is to provide solutions for more complex,
high-end data-oriented products or advanced communications services such as
Frame Relay or ATM services. We believe that by purchasing a package of local
access, long distance, wireless and Internet services from one communications
service provider, the customer may not have the opportunity to choose the
solutions that best meet its communications needs. By engaging our services, the
customer is able to select different providers for each type of service to best
meet its needs.

We will continue to establish technology experts to analyze existing and
developing communications services technologies. We will continue to evaluate
changing pricing programs of various service providers. We will continue to seek
technology and pricing solutions that best address the needs of our customers.
This assists our field sales personnel in customizing the services that we
recommend for each customer.

Grow Through Acquisitions

We intend to build a multi-regional presence in the communications market
by acquiring RBOC agents in major metropolitan areas and, as appropriate
opportunities become available, ISPs in small, high growth areas. We strive to
acquire companies that are well managed, have a strong customer base, are
profitable and would benefit from the additional resources that we intend to
provide. Our goal is to structure these acquisitions so that the owners who
manage the on-going business of each acquired agent receive a significant amount
of their portion of the purchase price in our common stock.

We believe the agents and ISPs we target for acquisition will be attracted
to, and benefit from, the opportunity to join us because we plan to offer them:

- shared systems, administration and infrastructure support;

- lower costs resulting from planned economies of scale;

- improved commission structures resulting from aggregating sales;

- availability of multiple long distance, wireless and Internet options;

- access to on-going analysis of available communications and Internet
technologies and pricing plans;

- access to other acquired companies' "best practices" models;

- greater access to capital for future growth;

- add-on sales to local operations of regional customers; and

- consolidated order entry and processing.

Increase Revenues of Acquired Companies

We intend to increase revenues of agents and ISPs we acquire as follows:

Introduce New Agent Services. The agents we have acquired and the
agents we intend to acquire primarily sell local access services for RBOCs.
We currently sell and will continue to sell Internet services, long
distance and wireless for voice and data communications through other agent
relationships. This will enable our customers to use PentaStar as the one
resource for all their communications needs.

4
<PAGE> 7

Increase Revenues Through Commission Strategies. As a result of
creating a larger organization, our commission rates have been enhanced by
meeting volume minimums in some existing commission contracts. We have and
expect to continue to negotiate more favorable commission arrangements than
are available to individual agents. We believe the impact of this strategy
will increase as we grow.

Enhance Selling and Advertising Efforts. We continue to expect to
attract new customers by increasing our direct selling and advertising
efforts. We continue to accomplish this in part by allowing the managers of
acquired agents and ISPs to have more time to focus on selling as a result
of relieving them of the administrative functions that will be consolidated
into our headquarters or regional centers. We believe advertising has not
been used in any significant way by agents or small ISPs. We have provided
management assistance and financial resources to implement a significant
advertising program. We have also developed marketing materials and
presentations to be used by management and the sales personnel of our
agents and ISPs.

Sell Communications Services Through ISP Sales Channel. We believe the
limited population of small markets makes it more difficult for
communications service providers to justify a local sales presence. If we
acquire ISPs, we believe we could increase our revenues by utilizing the
sales force of these ISPs to sell providers' local access, long distance
and wireless services for voice and data communications to business
subscribers of the ISPs. These ISPs would offer a unique sales channel for
us to serve small markets, in addition to providing us with the value of
their Internet business.

Utilize our Size to Increase Efficiencies in the Operating Regions

We have and will continue to consolidate functions that are not critical to
control at the local level into our corporate headquarters. These functions
include human resources, information systems, legal services and tax matters.
Additionally, we have and will continue to consolidate some aspects of
accounting, order processing and after-sales management into regional centers to
be established at designated local sites. The purchasing of insurance, supplies,
equipment and certain external services are being managed from our corporate
headquarters. Also, we expect to aggregate the service provider traffic of any
ISP we acquire onto a unified Internet connection, which we believe should
result in lower access costs to us.

Implement a Best Practices Program

The agents we have acquired are operating with a high degree of autonomy in
their regions, which we expect to be the case with our other agent and ISP
acquisitions. However, we are implementing and will continue to implement a best
practices program under which each acquired company will be able to adopt
successful business practices developed by our other agents and ISPs. This
allows each acquired company to develop a best practices model that works for
it. Our corporate management team is actively facilitating this process.

Create Strong Incentives for Management to Increase Earnings

We have established two strong incentives for our agent managers, who are
generally the former owners of the acquired agents, to increase their region's
earnings. The first incentive is the opportunity to earn a greater percentage of
the total shares of our common stock issued to acquire the agents based on each
agent's future performance. The second incentive is a bonus plan pursuant to
which each agent manager may receive a cash bonus of up to 5% of his area's
operating earnings before amortization expense. We expect that managers of other
agents we acquire and managers of acquired ISPs will also participate in bonus
programs based upon their ISPs operating earnings before amortization expense
and will also participate in our stock option plan.

5
<PAGE> 8

INDUSTRY

The Communications Services Agent Industry

General. Communications services agents are organizations that are
authorized to sell and facilitate the use of communications services of one or
more communications service providers. A full-service agent:

- establishes relationships with customers;

- assists the customer in analyzing its communications needs;

- arranges for the communications service providers to provide the customer
with the communications services that best suit the customer's needs; and

- facilitates the installation of communications services by the various
communications service providers.

Agents have been successful in obtaining new sales as a result of existing
relationships with customers and potential customers. We believe agents have a
sales cost that is competitive with that of the direct sales forces of service
providers. By utilizing agents to sell their services, service providers can
outsource a difficult and costly function.

Communications services agents are generally paid a commission by each
communications service provider based on a percentage of the customer's cost of
services sold by the agent. This commission typically ranges from 7% to 20% of
the contract value for an individual agent. It is paid upon either the execution
of the contract and installation of the services or pro-rata over the contract's
life, depending upon the service provider.

The communications services agent industry is highly fragmented and
characterized by hundreds of local companies with no large national competitors.
According to the 1999 MultiMedia Telecommunications Association Market Review
and Forecast, the core communications market segments, other than the Internet,
in which we compete had sales of $200.6 billion in 1998, which are expected to
grow to $283.8 billion by the end of 2002, a 9.0% compound annual growth rate.
Sales in these market segments are made directly by service providers and by
agents. We are not aware of any data that breaks down these sales between
service providers and agents. According to the Telecommunications and
Information Highways-Internet Market Report by Paul Budde Communication, the
U.S.-based Internet services market was $6.6 billion in 1998 and is expected to
grow to $24.7 billion in 2002, a compound annual growth rate of 39.1%. The total
market for all services that PentaStar sells was $207.2 billion in 1998 and is
projected to grow to $308.5 billion in 2002, a compound annual growth rate of
10.5%.

Communications service providers include:

- RBOCs;

- Competitive local exchange carriers, or CLECs;

- long distance service providers;

- wireless service providers; and

- ISPs.

Most communications service providers use agents to augment their direct
sales force. Generally, communications service providers select agents that they
believe have the knowledge and expertise to effectively sell communications
services and facilitate the installation process.

Local Access Market. According to the 1999 MultiMedia Telecommunications
Association Market Review and Forecast, local access services revenues,
including voice and data were $56.4 billion in 1998 and are expected to reach
$70.4 billion by 2002, a 5.7% compound annual growth rate. As a result of its
acquisition of Access and ICM, the Company derived approximately $6.6 million,
or 98.5%, of its combined revenues in 1998 and approximately $5.4 million, or
98.7%, of its combined revenues in 1999 from this market. We believe

6
<PAGE> 9

the RBOCs have continued to dominate the local access market. The Modified Final
Judgment that required the break-up of AT&T and the concurrent FCC decisions
that permitted the RBOCs to use affiliated and nonaffiliated entities to act as
sales agents on a commission basis for the local telecommunications services
offered by the RBOCs, led to the development of agency programs. The
Telecommunications Act of 1996, which changed the Modified Final Judgment's
line-of-business restrictions, permits the RBOCs to enter the in-region long
distance market upon the satisfaction of a statutory checklist of market-opening
criteria and other requirements. The Telecommunications Act of 1996 also allows
long distance carriers to provide local services in the RBOCs' territories.
Large long distance carriers were permitted to offer combined packages of long
distance and resold RBOC local services in the states where the RBOC has not
received in-region long distance authorization beginning February 8, 1999. These
long distance carriers are not permitted to market long distance and RBOC resold
local services through a "single transaction," meaning those carriers may not
use the same sales agent to market both products to the same customer in the
same communication. Also, the long distance carriers may not offer long distance
and RBOC resold local exchange services as a bundled package under an integrated
pricing schedule. The Telecommunications Act of 1996 also required the RBOCs to
allow other communications service providers to interconnect with the RBOC's
facilities and equipment. This has made the local access market more
competitive.

We believe that the RBOCs continue to have a distinct competitive advantage
in the local access market because they:

- control the line to customer locations;

- have an established customer base; and

- have greater financial and other resources to deploy new technologies.

As the local access market continues to offer greater service choices and face
increased competition, we believe that agents which are:

- cost effective;

- offer an efficient method of attracting and retaining customers; and

- have the ability to provide comprehensive communications services

will be in demand by both RBOCs and customers.

Long Distance Market. According to the 1999 MultiMedia Telecommunications
Association Market Review and Forecast, long distance revenues were $106 billion
in 1998 and are expected to reach $142.6 billion by 2002, a 7.7% compound annual
growth rate. As a result of its acquisition of Access and ICM, the Company
derived approximately $36,000, or 0.5% of its combined revenues in 1998 and
approximately $11,000, or 0.2% of its combined revenues in 1999 from this
market. The long distance market is highly price competitive and is dominated by
large national companies such as AT&T, MCI/WorldCom, Qwest and Sprint. These
large national carriers compete aggressively for market share and most have
established agency programs that enhance their overall sales efforts. The RBOCs
will also be allowed to offer long distance service upon satisfaction of the
statutorily mandated criteria, which determine when the local market has become
sufficiently competitive.

Wireless Market. According to the 1999 MultiMedia Telecommunications
Association Market Review and Forecast, the wireless communications services
market was $38.2 billion in 1998 and is expected to reach $70.8 billion by 2002,
a 16.7% compound annual growth rate. As a result of its acquisition of Access
and ICM, the Company derived approximately $4,000, or 0.1% of its combined
revenues in 1998 and approximately $24,000, or 0.4% of its combined revenues in
1999 from this market. Although much of the early growth in wireless
communications has occurred in the consumer sector, in particular cellular
telephones, we believe an increasing share of wireless communications services
will be used by business customers in the future.

The development of personal communication service, or PCS, and its ability
to facilitate voice, Internet, e-mail and other wireless services has ushered in
the increasing use of wireless technologies for the business
7
<PAGE> 10

market. According to the 1999 MultiMedia Telecommunications Association Market
Review and Forecast, the PCS services market was $3.7 billion in 1998 and is
expected to reach $16.6 billion in 2002, a 45.4% compound annual growth rate.
The integration of computer applications and wireless technologies is
anticipated to also fuel future market growth.

We expect that small to medium-size businesses will increasingly use
wireless communications for voice and data applications.

Internet Services Market. The Internet has grown rapidly since its
introduction to the public in the early 1990s, allowing millions of people
worldwide to communicate and conduct business electronically. The April 1999
Internet Demographics Survey, conducted by CommerceNet and Neilsen Media
Research, estimated the number of Internet users in the United States and Canada
at 92 million. According to the Telecommunications and Information
Highways-Internet Market Report by Paul Budde Communication, the U.S.-based ISP
market was $6.6 billion in 1998 and is expected to grow to $24.7 billion in
2002, a compound annual growth rate of 39.1%. As a result of its acquisition of
Access and ICM, the Company derived approximately $62,000, or 0.9% of its
combined revenues in 1998 and approximately $40,000, or 0.7% of its combined
revenues in 1999 from this market. The growth in the number of Internet users is
being fueled by a number of factors, including the increased use of personal
computers, the speed and reduction in cost of computer hardware and the
increasing importance of the Internet as a means of communication and commerce.

The Internet Service Provider Industry

Businesses are becoming more "virtual," which allows individuals to be less
concerned with proximity to the office and more concerned with communications
and Internet access to the office. The Internet has allowed many businesses and
individuals to conduct their business away from the traditional commercial
centers to regions and cities that have not previously been viable locations for
business. This trend is spurring growth in both Internet users and ISPs, as well
as in the use of the Internet for communications.

ISPs are organizations that offer a range of Internet and World Wide
Web-based services to customers. The Internet services market in the areas we
are targeting currently consists primarily of basic Internet access. The rapid
development and growth of the Internet has resulted in a highly fragmented
market. According to the 1999 Boardwatch Directory of Internet Service
Providers, there are over 5,000 ISPs in the United States. Most of these ISPs
are small and are local businesses. We believe that currently less than 15% of
the ISPs have regional or national market coverage. This industry is currently
undergoing substantial consolidation.

OUR SERVICES

Local Access

We currently act as a sales agent for U S WEST's comprehensive local access
services, including basic dial tone and advanced communications services in the
Colorado and Northwest regions. As a result of our acquisitions subsequent to
December 31, 1999, we are also offering these same services for U S WEST in the
Phoenix and Tucson, Arizona market and as a sales agent for Bell Atlantic,
Southwestern Bell and Bell South in the Northeast and Mid-Atlantic regions.
Basic dial tone services are telephone connections, voice messaging and call
management. More advanced communications services we act as a sales agent for
include:

- data transmission oriented services;

- dedicated high-capacity transmission services;

- high speed real time communications access, including digital subscriber
line, or DSL;

- packet-based transmission for wide area networks, including frame relay
service; and

- an advanced digital network for data, video, voice and Internet traffic,
including ISDN.

Long Distance

We currently offer Qwest and AT&T long distance services. Our predecessors
have offered Qwest long distance services in the Northwest and Colorado regions
since October 1998 and January 1999, respectively

8
<PAGE> 11

and AT&T long distance services in the Northwest region since April 1999. These
Northwest region services have been offered utilizing the agent relationships of
NCI, an affiliate of ICM, which was acquired by the Company subsequent to
December 31, 1999. Our relationships with these long distance providers allow us
to offer our customers the pricing, quality and add-on features that they
require for their specific long distance communications. As a result of our
acquisitions subsequent to December 31, 1999, we are also offering long distance
services provided by Sprint in the Northeast and Mid-Atlantic regions.

Wireless

We currently offer US WEST's wireless services in the Colorado and
Northwest regions. We concentrate on providing our customers with services and
capabilities that will allow them to better utilize wireless technology and make
this technology an integral part of their voice and data communications
strategy. Our predecessors have offered U S WEST's wireless services since
December 1998. These wireless services include cellular, paging and integrated
voice and data communications services. We provide and will continue to provide
our customers with competitive pricing, coverage and access to add-on features.

Internet

We currently offer US WEST's Internet services in the Colorado and
Northwest regions and, since February 2000, became a Certified Internet Agent
for Epoch Internet, a Tier-1 and nationwide ISP. We find that customers are
often confused by the process of selecting an ISP, connecting to the ISP and
integrating the service into their internal systems. Many ISPs do not provide
installation and start-up assistance or assistance in internal cabling and
networking for their customers. As a result, the customers must coordinate with
local access providers, networking/cabling consultants and the ISP to obtain
service. To address this problem, we offer a turnkey solution to our customers
through our agent relationships, connection expertise and relationships with
networking/cabling companies. Our predecessors have offered U S WEST's Internet
services since January 1998. As a result of our acquisitions subsequent to
December 31, 1999, we are also offering Internet services provided by Bell
Atlantic and North Atlantic Internet in the Northeast and Mid-Atlantic regions.

Project Management

The combination of wireless technologies, computer networking integration,
telephone system integration and Internet technologies creates significant
challenges for small to medium-size businesses attempting to implement an
overall communications solution. We believe that some of our customers may
benefit from our project management capabilities. We will continue to offer
comprehensive communications services, assistance in the selection of hardware
and cabling providers, supervision of the installation and integration of all
the communications services components and, to a limited extent, the
installation of hardware. However, we do not plan to offer computer network
implementation. As our size and geographic coverage expand, we believe we will
be able to offer project management to customers who have larger, more complex
projects requiring significant planning, resource management and coordination.

Analysis of New Technologies and Developments

We believe that over the course of the next few years the communications
industry will see the introduction and expanded use of a wide range of new
technologies and services. These new technologies will include the use of:

- Internet and wireless technologies for voice and data communications;

- wireless receptor technologies, such as dish relay, satellite and radio
towers and cable networks for communications; and

- intra-company networks.

9
<PAGE> 12

There are also several private companies developing satellite networks that
will be used for providing new services and capabilities. Many of these new
technologies will be valuable additions to the overall communications strategies
of our customers. However, this abundance of new options may add to the
confusion our customers face in making their communications choices. We will
offer our customers, at no charge, ongoing analysis of these new technologies
and services and assist them in their determination of which technologies may be
applicable to their needs.

Our Proposed Internet Services

The core product expected to be offered by ISPs we may acquire will be
dial-up and dedicated access to the Internet. Although individuals typically use
slower, less expensive Internet access methods, business customers often benefit
from dedicated, high-speed Internet access. We expect to have the ability to
procure the communications services necessary to provide our customers with the
highest speed access available in a particular market. We also plan to offer
e-mail applications, file transfer protocol, World Wide Web hosting, Web design,
project management of Web-based services and assistance with electronic
commerce. Our goal is to increase the use of these more advanced services by
customers of ISPs we may acquire.

Other Services

It is not currently common in the agent industry to provide customers with
post-sales support beyond installation. Additionally, small to medium-size
businesses typically do not have communications departments to deal with
post-sales issues. Since post-sales services have not been customarily offered
by agents, we do not know whether we can sell these services at a price that is
acceptable to the customer and economical to us. To fill this need we may offer
to our customers:

- on-going contract maintenance, including service and billing problem
dispute resolution with the communications service provider;

- 7-day a week emergency assistance for service interruption or
degradation;

- on-going audits and needs analysis to ensure that all services are
functioning appropriately;

- regular audits and analysis of the services in place and the need for new
services; and

- audits of billings and consolidation of billings.

We believe that providing these additional services may add significant
incremental revenues and further strengthen our customer relationships.

SALES AND MARKETING

Our direct sales efforts are conducted at the local level by our direct
sales force. Members of our direct sales team meet face-to-face with prospective
customers, discuss their communications needs and use our local project
management staff to design a comprehensive package of communications services.
We continue to focus on improving our project management staff and capabilities
and developing programs to recruit and train motivated sales people with good
technical and customer skills. Our goal is to establish a long-term relationship
as the customer's total solution provider.

Our agents also establish additional customer referral relationships by
working directly with:

- interconnect companies;

- value-added resellers;

- computer network integrators;

- telephone system integrators; and

- ISPs and equipment vendors.

10
<PAGE> 13

We customarily pay a referral fee to these companies or reciprocate in the
sharing of market opportunities.

In addition, we intend to maintain a comprehensive database for significant
customers that will document their communications service plans and providers,
historical usage and anticipated future needs. We believe that this database
will become a valuable tool for providing enhanced services to these customers.

COMPETITION

Agent Business

The market for communications services is extremely competitive and rapidly
changing. We expect competition to increase as communications service providers
expand their traditional service offerings. Many of our largest competitors are
national communications service providers that have significantly greater
financial, marketing and other resources. These competitors may adopt more
aggressive pricing policies and offer more attractive terms to customers than we
can. We may face increasing price pressure from our larger competitors. In
addition, some of our current and potential competitors have established, or may
establish, cooperative relationships among themselves or with third parties to
compete more effectively. We may not survive in this intensely competitive and
rapidly evolving market. Within this market, we encounter multiple competitors
that include:

- the direct sales forces of communications service providers, such as U S
WEST, AT&T, Qwest, MCI/WorldCom and numerous CLECs;

- other communications services agents;

- customer infrastructure out-sourcers, such as Convergent Technologies,
which buy a customer's computers, servers and telephone equipment and
lease them back to the customer along with providing the customer
CLEC-type services; and

- communications consultants, such as groups within Electronic Data Systems
and Andersen Consulting.

We believe the primary competitive factors in our market include:

- the ability to provide a solution that satisfies all the customer's
communications needs;

- pricing;

- customer service during and after installation;

- quality and reliability of communications services;

- access to multiple communications service provider options; and

- development of customer loyalty.

Although we face a broad range of competition from a variety of
communications service providers, we seek to compete effectively by acting as a
sales agent primarily for RBOC services in the local access market, along with
long distance, wireless and Internet services from providers in those markets,
with a strong focus on customer service.

Proposed ISP Business

Currently, we are focusing our resources and acquisition efforts on
communication services agents rather than ISPs. However, we intend to evaluate
and pursue potential ISP acquisition candidates of which we become aware and
which meet a strategic need. Our target market for Internet access is extremely
competitive. We expect competition to increase as Internet use grows and ISPs
expand their traditional services and new start-ups emerge in the marketplace.
Barriers to entry are minimal and competitors can enter the market at a
relatively low cost. Many of our competitors have greater financial, marketing
and other

11
<PAGE> 14

resources than we. We cannot guarantee that we will be able to compete
effectively in this market. Our competitors include:

- other local and regional ISPs;

- national ISPs, such as MindSpring and Verio;

- on-line information providers, such as America Online and Prodigy;

- large national communications providers, such as AT&T, Qwest,
MCI/WorldCom and the RBOCs; and

- traditional cable television providers, such as Time-Warner and AT&T.

In our target ISP market, we believe that the following are the principal
competitive factors:

- maintaining high-speed access options and adequate capacity;

- affordable pricing;

- the ability to assist customers in implementing services and resolving
problems; and

- offering a variety of services in addition to basic access.

GOVERNMENT REGULATION

Agent Business

PentaStar is not directly subject to any government regulations other than
normal business regulations. However, the communications service providers for
whom we act as a sales agent are subject to varying degrees of federal, state
and local regulation. Generally, the FCC exercises jurisdiction over all
communications service providers to the extent they provide services involving
the supplying of interstate or international communications. The
Telecommunications Act of 1996 expanded the FCC's jurisdiction to include
certain interconnection and related issues that traditionally have been
considered subject primarily to state regulation. The state regulatory
commissions also retain jurisdiction over significant aspects of the provision
of intrastate communications services. The Telecommunications Act of 1996 was
intended ultimately to permit service providers in the long distance and local
communications services markets, as well as cable television providers, to
compete freely in all communications markets. For example, the
Telecommunications Act of 1996 eventually will permit the RBOCs to compete fully
in the provision of in-region long distance services upon the satisfaction of
the statutorily mandated criteria. The 1996 Act also allows long distance
carriers to provide local services in the RBOCs' territories. Long distance
carriers are also permitted to offer combined packages of long distance and
resold RBOC local services. However, large long distance carriers are not
permitted to market long distance and resold RBOC local services through a
"single transaction" meaning that these carriers may not use the same sales
agent to market both products to the same customer in the same communication.
Also, the telecommunications carrier may not offer long distance and RBOC resold
local exchange services as a bundled package under an integrated pricing
schedule. The Telecommunications Act of 1996 also generally requires RBOCs to
provide competitors with interconnection and nondiscriminatory access to their
local exchange network on more favorable terms than have been available in the
past. As required by the Telecommunications Act of 1996, the FCC adopted in
August 1996 new rules implementing the interconnection and resale provisions of
the Telecommunications Act of 1996, which are intended to minimize regulatory,
economic and operational impediments to full competition for local services.

In general, we are unable to determine what effect the Telecommunications
Act of 1996 and other laws and regulations will have on the communications
industry in general and on us in particular. Numerous FCC, state and local
regulatory decisions are expected regarding issues that may materially affect us
because they will have an impact on:

- the services and the pricing that can be offered by RBOCs; and

- who can compete with RBOCs in various markets and the prices they will be
able to offer.

12
<PAGE> 15

Also, the communications service providers whose services we will market
are affected by the laws and changes in the laws affecting the provision of
telecommunications. These laws and changes may have an indirect effect on
PentaStar. For instance, on February 26, 1998, the FCC established rules that
restricted telecommunications carriers' use of customer proprietary network
information, or CPNI. The rules prohibit carriers from using information gleaned
from providing one type of service (local, long distance or wireless) to market
another type of service without first obtaining that customer's consent. This
means that a carrier could not give PentaStar a local service customer's
marketing information in order for PentaStar to market that carrier's long
distance, wireless or Internet services without first obtaining that customer's
consent to use his or her CPNI. However, the U.S. Court of Appeals for the Tenth
Circuit recently overturned most of the FCC's CPNI rules. On October 4, 1999,
the FCC filed a petition for rehearing of this case. This petition was denied on
November 30, 1999.

The communications service providers for which we act as a sales agent must
also comply with the FCC's verification requirements enacted to prevent
slamming, the unauthorized change of a customer's presubscribed carrier
selection. The slamming rules govern the manner in which telecommunications
carriers effectuate and verify selection by consumers of preferred providers of
local exchange and interexchange services. When we successfully sell a customer
a service that replaces that customer's local access or long distance service,
the provider of the new service must comply with the verification procedures in
order to switch our customer's service.

Proposed ISP Business

We anticipate providing Internet access, in part, through transmissions
over public telephone lines. These transmissions are governed by regulatory
policies establishing charges and terms for communications. As an ISP, we will
not be directly regulated by the FCC or any other agency, other than regulations
applicable to businesses generally. We could, however, become subject in the
future to regulation by the FCC or other regulatory agencies as a provider of
basic telecommunications services.

These regulations could affect the charges that we pay to connect to the
local telephone network or for other purposes. We, like other ISPs, will not be
required to pay carrier access charges. Access charges are assessed by local
telephone companies to long-distance companies for the use of the local
telephone network to originate and terminate long-distance calls, generally on a
per minute basis. Access charges have been a matter of continuing dispute
between local telephone companies and long-distance carriers. In May 1997, the
FCC reaffirmed its decision that ISPs should not be required to pay carrier
access charges.

To the extent that an end user's call to an ISP is local rather than long
distance, the local telephone company that serves the ISP may be entitled to
reciprocal compensation from the end user's local telephone company. Reciprocal
compensation is a reimbursement from one local telephone company to a second one
for handling calls that originate with the first local telephone company and
terminate with the second one. To the extent that a call from an end user to an
ISP is considered intrastate, the local telephone company serving an ISP would
be entitled to reciprocal compensation. This payment of reciprocal compensation
reduces the local telephone company's costs and ultimately reduces the ISP's
costs. The FCC recently determined that most, but not all, traffic to an ISP is
interstate in nature rather than local. This determination could potentially
eliminate the payment of reciprocal compensation to the local telephone company.
The FCC has yet to rule on the specific issue of reciprocal compensation and ISP
traffic; however, the FCC has stated that state commissions may determine
whether, in some circumstances, reciprocal compensation should be paid.

The FCC's current position is that Internet access providers should not be
required to contribute to a new universal service fund established to replace
current local rate subsidies and to meet other public policy objectives, such as
enhanced communications systems for schools, libraries and health care
providers. As a result, unlike telecommunications carriers and other
telecommunications providers, ISPs do not have to contribute a percentage of
their revenues to the federal universal service fund and are not expected to be
required to contribute to similar funds being established at the state level.
Both the access charge and universal service treatment of ISPs, however, are the
subjects of further FCC proceedings and could change. Telephone companies are
actively seeking reconsideration or reversal of the FCC decisions, and their

13
<PAGE> 16

arguments are gaining more support as Internet-based telephony begins to compete
with conventional telecommunications companies.

We are not in a position to predict how these matters will be resolved, but
we could be adversely affected if, in the future, we and other ISPs are required
to pay access charges, contribute to universal service support or our local
telephone companies no longer receive reciprocal compensation for our traffic.

The law relating to the liability of ISPs and on-line services companies
for information carried on or disseminated through their networks is unsettled.
As the law in this area develops, the potential imposition of liability upon us
for information carried on and disseminated through our network could require us
to implement measures to reduce our exposure to this liability, which may
require the expenditure of substantial resources or the discontinuation of some
of our products or service offerings. Any costs that are incurred as a result of
contesting any asserted claims or the consequent imposition of liability could
materially adversely affect our profitability.

Due to the increasing popularity and use of the Internet, a number of laws
and regulations have been adopted in recent months, and may be adopted in the
future, by federal and state governments, as well as by foreign governments with
respect to the Internet. These laws cover or may cover issues such as content,
user privacy, pricing and copyright infringement. We cannot predict the impact,
if any, that recent and any future regulatory changes or developments may have
on the business, financial condition and results of operations of any ISPs we
acquire. Changes in the regulatory environment relating to the Internet access
industry, including regulatory changes that directly or indirectly affect
telecommunication costs or increase the likelihood or scope of competition from
access providers or others, could have a material adverse effect on the ISP
business.

Employees

As of March 24, 2000, PentaStar had 245 employees, all of whom were
full-time employees. Of our full-time employees, 6 are corporate headquarter
employees, 141 are in sales and marketing, 56 are in operations and engineering
support, and 42 are in administration.

We believe that our relations with our employees are satisfactory. We are
not party to any collective bargaining agreements and we have never experienced
a work stoppage. As we continue to grow and acquire new companies, we expect to
hire additional personnel.

ITEM 2. DESCRIPTION OF PROPERTY

As of December 31, 1999 we maintain our corporate headquarters at 1522
Blake Street, Denver, Colorado. We lease 1,875 square feet under a lease which
expires August 31, 2002. Additionally, ICM and Access lease the following
facilities:

<TABLE>
<CAPTION>
LOCATION SQ. FT. TERM
- -------- ------- ----
<S> <C> <C>
Denver, Colorado................................. 9,050 4,250 sq. ft. expires 7/31/00
4,800 sq. ft. expires 12/31/01
Colorado Springs, Colorado....................... 300 Expires 3/31/00
Bellevue, Washington............................. 9,902 5,213 sq. ft. expires 11/30/02
4,689 sq. ft. expires 11/30/02
Portland, Oregon................................. 3,238 Expires 6/28/01
</TABLE>

We believe additional space is available for expansion.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings pending or, to our knowledge,
threatened against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

14
<PAGE> 17

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since October 26, 1999, the Company's common stock has traded on the Nasdaq
SmallCap Market under the symbol "PNTA." Prior to October 26, 1999, there was no
public trading market for the Company's common stock. As of March 24, 2000, the
Company had 23 holders of record. The following table sets forth the high and
low bid prices of the common stock as reported on Nasdaq.

<TABLE>
<CAPTION>
BID PRICE
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
Fourth Quarter (from October 26, 1999):......... $15.6875 $10.4375
</TABLE>

Such prices reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions.

DIVIDENDS

No dividends have been paid by PentaStar on its common stock as of December
31, 1999. The Company does not anticipate declaring or paying cash dividends on
its common stock at any time in the foreseeable future. The decision whether to
apply legally available funds to the payment of dividends on the Company's
common stock will be made by its board from time to time in the exercises of
business judgement, taking into account, among other things, results of
operations and financial condition, any then existing or proposed commitments by
it for the use of available funds, and the Company's obligations with respect to
the holders of any then outstanding indebtedness or preferred stock. In
addition, the Company may in the future issue debt securities or preferred stock
or enter into loan agreements or other arrangements that restrict the payment of
dividends on, and repurchases of, its common stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and related notes as of December 31, 1999 and for the period from
inception (March 15, 1999) through December 31, 1999, and the predecessor
financial statements of Access and ICM as of October 25, 1999 and December 31,
1998 and for the period from January 1, 1999 to October 25, 1999 and the year
ended December 31, 1998, included in Part II, Item 7 of this Form 10-KSB.

PentaStar was incorporated on March 15, 1999 under Delaware law.
PentaStar's activity through October 25, 1999 consisted of:

- organizing PentaStar;

- developing PentaStar's business plan, management and corporate structure;

- pursuing the acquisitions of the Acquired Companies; and

- conducting activities in connection with the Offering.

Upon the closing of the acquisitions of the Acquired Companies and the
Offering, PentaStar commenced its business operations as a communications
services agent for communications services including local access, long
distance, wireless and Internet services for voice and data communications.
PentaStar designs, procures and facilitates the installation and use of
communications services to best meet its customers' needs. PentaStar plans to
continue to acquire other communications services agents.

On October 26, 1999, the Company successfully completed its initial public
offering. The Offering resulted in the sale of 1,297,845 shares of its common
stock, for proceeds of $10,714,000 net of cash offering
15
<PAGE> 18

costs of $2,265,000. Immediately prior to the Offering, PentaStar completed the
acquisitions of the Acquired Companies. Purchase consideration for Access
consisted of $189,000 in cash, 205,000 shares of PentaStar's common stock and
assumption of liabilities. Purchase consideration for ICM consisted of
$1,619,000 in cash, 165,000 shares of PentaStar's common stock and assumption of
liabilities. In connection with the acquisition of ICM, $500,000 of cash was
placed in escrow for application against indemnification obligations. These
acquisitions were accounted for under the purchase method of accounting. The
principal shareholder of ICM and the principal shareholder of Access each
entered into escrow and contingent stock agreements with PentaStar on closing of
the acquisitions. These agreements adjust the final consideration paid to those
shareholders in return for their interests in ICM and Access.

Under these agreements, shares of PentaStar common stock were placed into
escrow. Based upon the earnings performance of an acquired company relative to
that of all other acquired companies for the 12-month period prior to the
earlier of a sale of substantially all of the assets or stock of PentaStar or
five years, the shareholder associated with that company or seller of that
company will receive back from escrow all, some or none of the shares such
shareholder or seller placed in escrow. In addition, based upon the relative
earnings performance of the acquired company, such shareholder or seller may
receive additional shares of common stock from PentaStar. PentaStar, at its
discretion, may distribute cash to such shareholder or seller in lieu of some or
all of the additional shares in an amount equal to the fair market value of the
additional shares not distributed. The agreements are designed, however, so that
there will be no net change to the total number of shares of PentaStar common
stock outstanding after the combined adjustments are made for all of the
Acquired Companies. We expect that the owners who manage other agent companies
that we acquire will be required to receive a significant amount of the purchase
price in PentaStar common stock and place into escrow from 25% to 50% of their
PentaStar common stock pursuant to similar arrangements.

ICM was a U S WEST agent, which means ICM has been accepted by U S WEST to
sell, order and assist in the implementation of U S WEST communications
services. PentaStar expects to retain the agent relationship with U S WEST
indefinitely. PentaStar believes that the loss of its agent relationship with U
S WEST would have a material adverse effect. Of ICM's revenues in 1999 and 1998,
99% were from U S WEST. Subsequent to the acquisition, ICM's former president,
Dennis W. Schillinger, has remained with PentaStar as manager of our Northwest
region. ICM, located in Bellevue, Washington, was founded in 1990.

Access was also a U S WEST agent. PentaStar expects to retain its agent
relationship with U S WEST indefinitely. PentaStar believes that the loss of its
agent relationship with U S WEST would have a material adverse effect. All of
Access' revenues in fiscal 1999 and 1998 were from U S WEST. Subsequent to the
acquisition, Access' former president, Jeffrey A. Veres, has remained with
PentaStar as manager of our Colorado region. Access, located in Denver,
Colorado, was founded in 1995.

On February 18, 2000, the Company, through a wholly-owned subsidiary,
completed the acquisition of the assets of USTeleCenters, Inc. and Vermont
Network Services Corporation (collectively referred to as "UST"). UST, founded
in 1986 and headquartered in Boston, Massachusetts, is a full-service
communications agent focusing on small business customers located throughout
Bell Atlantic's 13 state Northeast and Mid-Atlantic region. UST has agency
agreements with service providers including Bell Atlantic, Bell South,
Southwestern Bell and Sprint. Approximately 75% and 71% of UST's revenues were
from commissions paid from Bell Atlantic in 1999 and 1998, respectively. The
purchase price consideration consisted of $182,000 in cash paid at closing, the
issuance of 5,980 shares of the Company's common stock and the assumption of
approximately $2,500,000 of liabilities. The Company also assumed the on-going
obligations under various agreements relating to the acquired assets.

16
<PAGE> 19

$2,100,000 in cash, the issuance of the Company's common stock with a fair
market value of $950,000 and the assumption of certain liabilities at closing.
In addition, there is a potential earnout payment based upon the combined
earnings of ETI and UST for the year ending December 31, 2000.

On March 17, 2000, the Company completed the acquisition of the assets of
ParTel Communications, Inc (ParTel). ParTel, founded in 1982, is a full-service
communications agent based in Phoenix, Arizona primarily servicing customers in
the Phoenix and Tucson metropolitan markets. ParTel is an agent of U S WEST and
sells primarily high-end, data-oriented products. Historically all of ParTel's
revenues have been generated from commissions paid from U S WEST. The purchase
price consideration consisted of $519,000 in cash paid at closing and the
issuance of 30,310 shares of the Company's common stock. At the time the
acquisition of ParTel was consummated, the Company loaned $500,000 (interest at
the prime rate plus 1%) to a corporation controlled by the former shareholders
of ParTel. The loan will be due not later than December 31, 2001, and is
personally guaranteed by the former shareholders. In addition, there is a
potential earnout payment based upon the adjusted earnings of ParTel for the
year ending December 31, 2000.

Overview of Operations

The following discussion applies to ICM and Access for the periods prior to
their acquisition by PentaStar and is also applicable to PentaStar for the
period of its ownership of ICM and Access as a result of its acquisition of both
ICM and Access.

Substantially all of the revenues of ICM and Access are generated from the
commissions they receive from selling communications services as agents for
communications service providers. ICM and Access are paid a commission by each
service provider based on a percentage of each customer's cost of services. ICM
and Access sell advanced communications and basic dial tone services for the
local access market to facilitate data, voice and video communications. The
Company expects that, over time, the percentage of advanced communications
services revenues will increase as a percentage of revenues because of increased
demand for, and availability of, these services. Basic dial tone services in
general are telephone connections, voice messaging and call management. Advanced
communications services are all other voice and data communications services,
including:

- data transmission oriented services;

- dedicated high-capacity transmission services;

- high speed real time communications access, including digital subscriber
line, or DSL;

- packet-based transmission for wide area networks, including frame relay
service; and

- an advanced digital network for data, video, voice and Internet traffic,
including ISDN.

In the ordinary course of business, ICM and Access experience delays in
payments on commissions earned from U S WEST, commonly known as disputed items.
Disputed items represent accounts receivable in dispute for installed services
and arise primarily from differences in documentation between PentaStar and U S
WEST relating to:

- the commission percentages earned;

- the type of services sold; and

- the service installation dates.

17
<PAGE> 20

In 1999 and 1998, the gross amounts of disputed items represented 9% and
12.5%, respectively, of PentaStar's and its predecessor's combined revenues in
those years. U S WEST does not pay any portion of the commission when an amount
is in dispute. PentaStar believes, based upon an extensive review of the
disputed items, that the actual amounts in dispute are substantially less than
the gross amount of the commissions being withheld as a result of the disputes.
As of October 25, 1999, ICM and Access established allowances to reduce the
disputed accounts receivable to an amount each of them believes represents the
estimated net realizable value of their disputed items. The allowances were
established through a review by ICM and Access of all of the commissions due on
installed services, and PentaStar believes the allowances are adequate and has
established allowances at December 31, 1999 representing the net realizable
value of disputed items. As a result of PentaStar's continuing relationship with
U S WEST, changes have been implemented in the process of receiving payment for
installed services, which have resulted in 1999 disputed receivables being
cleared in a more timely manner.

Salaries and commissions expenses consist principally of salary and
incentive compensation that Access and ICM as operating companies pay their
sales and marketing, operations and engineering support and administrative
staff.

Other general and administrative expenses include communications expenses,
office rent and utilities, travel, professional fees and depreciation for Access
and ICM as operating companies. For the period from inception (March 15, 1999)
through December 31, 1999 this also includes the expenses related to the
operations and staffing of PentaStar's corporate office.

ICM and Access have experienced some seasonal variations in their
businesses. Orders for communications services tend to slow in the last quarter
of the calendar year due to customers' budgetary constraints. Generally, orders
increase in the first quarter of the following year. Because of the time lag
between order and installation, revenues in the first four months of each
calendar year are typically below the average of revenues for the remaining
portion of the year.

Significant Accounting Policies and Procedures

When the Company obtains an order for U S WEST communications services, the
Company receives an up-front payment of a portion of the commission the Company
is entitled to receive for the whole order. That up-front portion for ICM and
Access was 35% in 1998, but was increased to 55% for orders received after June
1, 1999. Those initial payments are accounted for as deferred revenue. After the
services are fully installed, which is approximately three months after order,
the Company becomes entitled to receive the remaining portion of the commission.
It is not until the final installation is completed by U S WEST that the Company
recognizes the revenue for the total commission, including the initial payment
and the final payment. The Company generally receives final payment within 90
days of final installation.

In connection with the acquisitions, the Company recorded goodwill of
$4,501,000, which represents the excess of the purchase price paid over the net
tangible book value. The goodwill amount is being amortized over its estimated
useful life of 20 years. The annual goodwill amortization expense is $225,000.
The assignment of an amortization period of 20 years was influenced by the
attributes and market position of each of ICM and Access. Future events or
changes in circumstances may result in a reduction in the 20-year amortization
period, which would result in increased annual goodwill expense. The Company has
and anticipates acquiring additional communications services agents in the
future and expects to record goodwill in those acquisitions. Future acquisitions
may warrant amortization periods of less than 20 years.

RESULTS OF OPERATIONS

PENTASTAR COMMUNICATIONS, INC.

FOR THE PERIOD FROM INCEPTION (MARCH 15, 1999) THROUGH DECEMBER 31, 1999

Revenues. Revenues consist principally of commissions from sales of
communications services as an agent for communications service providers. The
Company recorded revenue of $622,000 resulting from sales of advanced
communications services and $72,000 from sales of basic dial tone services.
These sales were the

18
<PAGE> 21

result of the Company's acquisitions of the Acquired Companies whose operations
have been reported in the consolidated financial statements of the Company since
October 26, 1999. Substantially all of the revenue during the period was
generated through the sales of U S WEST services. The Company's revenue
recognition policy is to recognize revenues on the date the respective service
is installed versus the date that the order for service is accepted by the
service provider. In general, it is the Company's experience that this period
between the order and installation of services is approximately three months. As
a result, the revenues recognized during the period were related to orders that
were made prior to the Company's acquisition of the Acquired Companies. Prior to
the Company's acquisition of the Acquired Companies, the Acquired Companies
managements' and employees' attention was diverted from the core operations of
the business as a result of the acquisition agreements and Offering with
PentaStar. Accordingly, the revenues for the period are lower than those
experienced historically by the Acquired Companies. The Company expects future
revenues to more closely approximate the historical levels of the Acquired
Companies as a result of the integration into the Company's ownership and
operations.

Operating expenses. Salaries and commissions expense of $796,000 consists
principally of costs of operations, sales, management and administrative
personnel at the operating companies. Other general and administrative expenses
of $558,000 consist principally of the overhead expenses of the operating
companies such as rent, telephone and supplies and the expenses applicable to
the corporate office of the Company such as personnel costs, travel, insurance
and professional fees. Additionally, the corporate expenses included
approximately $171,000 of consulting services expense, of which $126,000 of
noncash expense was associated with the issuance of common stock options at the
Offering and $45,000 was associated with the payment of cash. The Company was
formed on March 15, 1999 and, accordingly, began incurring expenses, but did not
have any operations until the acquisition of the Acquired Companies on October
26, 1999. Depreciation and amortization expense of $74,000 consists of
depreciation expense on property and equipment and the amortization of goodwill
associated with the acquisition of the Acquired Companies.

Loss from operations. The loss from operations of $734,000 was primarily
attributable to the above discussed effects of decreased revenue together with
the additional costs and expenses associated with the corporate office.

Other (income) expense, net. Other income, net, of $57,000 represents the
interest income earned on the invested cash proceeds from the Offering after the
acquisitions of the Acquired Companies. As the Company utilizes additional cash
resources for operating needs and future acquisitions, the Company expects
interest income to decrease.

Income taxes. A benefit of $244,000 was recorded for the period
representing an effective tax rate of 36.1%. The difference between the federal
statutory rate of 34% and the effective rate is due to state income taxes offset
by nondeductible goodwill amortization.

Net loss. For the reasons discussed above, a net loss of $433,000 was
recognized during the period.

ACQUIRED COMPANIES -- ICM Communications Integration, Inc.

"Management's Discussion And Analysis of Financial Condition And Results Of
Operations" consists primarily of comparisons of the historical financial
statements. The information may not be reflective of the continuing results of
operations and financial condition of ICM as a wholly-owned subsidiary of the
Company, because of certain non-recurring expenses related to the acquisition
and the elimination of redundant costs.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE PERIOD FROM JANUARY 1, 1999 TO
OCTOBER 25, 1999

Revenues. Total revenues of $4,275,000 and $3,245,000 were recorded for the
year ended December 31, 1998 and for the period from January 1, 1999 to October
25, 1999, respectively. The decrease was attributable to the shorter reporting
period and diversion of ICM's management's and employee's attention prior to
October 25, 1999, as a result of the acquisition by PentaStar and the Offering.
Advanced communications services revenues decreased from $3,681,000 for the year
ended December 31, 1998 to $2,718,000 for the period January 1, 1999 to October
25, 1999 for the reasons discussed above. Basic dial tone services revenues

19
<PAGE> 22

decreased from $594,000 for the year ended December 31, 1998 to $527,000 for the
period January 1, 1999 to October 25, 1999. This decrease was smaller than that
of the advanced communications services revenue decrease as a result of the
creation of a specific group dedicated to selling basic dial tone services that
was established in the first half of 1999.

Costs and expenses. Salaries and commissions of $2,746,000 and $2,322,000
were recorded for the year ended December 31, 1998 and for the period from
January 1, 1999 to October 25, 1999, respectively. This decrease was
attributable to the shorter reporting period and lower revenues. The salaries
and commissions as a percentage of revenue were higher for the period from
January 1, 1999 to October 25, 1999 as a result of the fixed cost component of
these costs attributable to management, operations, sales, and administrative
personnel not affected by the revenue decrease. Other general and administrative
expenses of $952,000 and $1,285,000 were recorded for the year ended December
31, 1998 and for the period from January 1, 1999 to October 25, 1999,
respectively. This increase was primarily due to professional fees and other
non-recurring costs associated with the acquisition by PentaStar and the
Offering.

Income (loss) from operations. Income from operations of $577,000 was
recorded for the year ended December 31, 1998 and a loss from operations of
$362,000 was recorded for the period from January 1, 1999 to October 25, 1999.
This change was the result of the above discussed changes in revenues and costs
and expenses.

Other (income) expense, net. Other (income) expense, net, of ($8,000) and
$9,000 was recorded for the year ended December 31, 1998 and for the period from
January 1, 1999 to October 25, 1999, respectively. This difference was the
result of ICM utilizing its line of credit in the 1999 period to fund its cash
needs versus interest income earned on excess cash balances in the 1998 period.

Income taxes. A provision for income taxes of $200,000 was recorded for the
year ended December 31, 1998 and a benefit for income taxes of $137,000 was
provided for the period from January 1, 1999 to October 25, 1999. The effective
tax rate was 34.2% in the 1998 period and increased to 36.9% in the 1999 period.

Net income (loss). For the reasons discussed above, net income of $385,000
was recorded in the year ended December 31, 1998 and a net loss of $234,000 was
recorded for the period from January 1, 1999 to October 25, 1999.

ACQUIRED COMPANIES -- DMA Ventures, Inc. dba Access Communications

"Management's Discussion And Analysis of Financial Condition And Results Of
Operations" consists primarily of comparisons of the historical financial
statements. The information may not be reflective of the continuing results of
operations and financial condition of Access as a wholly-owned subsidiary of the
Company, because of certain non-recurring expenses related to the acquisition
and the elimination of redundant costs.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE PERIOD FROM JANUARY 1, 1999 TO
OCTOBER 25, 1999

Revenues. Total revenues of $2,382,000 and $1,568,000 were recorded for the
year ended December 31, 1998 and for the period from January 1, 1999 to October
25, 1999, respectively. The decrease was attributable to the shorter reporting
period and diversion of Access' managements' and employees' attention prior to
October 25, 1999, as a result of the acquisition by PentaStar and the Offering.
Advanced communications services revenues decreased from $2,038,000 for the year
ended December 31, 1998 to $1,457,000 for the period from January 1, 1999 to
October 25, 1999 for the reasons discussed above. Basic dial tone services
revenues decreased from $344,000 for the year ended December 31, 1998 to
$111,000 for the period from January 1, 1999 to October 25, 1999 due to a
decreased focus on basic communications services and the reasons discussed
above.

Costs and expenses. Salaries and commissions of $1,201,000 and $1,138,000
were recorded for the year ended December 31, 1998 and for the period from
January 1, 1999 to October 25, 1999, respectively. This decrease was
attributable to the shorter reporting period and lower revenues. The salaries
and commissions as
20
<PAGE> 23

a percentage of revenue was higher for the period from January 1, 1999 to
October 25, 1999 as a result of the fixed cost component of these costs
attributable to management, operations, sales and administrative personnel not
affected by the revenue decrease. Other general and administrative expenses of
$577,000 and $479,000 were recorded for the year ended December 31, 1998 and for
the period from January 1, 1999 to October 25, 1999, respectively. This decrease
was attributable to the shorter reporting period. The amount as a percentage of
revenue was higher for the period from January 1, 1999 to October 25, 1999 as a
result of professional fees and other non-recurring costs associated with the
acquisition by PentaStar and the Offering.

Income (loss) from operations. Income from operations of $604,000 was
recorded for the year ended December 31, 1998 and a loss from operations of
$49,000 was recorded for the period from January 1, 1999 to October 25, 1999.
This change was the result of the above discussed changes in revenues and costs
and expenses.

Other (income) expense, net. Other (income) expense, net, of $49,000 and
$64,000 was recorded for the year ended December 31, 1998 and for the period
from January 1, 1999 to October 25, 1999, respectively. These amounts are
comprised primarily of interest expense on Access's borrowings. The difference
was the result of Access utilizing its line of credit in the 1999 period to fund
its cash needs.

Income taxes. A provision for income taxes of $212,000 was provided for the
year ended December 31, 1998 and a benefit for income taxes of $41,000 was
provided for the period from January 1, 1999 to October 25, 1999. The effective
tax rate was 38.2% in the 1998 period and decreased to 36.3% in the 1999 period.

Loss from discontinued operations. Losses from discontinued operations were
$370,000 and $74,000 for the year ended December 31, 1998 and for the period
from January 1, 1999 to October 25, 1999, respectively. The loss from
discontinued operations is net of income tax benefits of $219,000 for the year
ended December 31, 1998 and $42,000 for the period from January 1, 1999 to
October 25, 1999.

Net loss. For the reasons discussed above, net losses of $27,000 and
$146,000 were recorded for the year ended December 31, 1998 and for the period
from January 1, 1999 to October 25, 1999, respectively.

LIQUIDITY AND CAPITAL RESOURCES

PENTASTAR COMMUNICATIONS, INC.

PentaStar's operations provided net cash of $68,000 for the period from
inception (March 15, 1999) through December 31, 1999 which was primarily
attributable to the collections of receivables. PentaStar used net cash in
investing activities of $2,731,000 during the same period primarily due to the
acquisition of the Acquired Companies as discussed below. PentaStar's financing
activities during the same period provided net cash of $10,800,000 as a result
of the Offering and related party borrowings as discussed below.

During 1999, PentaStar issued promissory notes in the amount of $86,000 to
BACE Investments, LLC for funds loaned by BACE Investments, LLC to PentaStar to
pay expenses associated with the organization of PentaStar, the acquisitions of
the Acquired Companies and the Offering. Immediately prior to the Offering,
PentaStar issued 86 shares of Series A preferred stock to BACE Investments, LLC
as payment in full of the principal amount of the notes. BACE Investments, LLC
is the largest shareholder of PentaStar.

On October 26, 1999, PentaStar successfully completed its initial public
offering. The Offering resulted in the sale of 1,297,845 shares of its common
stock, resulting in proceeds of $10,714,000, net of cash offering costs of
$2,265,000. Of that amount, $2,590,000 was paid by PentaStar to acquire the
Acquired Companies and pay certain assumed liabilities of the Acquired
Companies. These remaining proceeds have been or will be used to:

- make other complementary acquisitions or investments; and

- fund working capital, systems investment and other general corporate
purposes.

21
<PAGE> 24

PentaStar intends to fund future acquisitions through the proceeds of the
Offering, the issuance of common stock, internally generated cash flow and
future borrowings.

As of December 31, 1999, PentaStar had no outstanding debt. PentaStar
believes it will be able to obtain a working capital line of credit or other
debt financing, however PentaStar may not be able to obtain this financing, or,
if available, the terms of the financing may not be favorable to the Company or
the shareholders without substantial dilution of ownership rights.

PentaStar believes that the net proceeds from the Offering, cash flow from
operations and debt financing will be sufficient to satisfy the Company's
anticipated cash requirements for the next 12-months. PentaStar will likely
require additional equity or debt financing beyond that period, and possibly
sooner, dependent upon the scope of the acquisition activity. PentaStar has not
yet identified any sources of long-term financing.

ACQUIRED COMPANIES -- ICM Communications Integration, Inc.

ICM's operations provided net cash of $9,000 for the period from January 1,
1999 to October 25, 1999, which is a decrease from the $291,000 provided for the
year ended December 31, 1998. ICM used net cash to purchase property and
equipment as well as to fund advances to related parties of ICM of $290,000 and
$321,000 for the period from January 1, 1999 to October 25, 1999 and for the
year ended December 31, 1998, respectively. Net cash of $145,000 was provided
from financing activities for the period from January 1, 1999 to October 25,
1999 as compared to the use of net cash of $13,000 for the year ended December
31, 1998. This difference was primarily attributable to the difference in the
outstanding balance under the line of credit. PentaStar repaid all interest
bearing indebtedness when it acquired ICM. The cash portion of the purchase
price otherwise payable to the shareholders of ICM at the closing was reduced by
the amount of interest bearing indebtedness so repaid.

ACQUIRED COMPANIES -- DMA Ventures, Inc. dba Access Communications

Access's operations used net cash of $266,000 for the period from January
1, 1999 to October 25, 1999, which is an increase from the $224,000 used for the
year ended December 31, 1998. Access used net cash to purchase and sell property
and equipment of $9,000 and $13,000 for the period from January 1, 1999 to
October 25, 1999 and for the year ended December 31, 1998, respectively. Net
cash of $193,000 was provided from financing activities for the period from
January 1, 1999 to October 25, 1999 as compared to the use of net cash of
$271,000 for the year ended December 31, 1998. This difference was primarily
attributable to the outstanding balance under the line of credit at October 25,
1999 and a capital contribution by the shareholder during the period January 1,
1999 to October 25, 1999. PentaStar repaid all interest bearing indebtedness
when it acquired Access. The cash portion of the purchase price otherwise
payable to the shareholder of Access at the closing was reduced by the amount of
interest bearing indebtedness so repaid.

YEAR 2000 RISKS

Many software applications and computer hardware and related equipment and
systems that use embedded technology, such as microprocessors, rely on two
digits rather than four to represent years in performing computations and
decision-making functions. These programs, hardware items and systems may fail
beginning on January 1, 2000, or earlier, because they misinterpret "00" as the
year 1900 rather than 2000. This problem is generally referred to as the "Year
2000" issue.

As of March 24, 2000, there were no material Year 2000 issues noted with
any of the Company's computer systems, or to the Company's knowledge, to any
third party that the Company does business with. No costs are expected to be
incurred or accrued relating to the Year 2000 issue.

INFLATION

As a result of the relatively low levels of inflation during the last three
years, inflation did not have a significant impact on the results of operations
in those periods of any of the businesses we have acquired.

22
<PAGE> 25

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). The Company is required to adopt SFAS
No. 133 no later than the first fiscal quarter of 2001. SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities. To
date, the Company has not entered into any derivative financial instruments or
hedging activities. The Company has not determined the impact of adopting SFAS
No. 133.

In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition". SAB No. 101
provides interpretive guidance on the recognition, presentation and disclosure
of revenue in financial statements. SAB No. 101 must be applied to financial
statements no later than the second fiscal quarter of 2000. The Company does not
believe adoption of SAB No. 101 will have a material impact on its consolidated
financial position or results of operations.

ITEM 7. FINANCIAL STATEMENTS

See Financial Statements beginning on page F-1.

ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None

23
<PAGE> 26

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The information required by Item 9 is incorporated herein by reference to
the Company's proxy statement for its 2000 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission within 120 days of the
Company's fiscal year ended December 31, 1999.

ITEM 10. EXECUTIVE COMPENSATION

The information required by Item 10 is incorporated herein by reference to
the Company's proxy statement for its 2000 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission within 120 days of the
Company's fiscal year ended December 31, 1999.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 11 is incorporated herein by reference to
the Company's proxy statement for its 2000 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission within 120 days of the
Company's fiscal year ended December 31, 1999.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 12 is incorporated herein by reference to
the Company's proxy statement for its 2000 Annual Meeting of Shareholders, which
will be filed with the Securities and Exchange Commission within 120 days of the
Company's fiscal year ended December 31, 1999.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are attached or incorporated by reference to the
documents indicated which have previously been filed with the Securities and
Exchange Commission.

24
<PAGE> 27

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.3 Restated Bylaws.
4.1* Specimen stock certificate representing shares of common
stock of PentaStar Communications, Inc.
4.2 Warrant for the purchase of common stock.
4.3 Certificate of Designation of Series A Preferred Stock.
10.1* PentaStar Communications, Inc. Stock Option Plan.**
10.2* Strategic Agent Sales Agreement by and between U S WEST
Communications, Inc. and Access Communications dated
February 15, 1998, as amended by memorandum dated March 24,
1999.
10.3* Strategic Agent Sales Agreement by and between U S WEST
Communications, Inc. and ICM Communications Integration,
Inc. dated February 13, 1998, as amended by memorandum dated
March 24, 1999.
10.4* Consulting Agreement effective September 1, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and BIBD, LLC.
10.5* Employment and Noncompetition Agreement entered into as of
August 13, 1999 between PentaStar Communications, Inc. and
Jeffrey A. Veres.**
10.6 Amended and Restated Principal Stockholder's Escrow and
Contingent Stock Agreement among PentaStar Communications,
Inc., OC Mergerco 1, Inc. and Jeffrey A. Veres.
10.7 Amended and Restated Principal Stockholder's Escrow and
Contingent Stock Agreement among PentaStar Communications,
Inc., OC Mergerco 2, Inc. and Dennis W. Schillinger.
10.8* Lease Agreement between BACE Real Estate, LLC and PentaStar
Communications, Inc.
10.9* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Robert S. Lazzeri and Lock-up Agreement dated
October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.10* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Black Diamond Capital, LLC and Lock-up Agreement
dated October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.11* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Jeffrey A. Veres and Lock-up Agreement dated
October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.12* Lock-up Agreement dated October 8, 1999 among PentaStar
Communications, Inc., Schneider Securities, Inc., BACE
Investments, LLC, Black Diamond Capital, LLC, Robert S.
Lazzeri and Jeffrey A. Veres.
10.13* Business Lease dated April 10, 1996 between Jeffrey and
Linda Veres and DMA Ventures, Inc. (dba Access
Communications) and First Amendment to Lease dated August
13, 1999.
</TABLE>

25
<PAGE> 28

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.14 Escrow Agreement among BACE Investments, LLC, Black Diamond
Capital, LLC, PentaStar Communications, Inc., Schneider
Securities, Inc. and American Securities Transfer & Trust,
Inc.
21.1 Subsidiaries of PentaStar Communications, Inc.
27.1 Financial Data Schedule.
</TABLE>

- ---------------

* Incorporated by reference from the Company's Registration Statement on Form
SB-2 (Registration No. 333-85281).

** Management contract or compensatory plan or arrangement.

(b) The issuer filed the following reports on Form 8-K during the fiscal
quarter ended December 31, 1999:

- Current Report on Form 8-K dated December 9, 1999

26
<PAGE> 29

SIGNATURES

In accordance with Section 13 or 15 (d) of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 30, 2000.

PENTASTAR COMMUNICATIONS, INC.

By: /s/ ROBERT S. LAZZERI
----------------------------------
Robert S. Lazzeri
Director and Chief Executive
Officer

By: /s/ DAVID L. DUNHAM
----------------------------------
David L. Dunham
Chief Financial Officer

In accordance with Section 13 or 15 (d) of the Securities and Exchange Act
of 1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ CRAIG J. ZOELLNER Director March 30, 2000
- -----------------------------------------------------
Craig J. Zoellner

/s/ RICHARD M. TYLER Director March 30, 2000
- -----------------------------------------------------
Richard M. Tyler

/s/ REYNALDO U. ORTIZ Director March 30, 2000
- -----------------------------------------------------
Reynaldo U. Ortiz

/s/ CARLETON A. BROWN Director March 30, 2000
- -----------------------------------------------------
Carleton A. Brown
</TABLE>

27
<PAGE> 30

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PENTASTAR COMMUNICATIONS, INC.
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheet................................ F-3
Consolidated Statement of Operations...................... F-4
Consolidated Statement of Shareholders' Equity............ F-5
Consolidated Statement of Cash Flows...................... F-6
Notes to Consolidated Financial Statements................ F-7

ICM COMMUNICATIONS INTEGRATION, INC.
Report of Independent Public Accountants.................. F-17
Balance Sheets............................................ F-18
Statements of Operations.................................. F-19
Statements of Shareholders' Equity........................ F-20
Statements of Cash Flows.................................. F-21
Notes to Financial Statements............................. F-22

DMA VENTURES, INC., DBA ACCESS COMMUNICATIONS
Report of Independent Public Accountants.................. F-28
Balance Sheets............................................ F-29
Statements of Operations.................................. F-30
Statements of Shareholder's Equity........................ F-31
Statements of Cash Flows.................................. F-32
Notes to Financial Statements............................. F-33
</TABLE>

F-1
<PAGE> 31

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
PentaStar Communications, Inc.:

We have audited the accompanying consolidated balance sheet of PentaStar
Communications, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1999, and the related consolidated statement of operations, shareholders'
equity and cash flows for the period from inception (March 15, 1999) through
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PentaStar Communications,
Inc. and subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for the period from inception (March 15, 1999)
through December 31, 1999 in conformity with accounting principles generally
accepted in the United States.

ARTHUR ANDERSEN LLP

Denver, Colorado,
March 24, 2000.

F-2
<PAGE> 32

PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 8,137
Accounts receivable....................................... 1,092
Prepaid expenses and other................................ 203
Related party note receivable............................. 601
-------
Total current assets.............................. 10,033
Property and equipment, net................................. 555
Deferred income taxes....................................... 323
Other assets................................................ 45
Goodwill, net............................................... 4,459
-------
Total assets...................................... $15,415
=======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 170
Other accrued liabilities................................. 65
Related party acquisition payables........................ 326
Accrued compensation...................................... 541
Deferred revenue.......................................... 393
Deferred income taxes..................................... 97
-------
Total current liabilities......................... 1,592
-------
Commitments and contingencies (Note 5)
Shareholders' equity:
Series A preferred stock, $1,000 stated value; 1,000,000
shares authorized; 86 shares issued and outstanding.... 86
Common stock, $.0001 par value; 20,000,000 shares
authorized; 4,797,842 shares issued and outstanding.... 1
Additional paid-in capital................................ 14,169
Retained deficit.......................................... (433)
-------
Total shareholders' equity........................ 13,823
-------
Total liabilities and shareholders' equity........ $15,415
=======
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of this consolidated balance sheet.

F-3
<PAGE> 33

PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MARCH 15, 1999) THROUGH DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S> <C>
Revenue:
Advanced communications services.......................... $ 622
Basic dial tone services.................................. 72
---------
694
---------
Operating expenses:
Salaries and commissions.................................. 796
Other general and administrative expenses (exclusive of
noncash consulting expense shown below)................ 432
Noncash consulting expense................................ 126
Depreciation and amortization............................. 74
---------
1,428
---------
Loss from operations.............................. (734)
---------
Other (income) expense:
Interest income........................................... (58)
Other expense............................................. 1
---------
Other (income) expense, net....................... (57)
---------
Loss before benefit for income taxes........................ (677)
Benefit for income taxes.................................... 244
---------
Net loss.................................................... $ (433)
=========
Basic and diluted net loss per common share................. $ (0.12)
Weighted-average common shares outstanding.................. 3,507,116
=========
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.

F-4
<PAGE> 34

PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (MARCH 15, 1999) THROUGH DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- ------------------ PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ --------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, March 15, 1999........ -- $-- -- $-- $ -- $ -- $ --
Issuance of common stock for
initial capitalization of
Company....................... -- -- 3,129,997 -- -- -- --
Issuance of common stock for
cash, net of offering costs of
$2,754........................ -- -- 1,297,845 1 10,224 -- 10,225
Issuance of warrants to
underwriter................... -- -- -- -- 489 -- 489
Issuance of options to
consultant.................... -- -- -- -- 126 -- 126
Issuance of common stock for
acquisitions.................. -- -- 370,000 -- 3,330 -- 3,330
Issuance of Series A preferred
stock for retirement of notes
payable....................... 86 86 -- -- -- -- 86
Net loss........................ -- -- -- -- -- (433) (433)
-- --- --------- --- ------- ----- -------
Balances, December 31, 1999..... 86 $86 4,797,842 $ 1 $14,169 $(433) $13,823
== === ========= === ======= ===== =======
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.

F-5
<PAGE> 35

PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MARCH 15, 1999) THROUGH DECEMBER 31, 1999
(IN THOUSANDS)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (433)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization.......................... 74
Issuance of options to consultant...................... 126
Deferred income tax benefit............................ (244)
Changes in operating assets and liabilities --
Accounts receivable, net............................. 533
Prepaid expenses and other........................... (83)
Accounts payable and accrued liabilities............. 38
Deferred revenue..................................... 57
-------
Net cash provided by operating activities......... 68
-------
Cash flows from investing activities:
Purchase of property and equipment........................ (91)
Advances to related parties............................... (9)
Acquisition of Acquired Companies......................... (2,586)
Other..................................................... (45)
-------
Net cash used in investing activities............. (2,731)
-------
Cash flows from financing activities:
Issuance of common stock for cash, net of offering
costs.................................................. 10,714
Proceeds from related party borrowings.................... 86
-------
Net cash provided by financing activities......... 10,800
-------
Net increase in cash and cash equivalents................... 8,137
Cash and cash equivalents, beginning of period.............. --
-------
Cash and cash equivalents, end of period.................... $ 8,137
=======
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.

F-6
<PAGE> 36

PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1. BUSINESS AND ORGANIZATION

PentaStar Communications, Inc., a Delaware corporation ("PentaStar" or the
"Company"), was founded on March 15, 1999, to become a multi-regional company
that designs, sells and facilitates the installation and usage of communications
services for small and medium-size business customers. Prior to October 26,
1999, PentaStar had not conducted any operations, and all of its activities were
related to its formation and the acquisitions and the offering discussed below.
On October 26, 1999 PentaStar, through its wholly-owned subsidiaries, acquired
the outstanding capital stock and other equity interests of DMA Ventures, Inc.,
dba Access Communications ("Access") and ICM Communications Integration, Inc.
("ICM") (together, the "Acquired Companies") (see Note 3) and completed an
initial public offering of its common stock (the "Offering") (see Note 4). The
Company continues to acquire companies to expand its operations (see Note 9).

Upon closing of the acquisitions of the Acquired Companies and the
Offering, PentaStar commenced its business operations as a sales agent for
communications services including local access, long distance, wireless and
internet services for voice and data communications. PentaStar designs, procures
and facilitates the installation and use of communications services to best meet
its customers' specific needs.

Approximately 99% of PentaStar's revenues were generated from the sales of
services for U S WEST Communications, Inc. ("U S WEST"), a regional Bell
operating company. The loss of the relationship with U S WEST or a material
diminishment in the volume of business with U S WEST would adversely affect the
Company. Management believes the Company could become a sales agent for another
provider with comparable terms if it were to lose its relationship with U S
WEST. Subsequent to December 31, 1999 the Company has completed the acquisitions
of other agents (see Note 9) whose revenues are principally generated from
communications service providers other than U S WEST.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and all wholly-owned subsidiaries. All significant intercompany accounts and
transactions were eliminated in consolidation.

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less that are readily convertible into cash
and are not subject to significant risk from fluctuations in interest rates to
be cash equivalents.

Revenue Recognition

The Company generates revenue from its sale of communications services.
Revenues are recognized on the date the respective service is installed. Amounts
collected in advance of the service installation date are recorded as deferred
revenue until the installation occurs. Historically, the Company has experienced
delays in the receipt of payment for certain installed services referred to as
disputed items. The delay in payment for these disputed items has been due to
deficiencies in documentation between the Company and U S WEST and discrepancies
in the amounts believed receivable from U S WEST. As a result of the Company's
continuing relationship with U S WEST, changes have been implemented in the
process of receiving payment for installed services, which have resulted in
receivables being cleared in a more timely manner.

In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition". SAB No. 101
provides interpretive guidance on the recognition,

F-7
<PAGE> 37
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

presentation and disclosure of revenue in financial statements. SAB No. 101 must
be applied to financial statements no later than the second fiscal quarter of
2000. The Company does not believe adoption of SAB No. 101 will have a material
impact on its consolidated financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses. The carrying value
of these financial instruments in the accompanying consolidated balance sheet
approximates their fair value because of their short-term nature.

Concentration of Credit Risk

The Company's financial instruments exposed to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company maintains
their cash in institutions that the Company considers of high credit quality.
The balances, at times, may exceed federally insured limits. Credit risk with
respect to accounts receivable is limited due to the credit worthiness of the
Company's primary customer, U S WEST. Management does not anticipate significant
credit losses from such financial instruments.

Property and Equipment

Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are capitalized and amortized using the straight-line
method over the shorter of the useful lives or the remaining lease term.

Expenditures for repairs and maintenance are expensed as incurred.
Expenditures for major renewals and betterments, which extend the useful lives
of existing equipment, are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized.

Property and equipment consists of the following at December 31, 1999:

<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE IN YEARS
----------------
<S> <C> <C>
Computer and telephone equipment............................ 3-6 $ 295
Office furniture and equipment.............................. 5-10 162
Leasehold improvements...................................... 3-10 116
Vehicles.................................................... 5 14
-----
587
Less: accumulated depreciation.............................. (32)
-----
Property and equipment, net................................. $ 555
=====
</TABLE>

Depreciation expense was $32 for the period from inception (March 15, 1999)
through December 31, 1999.

F-8
<PAGE> 38
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Goodwill

The excess of acquisition cost over fair value of net tangible assets of
businesses acquired has been recorded as goodwill and is being amortized on a
straight-line basis over its estimated life of 20 years. The Company accounts
for goodwill at the lower of amortized cost or net realizable value. As part of
an ongoing review of the valuation and amortization of goodwill, management
addresses the carrying value of the Company's goodwill assets to determine if
changes in facts and circumstances suggest that they may be impaired. If this
review indicates that the goodwill asset will not be recoverable, as determined
by a discounted cash flow analysis over the remaining amortization period, the
carrying value of the Company's goodwill would be reduced to its estimated fair
market value. No event has been identified that would indicate an impairment of
the value of goodwill recorded in the accompanying consolidated balance sheet.
Amortization expense was $42 for the period from inception (March 15, 1999)
through December 31, 1999.

Advertising and Promotion

Advertising and promotional related costs are expensed when incurred or the
first time the advertising appears. The Company did not incur any advertising
costs for the period from inception (March 15, 1999) through December 31, 1999.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation agreements
using the intrinsic value method under which no compensation is generally
recognized for options granted to employees with an exercise price equal to or
greater than the fair market value of the underlying stock. Equity instruments
granted to non-employees are recorded at fair value on the date of grant.

The Company follows the disclosure only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123").

Income Taxes

Deferred tax assets and liabilities are provided for differences between
the financial statement and tax basis of assets and liabilities using current
enacted tax rates. The provision for income taxes includes the amount due for
the current period and the change in deferred taxes between periods. A valuation
allowance is provided for a portion or all of the deferred tax asset when it is
more likely than not that the Company will not be able to realize the benefits
of the deferred tax assets in future years.

Earnings Per Share

The Company applies SFAS No. 128, "Earnings Per Share". SFAS No. 128
provides for the calculation of "Basic" and "Diluted" earnings or net income per
share. Basic net income per share includes no dilution and is computed by
dividing earnings available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted net income per share
reflects the potential dilution of stock options and warrants using the treasury
stock method. As of December 31, 1999, options to purchase 407,950 shares of
common stock and warrants to purchase 125,000 shares of common stock were
outstanding. The options and warrants are excluded from the calculation of
diluted loss per share as they are antidilutive.

Comprehensive Loss

The Company applies SFAS No. 130 "Reporting Comprehensive Income." For the
period from inception (March 15, 1999) through December 31, 1999, comprehensive
loss is the same as the Company's net loss.

F-9
<PAGE> 39
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Segment Information

The Company applies SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." The management approach to segment
reporting required by SFAS No. 131 designates the internal organization that is
used by senior management for making operational decisions and assessing
performance as the source of the Company's reportable segments. The Company
currently operates in one segment: Communications services sales.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The Company is
required to adopt SFAS No. 133 no later than the first fiscal quarter of 2001.
SFAS No. 133 establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments as well as other
hedging activities. To date, the Company has not entered into any derivative
financial instruments or hedging activities. The Company has not determined the
impact of adopting SFAS No. 133.

3. BUSINESS COMBINATIONS

As discussed in Note 1, on October 26, 1999, PentaStar acquired Access and
ICM. Purchase consideration for Access consisted of $189 in cash, 205,000 shares
of the Company's common stock and assumption of liabilities. Purchase
consideration for ICM consisted of $1,619 in cash, 165,000 shares of the
Company's common stock and assumption of liabilities. In connection with the
acquisition of ICM, $500 of cash was placed in escrow for application against
indemnification obligations.

Included in the accompanying consolidated balance sheet at December 31,
1999, is approximately $326 to be distributed to the prior shareholders of the
Acquired Companies for post closing working capital adjustments.

The sole shareholder of Access and the principal shareholder of ICM each
entered into escrow and contingent stock agreements with PentaStar on closing of
the acquisitions. These agreements adjust the final consideration paid to those
shareholders in return for their interest in Access and ICM. Under these
agreements, shares of PentaStar common stock were placed into escrow. Based upon
the earnings performance of an acquired company relative to that of all other
acquired companies for the 12-month period prior to the earlier of a sale of
substantially all of the assets or stock of PentaStar or five years, the
shareholder associated with that company will receive back from escrow all, some
or none of the shares placed in escrow. In addition, based again upon the
relative earnings performance of the acquired company, that shareholder may
receive additional shares of common stock from PentaStar. The agreements are
designed, however, so that there will be no net change to the total number of
shares of PentaStar common stock outstanding after the combined adjustments are
made for all of the acquired companies.

The acquisitions of the Acquired Companies were recorded using the purchase
method of accounting by which the purchase consideration was allocated to the
identifiable assets and liabilities of the Acquired Companies and the excess of
the purchase consideration over the fair value of the net assets acquired was
recorded as goodwill. The operating results of the Acquired Companies have been
included in the accompanying consolidated financial statements since the date of
acquisition.

F-10
<PAGE> 40
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The allocation of the purchase price of the Acquired Companies was as
follows:

<TABLE>
<CAPTION>
ACCESS ICM TOTAL
------ ------ -------
<S> <C> <C> <C>
Purchase Consideration:
Cash...................................................... $ 189 $1,619 $ 1,808
PentaStar common stock.................................... 1,845 1,485 3,330
Acquisition costs......................................... 52 22 74
------ ------ -------
$2,086 $3,126 $ 5,212
====== ====== =======
</TABLE>

Of the total purchase price of $5,212, $496 was allocated to property and
equipment, $215 to net working capital and $4,501 to goodwill. The purchase
price allocation is preliminary and may change upon final determination of the
fair market value of the assets acquired, principally the receivables disputed
with U S WEST.

The following unaudited pro forma condensed consolidated financial
information presents the consolidated results of operations of the Company as if
the acquisition of the Acquired Companies occurred at the beginning of the
respective periods. The unaudited pro forma financial data does not purport to
represent what PentaStar's combined results of operations would actually have
been if such transactions in fact had occurred on those dates and are not
necessarily representative of PentaStar's combined results of operations for any
future period. Since the Acquired Companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. Costs and expenses associated with the corporate office
and management of PentaStar are included in the 1999 net loss.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------
1999 1998
------- -------
(UNAUDITED)
<S> <C> <C>
Revenue..................................................... $5,507 $6,657
Net income (loss) from continuing operations................ (622) 567
Net income (loss) from continuing operations per
share -- basic and diluted................................ $(0.13) $ 0.12
</TABLE>

4. SHAREHOLDERS' EQUITY

Preferred Stock

The Board of Directors has the authority, without further action by the
shareholders, to issue up to 1,000,000 shares of preferred stock, in one or more
series and to determine dividends and other rights and preferences for the
preferred stock.

The Company issued Series A preferred stock to BACE Investments, LLC on
October 25, 1999 as payment in full of the principal amount of notes payable
issued by BACE Investments, LLC to the Company for financing of the Company's
operations prior to the Offering.

The Series A preferred stock has a stated value of $1,000 per share and
bears dividends on the stated value at a rate of 5% per annum, payable annually.
In the event of dissolution, liquidation or winding up of the Company, the
Series A preferred stock has a preference to the holders of the common stock in
an amount equal to the stated value, plus the unpaid dividends, whether or not
declared, thereon. The Series A preferred stock has no voting rights, redemption
or conversion features and rates junior to any other preferred stock.

F-11
<PAGE> 41
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Common Stock

In connection with the organization and initial capitalization of
PentaStar, the Company issued 3,129,997 shares of common stock at $.0001 par
value which gives retroactive effect to a 3,417.96 for 1 stock split during
1999.

On October 26, 1999, the Company successfully completed the Offering. The
Offering resulted in the sale of 1,297,845 shares of the common stock (includes
underwriters over-allotment purchase of an additional 47,845 shares), resulting
in proceeds of $10,714, net of cash offering costs of $2,265. These proceeds
were used to finance the cash consideration and payment of certain assumed
liabilities of the acquisitions of the Acquired Companies and will be used to
make other complementary acquisitions or investments and for working capital,
systems investment and other general corporate purposes.

Upon completion of the Offering, the Company sold to the representative of
the underwriters for a nominal cost, warrants to purchase 125,000 shares of
common stock. These warrants will become exercisable one year after the
effective date of the Offering at a per share exercise price of 120% of the
initial public offering price and will expire five years from the effective date
of the Offering. The common stock issuable on exercise of the warrants is
subject to certain adjustments to protect the holder from dilution. Upon
completion of the Offering, the Company issued options to purchase 20,000 shares
to a consultant for executive placement services. The options were immediately
vested and are exercisable at the initial public offering price. The options
expire in 10 years. The fair value of the warrants and options issued was $489
and $126 respectively, as determined by the Black-Scholes pricing model. The
assumptions used in the model were as follows:

<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.6%
Expected years until exercise............................... 5 and 10
Expected stock volatility................................... 42%
Dividend yield.............................................. 0.0%
</TABLE>

The Company issued 370,000 shares of its common stock to shareholders of
the Acquired Companies as partial consideration in the acquisition of the
Acquired Companies (see Note 3).

The Company adopted its stock option plan on August 13, 1999. The Company
has reserved 1,000,000 shares of its common stock for issuance pursuant to the
exercise of options granted under the Company's stock option plan (see Note 6).

5. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases various office facilities from certain shareholders and
other office facilities from unrelated parties under long-term leases. The
Company subleases a portion of one of its leases to an unrelated party.
Generally, the Company is required to pay executory costs such as property
taxes, maintenance and insurance.

F-12
<PAGE> 42
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1999, future minimum lease payments required under
operating leases are as follows:

<TABLE>
<CAPTION>
NET
MINIMUM TOTAL OBLIGATION
GROSS SUBLEASE NET TO RELATED
OBLIGATION COMMITMENTS OBLIGATION PARTIES
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Years Ending December 31 --
2000...................................... $307 $ 51 $256 $ 72
2001...................................... 262 51 211 72
2002...................................... 181 38 143 24
2003...................................... -- -- -- --
2004...................................... -- -- -- --
Thereafter................................ -- -- -- --
---- ---- ---- ----
$750 $140 $610 $168
==== ==== ==== ====
</TABLE>

Total facilities rent expense, net of sublease payments, was $52 for the
period from inception (March 15, 1999) through December 31, 1999, of which, $18
represents rent expense for the related party leases.

Employment Agreements

The Company has entered into employment agreements with a key executive of
Access and a key executive of ICM. These employment agreements generally
prohibit such individuals from disclosing confidential information and trade
secrets and restrict such individuals from competing with the Company for a
period of one to two years following termination of employment. The initial term
of these employment agreements is the earlier of a change in control of the
Company as defined in those agreements or five years.

Litigation

The Company is involved in litigation arising in the ordinary course of
business. It is the opinion of management that the outcome of such litigation
will not have a material effect on the Company's results of operations or
financial position.

6. STOCK OPTIONS

On August 13, 1999, the Board of Directors adopted the PentaStar
Communications, Inc. Stock Option Plan (the "Stock Option Plan") for the purpose
of attracting and retaining certain key employees of the Company. The Stock
Option Plan will terminate on the tenth anniversary of the date of its adoption,
unless earlier terminated by the Board of Directors pursuant to the terms of the
Stock Option Plan. The Stock Option Plan is administered by the Incentive Plan
Committee which is comprised of members of the Board of Directors. The Stock
Option Plan provides that an aggregate of 1,000,000 of the Company's authorized
shares be reserved for future grants under the Stock Option Plan. The exercise
price of incentive stock options granted pursuant to the Stock Option Plan
cannot be less than 100% of the fair market value of the common stock on the
date of the grant and the term of these options cannot exceed ten years.

F-13
<PAGE> 43
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Stock Option Plan activity for the period from inception (March 15,
1999) through December 31, 1999 is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------- --------
<S> <C> <C>
Options outstanding, beginning of period.................... -- $ --
Granted..................................................... 407,950 10.22
Exercised................................................... -- --
------- ------
Options outstanding, end of period.......................... 407,950 $10.22
======= ======
</TABLE>

Exercise prices for employee awards outstanding as of December 31, 1999 are
as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------ RANGE OF OPTIONS EXERCISABLE
REMAINING LIFE EXERCISE -------------------
NUMBER (IN YEARS) PRICE NUMBER PRICE
- ------- -------------- ------------- -------- --------
<S> <C> <C> <C> <C>
382,950 9.82 $ 10.00 93,750 $10.00
25,000 9.92 $ 13.63 -- --
- ------- ------
407,950 9.83 $10.00-$13.63 93,750 $10.00
======= ======
</TABLE>

Pro forma disclosure information regarding net income per share is required
by SFAS No. 123 and has been determined as if the Company had accounted for its
stock-based compensation using the fair value method prescribed by that
statement. Since the options granted during 1999 had exercise prices which were
greater than or equal to the fair value of the common stock on the date of
grant, no compensation expense was recognized in the statement of operations for
the period from March 15, 1999 through December 31, 1999. The following table
reflects the pro forma net loss had the Company elected to adopt the fair value
method prescribed by SFAS No. 123:

<TABLE>
<S> <C>
Net loss:
As reported................................... $ (433)
Pro forma..................................... $ (812)
Earnings per share:
As reported basic and diluted................. $(0.12)
Pro forma basic and diluted................... $(0.23)
</TABLE>

These pro forma amounts may not be representative of future disclosures
since the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be granted in future years.

The weighted-average fair value of options granted during 1999 was $3.46
per share. The estimated fair value of each option granted is calculated using
the Black-Scholes option-pricing model. The weighted-average assumptions used in
the model were as follows:

<TABLE>
<S> <C>
Risk-free interest rate................................ 5.6%
Expected years until exercise.......................... 4
Expected stock volatility.............................. 42%
Dividend yield......................................... 0.0%
</TABLE>

F-14
<PAGE> 44
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED-PARTY TRANSACTIONS

The Company leases its corporate office facilities from BACE Real Estate,
LLC pursuant to a 36-month term agreement for $3 per month. BACE Real Estate,
LLC is an affiliate of BACE Investments, LLC, which is the largest shareholder
of the Company.

The Company is a party to a consulting agreement with BIBD, LLC, a venture
between BACE Industries, LLC (an affiliate of BACE Investments, LLC) and Black
Diamond Capital, LLC (a significant shareholder of the Company). Under the
agreement, BIBD assists in identifying potential acquisition candidates and
other financial consulting. The agreement commenced on September 1, 1999 and
provides for payment of a monthly fee that varies depending on the Company's
annualized revenues and reimbursement of defined expenses. The Company made
payments to BIBD, LLC of $67 during the period from inception (March 15, 1999)
through December 31, 1999.

The Company leases certain operating company office facilities from the
previous sole shareholder of Access for $3 per month. This lease expires on
December 31, 2001.

In connection with the acquisition of ICM, the Company acquired a note
receivable from Network Communications, Inc. ("NCI"). NCI is owned by certain of
the previous shareholders of ICM, who, upon the Company's acquisition of ICM,
became shareholders of the Company. At December 31, 1999, NCI owed the Company
$601 under the terms of the note receivable for cash advances, commissions
payable to ICM and shared expenses. Subsequent to December 31, 1999, the Company
acquired the assets of NCI pursuant to an Asset Purchase Agreement for cash and
forgiveness of the outstanding balance of the note receivable (see Note 9).

8. INCOME TAXES

The benefit for income taxes consists of the following for the period from
inception (March 15, 1999) through December 31, 1999:

<TABLE>
<S> <C>
Deferred benefit:
Federal................................................... $211
State..................................................... 33
----
Total............................................. $244
====
</TABLE>

A reconciliation of the statutory income tax rate to the benefit for income
taxes is as follows:

<TABLE>
<S> <C>
Federal income tax at statutory rate........................ 34.0%
State income taxes, net of federal tax effect............... 3.3
Goodwill amortization and other............................. (1.2)
----
Total benefit..................................... 36.1%
====
</TABLE>

Deferred income taxes result from differences in the tax basis of assets
and liabilities and their carrying amounts for financial reporting purposes. The
current net deferred tax liability results from the Company's conversion from
the cash basis method to the accrual basis method for income tax reporting. The
noncurrent deferred tax assets and (liabilities), result principally from the
following:

<TABLE>
<S> <C>
Cash to accrual conversion.................................. $(71)
Property basis.............................................. (35)
Net operating losses........................................ 382
Other....................................................... 47
----
Net deferred tax asset............................ $323
====
</TABLE>

In connection with the acquisition of Access, the Company acquired
operating loss carryforwards for federal income tax purposes of approximately
$585, expiring in various years from 2013 to 2018. During 1999,

F-15
<PAGE> 45
PENTASTAR COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company generated approximately $438 of additional operating loss
carryforward which will expire in 2019.

9. SUBSEQUENT EVENTS

On February 18, 2000, the Company, through a wholly-owned subsidiary,
completed the acquisition of the assets of USTeleCenters, Inc. and Vermont
Network Services Corporation (collectively referred to as "UST"). UST, founded
in 1986 and headquartered in Boston, Massachusetts, is a full-service
communications agent focusing on small business customers located throughout
Bell Atlantic's 13 state Northeast and Mid-Atlantic region. UST has agency
agreements with service providers including Bell Atlantic, Bell South,
Southwestern Bell and Sprint. Approximately 75% and 71% of UST's revenues were
from commissions paid from Bell Atlantic in 1999 and 1998, respectively. The
purchase price consideration consisted of $182 in cash paid at closing, the
issuance of 5,980 shares of the Company's common stock and the assumption of
approximately $2,500 of liabilities. The Company also assumed the on-going
obligations under various agreements relating to the acquired assets.

On February 18, 2000, the Company signed a definitive agreement to acquire
the assets of Eastern Telecom, Inc. ("ETI"). ETI, founded in 1992, is a
full-service communications agent based in Warwick, Rhode Island primarily
servicing customers in Boston, New York, Albany, Providence and Warwick. ETI is
an authorized agent for Bell Atlantic and Bell South. The acquisition of the
assets of ETI is contingent upon receipt of the approval of the shareholders of
VSI Enterprises, Inc., which is the parent company of ETI. Terms of the
definitive agreement provide for a purchase price for the assets to consist of
approximately $2,100 in cash, the issuance of the Company's common stock with a
fair market value of $950 and the assumption of certain liabilities at closing.
In addition, there is a potential earnout payment based upon the combined
earnings of ETI and UST for the year ending December 31, 2000.

On February 22, 2000, the Company, through a wholly-owned subsidiary,
completed the acquisition of NCI. NCI is primarily a long distance
communications services agent located in Seattle, Washington. NCI has carrier
agreements with Qwest, AT&T and GST Telecom. NCI is owned by certain of the
previous shareholders of ICM, who, upon the Company's acquisition of ICM, became
shareholders of the Company. The purchase price paid for the assets consisted of
cash of $10 and the cancellation of a $601,000 note receivable from NCI to the
Company.

On March 17, 2000, the Company completed the acquisition of the assets of
ParTel Communications, Inc. ("ParTel"). ParTel, founded in 1982, is a
full-service communications agent based in Phoenix, Arizona, primarily servicing
customers in the Phoenix and Tucson metropolitan markets. ParTel is an agent of
U S WEST and sells primarily high-end, data oriented products. Historically, all
of ParTel's revenues have been generated from commissions paid by U S WEST. The
purchase price consideration consisted of $519 in cash paid at closing and the
issuance of 30,310 shares of the Company's common stock. At the time the
acquisition of ParTel was consummated, the Company loaned $500 (interest at the
prime rate plus 1%) to a corporation controlled by the former shareholders of
ParTel. The loan will be due not later than December 31, 2001, and is personally
guaranteed by the former shareholders. In addition, there is a potential earnout
payment based upon the adjusted earnings of ParTel for the year ending December
31, 2000.

F-16
<PAGE> 46

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
ICM Communications Integration, Inc.:

We have audited the accompanying balance sheets of ICM Communications
Integration, Inc. (a Washington corporation) as of October 25, 1999 and December
31, 1998, and the related statements of operations, shareholders' equity and
cash flows for the period from January 1, 1999 to October 25, 1999, and for the
year ended December 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ICM Communications
Integration, Inc. as of October 25, 1999 and December 31, 1998, and the results
of its operations and its cash flows for the period from January 1, 1999 to
October 25, 1999, and for the year ended December 31, 1998 in conformity with
accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Denver, Colorado,
January 19, 2000.

F-17
<PAGE> 47

ICM COMMUNICATIONS INTEGRATION, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 2 $ 138
Accounts receivable, net.................................. 1,306 1,229
Related party receivable.................................. -- 27
Prepaid expenses and other................................ 100 79
------ ------
Total current assets.............................. 1,408 1,473
Related party note receivable............................... 568 281
Property and equipment, net................................. 150 178
------ ------
Total assets...................................... $2,126 $1,932
====== ======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses..................... $ 324 $ 101
Compensation related accruals............................. 561 465
Deferred revenue.......................................... 260 159
Shareholder note payable.................................. 29 31
Line of credit............................................ 151 4
Income taxes payable...................................... 37 37
Deferred income taxes..................................... 146 302
------ ------
Total current liabilities......................... 1,508 1,099
------ ------
Deferred income taxes....................................... 19 --
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 1,000,000 shares authorized;
514,000 shares issued and outstanding.................. -- --
Retained earnings......................................... 599 833
------ ------
Total shareholders' equity........................ 599 833
------ ------
Total liabilities and shareholders' equity........ $2,126 $1,932
====== ======
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-18
<PAGE> 48

ICM COMMUNICATIONS INTEGRATION, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
---------------- ------------
<S> <C> <C>
Revenues:
Advanced communications services.......................... $2,718 $3,681
Basic dial tone services.................................. 527 594
------ ------
3,245 4,275
------ ------
Costs and expenses:
Salaries and commissions.................................. 2,322 2,746
Other general and administrative expenses................. 1,285 952
------ ------
3,607 3,698
------ ------
Income (loss) from operations..................... (362) 577
------ ------
Other (income) expense:
Interest income........................................... (1) (9)
Interest expense.......................................... 10 1
------ ------
Other (income) expense, net....................... 9 (8)
------ ------
Income (loss) before provision for income taxes............. (371) 585
Provision (benefit) for income taxes........................ (137) 200
------ ------
Net income (loss)........................................... $ (234) $ 385
====== ======
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-19
<PAGE> 49

ICM COMMUNICATIONS INTEGRATION, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balances, December 31, 1997............................ 520 $ 10 $ 476 $ 486
Retirement of repurchased shares..................... (6) (10) (28) (38)
Net income........................................... -- -- 385 385
--- ---- ----- -----
Balances, December 31, 1998............................ 514 -- 833 833
Net loss............................................. -- -- (234) (234)
--- ---- ----- -----
Balances, October 25, 1999............................. 514 $ -- $ 599 $ 599
=== ==== ===== =====
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-20
<PAGE> 50

ICM COMMUNICATIONS INTEGRATION, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(234) $ 385
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Deferred income tax benefit............................ (137) (47)
Depreciation........................................... 38 37
Gain on disposition of assets.......................... (7) --
Provision for uncollectible accounts................... 116 141
Changes in operating assets and liabilities --
Accounts receivable, net............................. (166) (621)
Prepaid expenses and other........................... (21) (28)
Accounts payable and accrued expenses................ 319 154
Income taxes payable................................. -- 160
Deferred revenue..................................... 101 110
----- -----
Net cash provided by operating activities......... 9 291
----- -----
Cash flows from investing activities:
Purchase of property and equipment........................ (11) (96)
Advances to related parties............................... (287) (225)
Proceeds from disposition of assets....................... 8 --
----- -----
Net cash used in investing activities............. (290) (321)
----- -----
Cash flows from financing activities:
Net change in line of credit.............................. 147 4
Treasury stock repurchase................................. (2) (7)
Payments on capital lease obligations..................... -- (10)
----- -----
Net cash provided by (used in) financing
activities...................................... 145 (13)
----- -----
Net decrease in cash and cash equivalents................... (136) (43)
Cash and cash equivalents, beginning of period.............. 138 181
----- -----
Cash and cash equivalents, end of period.................... $ 2 $ 138
===== =====
Supplemental schedule of noncash investing and financing
activities:
Acquisition of treasury stock for note payable............ $ -- $ 38
===== =====
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 10 $ 1
===== =====
Cash paid for taxes....................................... $ -- $ 88
===== =====
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-21
<PAGE> 51

ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
1. BUSINESS AND ORGANIZATION

The financial statements reflect the historical cost of assets and
liabilities and results of operations of ICM Communications Integration, Inc., a
Washington corporation (the "Company"), incorporated on January 3, 1995. On
October 26, 1999, PentaStar Communications, Inc. ("PentaStar"), through a wholly
owned subsidiary, closed an Agreement and Plan of Merger, pursuant to which the
Company was merged into PentaStar.

Dependence Upon U S WEST

The Company acts as a sales agent for and generated substantially all of
its revenues from U S WEST Communications, Inc. ("U S WEST"), a regional Bell
operating company. The loss of the relationship with U S WEST or a material
diminishment in the volume of business with U S WEST would adversely affect the
Company. Management believes the Company could become a sales agent for another
provider with comparable terms if it were to lose its relationship with U S
WEST.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Expenditures for repairs and maintenance are expensed as incurred. Expenditures
for major renewals and betterments, which extend the useful lives of existing
equipment, are capitalized and depreciated. Upon retirement or disposition of
property and equipment, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is recognized in the
statements of operations. Property and equipment consists of the following:

<TABLE>
<CAPTION>
ESTIMATED USEFUL OCTOBER 25, DECEMBER 31,
LIFE IN YEARS 1999 1998
---------------- ----------- ------------
<S> <C> <C> <C>
Computer and telephone equipment.............. 3-5 $177 $191
Office furniture and fixtures................. 7 63 40
---- ----
240 231
Less: accumulated depreciation................ (90) (53)
---- ----
Property and equipment, net......... $150 $178
==== ====
</TABLE>

Depreciation expense was approximately $38 and $37 for the period from
January 1, 1999 to October 25, 1999, and for the year ended December 31, 1998,
respectively.

Revenue Recognition

Revenue and the related commissions expense are recognized in the month
when services are installed by U S WEST. Deferred revenue in the accompanying
balance sheets represents cash collected from U S WEST on uninstalled services.

Beginning in 1998, the Company received advanced communication service
commissions from a related entity for telecommunication agency services not
related to U S WEST. The revenue approximated $83 and

F-22
<PAGE> 52
ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$32 for the period from January 1, 1999 to October 25, 1999, and for the year
ended December 31, 1998, respectively.

The Company has not received payment for certain installed services of $865
and $1,018 at October 25, 1999 and December 31, 1998, respectively. The delay in
payment for these disputed items has been due to deficiencies in documentation
between the Company and U S WEST and discrepancies in the amounts believed
receivable from U S WEST. An allowance of $238 and $240 at October 25, 1999 and
December 31, 1998, respectively, has been established for these disputed
receivables.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant estimates
which could change in the near future include the allowance provided for
disputed receivables.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents,
investments, accounts receivable, accounts payable and borrowings. The carrying
value of these financial instruments on the accompanying balance sheets
approximates their fair value because of their short-term nature.

Concentration of Credit Risk

The Company's financial instruments exposed to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company maintains
their cash in institutions, which the Company considers of high credit quality.
The balances, at times, may exceed federally insured limits. Credit risk with
respect to accounts receivable is limited due to the credit worthiness of the
Company's major customer, U S WEST. Management does not anticipate significant
credit losses from such financial instruments.

Asset Impairment

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Long-lived assets, which are held and used in operations would
be impaired if the undiscounted future cash flows related to the asset did not
exceed the net book value. If an asset is determined to be impaired, it is
written down to its fair value.

Advertising and Promotion

Advertising and promotional related expenses are charged to operations when
incurred or the first time the advertising occurs. Advertising expense totaled
$18 and $30 for the period from January 1, 1999 to October 25, 1999 and for the
year ended December 31, 1998, respectively.

Income Taxes

A valuation allowance is provided for a portion or all of the deferred tax
asset when it is more likely than not that the Company will not be able to
realize the benefits of the deferred tax assets in future years.

F-23
<PAGE> 53
ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
The Company is required to adopt SFAS No. 133 no later than the first fiscal
quarter of 2001. SFAS No. 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. To date, the Company has not entered into any
derivative financial instruments or hedging activities. The Company has not
determined the impact of adopting SFAS No. 133.

3. BORROWINGS

Line of Credit

In June 1997, the Company established a line of credit with SeaFirst Bank,
which permits the Company to borrow up to $50 at a rate equal to the prime rate
plus 3% (11.25% and 10.75% at October 25, 1999, and December 31, 1998,
respectively). The line of credit expires on November 5, 1999. A related party,
who is a shareholder and director, guarantees borrowings under the agreement.
The credit line was increased to $150 in April of 1999 and three additional
shareholders and directors became guarantors. The Company had outstanding
balances under this line of credit of $151 and $4 at October 25, 1999, and
December 31, 1998, respectively. Subsequent to October 25, 1999, in connection
with the acquisition of the Company by PentaStar, the line of credit was paid in
full.

4. OPERATING LEASES

The Company leases three office facilities in Bellevue, Washington and
Portland, Oregon. The Company sublet a portion of one of the Bellevue,
Washington leases to a related party through August 1999 and began subletting to
an unrelated party in September 1999. The Company is required to pay executory
costs such as property taxes, maintenance and insurance under its operating
leases.

As of October 25, 1999, future minimum lease payments required under
operating leases, net of sublease payments, are as follows:

<TABLE>
<CAPTION>
MINIMUM
GROSS SUBLEASE NET
OBLIGATION COMMITMENTS OBLIGATION
---------- ----------- ----------
<S> <C> <C> <C>
Period from October 26, 1999 to December 31, 1999... $ 34 $ 8 $ 26
Years ended December 31 --
2000.............................................. 208 51 157
2001.............................................. 190 51 139
2002.............................................. 157 38 119
---- ---- ----
$589 $148 $441
==== ==== ====
</TABLE>

Rent expense, net of sublease payments, charged to operations totaled
approximately $129 and $106 for the period from January 1, 1999 to October 25,
1999 and for the year ended December 31, 1998, respectively. Sublease charges to
the related party were $33 and $16 for the period from January 1, 1999 to
October 25, 1999 and for the year ended December 31, 1998, respectively.

F-24
<PAGE> 54
ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The (benefit) provision for income taxes consists of the following:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Current (benefit) provision:
Federal................................................... $ -- $213
State..................................................... -- 34
----- ----
Total current..................................... -- 247
----- ----
Deferred (benefit) provision:
Federal................................................... (119) (41)
State..................................................... (18) (6)
----- ----
Total deferred.................................... (137) (47)
----- ----
(Benefit) provision for income taxes...................... $(137) $200
===== ====
</TABLE>

A reconciliation of the statutory income tax rate to the provision for
income taxes is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Federal income tax at statutory rate........................ 34.0% 34.0%
State income taxes, net of federal tax effect............... 3.3 3.3
Other....................................................... (0.4) (3.1)
---- ----
Total provision................................... 36.9% 34.2%
==== ====
</TABLE>

The tax effects of temporary differences, representing deferred tax assets
and liabilities, result principally from the following:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Current deferred tax assets (liabilities):
Accounts receivable, prepaids and other................... $(644) $(595)
Deferred revenue.......................................... 97 59
Payables and accruals..................................... 343 144
Allowance for disputed receivables........................ 58 90
----- -----
Net current deferred tax liability................ $(146) $(302)
===== =====
Deferred tax liability:
Property basis............................................ $ (19) $ --
</TABLE>

6. RETIREMENT SAVING PLAN

The Company adopted an IRA plan in October 1997. Under the plan, qualified
employees may elect to defer up to $6 of their calendar year compensation. The
plan provides for contributions by the Company to match the first 3% of the
qualified compensation. The Company may match less than 3%, but not below 1%, in
no more than two out of the past five years. Alternatively, the Company may
contribute 2% of compensation to all eligible employees, whether or not they
participate in the plan. The Company's contributions were $24 for both the
period from January 1, 1999 to October 25, 1999, and the year ended December 31,
1998.

F-25
<PAGE> 55
ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED-PARTY TRANSACTIONS

Noncurrent Receivable

The Company has a note receivable from a related entity. The related entity
and the Company have some common shareholders. The receivable consists of cash
advances, commissions receivable from sales made on behalf of the related entity
and shared expenses. Management believes that the amount is fully collectible
and repayments will begin in the year 2000. The balance was approximately $568
and $281 at October 25, 1999 and December 31, 1998, respectively.

Amounts charged to the related entity for the shared expenses, commissions
earned from the sales made on behalf of the related entity and cash advances to
the related entity were as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Commission earned........................................... $83 $ 32
Salaries and bonuses........................................ 67 53
Other expenses.............................................. 41 63
Cash advances............................................... 96 102
</TABLE>

Current Receivables

The Company had a note receivable from one of its shareholders. Interest
accrued at 12% per annum and the monthly principal and interest payments were
$1. The note was paid in July 1999.

The Company had a $25 non-interest bearing receivable from a related entity
outstanding at December 31, 1998. The advance was repaid in July 1999.

Shareholder Notes Payable

In November of 1998, the Company repurchased six shares of no-par stock
from a shareholder for $38. Consideration for the repurchase was a note payable
with monthly payments of $3, maturing in October of 1999. Interest accrued at a
rate of 6% per annum.

Sublease Income

From October 1998 through August 1999, the Company sublet space to a
related entity. The terms of the sublease mirrored the terms of the master
lease. The related entity was responsible for all lease payments and related
property expenses.

Guarantees

In June 1997, a shareholder and director guaranteed the Company's line of
credit from SeaFirst Bank. Subsequent to December 31, 1998, the loan was
amended, to include among other things, additional shareholders and directors as
guarantors.

8. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in litigation arising in the ordinary course of
business. It is the opinion of management that the outcome of this litigation
will not have a material effect on the financial position of the Company.

F-26
<PAGE> 56
ICM COMMUNICATIONS INTEGRATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. SUBSEQUENT EVENT

On October 26, 1999, the Company was merged into PentaStar. The purchase
consideration consisted of approximately $1,619 in cash, 165,000 shares of
PentaStar common stock and assumption of liabilities. Additional shares of
PentaStar common stock may be issued to one of the shareholders based upon the
relative earnings performance of the Company to that of other acquired companies
of PentaStar.

In determining the cash portion of the consideration, the purchase
agreement distinguishes, by definition, the liabilities of the Company at
October 25, 1999, between retained and non-retained liabilities. Non-retained
liabilities represent pre-acquisition liabilities deducted from the cash
consideration otherwise payable to the shareholders and consist of the following
at October 25, 1999:

<TABLE>
<S> <C>
Accounts payable and accrued expenses....................... $294
Income taxes payable........................................ 37
Shareholder note payable.................................... 29
Line of credit.............................................. 151
Related-party note payable.................................. 25
----
$536
====
</TABLE>

F-27
<PAGE> 57

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
DMA Ventures, Inc., dba Access Communications:

We have audited the accompanying balance sheets of DMA Ventures, Inc. dba
Access Communications (a Colorado corporation) as of October 25, 1999 and
December 31, 1998, and the related statements of operations, shareholder's
equity and cash flows for the period from January 1, 1999 to October 25, 1999
and for the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DMA Ventures, Inc. as of
October 25, 1999 and December 31, 1998, and the results of its operations and
its cash flows for the period from January 1, 1999 to October 25, 1999 and for
the year ended December 31, 1998 in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Denver, Colorado,
February 2, 2000.

F-28
<PAGE> 58

DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 1 $ 83
Accounts receivable, net.................................. 319 179
Prepaid expenses and other................................ 20 46
Deferred income taxes..................................... 163 149
Net current assets of discontinued operations............. -- 60
---- ----
Total current assets.............................. 503 517
---- ----
Property and equipment, net................................. 346 399
---- ----
Total assets...................................... $849 $916
==== ====

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Related party borrowings.................................. $ 4 $ 5
Current maturities of long-term borrowings................ 76 72
Current maturities of capital leases...................... 45 63
Line of credit............................................ 202 --
Accounts payable.......................................... 40 71
Accrued expenses.......................................... 182 161
Income taxes payable...................................... -- 82
Deferred revenue.......................................... 76 114
---- ----
Total current liabilities......................... 625 568
---- ----
Long-term borrowings........................................ 87 185
Capital lease obligations................................... 9 18
Deferred income taxes....................................... 16 --
Commitments and contingencies
Shareholder's equity:
Common stock, no par value; 25,000,000 shares authorized;
10,000,000 shares issued and outstanding............... 114 1
Preferred stock, no par value; 10,000,000 shares
authorized; no shares issued and outstanding........... -- --
Retained (deficit) earnings............................... (2) 144
---- ----
Total shareholder's equity........................ 112 145
---- ----
Total liabilities and shareholder's equity........ $849 $916
==== ====
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-29
<PAGE> 59

DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Advanced communications services.......................... $1,457 $2,038
Basic dial tone services.................................. 111 344
------ ------
1,568 2,382
------ ------
Costs and expenses:
Salaries and commissions.................................. 1,138 1,201
Other general and administrative expenses................. 479 577
------ ------
1,617 1,778
------ ------
Income (loss) from operations..................... (49) 604
------ ------
Other (income) expense:
Interest income........................................... -- (3)
Interest expense.......................................... 37 52
Other expense............................................. 27 --
------ ------
Other (income) expense, net....................... 64 49
------ ------
Income (loss) from continuing operations before provision
for income taxes.......................................... (113) 555
Provision (benefit) for income taxes........................ (41) 212
------ ------
Net income (loss) from continuing operations................ (72) 343
Loss from discontinued operations (less applicable income
tax benefit of $42 and $219, respectively)................ (74) (370)
------ ------
Net loss.......................................... $ (146) $ (27)
====== ======
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-30
<PAGE> 60

DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK RETAINED TOTAL
-------------------- ---------------- EARNINGS SHAREHOLDER'S
SHARES AMOUNT SHARES AMOUNT (DEFICIT) EQUITY
---------- ------ ------ ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997..... 10,000,000 $ 1 -- $ -- $ 239 $ 240
Distributions to
shareholder................ -- -- -- -- (68) (68)
Net loss...................... -- -- -- -- (27) (27)
---------- ---- ---- ---- ----- -----
Balances, December 31, 1998..... 10,000,000 1 -- -- 144 145
Contribution from
shareholder................ -- 113 -- -- -- 113
Net loss...................... -- -- -- -- (146) (146)
---------- ---- ---- ---- ----- -----
Balances, October 25, 1999...... 10,000,000 $114 -- $ -- $ (2) $ 112
========== ==== ==== ==== ===== =====
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-31
<PAGE> 61

DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(146) $ (27)
Adjustments to reconcile net loss to net cash used in
operating activities --
Deferred income tax provision.......................... 2 203
Depreciation........................................... 62 79
Provision for uncollectible accounts................... 27 10
Changes in operating assets and liabilities --
Accounts receivable, net............................. (167) (65)
Prepaid expenses and other........................... 26 (17)
Payables and accrued expenses........................ (92) (340)
Deferred revenue..................................... (38) 19
Discontinued operations.............................. 60 (86)
----- -----
Net cash used in operating activities............. (266) (224)
----- -----
Cash flows from investing activities:
Purchase of property and equipment........................ (35) (13)
Proceeds from sale of property and equipment.............. 26 --
----- -----
Net cash used in investing activities............. (9) (13)
----- -----
Cash flows from financing activities:
Increase in line of credit................................ 202 --
Principal payments on related-party borrowings............ (1) (67)
Principal payments on long-term borrowings................ (94) (49)
Payments on capital lease................................. (27) (87)
Distributions to shareholder.............................. -- (68)
Capital contribution...................................... 113 --
----- -----
Net cash provided by (used in) financing
activities...................................... 193 (271)
----- -----
Net decrease in cash and cash equivalents................... (82) (508)
Cash and cash equivalents, beginning of period.............. 83 591
----- -----
Cash and cash equivalents, end of period.................... $ 1 $ 83
===== =====
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ 37 $ 67
===== =====
Cash paid for taxes....................................... $ -- $ 12
===== =====
</TABLE>

The accompanying notes to financial statements
are an integral part of these statements.

F-32
<PAGE> 62

DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

1. BUSINESS AND ORGANIZATION

The financial statements reflect the historical cost of assets and
liabilities and results of operations of DMA Ventures, Inc. dba Access
Communications, a Colorado corporation (the "Company") incorporated on August
10, 1993. Prior to May 1, 1999, the Company was a network integrator, focused on
converging technologies for voice, data and video communication ("Hardware
Business") and a sales agent for U S WEST Communications, Inc. ("U S WEST"), a
regional Bell operating company. During 1999, the Company decided to discontinue
the operations of the Hardware Business. On October 26, 1999, PentaStar
Communications, Inc. ("PentaStar"), through a wholly-owned subsidiary, closed an
Agreement and Plan of Merger, pursuant to which the Company was merged into
PentaStar.

Fiscal Year

The Company's fiscal year ends on July 31. The accompanying financial
statements have been conformed to a December 31 year end in connection with the
acquisition of the Company by PentaStar.

Dependence Upon U S WEST

The Company acts as a sales agent for and generated all of its continuing
revenues from U S WEST. The loss of the relationship with U S WEST or a material
diminishment in the volume of business with U S WEST would adversely affect the
Company. Management believes the Company could become a sales agent for another
provider with comparable terms if it were to lose its relationship with U S
WEST.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Property and Equipment

F-33
<PAGE> 63
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property and equipment consists of the following:

<TABLE>
<CAPTION>
ESTIMATED USEFUL OCTOBER 25, DECEMBER 31,
LIFE IN YEARS 1999 1998
---------------- ----------- ------------
<S> <C> <C> <C>
Computer and telephone equipment.............. 3-6 $ 282 $ 250
Office furniture and equipment................ 5-10 111 112
Leasehold improvements........................ 3-10 139 140
Vehicles...................................... 5 39 74
----- -----
571 576
Less: accumulated depreciation................ (225) (177)
----- -----
Property and equipment, net................... $ 346 $ 399
===== =====
</TABLE>

Depreciation expense was $62 and $79 for the period from January 1, 1999 to
October 25, 1999, and for the year ended December 31, 1998, respectively.

Revenue Recognition

The Company has not received payment for certain installed services of $247
and $150, as of October 25, 1999, and December 31, 1998, respectively, due to a
dispute with U S WEST. The delay in payment for these disputed items has been
due to deficiencies in documentation between the Company and U S WEST and
discrepancies in the amounts believed receivable from U S WEST. An allowance of
$115 and $180 at October 25, 1999, and December 31, 1998, respectively, has been
established for the Company's receivables.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant estimates
which could change in the near future include the allowance for disputed
receivables.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and borrowings. The carrying value of
these financial instruments in the accompanying balance sheets approximates
their fair value because of their short-term nature.

Concentration of Credit Risk

The Company's financial instruments exposed to concentrations of credit
risk consist primarily of cash and accounts receivable. The Company maintains
their cash in institutions which the Company considers of high credit quality.
The balances, at times, may exceed federally insured limits. Credit risk with
respect to accounts receivable is limited due to the credit worthiness of the
Company's primary customer, U S WEST. Management does not anticipate significant
credit losses from such financial instruments.

F-34
<PAGE> 64
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Asset Impairment

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Long-lived assets which are held and used in operations would be
impaired if the undiscounted future cash flows related to the asset did not
exceed the net book value. If an asset is determined to be impaired, it is
written down to its fair value.

Advertising and Promotion

Advertising and promotional related expenses are charged to operations when
incurred or the first time the advertising appears. Advertising expense for the
period from January 1, 1999 to October 25, 1999, and for the year ended December
31, 1998 was not significant.

Income Taxes

Stock-Based Compensation

Reclassifications

Certain prior year amounts have been reclassified to conform to current
year classifications.

Recent Accounting Pronouncements

3. BORROWINGS

Line of Credit

The Company had a line of credit with Colorado Business Bank, N.A. which
permitted the Company to borrow up to $350 at a rate equal to the prime rate
plus 1% (9.25% and 8.75% at October 25, 1999 and December 31, 1998,
respectively). The line of credit was renewed on a yearly basis. Borrowings
under the agreement were collateralized by all accounts, inventory, equipment
and general intangibles of the Company, as well as shareholder owned marketable
securities and the shareholder's life insurance policy. The Company's borrowings
were limited to 75% of the total accounts receivable balance less than ninety
days (approximately $154 borrowing limitation at October 25, 1999). At October
25, 1999, there was an outstanding balance of

F-35
<PAGE> 65
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$202 under this line. Subsequent to October 25, 1999, in connection with the
acquisition of the Company by PentaStar, the line of credit was paid in full.

Notes Payable

At October 25, 1999, and December 31, 1998 notes payable consisted of the
following:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Note payable to Colorado Business Bank, N.A., Denver,
Colorado; interest at 9.5% per annum; collateralized by all
accounts, inventory, equipment, general intangibles, and
shareholder owned marketable securities; cross
collateralized with the line of credit; co-borrower with the
Company's shareholder and an officer; payable in monthly
installments of $6.3; due April 2002........................ $163 $220
Note payable to Lexus Financial Services Corporation;
interest at 8.5% per annum; collateralized by a vehicle;
payable in monthly principal and interest installments of
$.884; due April 2002. Paid October 1999.................... -- 31
Note payable to Colorado Business Bank, N.A., Littleton,
Colorado; interest at 10.5% per annum; collateralized by a
vehicle; payable in monthly principal and interest
installments of $.798; paid August 1999..................... -- 6
Note payable to shareholder; interest at the annual federal
rate (5.5% and 5.1% at October 25, 1999 and December 31,
1998, respectively), unsecured.............................. 4 5
---- ----
167 262
Less: current maturities.................................... (80) (77)
---- ----
Long-term borrowings, net of current maturities............. $ 87 $185
==== ====
</TABLE>

Subsequent to October 25, 1999, in connection with the acquisition of the
Company by PentaStar, outstanding balances under notes payable were paid in
full.

Capital Leases

The Company leased certain office furniture and equipment under agreements
which were classified as capital leases. Cost of such assets at October 25,
1999, and December 31, 1998 totaled $258 and $237, respectively and accumulated
amortization totaled $98 and $76, respectively. Subsequent to October 25, 1999,
in connection with the acquisition of the Company by PentaStar, all capital
lease obligations were paid in full.

F-36
<PAGE> 66
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. OPERATING LEASES:

The Company leases office and warehouse facilities from its shareholder and
other office space and equipment from unrelated parties under long-term leases
expiring in various years through the year 2001. Generally, the Company is
required to pay executory costs such as property taxes, maintenance and
insurance.

As of October 25, 1999, future minimum lease payments required under
operating leases were as follows:

<TABLE>
<CAPTION>
RELATED
OTHERS PARTIES
------ -------
<S> <C> <C>
For the period from October 26, 1999 to December 31, 1999... $ 8 $ 6
Years ending December 31,
2000...................................................... 27 36
2001...................................................... -- 36
2002...................................................... -- --
2003...................................................... -- --
Thereafter................................................ -- --
--- ---
$35 $78
=== ===
</TABLE>

Total rent expense charged to income for leases totaled $73 and $79 for the
period from January 1, 1999 to October 25, 1999, and for the year ended December
31, 1998, respectively, of which, $30 and $36 represents rent expense for
related-party leases, respectively.

5. INCOME TAXES:

The (benefit) provision for income taxes consists of the following:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Current (benefit):
Federal................................................... $(74) $(182)
State..................................................... (11) (28)
---- -----
Total current..................................... (85) (210)
Deferred provision:
Federal................................................... 2 176
State..................................................... -- 27
---- -----
Total deferred.................................... 2 203
---- -----
Benefit for income taxes.................................. $(83) $ (7)
==== =====
</TABLE>

A reconciliation of the statutory income tax rate to the benefit for income
taxes from continuing operations is as follows:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Federal income tax at statutory rate........................ 34.0% 34.0%
State income taxes, net of federal tax effect............... 3.3 3.3
Other....................................................... (1.0) .9
---- ----
Total provision................................... 36.3% 38.2%
==== ====
</TABLE>

F-37
<PAGE> 67
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes result from differences in the tax basis of assets
and liabilities and their carrying amounts for financial reporting purposes. The
tax effects of these temporary differences, representing deferred tax assets and
liabilities, result principally from the following:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Current deferred tax assets (liabilities):
Accounts receivable and allowance......................... $(114) $(52)
Accrued expenses.......................................... 59 127
Net operating loss carry forward.......................... 218 56
Other..................................................... -- 18
----- ----
Net current deferred tax asset.................... $ 163 $149
===== ====
Deferred tax liability:
Property basis............................................ $ (16) $ --
</TABLE>

The Company has generated net operating losses of approximately $585 for
federal income tax purposes, expiring in various years from 2013 to 2018.

6. STOCK OPTION PLAN

In February 1998, the Company adopted a stock option plan, which provides
for the granting of options to employees, directors and consultants. A maximum
of 700,000 shares of common stock may be issued under the plan. The option
price, number of shares and grant date are determined at the discretion of the
Company's Board of Directors. The exercise price of the options granted has been
established at no less than the fair value at the date of grant. Options granted
under the plan expire ten years after the grant date and vest 1/12th on the last
day of each fiscal quarter.

A summary of option transactions for the year ended December 31, 1998 and
for the period from January 1, 1999 to October 25, 1999 and options outstanding
at October 25, 1999 and December 31, 1998 are shown below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Options Granted in 1998..................................... 551,500 $0.33
Exercised................................................... -- --
-------- -----
Outstanding at December 31, 1998.......................... 551,500 0.33
Options Granted in 1999..................................... 22,500 0.33
Forfeited................................................... (310,000) 0.33
Exercised................................................... -- --
-------- -----
Outstanding at October 25, 1999........................... 264,000 $0.33
======== =====
Exercisable at December 31, 1998............................ 140,250 $0.33
======== =====
Exercisable at October 25, 1999............................. 121,792 $0.33
======== =====
</TABLE>

F-38
<PAGE> 68
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- --------------------------
WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF LIFE EXERCISE EXERCISE
EXERCISE PRICE NUMBER (IN YEARS) PRICE NUMBER PRICE PRICE
- -------------- ------- ---------- -------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
$0.33 241,500 8.42 $0.33 119,501 $0.33 $0.33
$0.33 22,500 9.57 $0.33 2,291 $0.33 $0.33
------- ---- ----- ------- ----- -----
264,000 8.52 $0.33 121,792 $0.33 $0.33
======= ==== ===== ======= ===== =====
</TABLE>

The fair value of the options granted was $0.06 and $0.05 per share for
options granted during 1999 and 1998, respectively. Had the Company's stock
based compensation cost been determined using their fair value at the grant
date, the Company's net income would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
OCTOBER 25, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Net Income:
As reported............................................... $(146) $(27)
Pro forma................................................. (150) (32)
</TABLE>

The above fair value was determined using the minimum value method (no
volatility assumed), a risk free interest rate of 5.6% and 4.55% for 1999 and
1998, respectively, an expected life of four years and no dividend payout.

7. RETIREMENT SAVING PLAN

The Company maintains a qualified retirement savings plan under Section
401(k) of the Internal Revenue Code. Under the plan, employees may elect to
defer up to 15% of their compensation, subject to Internal Revenue Service
limits. The plan allows for discretionary contributions to be made by the
Company. No Company contributions were made for the period from January 1, 1999
to October 25, 1999, or for the year ended December 31, 1998. The plan is
administered by a third party.

8. COMMITMENTS AND CONTINGENCIES

Guarantees

In December 1995, the Company, acting as a co-borrower with its shareholder
and an officer, obtained a loan from Key Bank ("Key Bank"). The funds were used
to purchase, among other items, real estate owned by the shareholder and
officer. The loan was secured by the real estate, through a Deed of Trust dated
December 28, 1995. In May 1996, the U.S. Small Business Administration ("SBA")
guaranteed the Key Bank loan, which resulted in the Deed of Trust being
transferred to the SBA. In August 1998, the Key Bank debt balance was paid in
full, with proceeds obtained by the shareholder and officer from the Colorado
Business Bank. The Company is a guarantor on the Colorado Business Bank note.
The real estate securing the note has been leased by the Company since April
1996.

The Colorado Business Bank note bears interest at 9% and is due in monthly
principal and interest installments of $1. The note is secured by a first deed
of trust and an assignment of rents between the Company and its shareholder. In
November 1999, the shareholder paid off the outstanding balance of $116 and,
accordingly, the Company no longer guarantees the note.

F-39
<PAGE> 69
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Litigation

The Company is involved in litigation arising in the ordinary course of
business. It is the opinion of management that the outcome of any such
litigation will not have a material effect on the financial statements of the
Company.

9. DISCONTINUED OPERATIONS

During February 1999, management approved a formal plan to dispose of the
Company's Hardware Business. Operations related to this business ceased on April
30, 1999, with the completion of all installations. The Company reduced its
labor force, eliminated all inventories, and wrote-down the value of the
property and equipment. As a result of this decision, the Company has reflected
the operations of the Hardware Business as discontinued operations in the
accompanying financial statements.

Net current assets of discontinued operations as of December 31, 1998 are
as follows:

<TABLE>
<S> <C>
Current Assets:
Accounts receivable, net.................................. $284
Inventory................................................. 178
----
Total current assets.............................. 462
----
Current Liabilities:
Accounts payable and accrued expenses..................... $274
Deferred revenue.......................................... 128
----
Total current liabilities......................... $402
----
Net assets of discontinued operations............. $ 60
====
</TABLE>

The results of discontinued operations were as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
OCTOBER 25, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues................................................... $ 817 $3,223
Costs and expenses......................................... 933 3,812
----- ------
Loss from discontinued operations................ $(116) $ (589)
===== ======
</TABLE>

F-40
<PAGE> 70
DMA VENTURES, INC.
DBA ACCESS COMMUNICATIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. SUBSEQUENT EVENT

On October 26, 1999, the Company was merged into PentaStar. The purchase
consideration consisted of approximately $189 in cash, 205,000 shares of
PentaStar common stock and assumption of liabilities. Additional shares of
PentaStar common stock may be issued to one of the shareholders based upon the
relative earnings performance of the Company to that of other acquired companies
of PentaStar.

In determining the cash portion of the consideration, the purchase
agreement distinguishes, by definition, the liabilities of the Company at
October 25, 1999, between retained and non-retained liabilities. Non-retained
liabilities represent preacquisition liabilities deducted from the cash
consideration otherwise payable to the sole shareholder and consist of the
following at October 25, 1999:

<TABLE>
<S> <C>
Related party borrowings.................................... $ 4
Long term borrowings........................................ 163
Capital leases.............................................. 54
Line of credit.............................................. 202
Accounts payable............................................ 19
Accrued expenses............................................ 56
----
$498
====
</TABLE>

F-41
<PAGE> 71

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
2.1* Agreement and Plan of Merger dated August 13, 1999 among
PentaStar Communications, Inc., OC Mergerco 1, Inc., DMA
Ventures, Inc. and its principal shareholder, Jeffrey A.
Veres.
2.2* Agreement and Plan of Merger dated August 13, 1999 among
PentaStar Communications, Inc., OC Mergerco 2, Inc., ICM
Communications Integration, Inc. and the shareholders of ICM
Communications Integration, Inc.
2.3 Letter Agreement amending Agreement and Plan of Merger dated
as of August 13, 1999 by and among PentaStar Communications,
Inc., OC Mergerco 2, Inc., ICM Communications Integration,
Inc. and the Shareholders of ICM Communications Integration,
Inc. dated October 20, 1999.
2.4 Second Letter Agreement amending letter agreement dated as
of October 20, 1999 by and among PentaStar Communication,
Inc., OC Mergerco 2, Inc., ICM Communications Integration,
Inc. and the Shareholders of ICM Communications Integration,
Inc. which amended the Agreement and Plan of Merger dated as
of August 13, 1999 by and among the same parties, dated
December 27, 1999.
2.5 Letter Agreement amending Agreement and Plan of Merger dated
as of August 13, 1999 by and among PentaStar Communications,
Inc., OC Mergerco 1, Inc., DMA Ventures, Inc. and Jeffery
Veres, dated October 20, 1999.
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Amendment to Restated Certificate of
Incorporation.
3.3 Restated Bylaws.
4.1* Specimen stock certificate representing shares of common
stock of PentaStar Communications, Inc.
4.2 Warrant for the purchase of common stock.
4.3 Certificate of Designation of Series A Preferred Stock.
10.1* PentaStar Communications, Inc. Stock Option Plan.**
10.2* Strategic Agent Sales Agreement by and between U S WEST
Communications, Inc. and Access Communications dated
February 15, 1998, as amended by memorandum dated March 24,
1999.
10.3* Strategic Agent Sales Agreement by and between U S WEST
Communications, Inc. and ICM Communications Integration,
Inc. dated February 13, 1998, as amended by memorandum dated
March 24, 1999.
10.4* Consulting Agreement effective September 1, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and BIBD, LLC.
10.5* Employment and Noncompetition Agreement entered into as of
August 13, 1999 between PentaStar Communications, Inc. and
Jeffrey A. Veres.**
10.6 Amended and Restated Principal Stockholder's Escrow and
Contingent Stock Agreement among PentaStar Communications,
Inc., OC Mergerco 1, Inc. and Jeffrey A. Veres.
10.7 Amended and Restated Principal Stockholder's Escrow and
Contingent Stock Agreement among PentaStar Communications,
Inc., OC Mergerco 2, Inc. and Dennis W. Schillinger.
10.8* Lease Agreement between BACE Real Estate, LLC and PentaStar
Communications, Inc.
</TABLE>
<PAGE> 72

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.9* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Robert S. Lazzeri and Lock-up Agreement dated
October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.10* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Black Diamond Capital, LLC and Lock-up Agreement
dated October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.11* Stock Purchase Agreement dated March 31, 1999 between
Optimal Communications, Inc. (nka PentaStar Communications,
Inc.) and Jeffrey A. Veres and Lock-up Agreement dated
October 8, 1999 among PentaStar Communications, Inc.,
Schneider Securities, Inc., BACE Investments, LLC, Black
Diamond Capital, LLC, Robert S. Lazzeri and Jeffrey A.
Veres.
10.12* Lock-up Agreement dated October 8, 1999 among PentaStar
Communications, Inc., Schneider Securities, Inc., BACE
Investments, LLC, Black Diamond Capital, LLC, Robert S.
Lazzeri and Jeffrey A. Veres.
10.13* Business Lease dated April 10, 1996 between Jeffrey and
Linda Veres and DMA Ventures, Inc. (dba Access
Communications) and First Amendment to Lease dated August
13, 1999.
10.14 Escrow Agreement among BACE Investments, LLC, Black Diamond
Capital, LLC, PentaStar Communications, Inc., Schneider
Securities, Inc. and American Securities Transfer & Trust,
Inc.
21.1 Subsidiaries of PentaStar Communications, Inc.
27.1 Financial Data Schedule.
</TABLE>

- ---------------

* Incorporated by reference from the Company's Registration Statement on Form
SB-2 (Registration No. 333-85281).

** Management contract or compensatory plan or arrangement.

<PAGE> 1
EXHIBIT 2.3

October 20, 1999

ICM Communications Integration, Inc.
4122 128th Avenue, S.E., Suite 300
Bellevue, Washington 98006
Attn: Dennis Schillinger

The Persons on Attached Schedule I

Re: Agreement and Plan of Merger dated August 13, 1999

Dear Ladies and Gentlemen:

This letter agreement serves as an amendment to the Agreement
and Plan of Merger dated as of August 13, 1999 (the "Agreement") by and among
PentaStar Communications, Inc., OC Mergerco 2, Inc., ICM Communications
Integration, Inc. and the Shareholders of ICM Communications Integration, Inc.
All capitalized terms used in this letter agreement without definition have the
respective meanings given to them in the Agreement.

The parties hereby amend the Agreement as follows:

1. The Closing shall occur at 8:00 a.m. Denver, Colorado time
on Monday, October 25, 1999, the proposed date on which PentaStar's Registration
Statement will be declared effective by the SEC. At the Closing, PentaStar will
deliver a promissory note in the form attached as Exhibit A (the "Temporary
Note") in an amount determined pursuant to clause (a) of Section 2(k) of the
Agreement (the "Cash Purchase Price Amount"), rather than delivering cash in
such amount at the Closing. Upon closing of the IPO, cash in an amount equal to
the Cash Purchase Price Amount will be delivered as specified in Section 2(k) of
the Agreement in exchange for the return of the Temporary Note to PentaStar and
its cancellation. All other Closing conditions set forth in Sections 6.1 and 6.2
of the Agreement shall be completed at the Closing as set forth in such
Sections. If the closing of the IPO does not occur by the close of business on
October 29, 1999, the Closing shall be unwound and rescinded effective as of
8:00 a.m. Denver, Colorado time on Monday, October 25, 1999 as if it had never
occurred, and the Agreement will remain in full force and effect until
terminated in accordance with its terms. In order to facilitate such unwinding
and rescission if necessary, the Company will not be merged into the Acquiror
until cash in an amount equal to the Cash Purchase Price Amount is delivered as
specified in Section 2(k) of the Agreement.

2. (a) The definition of "Cash" set forth in Exhibit 1.1(a) is
amended and restated to read in its entirety as follows:

<PAGE> 2

Cash means the sum of (a) the amount of cash and cash
equivalents held by the Company at 11:59 p.m. Pacific
Standard Time ("PST") on October 19, 1999 which continues to
be held by the Company on the Closing Date plus (b) the
amount of cash received by the Company in respect of the
August/September Receivables between 12:00 a.m. PST on
October 20, 1999 and the Closing Date which continues to be
held by the Company on the Closing Date. "Cash" for purposes
of this Agreement, including, without limitation, for
purposes of calculating Cash held by the Company to
determine the amount of Cash to be set forth on the
Estimated Closing Date Balance Sheet or on the Closing Date
Balance Sheet pursuant to Section 2 or for making any other
calculation or determination pursuant to Section 2 or any
other section of the Agreement, shall not include any other
cash or cash equivalents ("Other Cash") which are acquired
by the Company between 12:00 a.m. PST on October 20, 1999
and the Closing Date. Such Other Cash shall be separately
set aside by the Company until the Closing Date and shall be
the property of PentaStar upon the Closing Date.

(b) A definition of "August/September Receivables" is added
to Exhibit 1.1(a) to read in its entirety as follows:

August/September Receivables means commissions received by
the Company prior to the Closing Date or by the Acquiror on
or after the Closing Date pursuant to the US West Contract
in respect of, and only in respect of, (a) customer's orders
that were submitted to and accepted by US West in August or
September 1999 or (b) customer installations completed by US
West in August or September 1999, but in either case net of
the amount of any related Cash Covered Accrued Commission
Liability.

(d) If, after the Closing Date, the Acquiror receives
payment from US West in respect of an August/September Receivable, the Acquiror
will immediately deliver the

<PAGE> 3

amount of such August/September Receivable, netted as set forth in the
definition thereof, to the Shareholders in the same proportions that the Cash
Purchase Price Amount is paid to them pursuant to Section 2(k) of the Agreement.

(e) During the 180 day period following the Closing Date, no
Shareholder will, and no Shareholder will permit such Shareholder's agents or
attorneys to, contact US West concerning the Closing Accounts Receivable.

(f) If the closing of the IPO does not occur by the close of
business on October 29, 1999, Section 2 of this letter agreement shall be of no
further force and effect and the changes to the Agreement described in this
Section 2 shall be void ab initio.

3. Notwithstanding the definition of "Retained Liabilities,"
the amount of the Retained Liability to the Acquiror in respect of the Simple
IRA Plan is $14,634.67 if the closing of the IPO occurs on or before October 31,
1999. If the closing of the IPO occurs after that date, the amount of such
Retained Liability would be the amount accrued in respect thereof in the
ordinary course of business consistent with the 1999 accruals for such
liability.

4. Section 3.1(j) of the Agreement is amended and restated in
its entirety to read as follows:

(j) Notes and Accounts Receivable. The $1,267,000.00 net
amount of the notes and accounts receivable of the Company
reflected on its Latest Balance Sheet, and all notes and
accounts receivable arising on or prior to the Closing Date,
arose and will arise from bona fide transactions by the
Company in the ordinary course of business and will be paid
to PentaStar as set forth in Section 5.8.

5. Exhibit 1.1 (c) is amended and restated in its entirety by
Exhibit 1.1(c) attached hereto.

6. Exhibit 1.1 (d) is amended and restated in its entirety by
Exhibit 1.1(d) attached hereto.

7. Exhibit 3.1(b)(ii) is amended and restated in its entirety
by Exhibit 3.1(b)(ii) attached hereto.

8. Exhibit 3.1(c) is amended and restated in its entirety by
Exhibit 3.1(c) attached hereto.

<PAGE> 4

9. Exhibit 3.1(e)(iv) is amended and restated in its entirety
by Exhibit 3.1(e)(iv) attached hereto.

10. Exhibit 3.1(e)(vi) is amended and restated in its entirety
by Exhibit 3.1(e)(vi) attached hereto.

11. Exhibit 3.1(g)(i) is amended and restated in its entirety
by Exhibit 3.1(g)(i) attached hereto.

12. Exhibit 3.1(h) is amended and restated in its entirety by
Exhibit 3.1(h) attached hereto.

13. Exhibit 3.1(k) is amended and restated in its entirety by
Exhibit 3.1(k) attached hereto.

14. Exhibit 3.1(m)(i) is amended and restated in its entirety
by Exhibit 3.1(m)(i) attached hereto.

15. Exhibit 3.1(m)(iii) is amended and restated in its
entirety by Exhibit 3.1(m)(iii) attached hereto.

16. Exhibit 3.1(s) is amended and restated in its entirety by
Exhibit 3.1(s) attached hereto.

17. Exhibit 3.1(t) is amended and restated in its entirety by
Exhibit 3.1(t) attached hereto.

18. Exhibit 3.3(a)(ii) is amended and restated in its entirety
by Exhibit 3.3(a)(ii) attached hereto.

19. Exhibit 3.3(a)(x) is amended and restated in its entirety
by Exhibit 3.3(a)(x) attached hereto.

20. Exhibit 4.8 is amended and restated in its entirety by
Exhibit 4.8 attached hereto.

<PAGE> 5

By signing below, you acknowledge and agree that (a) this
letter agreement amends the Agreement as set forth above, (b) in the event of
any conflict between this letter agreement and the Agreement, this letter
agreement shall control, and (c) the Agreement, as amended by this letter
agreement, remains in full force and effect.

Very truly yours,

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Craig J. Zoellner
--------------------------------
Name: Craig J. Zoellner
Title: President

OC MERGERCO 1, INC.

By: /s/ Craig J. Zoellner
--------------------------------
Name: Craig J. Zoellner
Title: President

Agreed and accepted this 20th day of October, 1999, effective as of
August 13, 1999.

ICM COMMUNICATIONS INTEGRATION, INC.

By: /s/ Dennis Schillinger
--------------------------------
Name: Dennis Schillinger
Title: President

SHAREHOLDERS:

/s/ Dennis Schillinger
-----------------------------------
Dennis Schillinger

<PAGE> 6

/s/ N. van Gelder
-----------------------------------
Nicolas van Gelder

/s/ Norma A. Douthit
-----------------------------------
Norma Douthit

/s/ John R. Hall
-----------------------------------
John Hall

/s/ Charles E. Gibson
-----------------------------------
Charles Gibson

/s/ Jeannette D. Murphy
-----------------------------------
Jeanette Murphy

/s/ R. Johnson
-----------------------------------
Rick Johnson

/s/ Ed Peterson
-----------------------------------
Ed Peterson

Spouses of Shareholders (not Shareholders)

/s/ Monica Schillinger
- ------------------------------------------
Monica Schillinger

<PAGE> 7

/s/ Kirsten van Gelder
- ------------------------------------------
Kirstin van Gelder

/s/ David T. Douthit
- ------------------------------------------
David T. Douthit

/s/ Judy Gibson
- ------------------------------------------
Judy Gibson

/s/ Dennis M. Balascio
- ------------------------------------------
Dennis M. Baluseio

/s/ MA Johnson
- ------------------------------------------
Margaret Johnson

/s/ Glenda Blackburn
- ------------------------------------------
Glenda Blackburn

cc: Patrick Moran, Esq.

<PAGE> 8

SCHEDULE I

Dennis Schillinger
Nicolas van Gelder
Norma Douthit
John Hall
Charles Gibson
Jeanette Murphy
Rick Johnson
Ed Peterson

<PAGE> 9

EXHIBITS OMITTED

<PAGE> 1
EXHIBIT 2.4

December 27, 1999

The Persons on Attached Schedule I

Re: Letter Agreement dated October 20, 1999 and Agreement
and Plan of Merger dated August 13, 1999

Dear Ladies and Gentlemen:

This letter agreement ("Second Letter Agreement") serves as
(i) an amendment to the letter agreement dated as of October 20, 1999, by and
among PentaStar Communications, Inc., OC Mergerco 2, Inc., ICM Communications
Integration, Inc. and the Shareholders of ICM Communications Integration, Inc.
(the "First Letter Agreement"), which amended the Agreement and Plan of Merger
dated as of August 13, 1999 by and among the same parties (as so amended by the
First Letter Agreement, the "Agreement"), and (ii) an amendment to the
Agreement. All capitalized terms used in this Second Letter Agreement without
definition have the respective meanings given to them in the Agreement.

The parties hereby amend the Agreement as follows:

1. Section 2(d) of the First Letter Agreement is amended and
restated in its entirety as follows:

(d) If, after the Closing Date, the Acquiror receives payment
from US West in respect of an August/September Receivable, the Acquiror will
immediately deliver (i) the amount of such August/September Receivable, netted
as set forth in the definition thereof, less (ii) 15% of such August/September
Receivable, to the Shareholders in the same proportions that the Cash Purchase
Price Amount is paid to them pursuant to Section 2(k) of the Agreement. The
Acquiror shall be responsible for the income Taxes payable with respect to any
such payment received from US West in respect of an August/September Receivable.

2. The first sentence of Section 2(l) of the Agreement is
amended and restated in its entirety as follows:

(l) Closing Date Balance Sheet. Within 90 days after the
Closing Date, an audited balance sheet for the Company will be prepared as of
the Closing Date (the "Closing Date Balance Sheet") and delivered to PentaStar
and the Shareholders.

By signing below, you acknowledge and agree that (a) this
Second Letter Agreement amends the First Letter Agreement and the Agreement as
set forth above, (b) in the event of any conflict among this Second Letter
Agreement, the First Letter Agreement and the Agreement, this Second Letter
Agreement shall control, and (c) the First Letter Agreement, as

<PAGE> 2

amended by this Second Letter Agreement, and the Agreement, as amended by the
First Letter Agreement and this Second Letter Agreement, remain in full force
and effect.

Very truly yours,

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Richard M. Tyler
-----------------------------
Name: Richard M. Tyler
Title: Vice President

OC MERGERCO 2, INC.

By: /s/ Richard M. Tyler
-----------------------------
Name: Richard M. Tyler
Title: Vice President

Agreed and accepted this 27 day of December, 1999, effective as of
August 13, 1999.

SHAREHOLDERS:

/s/ Dennis Schillinger
--------------------------------
Dennis Schillinger

/s/ N. van Gelder
--------------------------------
Nicolas van Gelder

/s/ Norma A. Douthit
--------------------------------
Norma Douthit

/s/ John R. Hall
--------------------------------
John Hall

<PAGE> 3

/s/ Charles E. Gibson
--------------------------------
Charles Gibson

/s/ JD Murphy
--------------------------------
Jeanette Murphy

/s/ R. Johnson
--------------------------------
Rick Johnson

/s/ Ed Peterson
--------------------------------
Ed Peterson

Spouses of Shareholders (not Shareholders)

/s/ Monica Schillinger
- ------------------------------------------
Monica Schillinger

/s/ Kirsten van Gelder
- ------------------------------------------
Kirstin van Gelder

/s/ David T. Douthit
- ------------------------------------------
David T. Douthit

/s/ Judy Gibson
- ------------------------------------------
Judy Gibson

<PAGE> 4

/s/ Dennis M. Balscio
- ------------------------------------------
Dennis M. Baluseio

/s/ MA Johnson
- ------------------------------------------
Margaret Johnson

/s/ Glenda Blackburn
- ------------------------------------------
Glenda Blackburn

<PAGE> 5

SCHEDULE I

Dennis Schillinger
Nicolas van Gelder
Norma Douthit
John Hall
Charles Gibson
Jeanette Murphy
Rick Johnson
Ed Peterson

5
<PAGE> 6

EXHIBITS OMITTED

<PAGE> 1
EXHIBIT 2.5

October 20, 1999

DMA Ventures, Inc.
7076 S. Alton Way, Building A
Englewood, Colorado 80112
Attn: Jeffery A. Veres

Jeffery A. Veres
9160 South Princeton Street
Highlands Ranch, Colorado 80126

Re: Agreement and Plan of Merger dated August 13, 1999

Dear Jeff:

This letter agreement serves as an amendment to the Agreement
and Plan of Merger dated as of August 13, 1999 (the "Agreement") by and among
PentaStar Communications, Inc., OC Mergerco 1, Inc., DMA Ventures, Inc., and
Jeffery Veres. All capitalized terms used in this letter agreement without
definition have the respective meanings given to them in the Agreement.

The parties hereby amend the Agreement as follows:

1. The Closing shall occur at 8:00 a.m. Denver, Colorado time
on Monday, October 25, 1999, the proposed date on which PentaStar's Registration
Statement will be declared effective by the SEC. At the Closing, PentaStar will
deliver a promissory note in the form attached as Exhibit A (the "Temporary
Note") in an amount determined pursuant to clause (a) of Section 2(k) of the
Agreement (the "Cash Purchase Price Amount"), rather than delivering cash in
such amount at the Closing. Immediately upon the closing of the IPO, cash in an
amount equal to the Cash Purchase Price Amount will be delivered as specified in
Section 2(k) of the Agreement in exchange for the return of the Temporary Note
to PentaStar and its cancellation. All other Closing conditions set forth in
Sections 6.1 and 6.2 of the Agreement shall be completed at the Closing as set
forth in such Sections. If the closing of the IPO does not occur by the close of
business on October 29, 1999, the Closing shall be unwound and rescinded
effective as of 8:00 a.m. Denver, Colorado time on Monday, October 25, 1999 as
if it had never occurred, and the Agreement will remain in full force and effect
until terminated in accordance with its terms. In order to facilitate such
unwinding and rescission if necessary, the Company will not be merged into the
Acquiror until cash in an amount equal to the Cash Purchase Price Amount is
delivered as specified in Section 2(k) of the Agreement.

<PAGE> 2

2. (a) A definition of "cash" is added to Exhibit
1.1(a) to read in its entirety as follows:

Cash means the sum of (a) the amount of cash and
cash equivalents held by the Company at 11:59 p.m.
Mountain Standard Time ("MST") on October 19, 1999
which continues to be held by the Company on the
Closing Date plus (b) the amount of cash received
by the Company in respect of the August/September
Receivables between 12:00 a.m. MST on October 20,
1999 and the Closing Date which continues to be
held by the Company on the Closing Date. "Cash"
for purposes of this Agreement, including, without
limitation, for purposes of calculating cash held
by the Company to determine the amount of cash to
be set forth on the Estimated Closing Date Balance
Sheet or on the Closing Date Balance Sheet
pursuant to Section 2 or for making any other
calculation or determination pursuant to Section 2
or any other section of the Agreement, shall not
include any other cash or cash equivalents ("Other
Cash") which are acquired by the Company between
12:00 a.m. MST on October 20, 1999 and the Closing
Date. Such Other Cash shall be separately set
aside by the Company until the Closing Date and
shall be the property of PentaStar upon the
Closing Date.

(b) A definition of "August/September Receivables"
is added to Exhibit 1.1(a) to read in its entirety as follows:

August/September Receivables means commissions
received by the Company prior to the Closing Date
or by the Acquiror on or after the Closing Date
pursuant to the US West Contract in respect of,
and only in respect of, (a) customer's orders that
were submitted to and accepted by US West in
August or September 1999 or (b) customer
installations completed by US West in August or
September 1999, but in either case net of the
amount of any related Cash Covered Accrued
Commission Liability.

(c) If, after the Closing Date, the Acquiror
receives payment from US West in respect of an August/September Receivable, the
Acquiror will immediately deliver the amount of such August/September
Receivable, netted as set forth in the definition thereof, to the Shareholder.

<PAGE> 3

(d) During the 180 day period following the
Closing Date, Shareholder will not, and the Shareholder will not permit the
Shareholder's agents or attorneys to, contact US West concerning the Closing
Accounts Receivable, except as normal collection efforts are undertaken by the
Shareholder in his capacity as an employee of the Acquiror after approval by
PentaStar.

3. The 1998 Stock Option Plan set forth in section (i)(H) of
Exhibit 3.1(h) to the Agreement shall be terminated by the Company prior to the
Closing Date with no Liability to PentaStar or the Acquiror. Therefore, that
plan is hereby excluded from clause (a) of the definition of Retained
Liabilities and is included in Exhibit 1.1(b) to the Agreement as a contract so
excluded.

4. With respect to Section 3.1(b)(i) of the Agreement, the
Shareholder agrees that he shall cause to be terminated prior to the Closing
Date, with no Liability to PentaStar or the Acquiror, all existing rights of
first refusal, buy-sell arrangements, options, warrants, rights, calls or other
commitments or restrictions of any character relating to any of the Company's
authorized capital stock, including the stock options set forth in Exhibit
3.1(b)(i) to the Agreement, except those restrictions on transfer imposed by the
Securities Act of 1933, as amended, and applicable state securities laws.
Notwithstanding the foregoing, the Company entered into an Incentive Stock
Option Agreement with Mary Ann O'Connor dated as of December 11, 1998 (the
"Option Agreement"). Pursuant to the Option Agreement, the Company granted Ms.
O'Connor the right and option to purchase 2,500 shares of the common stock of
the Company at no cost to her. Despite diligent efforts, neither the Company nor
the Shareholder has been able, as of the Closing, to locate Ms. O'Connor in
order to terminate, with no Liability to PentaStar or the Acquiror, any rights
of Ms. O'Connor under the Option Agreement. The Shareholder shall hold PentaStar
and the Acquiror harmless from and against all Adverse Consequences which result
from, arise out of, relate to or are caused by (a) any failure of the
Shareholder to obtain a termination, with no Liability to PentaStar or the
Acquiror, of any rights of Ms. O'Connor under the Option Agreement or (b) any
claims by Ms. O'Connor of any ownership interest in, or option or other right
with respect to, the Company, PentaStar or the Acquiror. Any consideration that
the Shareholder chooses to pay Ms. O'Connor in connection with termination of
the Option Agreement shall not involve the transfer by the Shareholder of any
shares of PentaStar stock.

5. Under the terms of the Agreement, Retained Liabilities does
not include the Liability represented by the loan from Colorado Business Bank to
Jeff and Linda Veres on August 5, 1998 in the original principal amount of
$138,775.76 (Loan No. 7758201000) on which the Company is the co-borrower and/or
guarantor (the "Bank Loan") and the U.S. Small Business Administration ("SBA")
Note 504 by and between Denver Urban Economic Development Corporation and Jeff
and Linda Veres on May 13, 1996 in the original principal amount of $120,00.00
(Loan No. CDC 906, 596-30-07-DEN) on which the Company is the co-borrower and/or
guarantor (the "SBA Loan") (the SBA Loan, together with all amounts outstanding
thereunder and all related Encumbrances are referred to collectively as the "SBA
Liability"). Prior to the Closing, the Company will deliver to PentaStar a
letter from Colorado

<PAGE> 4

Business Bank, reasonably satisfactory to PentaStar, releasing the Company as a
both a co-borrower and a guarantor from the Bank Loan and stating that Colorado
Business Bank has no security interest in any properties or assets of the
Company with respect to the Bank Loan. However, because of certain SBA loan
processing procedures, the SBA Liability will not be terminated until January of
2000 and the release of the deed of trust with respect thereto will not be
recorded in the appropriate county until sometime thereafter. Notwithstanding
those procedures, the Shareholder agrees that on or before November 18, 1999, he
will obtain a letter from the SBA stating the entire pay off amount of the SBA
Liability (the "Pay Off Amount"), and that on or before November 18, 1999, he
will cause such Pay Off Amount to be paid to the SBA. In order to secure the
payment of the Pay Off Amount to the SBA, the parties agree that $120,000.00 of
the cash portion of the Purchase Price otherwise payable at Closing (the "SBA
Liability Escrow") will be deposited into an Escrow Account (as defined in the
Escrow Agreement the form of which is attached as Exhibit A) with Colorado
Business Bank (the "Escrow Agent"). The Shareholder agrees that, notwithstanding
any contrary provision of the Escrow Agreement, he will pay all of the Escrow
Agent's fees and expenses associated with both the SBA Liability Escrow and the
Escrow Account and that there will be no Liability to either PentaStar or the
Acquiror with respect to such fees or expenses. The Escrow Deposit will be held,
invested, administered and disbursed according to the Escrow Agreement. Upon the
Escrow Agent's receipt of (a) a letter from the SBA to the Company stating the
Pay Off Amount and (b) a letter from the Denver Economic Urban Development
Corporation ("DEUDC") confirming the receipt by the SBA of the Pay Off Amount,
(collectively, the "Pay Off Letters"), copies of which will also be provided to
PentaStar, the Escrow Agent will, as provided in the Escrow Agreement, pay the
SBA Liability Escrow amount of $120,000.00 to the Shareholder by wire transfer
in immediately available funds to an account or accounts designated by the
Shareholder. If PentaStar and the Escrow Agent do not receive the Pay Off
Letters on or before December 15, 1999, PentaStar may take any lawful action to
terminate the SBA Liability, including, but not limited to, using the SBA
Liability Escrow to pay the SBA Liability. The Shareholder agrees that, in the
event that PentaStar and the Escrow Agent do not receive the Pay Off Letters on
or before December 15, 1999, the Escrow Agent will, as provided in the Escrow
Agreement, pay the SBA Liability Escrow amount of $120,000.00 to PentaStar by
wire transfer in immediately available funds to an account or accounts
designated by PentaStar. If the SBA Liability Escrow exceeds the amount required
to terminate the SBA Liability, after paying the SBA Liability PentaStar will
pay the amount of such excess to the Shareholder by wire transfer in immediately
available funds to an account or accounts designated by the Shareholder. Based
upon its best information and knowledge, the Shareholder believes that as of the
date of this letter agreement the amount of the SBA Liability does not exceed
$120,000.00. By agreeing to the foregoing, PentaStar does not waive any of its
rights under the Agreement, and the Shareholder agrees that, notwithstanding
PentaStar's and the Escrow's Agent's receipt of the Pay Off Letters and the
Escrow Agent's release of the SBA Liability Escrow amount of $120,000.00 to him,
he will hold PentaStar and the Acquiror harmless from any Adverse Consequences
they may suffer as a result of the Bank Loan not having been terminated by the
Shareholder prior to the Closing Date or as a result of the SBA Liability not
having been terminated and the corresponding deed of trust not having been
released.

<PAGE> 5

6. Exhibit 1.1(b) is amended and restated in its entirety by
Exhibit 1.1(b) attached hereto.

7. Exhibit 3.1(c) is amended and restated in its entirety by
Exhibit 3.1(c) attached hereto.

8. Exhibit 3.1(d)(i)(B) is amended and restated in its
entirety by Exhibit 3.1(d)(i)(B) attached hereto.

9. Exhibit 3.1(e)(i) is amended and restated in its entirety
by Exhibit 3.1(e)(i) attached hereto.

10. Exhibit 3.1(h) is amended and restated in its entirety by
Exhibit 3.1(h) attached hereto.

11. Exhibit 3.1(m)(i) is amended and restated in its entirety
by Exhibit 3.1(m)(i) attached hereto.

12. Exhibit 3.1(o)(i)(B) is amended and restated in its
entirety by Exhibit 3.1(o)(i)(B) attached hereto.

Very truly yours,

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Craig J. Zoellner
--------------------------------
Name: Craig J. Zoellner
Title: President

OC MERGERCO 1, INC.

By: /s/ Craig J. Zoellner
--------------------------------
Name: Craig J. Zoellner
Title: President

<PAGE> 6

Agreed and accepted this 20th day of October, 1999, effective
as of August 13, 1999.

DMA VENTURES, INC.

By: /s/ Jeffery A. Veres
--------------------------------
Name: Jeffery A. Veres
Title: President

/s/ Jeffery A. Veres
-----------------------------------
Jeffery A. Veres

cc: Joseph M. Brooker, Esq.

<PAGE> 7

EXHIBITS OMITTED

<PAGE> 1
EXHIBIT 3.1

RESTATED

CERTIFICATE OF INCORPORATION

PENTASTAR COMMUNICATIONS, INC.

The undersigned, Richard M. Tyler, hereby certifies that:

ONE: He is the duly elected and acting Vice President of PentaStar
Communications, Inc.

TWO: The corporation's original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on March 15, 1999. The name
of the corporation at that time was Optimal Communications, Inc.

THREE: This Restated Certificate of Incorporation amends, integrates
and restates the corporation's Certificate of Incorporation filed on March 15,
1999 and amended on August 13, 1999, and has been duly adopted in accordance
with Sections 242 and 245 of the General Corporation Law of the State of
Delaware (the "DGCL").

FOUR: The text of the Certificate of Incorporation of this corporation
is hereby amended and restated to read in its entirety as follows:

ARTICLE I.
NAME

The name of this corporation is PentaStar Communications, Inc.

ARTICLE II.
REGISTERED OFFICER AND AGENT

The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware 19805. The
name of its registered agent at such address is Corporation Service Company.

ARTICLE III.
PURPOSES AND POWERS

The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the DGCL.

<PAGE> 2

ARTICLE IV.
CAPITALIZATION

A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Twenty One Million
(21,000,000) shares. Twenty Million (20,000,000) shares shall be Common Stock,
par value $.0001 per share. One Million (1,000,000) shares shall be Preferred
Stock, par value $.0001 per share.

B. Each of the 915.7509 shares of the corporation's common stock, par
value $.01 per share, issued and outstanding as of the effective time of this
Restated Certificate of Incorporation shall, without further action, be
subdivided, reclassified and changed into 3,417.96 fully paid and nonassessable
shares of Common Stock. Each holder of record of certificates for any of such
915.7509 shares of common stock of the corporation as of the effective time of
this Restated Certificate of Incorporation shall be entitled to receive, as soon
as practicable upon surrender of the stock certificate(s) representing such
shares, stock certificates representing 3,417.96 shares of Common Stock for each
one share of such common stock represented by the surrendered certificate of
such holder; provided, however, that no fractional shares resulting from such
subdivision shall be issued but the corporation shall instead pay to any holder
otherwise entitled to receive a fractional share an amount determined by
multiplying such fractional share by the public offering price per share of the
corporation's Common Stock set forth on the cover page of the corporation's
prospectus relating to the corporation's Initial Public Offering (as defined in
Article V below), which is determined to be the fair value of such fractional
share.

C. The following is a statement of the designations and powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of the Common Stock:

1. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors,
out of the assets of the corporation which are by law available
therefor, dividends payable either in cash, in property or in shares of
Common Stock.

2. Except as otherwise required by law, at every annual or
special meeting of stockholders of the corporation, every holder of
Common Stock shall be entitled to one vote, in person or by proxy, for
each share of Common Stock standing in such holder's name on the books
of the corporation.

3. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, after
payment or provision for payment of the debts and other liabilities of
the corporation and of the preferential amounts, if any, to which the
holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably
in the remaining net assets of the corporation.

<PAGE> 3

D. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate
pursuant to the DGCL, to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each series and the qualifications,
limitations or restrictions of any wholly unissued series or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of any
series then outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

ARTICLE V.
DIRECTORS

For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

A. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by, or in the manner provided in, the Bylaws of the corporation.

B. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.

Notwithstanding the foregoing provisions of this Article, each
director shall serve until such director's successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director.

<PAGE> 4

C. Removal of Directors

1. Subject to the rights of the holders of any series of
Preferred Stock, neither the Board of Directors nor any individual director may
be removed without cause.

2. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.

D. Vacancies

1. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.

2. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.

ARTICLE VI.
BYLAWS

In furtherance and not in limitation of the powers conferred by statue,
the Board of Directors of the corporation is expressly authorized to make, alter
or repeal the bylaws of the corporation, but such authorization shall not divest
the stockholders of the power, nor limit their power, to make, alter or repeal
bylaws.

A. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.

<PAGE> 5

B. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.

C. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.

ARTICLE VII.
LIMITATION OF DIRECTORS' LIABILITY

A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.

B. Any repeal or modification of this VII shall be prospective and
shall not adversely affect any right or protection of a director under this
Article VII as in effect immediately prior to such repeal or modification with
respect to any liability that would have accrued, but for this Article VII,
prior to such repeal or modification.

ARTICLE VIII.
INDEMNIFICATION

The corporation shall, to the fullest extent permitted by Section 145
of the DGCL (or any successor section), as the same may be amended and
supplemented, indemnify any director or officer of the corporation, including
any director or officer of the corporation who was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any and all of
the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, shall continue as to a person who
has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors, and administrators of such person. No amendment or repeal of
this Article VIII shall apply to or have any affect on any right to
indemnification provided hereunder with respect to any acts or omissions
occurring prior to such amendment or repeal.

ARTICLE IX.
RESERVATION OF POWER TO AMEND

The corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, as from time to time amended, in the manner now or hereafter
prescribed by law; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other persons whomsoever by
and
5

<PAGE> 6

pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article IX.

ARTICLE X.
TRANSACTIONS WITH DIRECTORS AND OFFICERS

The corporation shall have authority, to the fullest extent now or
hereafter permitted by the DGCL, or by any other applicable law, to enter into
any contract or transaction with one or more of its directors or officers, or
with any corporation, partnership, joint venture, trust, association or other
entity in which one or more of its directors or officers are directors or
officers or have a financial interest, notwithstanding such relationships and
notwithstanding the fact that the director or officer is present at or
participates in the meeting of the board of directors or committee thereof which
authorizes the contract or transaction.

IN WITNESS WHEREOF, this Certificate has been subscribed this 21st day
of October, 1999 by the undersigned, who affirms that the statements made herein
are true and correct.

PENTASTAR COMMUNICATIONS, INC.

BY: /s/ Richard M. Tyler
------------------------------
Richard M. Tyler
Vice President

<PAGE> 1
EXHIBIT 3.2

CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
PENTASTAR COMMUNICATIONS, INC.

PentaStar Communications, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of PentaStar Communications, Inc.,
by unanimous written consent of the directors effective October 22, 1999,
adopted a resolution setting forth a proposed amendment to the Restated
Certificate of Incorporation of said corporation. The resolution setting forth
the proposed amendment is as follows:

RESOLVED, that a proposed amendment to the Restated Certificate of
Incorporation of the Corporation, amending and restating ARTICLE V.C.
"Removal of Directors" to read in its entirety as follows, is
recommended to the stockholders for approval as being in the best
interests of the Corporation:

C. Removal of Directors

Subject to any limitation imposed by law, any
individual director or directors may be removed with or without cause
by the holders of a majority of the voting power of the corporation
entitled to vote at an election of directors.

SECOND: That the stockholders of said corporation duly adopted such
resolutions by written consent effective October 22, 1999 in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware, and any required written notice thereof has been given as provided in
such Section 228.

THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, PentaStar Communications, Inc. has caused this
certificate to be executed by Richard M. Tyler, its Vice President, on this 22nd
day of October, 1999.

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Richard M. Tyler
-------------------------
Richard M. Tyler, Vice
President

<PAGE> 1
EXHIBIT 3.3

RESTATED

BYLAWS

PENTASTAR COMMUNICATIONS, INC.

(A DELAWARE CORPORATION)

<PAGE> 2

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - Offices...............................................................................................1
Section 1. Registered Office ...........................................................................1
Section 2. Other Offices ...............................................................................1

ARTICLE II - Corporate Seal.......................................................................................1
Section 3. Corporate Seal ..............................................................................1

ARTICLE III - Stockholders' Meetings..............................................................................1
Section 4. Place Of Meetings. ..........................................................................1
Section 5. Annual Meetings. ............................................................................2
Section 6. Special Meetings. ...........................................................................4
Section 7. Notice Of Meetings. .........................................................................5
Section 8. Quorum ......................................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings ................................................6
Section 10. Voting Rights ...............................................................................6
Section 11. Joint Owners Of Stock .......................................................................6
Section 12. List Of Stockholders ........................................................................6
Section 13. Action Without Meeting ......................................................................7
Section 14. Organization ................................................................................7

ARTICLE IV - Directors............................................................................................8
Section 15. Number And Term Of Office ..................................................................8
Section 16. Powers. ....................................................................................8
Section 17. Classes of Directors .......................................................................8
Section 18. Vacancies ..................................................................................9
Section 19. Resignation. ...............................................................................9
Section 20. Removal....................................................................................10
Section 21. Meetings ..................................................................................10
Section 22. Quorum And Voting..........................................................................11
Section 23. Action Without Meeting.....................................................................11
Section 24. Fees And Compensation......................................................................11
Section 25. Committees.................................................................................11
Section 26. Organization...............................................................................13
</TABLE>

<PAGE> 3

<TABLE>

<S> <C> <C>
ARTICLE V - Officers.............................................................................................13
Section 27. Officers Designated........................................................................13
Section 28. Tenure And Duties Of Officers..............................................................13
Section 29. Delegation Of Authority....................................................................15
Section 30. Resignations...............................................................................15
Section 31. Removal ...................................................................................15

ARTICLE VI - Execution Of Corporate Instruments And Voting Of Securities Owned By The Corporation................15
Section 32. Execution Of Corporate Instruments ........................................................15
Section 33. Voting Of Securities Owned By The Corporation ............................................16

ARTICLE VII - Shares Of Stock....................................................................................16
Section 34. Form And Execution Of Certificates. .......................................................16
Section 35. Lost Certificates .........................................................................17
Section 36. Transfers .................................................................................17
Section 37. Fixing Record Dates .......................................................................17
Section 38. Registered Stockholders ...................................................................18

ARTICLE VIII - Other Securities Of The Corporation...............................................................18
Section 39. Execution Of Other Securities..............................................................18

ARTICLE IX - Dividends...........................................................................................19
Section 40. Declaration Of Dividends ..................................................................19
Section 41. Dividend Reserve ..........................................................................19

ARTICLE X - Fiscal Year..........................................................................................19
Section 42. Fiscal Year ...............................................................................19

ARTICLE XI - Indemnification.....................................................................................20
Section 43. Indemnification Of Directors, Executive Officers, Other Officers,
Employees And Other Agents ................................................................20

ARTICLE XII - Notices............................................................................................23
Section 44. Notices 23

ARTICLE XIII - Amendments........................................................................................25
Section 45. Amendments 25

ARTICLE XIV - Loans To Officers..................................................................................25
Section 46. Loans To Officers .........................................................................25
</TABLE>

<PAGE> 4

RESTATED

BYLAWS

PENTASTAR COMMUNICATIONS, INC.

(A DELAWARE CORPORATION)

ARTICLE I

Offices

Section 1. Registered Office. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.

Section 2. Other Offices. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.

ARTICLE II

Corporate Seal

Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.

ARTICLE III

Stockholders' Meetings

Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.

<PAGE> 5

Section 5. Annual Meetings.

(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5.

(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the General Corporation Law of Delaware, (iii) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each

<PAGE> 6

person whom the stockholder proposed to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (B) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (C) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner, (ii) the class and number of
shares of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, and (iii) whether either such stockholder
or beneficial owner intends to deliver a proxy statement and form of proxy to
holders of, in the case of the proposal, at least the percentage of the
corporation's voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, a sufficient number of holders
of the corporation's voting shares to elect such nominee or nominees (an
affirmative statement of such intent, a "Solicitation Notice").

(c) Notwithstanding anything in the second sentence of Section 5(b) of
these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.

(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.

<PAGE> 7

(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.

(f) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.

Section 6. Special Meetings.

(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) or (iv) 10% or more of the stockholders of the
corporation entitled to vote at an election of directors, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.

(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.

(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth

<PAGE> 8

in this Section 6(c). In the event the corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the corporation's
notice of meeting, if the stockholder's notice required by Section 5(b) of these
Bylaws shall be delivered to the Secretary at the principal executive offices of
the corporation not earlier than the close of business on the one hundred
twentieth (120th) day prior to such special meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such meeting or
the tenth (10th) day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.

Section 7. Notice Of Meetings. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.

Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the

<PAGE> 9

Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.

Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.

Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.

Section 12. List Of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the

<PAGE> 10

meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not specified, at the place where the meeting is to be held. The
list shall be produced and kept at the time and place of meeting during the
whole time thereof and may be inspected by any stockholder who is present.

Section 13. Action Without Meeting.

(a) Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.

(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.

(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given in accordance with
Section 228 of the Delaware General Corporation Law.

(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").

Section 14. Organization.

(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the Chief
Executive Officer, or, if the Chief Executive Officer is absent, a chairman of
the meeting chosen by a majority in interest of the stockholders entitled to
vote, present in person or by proxy, shall act as chairman. The Secretary, or,
in his

<PAGE> 11

absence, an Assistant Secretary directed to do so by the Chief Executive
Officer, shall act as secretary of the meeting.

(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.

ARTICLE IV

Directors

Section 15. Number And Term Of Office. The authorized number of
directors of the corporation shall be fixed by one or more resolutions of the
Board of Directors. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any reason, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.

Section 16. Powers. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.

Section 17. Classes of Directors. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public

<PAGE> 12

Offering, the term of office of the Class III directors shall expire and Class
III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.

Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

Section 18. Vacancies.

(a) Unless otherwise provided in the Certificate of Incorporation, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, except as otherwise provided by
law, be filled only by the affirmative vote of a majority of the directors then
in office, even though less than a quorum of the Board of Directors. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the director for which the vacancy was created
or occurred and until such director's successor shall have been elected and
qualified. A vacancy in the Board of Directors shall be deemed to exist under
this Bylaw in the case of the death, removal or resignation of any director.

(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.

Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.

<PAGE> 13

Section 20. Removal. Subject to any limitation imposed by law, any
individual director or directors may be removed with or without cause by the
affirmative vote of a majority of the voting power of the corporation entitled
to vote at an election of directors.

Section 21. Meetings.

(a) Annual Meetings. The annual meeting of the Board of Directors shall
be held immediately before or after the annual meeting of stockholders and at
the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.

(b) Regular Meetings. Unless otherwise restricted by the Certificate of
Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.

(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the Chief Executive Officer or any two of the directors.

(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.

(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

(f) Waiver of Notice. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of

<PAGE> 14

notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.

Section 22. Quorum And Voting.

(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.

(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.

Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.

Section 25. Committees.

(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly

<PAGE> 15

required by the Delaware General Corporation Law to be submitted to stockholders
for approval, or (ii) adopting, amending or repealing any bylaw of the
corporation.

(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.

(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of Preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.

<PAGE> 16

Section 26. Organization. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the Chief Executive Officer (if a director), or if the Chief
Executive Officer is absent, the President, or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the Chief Executive Officer, shall act as
secretary of the meeting.

ARTICLE V

Officers

Section 27. Officers Designated. The officers of the corporation shall
be appointed or elected by vote of the Board of Directors. The officers shall
include a Chairman of the Board of Directors, a Chief Executive Officer, a
President and Chief Operating Officer, a Chief Financial Officer, one or more
Vice Presidents, a Secretary, and a Treasurer, all of whom shall be elected at
the annual organizational meeting of the Board of Directors. The Board of
Directors may also appoint one or more Assistant Secretaries, Assistant
Treasurers and such other officers and agents with such powers and duties as it
shall deem necessary. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may
hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other compensation of
the officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors.

Section 28. Tenure And Duties Of Officers.

(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.

(b) Chairman of the Board of Directors. The Chairman of the Board of
Directors, when present, shall preside at all meetings of the stockholders and
the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers, as the Board of Directors shall designate
from time to time. If there is no Chief Executive Officer, then the Chairman of
the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.

(c) Chief Executive Officer. The Chief Executive Officer shall be the
chief executive officer of the corporation and, subject to the direction and
control of the Board of Directors, shall manage the business of the corporation.
The Chief Executive Officer may execute contracts, deeds

<PAGE> 17

and other instruments on behalf of the corporation. In the absence of the
Chairman of the Board or in the event of his disability, inability or refusal to
act, the Chief Executive Officer shall perform the duties and exercise the power
of the Chairman of the Board. The Chief Executive Officer shall have full
authority on behalf of the corporation to attend any meeting, give any waiver,
cast any vote, grant any discretionary or directed proxy to any person, and
exercise any other rights of ownership with respect to any shares of capital
stock or other securities held by the corporation and issued by any other
corporation or with respect to any partnership, trust or similar interest held
by the corporation.

(d) President and Chief Operating Officer. The President and Chief
Operating Officer shall be the chief operating officer of the corporation and,
subject to the direction and control of the Board of Directors and the Chief
Executive Officer, shall manage the day-to-day operations of the corporation.
The President and Chief Operating Officer may execute contracts, deeds and other
instruments on behalf of the corporation. The President and Chief Operating
Officer shall have full authority on behalf of the corporation to attend any
meeting, give any waiver, cast any vote, grant any discretionary or directed
proxy to any person, and exercise any other rights of ownership with respect to
any shares of capital stock or other securities held by the corporation and
issued by any other corporation or with respect to any partnership, trust or
similar interest held by the corporation. The President and Chief Operating
Officer shall perform such other duties as the Board of Directors, the Chairman
of the Board, or the Chief Executive Officer may from time to time prescribe or
delegate to him.

(e) Chief Financial Officer. The Chief Financial Officer shall be the
chief financial and accounting officer of the corporation, subject to the
direction and control of the Board of Directors and the Chief Executive Officer.
The Chief Financial Officer may execute contracts, deeds and other instruments
on behalf of the corporation. The Chief Financial Officer shall perform such
other duties as the Board of Directors, the Chairman of the Board, or the Chief
Executive Officer may from time to time prescribe or delegate to him.

(f) Vice President. Each Vice President, if any, shall perform such
functions as may be prescribed by the Board of Directors or the Chief Executive
Officer. Each Vice President may execute contracts, deeds and other instruments
on behalf of the corporation. Each Vice President shall have full authority on
behalf of the corporation to attend any meeting, give any waiver, cast any vote,
grant any discretionary or directed proxy to any person, and exercise any other
rights of ownership with respect to any shares of capital stock or other
securities held by the corporation and issued by any other corporation or with
respect to any partnership, trust or similar interest held by the corporation.
Each Vice President shall perform such other duties as the Board of Directors,
the Chairman of the Board, or the Chief Executive Officer may from time to time
prescribe or delegate to him.

<PAGE> 18

(g) Secretary. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and, upon the request of a person entitled
to call a special meeting of the Board of Directors, he shall give notice of any
such special meeting. He shall keep the minutes of all meetings of the
stockholders, the Board of Directors, or any committee established by the Board
of Directors. The Secretary shall be responsible for the maintenance of all
records of the corporation and may attest documents on behalf of the
corporation. The Secretary shall perform such other duties as the Board of
Directors, the Chairman of the Board, or the Chief Executive Officer may from
time to time prescribe or delegate to him. Each Assistant Secretary shall have
all power and authority of the Secretary unless otherwise determined by the
Board of Directors.

(h) Treasurer. The Treasurer shall be responsible for the control of
the funds of the corporation and the custody of all securities owned by the
corporation. The Treasurer shall perform such other duties as the Board of
Directors, the Chairman of the Board, or the Chief Executive Officer may from
time to time prescribe or delegate to him. Each Assistant Treasurer shall have
all power and authority of the Treasurer unless otherwise determined by the
Board of Directors.

Section 29. Delegation Of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.

Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chief Executive Officer or to
the Secretary. Any such resignation shall be effective when received by the
person or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.

Section 31. Removal. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.

ARTICLE VI

Execution Of Corporate Instruments And
Voting Of Securities Owned By The Corporation

Section 32. Execution Of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on

<PAGE> 19

behalf of the corporation, except where otherwise provided by law or these
Bylaws, and such execution or signature shall be binding upon the corporation.

All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.

Section 33. Voting Of Securities Owned By The Corporation. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.

ARTICLE VII

Shares Of Stock

Section 34. Form And Execution Of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each

16
<PAGE> 20

class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Except as otherwise expressly
provided by law, the rights and obligations of the holders of certificates
representing stock of the same class and series shall be identical.

Section 35. Lost Certificates. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.

Section 36. Transfers.

(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.

(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.

Section 37. Fixing Record Dates.

(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.

(b) Prior to the Initial Public Offering, in order that the corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the

<PAGE> 21

resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within ten (10) days after the date on which
such a request is received, adopt a resolution fixing the record date. If no
record date has been fixed by the Board of Directors within ten (10) days of the
date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.

(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.

Section 38. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

Other Securities Of The Corporation

Section 39. Execution Of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the Chief Executive Officer, the President or any Vice President, or
such other person as may be authorized by the Board of Directors, and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of

<PAGE> 22

the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.

ARTICLE IX

Dividends

Section 40. Declaration Of Dividends. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation and applicable law.

Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

Fiscal Year

Section 42. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.

<PAGE> 23

ARTICLE XI

Indemnification

Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.

(a) Directors and Executive Officers. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).

(b) Other Officers, Employees and Other Agents. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law or any other applicable law. The
Board of Directors shall have the power to delegate the determination of whether
indemnification shall be given to any such person except executive officers to
such officers or other persons as the Board of Directors shall determine.

(c) Expenses. The corporation shall advance to any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.

Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the

<PAGE> 24

proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.

(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. In connection with any claim
by an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law or any
other applicable law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct. In any suit brought by a director or executive officer to
enforce a right to indemnification or to an advancement of expenses hereunder,
the burden of proving that the director or executive officer is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.

(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting

<PAGE> 25

indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law, or by any other applicable law.

(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.

(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law or any other applicable law, the corporation, upon approval by
the Board of Directors, may purchase insurance on behalf of any person required
or permitted to be indemnified pursuant to this Bylaw.

(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.

(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full to the full extent under any other applicable law.

(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:

(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.

(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.

(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position

<PAGE> 26

under the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.

(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.

ARTICLE XII

Notices

Section 44. Notices.

(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.

(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.

(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.

<PAGE> 27

(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.

(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.

(f) Failure To Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.

(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.

(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.

<PAGE> 28

ARTICLE XIII

Amendments

Section 45. Amendments. Subject to the provisions of the Certificate of
Incorporation, these bylaws may be altered, amended or repealed at any regular
meeting of the stockholders (or at any special meeting thereof duly called for
that purpose), provided that in the notice of the special meeting, notice of
such purpose given. Subject to the laws of the State of Delaware, the
Certificate of Incorporation and the other provisions of these bylaws, the Board
of Directors may, by majority vote of the entire Board of Directors alter, amend
or repeal these bylaws, or enact such other bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of the corporation.

ARTICLE XIV

Loans To Officers

Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty.

<PAGE> 1
EXHIBIT 4.2

THE REPRESENTATIVE'S WARRANTS EVIDENCED AND REPRESENTED BY THIS CERTIFICATE (THE
"REPRESENTATIVE'S WARRANTS") AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
(THE "WARRANT SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND WITH THE SECURITIES ADMINISTRATORS OF CERTAIN STATES
UNDER THE SECURITIES ("BLUE SKY") LAWS OF SUCH STATES. HOWEVER, NEITHER THE
REPRESENTATIVE'S WARRANTS NOR SUCH WARRANT SHARES MAY BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO (I) A POST-EFFECTIVE AMENDMENT TO
SUCH REGISTRATION STATEMENT, (II) A SEPARATE REGISTRATION STATEMENT UNDER SUCH
ACT, OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND UNDER THE
APPLICABLE BLUE SKY LAWS , AS ESTABLISHED TO THE REASONABLE SATISFACTION OF THE
COMPANY.

THIS REPRESENTATIVE'S WARRANT AND THE WARRANT SHARES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED EXCEPT AS OTHERWISE PROVIDED HEREIN AND THE HOLDER OF
THIS REPRESENTATIVE'S WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT
SELL, TRANSFER OR ASSIGN THIS REPRESENTATIVE'S WARRANT OR THE WARRANT SHARES
EXCEPT AS OTHERWISE PROVIDED HEREIN.

PENTASTAR COMMUNICATIONS, INC.

Representative's Warrant for the Purchase of Common Stock

No. UW-001 125,000 Representative's Warrants

THIS CERTIFIES that, for receipt in hand of $10 and other value received,
SCHNEIDER SECURITIES, INC. (the "Holder"), is entitled to subscribe for and
purchase from PENTASTAR COMMUNICATIONS, INC., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time, or from
time to time, after October 26,1999, and before 5:00 p.m. Mountain time on
October 26, 2004 (the "Exercise Period"), 125,000 shares of Common Stock (the
"Warrant Shares"), at a price of $12.00 per Warrant Share (the "Exercise
Price"), or 120% of the offering price of Common Stock to be sold by the Company
in a public offering (the "Public Offering") at or prior to the date hereof.

The term the "Holder" as used herein shall include any transferee to whom
this Representative's Warrant has been transferred in accordance with the above.
As used herein the term "this Representative's Warrant" shall mean and include
this Representative's Warrant and any Representative's Warrant or
Representative's Warrants hereafter issued as a consequence of the exercise or
transfer of this Representative's Warrant in whole or in part, and the term
"Common Stock" shall mean and include the Company's Common Stock with ordinary
voting power, which class at the date hereof is publicly traded.

1. This Representative's Warrant may not be sold, transferred, assigned,
pledged or hypothecated until October 26, 2000 (12 months from the Effective
Date of the Registration Statement on which it is initially registered) except
that it may be transferred, in whole or in part, (i) to one or more officers or
partners of the Holder (or the officers or partners of any such partner); (ii)
to a member of the underwriting syndicate and/or its officers or partners; or
(iii) by operation of law. After October 26, 2000, this Representative's Warrant
may be sold, transferred, assigned or hypothecated in accordance with applicable
law and the terms of this Representative's Warrant.

<PAGE> 2
2. a. This Representative's Warrant may be exercised during the Exercise
Period as to the whole or any lesser number of Warrant Shares, by the
surrender of this Representative's Warrant (with the election attached
hereto duly executed) to the Company at its office at 1522 Blake Street,
Denver, Colorado, or such other place as is designated in writing by the
Company, together with a certified or bank cashier's check payable to the
order of the Company in an amount equal to the Exercise Price multiplied by
the number of Warrant Shares for which this Representative's Warrant is
being exercised.

b. Upon written request of the Holder, and in lieu of payment for the
Warrant Shares by check in accordance with paragraph 2(a) hereof, the
Holder may exercise the Representative's Warrant (or any portion thereof)
for and receive the number of Warrant Shares equal to a fraction, the
numerator of which equals (i) the amount by which the Current Market Price
of the Common Stock for the ten (10) trading days preceding the date of
exercise exceeds the Exercise Price per Share, multiplied by (ii) the
number of Warrant Shares to be purchased; the denominator of which equals
the Current Market Price.

c. For the purposes of any computation under this Representative's
Warrant, the "Current Market Price" at any date shall be the closing price
of the Common Stock on the business day next preceding the event requiring
an adjustment hereunder. If the principal trading market for such
securities is an exchange, the closing price shall be the reported last
sale price on such exchange on such day provided if trading of such Common
Stock is listed on any consolidated tape, the closing price shall be the
reported last sale price set forth on such consolidated tape. If the
principal trading market for such securities is the over-the-counter
market, the closing price shall be the last reported sale price on such
date as set forth by The Nasdaq Stock Market, Inc., or, if the security is
not quoted on such market, the average of the closing bid and asked prices
as set forth in the National Quotation Bureau pink sheets or the Electronic
Bulletin Board System for such day. Notwithstanding the foregoing, if there
is no reported last sale price or average closing bid and asked prices, as
the case may be, on a date prior to the event requiring an adjustment
hereunder, then the current market price shall be determined as of the
latest date prior to such day for which such last sale price or average
closing bid and asked prices are available.

3. Upon each exercise of this Representative's Warrant, the Holder shall be
deemed to be the holder of record of the Warrant Shares issuable upon such
exercise, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. As soon as practicable after each such
exercise of this Representative's Warrant, the Company shall issue and deliver
to the Holder a certificate or certificates for the Warrant Shares

2
<PAGE> 3

issuable upon such exercise, registered in the name of the Holder or its
designee. If this Representative's Warrant should be exercised in part only, the
Company shall, upon surrender of this Representative's Warrant for cancellation,
execute and deliver a new Representative's Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares (or portions thereof)
subject to purchase hereunder.

4. The Representative's Warrants shall be registered in a Representative's
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Representative's Warrant on the Representative's
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such
Representative's Warrant on the part of any other person. The Representative's
Warrants shall be transferable only on the books of the Company upon delivery
thereof duly endorsed by the Holder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Representative's Warrant or
Representative's Warrants to the person entitled thereto. The Representative's
Warrants may be exchanged, at the option of the Holder thereof, for another
Representative's Warrant, or other Representative's Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof) upon surrender to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause the Representative's Warrants to be
transferred on its books to any person if, in the opinion of counsel to the
Company, such transfer does not comply with the provisions of the Securities Act
of 1933, as amended (the "Act"), or applicable state blue sky laws and the rules
and regulations thereunder.

5. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Representative's Warrant, such number of shares of Common
Stock as shall, from time to time, be sufficient therefor. The Company covenants
that all Warrant Shares issuable upon exercise of this Representative's Warrant
shall be validly issued, fully paid, nonassessable, and free of preemptive
rights.

6. a. If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the number
of Warrant Shares subject to this Representative's Warrant immediately
prior to such subdivision shall be proportionately increased, and if the
Company shall at any time combine the outstanding Common Stock by
recapitalization, reclassification or combination thereof, the number of
Warrant Shares subject to this Representative's Warrant immediately prior
to such combination shall be proportionately decreased.

3
<PAGE> 4

Any corresponding adjustment to the Exercise Price shall become effective
at the close of business on the record date for such subdivision or
combination.

b. If the Company after the date hereof shall distribute to the
holders of its Common Stock any securities or other assets (other than a
distribution of Common Stock or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Exercise Price in effect immediately prior to the record
date of such distribution as may be necessary to preserve the rights
substantially proportionate to those enjoyed hereunder by the Holder
immediately prior to such distribution. Any such adjustment made in good
faith by the Board of Directors shall be final and binding upon the Holder
and shall become effective as of the record date for such distribution.

c. No adjustment in the number of Warrant Shares subject to this
Representative's Warrant shall be required unless such adjustment would
require an increase or decrease in such number of Warrant Shares of at
least 1% of the then adjusted number of Warrant Shares issuable upon
exercise of this Representative's Warrant, provided, however, that any
adjustments which by reason of the foregoing are not required at the time
to be made shall be carried forward and taken into account and included in
determining the amount of any subsequent adjustment; and provided further,
however, that in case the Company shall at any time subdivide or combine
the outstanding Common Stock or issue any additional Common Stock as a
dividend, said percentage shall forthwith be proportionately increased in
the case of a combination or decreased in the case of a subdivision or
dividend of Common Stock so as to appropriately reflect the same. If the
Company shall make a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or distribution and
legally abandon its plan to pay or deliver such dividend or distribution
then no adjustment in the number of Warrant Shares subject to this
Representative's Warrant shall be required by reason of the making of such
record.

d. Whenever the number of Warrant Shares purchasable upon the exercise
of this Representative's Warrant is adjusted as provided herein, the
Exercise Price shall be adjusted (to the nearest one tenth of a cent) by
respectively multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable upon the exercise of this Representative's
Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares purchasable immediately thereafter.

4
<PAGE> 5

e. In case of any reclassification of the outstanding Common Stock
(other than a change covered by (a) hereof or which solely affects the par
value of such Common Stock) or in the case of any merger or consolidation
of the Company with or into another corporation (other than a consolidation
or merger in which the Company is the continuing corporation and which does
not result in any reclassification or capital reorganization of the
outstanding Common Stock), or in the case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Representative's Warrant shall have the right
thereafter (until the expiration of the right of exercise of this
Representative's Warrant) to receive upon the exercise hereof, for the same
aggregate Exercise Price payable hereunder immediately prior to such event,
the kind and amount of shares of stock or other securities or property
receivable upon such reclassification, capital reorganization, merger or
consolidation, or upon the dissolution following any sale or other
transfer, by a holder of the number of Warrant Shares obtainable upon the
exercise of this Representative's Warrant immediately prior to such event;
and if any reclassification also results in a change in Common Stock
covered by (a) above, then such adjustment shall be made pursuant to both
this paragraph (e) and paragraph (a). The provisions of this paragraph (e)
shall similarly apply to successive re- classifications, or capital
reorganizations, mergers or consolidations, sales or other transfers.

f. i. Upon occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Warrant Shares purchasable upon
exercise of this Representative's Warrant in accordance with, and as
required by, the terms hereof, the Company shall forthwith compute the
adjusted Exercise Price and the adjusted number of Warrant Shares
purchasable at such adjusted Exercise Price by reason of such event in
accordance herewith. The Company shall give to each Holder of the
Representative's Warrants a copy of such computation which shall be
conclusive and shall be binding upon such Holders unless contested by
Holders by written notice to the Company within thirty (30) days after
receipt thereof.

ii. In case the Company after the date hereof shall propose to
take any action requiring adjustment of the number of Warrant Shares
pursuant to paragraph 6(a), (b) or (e), or the liquidation,
dissolution or winding up of the Company, then in each such case, the
Company shall make the computation described above and if an
adjustment to the Exercise Price is required, the Company shall notify
the Holders of the Representative's Warrants of such proposed action,
which shall specify the record date for any such action or if no
record date is established with respect thereto, the date on which
such action shall occur or

5
<PAGE> 6

commence, or the date of participation therein by the holders of
Common Stock if any such date is to be fixed, and shall also set forth
such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Exercise Price and the
number, or kind, or class of shares or other securities or property
obtainable upon exercise of this Representative's Warrant after giving
effect to any adjustment which will be required as a result of such
action. Such notice shall be given at least fifteen (15) days prior to
the record date for determining holders of the Common Stock for
purposes of any such action, and in the case of any action for which a
record date is not established then such notice shall be mailed at
least fifteen (15) days prior to the taking of such proposed action.

iii. Failure to file any certificate or notice or to give any
notice, or any defect in any certificate or notice, shall not effect
the legality or validity of the adjustment in the Exercise Price or in
the number, or kind, or class of shares or other securities or
property obtainable upon exercise of the Representative's Warrants or
of any transaction giving rise thereto.

g. The Company shall not be required to issue fractional Warrant
Shares upon any exercise of the Representative's Warrants. As to any final
fraction of a Share which the Holder of a Representative's Warrant would
otherwise be entitled to purchase upon such exercise, the Company shall pay
a cash adjustment in respect of such final fraction in an amount equal to
the same fraction of the market price of a share of such stock on the
business day preceding the day of exercise. The Holder of a
Representative's Warrant, by his acceptance of a Representative's Warrant,
expressly waives any right to receive any fractional Warrant Shares.

h. Regardless of any adjustments pursuant to this section in the
Exercise Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of a Representative's
Warrant, a Representative's Warrant may continue to express the Exercise
Price and the number of Warrant Shares obtainable upon exercise at the same
price and number of Warrant Shares as are stated herein.

i. The number of Warrant Shares, the Exercise Price and all other
terms and provisions of the Company's agreement with the Holder of this
Representative's Warrant shall be determined exclusively pursuant to the
provisions hereof.

j. The above provisions of this section 6 shall similarly apply to
successive transactions which require adjustments.

k. Notwithstanding any other language to the contrary herein, (i) the
anti-dilution terms of this Representative's Warrant will not be enforced
so as to provide the Holder the right to

6
<PAGE> 7

receive, or for the accrual of, cash dividends prior to the exercise of
this Representative's Warrant, and (ii) the anti-dilution terms of this
Representative's Warrant will not be enforced in such a manner as to
provide the Holder with disproportionate rights, privileges and economic
benefits not provided to purchasers of the Common Stock in the Public
Offering.

7. The issuance of any Warrant Shares or other securities upon the exercise
of this Representative's Warrant and the delivery of certificates or other
instruments representing such securities, or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.

8. a. If, at any time after October 26, 1999 (the Effective Date of the
Registration Statement), and ending October 26, 2006 (seven years after the
Effective Date of the Registration Statement), the Company shall file a
registration statement (other than on Form S-4, Form S-8, or any successor
form) with the Securities and Exchange Commission (the "Commission") while
Warrant Shares are available for purchase upon exercise of this
Representative's Warrant or while any Warrant Shares (collectively, the
Representative's Warrants and the underlying Warrant Shares, the
"Representative's Securities") are outstanding, the Company shall, on two
occasions only, give the Holder and all the then holders of such
Representative's Securities at least 30 days prior written notice of the
filing of such registration statement. If requested by the Holder or by any
such holder in writing within 10 days after receipt of any such notice, the
Company shall, at the Company's sole expense (other than the fees and
disbursements of counsel for the Holder or such holder and the underwriting
discounts, if any, payable in respect of the securities sold by the Holder
or any such holder), register or qualify the Representative's Securities of
the Holder or any such holders who shall have made such request
concurrently with the registration of such other securities, all to the
extent requisite to permit the public offering and sale of the
Representative's Securities requested to be registered. Notwithstanding the
foregoing, if the managing underwriter of any such offering shall advise
the Company in writing that, in its opinion, the distribution of all or a
portion of the Representative's Securities requested to be included in the
registration concurrently with the securities being registered by the
Company would materially adversely affect the distribution of such
securities by the Company for its own account, then the Holder or any such
holder who shall have requested registration of his or its Representative's
Securities shall delay the offering and sale of

7
<PAGE> 8

such Representative's Securities (or the portions thereof so designated by
such managing underwriter) for such period, not to exceed 90 days, as the
managing underwriter shall request, provided that no such delay shall be
required as to any Representative's Securities if any securities of the
Company are included in such registration statement for the account of any
person other than the Company and the Holder unless the securities included
in such registration statement for such other person shall have been
reduced pro rata to the reduction of the Representative's Securities which
were requested to be included in such registration. The Company shall not
be required to complete any registration commenced under this paragraph
8(a) if it determines for any reason not to proceed with the offering of
securities it proposed to register.

b. If at any time after October 26, 1999 (the Effective Date of the
Registration Statement), and before October 26, 2004 (five years after the
Effective Date of the Registration Statement), the Company shall receive a
written request from holders of Representative's Securities who, in the
aggregate, own (or upon exercise of all Representatives Warrants will own)
a majority of the total number of Warrant Shares, the Company shall, as
promptly as practicable, prepare and file with the Commission a
registration statement sufficient to permit the public offering and sale of
the Representative's Securities, and will use its best efforts through its
officers, directors, auditors and counsel to cause such registration
statement to become effective as promptly as practicable; provided,
however, that the Company shall only be obligated to file and obtain
effectiveness of one such registration statement. All expenses incurred in
connection with such registration (other than the fees and disbursements of
counsel for the Holder or such holders and underwriting discounts, if any,
payable in respect of the Representative's Securities sold by the Holder or
any such holder) shall be borne by the Company. Notwithstanding the
foregoing, if the Company shall furnish to each of the Holders a
certificated signed by the Chief Executive Officer of the Company stating
that in the good faith judgment of the Board of Director of the Company it
would be significantly disadvantageous to the Company and its shareholders
for such a registration statement to be filed, the Company shall have the
right to defer such filing for a period of not more than 90 days after
receipt of the request to effect such a registration; provided, however,
that the Company may not utilize this right more than once; and provided,
further, that the holders who made such written request to effect such
registration, may, at any time in writing during this 90-day deferral,
withdraw such request for such registration and thereby preserve the right
provided in this paragraph 6b to again request such registration; and
provided further, however, that during such 90-day period and for a period
of 30 days after the effectiveness of such registration statement, the
Company will not file any registration statement(s) relating to an offering
or sale of shares of its Common Stock by the Company or any selling
shareholder other than the Holders.

8
<PAGE> 9

c. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall use its best efforts to cause the
Representative's Securities so registered to be registered or qualified for
sale under the securities or blue sky laws of such jurisdictions as the
Holder or such holders may reasonably request; provided, however, that the
Company shall not be required to qualify to do business in any state by
reason of this paragraph 8(c) in which it is not otherwise required to
qualify to do business and provided further, that the Company has no
obligation to qualify the Representative's Securities where such
qualification would cause any unreasonable delay or expenditure by the
Company.

d. The Holders agree not to effect any public sale or public
distribution of equity securities of the Company or any securities
exercisable for such securities, during the seven days prior to and the
60-day period beginning on the effective date of any underwritten
registration in which Representative's Securities are included (except as
part of such underwritten registration) unless the managers managing the
registered public offering otherwise agree.

e. The Company shall keep effective any registration or qualification
contemplated by this paragraph 8 and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period
of time as shall be required to permit the Holder or such holders to
complete the offer and sale of the Representative's Securities covered
thereby. The Company shall in no event be required to keep any such
registration or qualification in effect for a period in excess of nine
months from the date on which the Holder and such holders are first free to
sell such Representative's Securities; provided, however, that if the
Company is required to keep any such registration or qualification in
effect beyond such period with respect to securities other than the
Representative's Securities, the Company shall keep such registration or
qualification in effect as it relates to the Representative's Securities
for so long as such registration or qualification remains or is required to
remain in effect in respect of such other securities.

f. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall furnish to the Holder and to each such
holder such reasonable number of copies of the registration statement and
of each amendment and supplement thereto (in each case, including all
exhibits), such reasonable number of copies of each prospectus contained in
such registration statement and each supplement or amendment thereto
(including each preliminary prospectus), all of which shall conform to the
requirements of the Act and the rules and regulations thereunder, and

9
<PAGE> 10

such other documents as the Holder or such holders may reasonably request
in order to facilitate the disposition of the Representative's Securities
included in such registration.

g. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall furnish the Holder and each holder of any
Representative's Securities so registered with an opinion of its counsel to
the effect that (i) the registration statement has become effective under
the Act and no order suspending the effectiveness of the registration
statement, preventing or suspending the use of the registration statement,
any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to such counsel's actual knowledge
has the Securities and Exchange Commission or any securities or blue sky
authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order and (ii) the registration
statement and each prospectus forming a part thereof (including each
preliminary prospectus), and any amendment or supplement thereto, complies
as to form with the Act and the rules and regulations thereunder. Such
counsel shall also provide a Blue Sky Memorandum setting forth the
jurisdictions in which the Representative's Securities have been registered
or qualified for sale pursuant to the provisions of paragraph 8(c).

h. The Company agrees that until all the Representative's Securities
have been sold under a registration statement or pursuant to Rule 144 under
the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Representative's Securities to sell such securities under Rule 144.

i. The Holder and any holders who propose to register their
Representative's Securities under the Act shall execute and deliver to the
Company a selling stockholder questionnaire on a form to be provided by the
Company. Prior to filing any registration statement, or any amendments or
supplements thereto, which includes any Representative's Securities, the
Company will furnish to counsel for each Holder or other holder who has
included Representative's Securities in such registration statement copies
of all documents proposed to be filed, which documents will be subject to
the timely review of such counsel. Each Holder or other holder shall be
responsible for all fees and expenses of its own counsel. The Company shall
allow each such Holder or other holder to conduct any desired due diligence
in connection with such review. Each Holder and such other holders agree to
provide all such information and materials and take all such action as may
be reasonably required in order to permit the Company to comply with all
applicable requirements of the Commission and to obtain any desired
acceleration of the effective date of such registration statement.

10
<PAGE> 11

j. The Company shall not be required by the terms hereof to file a
Registration Statement if, in the opinion of counsel to the holders of the
Representative's Warrants and Warrant Shares and counsel for the Company
(or, should they not agree, in the opinion of another counsel experienced
in securities law matters acceptable to counsel for the holders of
Representative's Warrants and Warrant Shares and the Company), the proposed
public offering or other transfer as to which such Registration Statement
is requested to be filed is exempt from applicable federal and state
securities laws, rules, regulations and would result in unaffiliated
purchasers or transferees obtaining securities that are not "restricted
securities" as that term is defined in Rule 144 under the Act.

9. a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, any holder of any of the
Representative's Securities, their officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls any
such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
and against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 9, but
not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts
paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement
or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement
thereto, or (B) in any application or other document or communication (in
this Section 9 collectively called an "application") executed by or on
behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Representative's Securities under the securities or blue
sky laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect
to the Holder or any holder of any of the Representative's Securities by or
on behalf of such person expressly for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (ii) any
breach of any representation, warranty, covenant or agreement of the
Company

11
<PAGE> 12
contained in this Representative's Warrant. The foregoing agreement to indemnify
shall be in addition to any liability the Company may otherwise have, including
liabilities arising under this Representative's Warrant.

If any action is brought against the Holder or any holder of any of
the Representative's Securities or any of its officers, directors, partners,
employees, agents or counsel, or any controlling persons of such person (an
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may otherwise have to Holder or any holder of any of the Representative's
Securities) and the Company shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent.

b. The Holder and each holder agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who
shall have signed any registration statement covering the Representative's
Securities held by the Holder and each holder and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, and each underwriter of an
underwritten offering, to the same extent as the foregoing indemnity from
the Company to the Holder and each holder in paragraph 9(a), but only with
respect to statements or omissions, if any, made in any registration
statement, preliminary prospectus, or final prospectus (as from time to
time amended and supplemented), or any amendment or supplement thereto, or
in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder and each
holder by or on

12
<PAGE> 13

behalf of the Holder and each holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be.
If any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or
in any application, and in respect of which indemnity may be sought against
the Holder and each holder pursuant to this paragraph 9(b), the Holder and
each holder shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and
duties given to the indemnified parties, by the provisions of paragraph
9(a).

c. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph
9(a) or 9(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act or otherwise because the indemnification provided for in this
Section 9 is for any reason held to be unenforceable by the Company and the
Holder and any holder, then the Company (including for this purpose any
contribution made by or on behalf of (i) any director of the Company, (ii)
any officer of the Company who signed any such registration statement and
(iii) any controlling person of the Company), as one entity, and the Holder
and any holder of any of the Representative's Securities included in such
registration in the aggregate (including for this purpose any contribution
by or on behalf of the Holder or any holder), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses
whatsoever to which any of them may be subject, on the basis of relevant
equitable considerations such as the relative fault of the Company and the
Holder or any such holder in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses. The relative fault,
in the case of an untrue statement, alleged untrue statement, omission or
alleged omission, shall be determined by, among other things, whether such
statement, alleged statement, omission or alleged omission relates to
information supplied by the Company, by the Holder or by any holder of
Representative's Securities included in such registration, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Holder agree that it would be unjust and
inequitable if the respective obligations of the Company and the Holder for
contribution were determined by pro rata or per

13
<PAGE> 14

capita allocation of the aggregate losses, liabilities, claims, damages and
expenses (even if the Holder and the other indemnified parties were treated
as one entity for such purpose) or by any other method of allocation that
does not reflect the equitable considerations referred to in this paragraph
9(c). No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For
purposes of this paragraph 9(c), each person, if any, who controls the
Holder or any holder of any of the Representative's Securities within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
each officer, director, partner, employee, agent and counsel of each such
person, shall have the same rights to contribution as such person and each
person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed any such registration statement, and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the provisions of this paragraph 9(c).
Anything in this paragraph 9(c) to the contrary notwithstanding, no party
shall be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This paragraph 9(c)
is intended to supersede any right to contribution under the Act, the
Exchange Act or otherwise.

10. Unless the Representative's Securities have been registered or an
exemption from such registration is available, the Warrant Shares issued upon
exercise of the Representative's Warrants shall be subject to a stop transfer
order and the certificate or certificates evidencing any such Warrant Shares
shall bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
NOR HAVE THEY BEEN REGISTERED UNDER THE SECURITIES ("BLUE SKY") LAWS OF ANY
STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND UNDER THE APPLICABLE STATE SECURITIES ("BLUE SKY") LAWS OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND LAWS IS ESTABLISHED TO THE SATISFACTION OF THE COMPANY, WHICH MAY
NECESSITATE A WRITTEN OPINION OF SELLER'S COUNSEL SATISFACTORY TO COMPANY
COUNSEL.

11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Representative's Warrant (and upon
surrender of any Representative's Warrant if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Representative's Warrant of like date, tenor
and denomination.

12. The Holder of any Representative's Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Representative's Warrant.

14
<PAGE> 15

13. This Representative's Warrant shall be construed in accordance with the
laws of the State of Colorado, without giving effect to conflict of laws.

Dated: October 29, 1999

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Craig J. Zoellner
----------------------------------
[SEAL] Craig J. Zoellner, Vice President

15
<PAGE> 16

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the
attached Representative's Warrant.)

FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________ Representative's Warrants to
purchase __________ shares of Common Stock of PentaStar Communications, Inc.
(the "Company"), together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ____________________________ attorney
to transfer such Representative's Warrants on the books of the Company, with
full power of substitution.

Dated:
---------------------------

Signature:
---------------------------------------

Signature Guaranteed:

NOTICE

The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.

16
<PAGE> 17

ELECTION TO EXERCISE

(To be executed by the holder if such holder desires to
exercise the attached Representative's Warrant)

The undersigned hereby exercises his or its rights to subscribe for
__________ shares of Common Stock covered by the within Representative's Warrant
(each as defined in the within Representative's Warrant) and tenders payment
herewith in the amount of $__________ in accordance with the terms thereof, and
requests that certificates for such Warrants be issued in the name of, and
delivered to:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
(Print Name, Address and Social Security or
Tax Identification Number)

and, if such number of Warrants (or portions thereof) shall not be all the
Warrants covered by the within Representative's Warrant, that a new
Representative's Warrant for the balance of the Representative's Warrants (or
portions thereof) covered by the within Representative's Warrant be registered
in the name of, and delivered to, the undersigned at the address stated below.

Name:
----------------------------------------------------------------------------
(Print)

Address:
-------------------------------------------------------------------------

(Signature)

Dated: Signature Guaranteed:

NOTICE

The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.

<PAGE> 1
EXHIBIT 4.3

PENTASTAR COMMUNICATIONS, INC.

------------------------------

CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK

------------------------------

First:

The name of the corporation is PentaStar Communications, Inc.

Second:

PentaStar Communications, Inc., a Delaware corporation, certifies that,
pursuant to authority granted to and vested in the Board of Directors of the
corporation by the provisions of the certificate of incorporation of the
corporation, the Board duly adopted, effective October 12, 1999, the following
resolution designating a series of the Preferred Stock of the corporation:

RESOLVED: That there be created a series of Preferred Stock which shall
be designated as Series A Preferred Stock and shall have the powers,
preferences, rights, qualifications, limitations and restrictions set forth
below:

1. Designation and Number. A series of Preferred Stock is hereby
established and designated the Series A Preferred Stock, par value $.0001 per
share (the "Series A Preferred Stock"). The number of shares which constitutes
the Series A Preferred Stock is 86 shares. Each share of the Series A Preferred
Stock shall have a stated value of $1,000 per share.

2. Dividends.

(a) The holders of Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds at
the time legally available therefor, dividends at the annual rate of $50.00 per
annum per share (i.e., a 5% annual rate on its $1,000 stated value), which shall
be fully cumulative, shall accrue from the date of initial issuance of each
share of Series A Preferred Stock (on a daily basis whether or not sufficient
funds would be legally available at that time for the payment of such dividends)
and shall be payable in cash annually in arrears on December 31 of each year in
respect of the 12-month period (or portion thereof during which such Preferred
Stock was outstanding) ending on such December 31 (except that if any such

<PAGE> 2

payment date is a Saturday, Sunday or legal holiday, then such dividend shall be
payable on the first preceding day that is not a Saturday, Sunday or legal
holiday). Each such dividend shall be paid to the holders of record of the
Series A Preferred Stock as they appear upon the stock transfer books of the
corporation at the close of business on such payment date. For purposes hereof,
the term "legal holiday" shall mean any day on which banking institutions are
authorized to close in Denver, Colorado. Dividends on account of arrears for any
past dividend period may be declared and paid at any time, without reference to
any regular dividend payment date.

(b) The corporation may elect to defer payment of dividends if
and to the extent the payment of such dividends would violate restrictions in
any loan agreement or indenture of the corporation or a subsidiary thereof
pursuant to which any of them then has indebtedness outstanding (such
restrictions being referred to as "Dividend Restrictions") or violate the
General Corporation Law of the State of Delaware (the "GCL"), and such dividends
so deferred will accumulate additional dividends as provided in Section 2(c).
Except as provided in the following sentence, such additional dividends will be
payable at the times referred to in Section 2(a). The corporation shall pay all
such deferred dividends and additional amounts accrued thereon, out of funds
then legally available therefor, as soon as, and to the extent that, such
payment does not violate the Dividend Restrictions or the GCL.

(c) Dividends whose payment is not made on a timely basis as
specified above (including, without limitation, all amounts referred to in
Section 2(b)) shall accumulate, together with an amount computed at the rate of
5% per annum thereon from the date such dividends were payable until paid in
full, compounded annually, which additional accrued amounts shall be paid as
additional dividends hereunder. In the event that the funds legally available
for dividends are not sufficient to pay the dividends accrued on the Series A
Preferred Stock, the funds available shall be paid to the holders of Preferred
Stock ratably in proportion to the respective unpaid dividends accrued on the
Series A Preferred Stock.

3. Voting Rights. Except as otherwise provided by the GCL, the Series A
Preferred Stock will not be entitled to vote on any matters to be voted on by
the corporation's stockholders.

4. Liquidation Preference.

(a) In the event of a liquidation, dissolution or winding up
of the corporation, whether voluntary or involuntary, the holders of shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
corporation available for distribution to stockholders an amount equal to the
dividends accrued and unpaid on such shares on the date of final distribution to
such holders, whether or not declared, including any accruals thereon provided
in Section 2(b) or (c), plus a sum equal to $1,000 per share, before any payment
shall be made or any assets distributed to the holders of shares of Common
Stock.

<PAGE> 3

(b) After payment in full of the liquidation preference of the
shares of the Series A Preferred Stock, any remaining assets of the corporation
available for distribution to the stockholders shall be distributed as set forth
in the corporation's certificate of incorporation.

(c) Any (i) transaction or event in connection with which the
Common Stock of the corporation shall be converted into or constitute solely the
right to receive cash, securities (other than solely equity securities of the
corporation), property or other assets (whether by means of an exchange offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise), (ii) conveyance, sale, lease, assignment, transfer or other
disposition of all or substantially all of the corporation's property, business
or assets, (iii) sale by the corporation or one or more of its stockholders in a
single transaction or series of related transactions of at least 50% of the
corporation's voting power after such sale or (iv) consolidation or merger of
the corporation with or into any other entity or entities where the corporation
is not the surviving entity (other than a merger solely for the purpose of
changing the corporation's state of incorporation) or in which 50% or more of
the corporation's voting power is transferred, shall be deemed to be a
liquidation, dissolution and winding up of the corporation within the meaning of
Section 4(a). The phrase "voting power" means general voting power under
ordinary circumstances to elect the board of directors of the corporation
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).

5. Redemption or Call. No holder of Series A Preferred Stock may
require the corporation to redeem all or any part of the shares of Series A
Preferred Stock. The corporation may not call or redeem all or any part of the
shares of Series A Preferred Stock.

6. Conversion. The shares of Series A Preferred Stock shall not be
convertible into Common Stock or any other capital stock of the corporation.

7. Limitations. The corporation may, at any time the Series A Preferred
Stock is outstanding, authorize or issue any series of Preferred Stock that is
senior to or on parity with the Series A Preferred Stock as to dividend or
redemption rights, liquidation preferences or otherwise. So long as any shares
of Series A Preferred Stock remain outstanding, the corporation shall not,
directly or indirectly, without the written consent of the holders of a majority
of the then-outstanding shares of Series A Preferred Stock:

(a) Purchase, redeem or otherwise acquire for value (or pay
into or set aside as a sinking fund for such purpose) any Common Stock or any
warrant, option or right to purchase any Common Stock;

(b) At any time during which there are accrued dividends
outstanding on the Series A Preferred Stock, declare or pay any dividends on or
declare or make any other distribution, direct or indirect (other than a
dividend payable solely in shares of Common Stock), on account of the Common
Stock (or set apart any sum for any such purpose);

<PAGE> 4

(c) Amend its Certificate of Incorporation or amend or repeal its
bylaws in any manner that would adversely affect the rights or preferences of
the Series A Preferred Stock; or

(d) Issue any additional shares of Series A Preferred Stock.

Third:

The foregoing resolution of the Board of Directors and creation and
authorization of the issuance of said series of Preferred Stock were duly made
by the Board of Directors pursuant to and in accordance with Section 151 of the
Delaware General Corporation Law.

IN WITNESS WHEREOF, PentaStar Communications, Inc. has caused this
Certificate of Designation to be executed by Richard M. Tyler, its Vice
President, on this 21st day of October, 1999.

PENTASTAR COMMUNICATIONS, INC.

By: /s/ Richard M. Tyler
------------------------------
Richard M. Tyler,
Vice President

<PAGE> 1
EXHIBIT 10.6

AMENDED AND RESTATED
PRINCIPAL STOCKHOLDER'S ESCROW
AND CONTINGENT STOCK AGREEMENT

This Amended and Restated Escrow and Contingent Stock Agreement (this
"Agreement") is entered into effective as of October 26, 1999, regardless of its
actual date of execution, among PentaStar Communications, Inc., a Delaware
corporation ("PentaStar" or the "Escrow Agent"), OC Mergerco 1, Inc., a Delaware
corporation (the "Acquiror"), and Jeffrey Veres ("Veres"), who is the principal
stockholder of DMA Ventures, Inc., a Colorado corporation ("Access")
(collectively, the "Parties").

RECITALS

1. The Parties are party to a Principal Stockholder's Escrow and
Contingent Stock Agreement dated October 26, 1999 (the "Original
Agreement"). The parties are entering into this Agreement for the
purpose of amending and restating the Original Agreement in its
entirety.

2. PentaStar, the Acquiror, Access, and Veres are parties to an agreement
and plan of merger dated August 13, 1999, under which Access will be
merged into the Acquiror in a transaction intended to qualify as a
tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Merger Transaction").

3. In the Merger Transaction, Veres will receive 205,000 shares of
PentaStar common stock and $500,000 of cash in return for his shares of
Access.

4. At the time of the Merger Transaction, the value of Access cannot be
determined with certainty.

5. The purpose of this Agreement is to provide for certain adjustments in
the amount of stock consideration Veres will receive in the Merger
Transaction.

NOW, THEREFORE, the parties to this Agreement agree as follows:

ARTICLE 1: DIRECTIONS

1.1 ESCROWED PROPERTY:

Veres will deposit with the Escrow Agent 68,265 shares of PentaStar
common stock (the "Shares"), which will be held by the Escrow Agent in
a separate account the sole assets of which will consist of the Shares
and certain shares of PentaStar common stock issued in connection with
the acquisition by PentaStar of certain other businesses (the "Escrow
Account"). The certificates for the Shares shall be delivered with
appropriate stock powers duly executed in blank.

<PAGE> 2

1.2 INSTRUCTIONS:

The Escrow Agent shall hold and disburse the Shares pursuant to the
instructions set forth in Schedule A, attached hereto and incorporated
herein by reference.

1.3 ASSIGNMENT OF INTEREST:

The assignment, transfer, conveyance, or hypothecation of any right,
title, or interest in and to the subject matter of this Agreement is
prohibited by any party, and no such assignment, transfer, conveyance,
or hypothecation will be given effect.

ARTICLE 2: RIGHTS OF VERES IN THE SHARES

During the term of this Agreement, (i) the Shares shall be reflected as
issued and outstanding on PentaStar's financial statements and other books and
records; (ii) Veres shall have all ownership rights with respect to the Shares,
including rights to vote such Shares and rights to any dividends paid by
PentaStar with respect to the Shares, and the books and records of PentaStar
will reflect such ownership. Upon the death or termination of employment of
Veres, the Shares will remain in the Escrow Account subject to disbursement to
Veres's legal heirs in accordance with Schedule A.

ARTICLE 3: PROVISIONS CONCERNING ESCROW AGENT

3.1 ESCHEAT:

The Parties are aware that under Colorado law, escrowed property which
is presumed abandoned may escheat to the State. The Escrow Agent shall
have no liability to Veres, his respective heirs, legal
representatives, and successors, should any or all of the Shares become
escheatable or escheat by operation of law.

3.2 NON-LIABILITY:

The Escrow Agent shall not be liable for any act or omission while
acting in good faith and in the exercise of its own best judgment. Any
act or omission by the Escrow Agent pursuant to the advice of its
attorneys shall be conclusive evidence of such good faith. The Escrow
Agent shall have the right to consult with counsel at its expense
whenever any question arises concerning the Agreement and shall incur
no liability for any delay reasonably required to obtain such advice of
counsel. The Escrow Agent shall not be liable for the alteration,
modification or elimination of any right permitted or given under the
instructions set forth in Schedule A and/or in any document deposited
under this Agreement pursuant to any statute of limitations or by
reason of laches. The Escrow Agent shall have no further responsibility
or liability whatsoever to Veres following a partial or complete
distribution of the Shares pursuant to this Agreement. The Escrow Agent
shall not incur any liability with respect to any act or omission in
reliance upon any document, including any written notice or
instructions provided for in this Agreement. In performing its
obligations hereunder, the Escrow Agent shall be entitled to presume,
without inquiry, the due execution, validity and effectiveness of all
documents it receives, and also the truth and accuracy of any
information contained therein. The Escrow Agent shall not be
responsible or liable for any diminution in value of the Shares,
whatsoever, for any reason.

<PAGE> 3

3.3 DISAGREEMENTS:

If any disagreement or dispute arises between the Parties to this
Agreement concerning the meaning or validity of any provision hereunder
or concerning any other matter relating to this Agreement, the Escrow
Agent:

a. Shall be under no obligation to act, except under process or
order of court, or until it has been adequately indemnified to
its full satisfaction, and shall sustain no liability for its
failure to act pending such process, court order or
indemnification; and

b. May, in its sole and absolute discretion, interplead the
Shares or that portion of Shares it then holds with the
District Court of the City and County of Denver, State of
Colorado, and name the Parties in such interpleader action.
Upon filing the interpleader action, the Escrow Agent shall be
relieved of all liability as to the Shares. The Parties by
signing this Agreement submit themselves to the jurisdiction
of such Court and do appoint the Clerk of such Court as their
agent for the service of all process in connection with such
proceedings. In no event shall the institution of such
interpleader action impair the rights of the Escrow Agent
described in Section 3.2 of this Article.

ARTICLE 4: GENERAL TERMS AND CONDITIONS

4.1 EXTENSION OF BENEFITS:

Subject to Section 1.3, this Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective heirs, legal
representatives, successors, and assigns of all the Parties and the
Escrow Agent.

4.2 GOVERNING LAW:

This Agreement shall be construed and enforced in accordance with the
laws of the State of Colorado, without regard to the provisions of the
laws of the State of Colorado or any other State regarding conflicts of
laws.

4.3 NOTICES:

All notices, requests, demands, and other communications required under
this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or by certified mail, return receipt
requested, and postage prepaid. If any notice is mailed, it shall be
deemed given on the date such notice is deposited in the United States
mail. If any notice is personally delivered, it shall be deemed given
upon the date of such delivery. If notice is given to a party, it shall
be mailed or delivered to the addresses set forth below the signature
blocks. It shall be the responsibility of the Parties to notify the
Escrow Agent in writing of any name or address changes.

4.4 ENTIRE AGREEMENT:

With respect to the subject matter hereof, this Agreement sets forth
the entire agreement and understanding of the Parties.

<PAGE> 4

4.5 AMENDMENT:

This Agreement may be amended, modified, superseded, rescinded, or
canceled only by a written instrument executed by the Parties.

4.6 WAIVERS:

The failure of any party to this Agreement at any time or times to
require performance of any provision under this Agreement shall in no
manner affect the right at a later time to enforce the same
performance. A waiver by any party to this Agreement of any such
condition or breach of any term, covenant, representation, or warranty
contained in this Agreement, in any one or more instances, shall
neither be construed as a further or continuing waiver of any such
condition or breach nor a waiver of any other condition or breach of
any other term, covenant, representation, or warranty contained in this
Agreement.

4.7 HEADINGS:

Section headings of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or otherwise modify any
of the terms of provisions of this Agreement.

4.8 COUNTERPARTS:

This Agreement may be executed in one or more counterparts, each of
which when executed shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument.
This Agreement may be delivered by facsimile, and facsimile signatures
shall be treated as original signatures for all applicable purposes.

4.9 ARBITRATION.

Any disputes arising under or in connection with this Agreement,
including, without limitation, those involving claims for specific
performance or other equitable relief, will be submitted to binding
arbitration in Denver, Colorado before the Judicial Arbiter Group, but
under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration
statutes, and shall not be the subject of litigation in any forum. If
the Judicial Arbiter Group is unavailable to conduct the arbitration,
the it shall be before the American Arbitration Association. EACH
PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY, KNOWINGLY AND
INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE HAVE TO SEEK
REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO JURY TRIAL.
The arbitrator shall have full authority to order specific performance
and other equitable relief and award damages and other relief available
under this Agreement or applicable law, but shall have no authority to
add to, detract from, change or amend the terms of this Agreement or
existing law. All arbitration proceedings, including settlements and
awards, shall be confidential. The decision of the arbitrators will be
final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND
AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The prevailing
party or parties in any such arbitration in any action to enforce this
Agreement will be entitled to recover, in addition to any other relief
awarded by

<PAGE> 5

the arbitrator, all reasonable costs and expenses, including fees and
expenses of arbitrators and attorneys, incurred in connection
therewith. If each party prevails on specific issues in the
arbitration, the arbitrator may allocate the costs incurred by all
parties on a basis the arbitrator deems appropriate.

IN WITNESS WHEREOF, the Parties to this Agreement have each caused
this Agreement to be duly executed on this 12 day of January, 2000, but
effective as of October 26, 1999.

PENTASTAR COMMUNICATIONS, INC.

/s/ Craig J. Zoellner /s/ Jeffrey Veres
- --------------------------------- -----------------------------------
By: Craig J. Zoellner JEFFREY VERES
Its: Vice President

OC MERGERCO 1, INC.

/s/ Craig J. Zoellner
- ---------------------------------
By: Craig J. Zoellner
Its: Vice President

<PAGE> 6

SCHEDULE A TO THE ESCROW AGREEMENT

DISBURSEMENT OF THE SHARES AND
POTENTIAL ISSUANCE OF ADDITIONAL PENTASTAR SHARES

1. Upon the occurrence of the earlier of (i) a sale of substantially all of the
assets of all of or the outstanding stock of PentaStar, or (ii) October 26, 2004
(the "Valuation Event"), the number of Adjusted Shares shall be determined
pursuant to the formula set forth below.

2. If the number of Adjusted Shares exceeds the number of Shares, (a) the Escrow
Agent shall distribute all of the Shares to Veres within 60 days of the date of
the Valuation Event; and (b) within such 60 day period, PentaStar shall issue to
Veres additional shares of PentaStar common stock equal to such excess (the
"Additional Shares"). The Parties agree that a portion of the Additional Shares
shall be treated as imputed interest under Section 483 of the Internal Revenue
Code and reported as interest for all applicable tax purposes. Notwithstanding
the foregoing, in no event shall the number of Additional Shares exceed the
number of shares of PentaStar common stock issued to Veres at the closing in the
Merger Transaction but not deposited in the Escrow Account.

3. If the number of Shares exceeds the number of Adjusted Shares, then within 60
days of the date of the Valuation Event, (a) the Escrow Agent shall retain such
excess number of Shares and (b) the Escrow Agent shall distribute the remainder
of the Shares (which shall equal the number of Adjusted Shares), to Veres.

4. The number of Adjusted Shares shall be calculated under the following
formula:

Adjusted Shares = (Total Escrowed Shares) x (Veres Percentage)

Veres Percentage = Veres' Adjusted EBITA
---------------------
Total Operating Partner EBITA

Veres Adjusted EBITA = (26.77%) x (Access Measurement Period EBITA)

Access Measurement Period EBITA = The lesser of (i) Access' earnings before
interest, income taxes, and amortization (determined in accordance with
generally accepted accounting principles) for the twelve-month period ending on
the date of termination of Veres' employment with PentaStar or (ii) Access'
earnings before interest, income taxes, and amortization (determined in
accordance with generally accepted accounting principles) for the twelve-month
period ending on date of the Valuation Event. In any case, if the Valuation
Event occurs before termination of Veres' employment, the Access Measurement
Period EBITA shall be the twelve-month period ending on the Valuation Date. For
these purposes, Access' earnings will include earnings of Access (and its
subsidiaries, if any) before and after the acquisition of Access by PentaStar,
and, if Access is merged into PentaStar, Access earnings shall include those
earnings of PentaStar attributable to the metropolitan area in which Access
operated prior to such merger.

Total Escrowed Shares = the total number of shares of PentaStar common stock
received by Principal Shareholders prior to the date of the Valuation Event,
which Shares are placed in the Escrow Account under escrow agreements similar to
this Agreement.

Principal Shareholders = those owners of a business (including Access) acquired
by PentaStar (whether through a stock or other equity interest acquisition, a
merger, an asset acquisition or otherwise) prior to the date of the Valuation
Event who are active in the operation of such business both before and after
such acquisition, and who enter into an

<PAGE> 7

agreement, the terms and conditions of which are substantially similar to this
Agreement.

Total Operating Partner EBITA = the total Adjusted EBITA of all Principal
Shareholders (including Veres), where the Adjusted EBITA for each such Principal
Shareholder is calculated in the same manner as the Veres Adjusted EBITA is
calculated, as described above.

EXAMPLES

EXAMPLE 1: Assume that all of the outstanding stock of PentaStar is sold on
December 31, 2003. Assume further that Access EBITA for 2003 = $3 million, and
that total Operating Partner EBITA (as defined above) for 2003 is $10 million.
Also, assume that 1 million total shares of PentaStar common stock (including
the Shares) are placed in the Escrow Account by all Principal Shareholders. The
Veres Adjusted EBITA = 26.77% X $3 million, which equals $803,100. The Veres
Percentage = $803,100 over $10 million, which = 8.03%. The number of Adjusted
Shares for Veres = 1 million (the total number of Shares placed in escrow) X
0.0803 (the Veres Percentage), which = 80,310. Consequently, Veres will receive
the Shares back from the Escrow Account, plus 12,045 additional shares of
PentaStar common stock directly from PentaStar.

EXAMPLE 2: Assume that all of the outstanding stock of PentaStar is sold on
December 31, 2003. Assume further that Access EBITA for 2003 = $1 million, and
that total Operating Partner EBITA (as defined above) for 2003 is $10 million.
Also, assume that 1 million total shares of PentaStar common stock (including
the Shares) are placed in the Escrow Account by all Principal Shareholders. The
Veres Adjusted EBITA = 26.77% X $1 million, which equals $267,700. The Veres
Percentage = $267,700 over $10 million, which = 2.68%. The number of Adjusted
Shares for Veres = 1 million (the total number of Shares placed in escrow) X
0.0268 (the Veres Percentage), which = 26,770. Consequently, Veres will receive
26,770 of the Shares back, and the remaining 41,495 Shares will be retained by
PentaStar.

<PAGE> 1
EXHIBIT 10.7

AMENDED AND RESTATED
PRINCIPAL STOCKHOLDER'S ESCROW
AND CONTINGENT STOCK AGREEMENT

This Amended and Restated Principal Stockholder's Escrow and Contingent
Stock Agreement (this "Agreement") is entered into effective as of October 26,
1999, regardless of its date of execution, among PentaStar Communications, Inc.,
a Delaware corporation ("PentaStar" or the "Escrow Agent"), OC Mergerco 2, Inc.,
a Delaware corporation (the "Acquiror"), and Dennis Schillinger ("Schillinger"),
who is the principal stockholder of ICM Communications Integration, Inc., a
Washington corporation ("ICM") (collectively, the "Parties").

RECITALS

2. PentaStar, the Acquiror, Schillinger and ICM are parties to an
agreement and plan of merger dated August 13, 1999, under which ICM
will be merged into the Acquiror in a transaction intended to qualify
as a tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Merger Transaction").

3. In the Merger Transaction, Schillinger will receive 120,000 shares of
PentaStar common stock and $200,000 of cash in return for his shares of
ICM.

4. At the time of the Merger Transaction, the value of ICM cannot be
determined with certainty.

5. The purpose of this Agreement is to provide for certain adjustments in
the amount of stock consideration Schillinger will receive in the
Merger Transaction.

NOW, THEREFORE, the parties to this Agreement agree as follows:

ARTICLE 1: DIRECTIONS

1.1 ESCROWED PROPERTY:

Schillinger will deposit with the Escrow Agent 40,000 shares of
PentaStar common stock (the "Shares"), which will be held by the Escrow
Agent in a separate account the sole assets of which will consist of
the Shares and certain shares of PentaStar common stock issued in
connection with the acquisition by PentaStar of certain other
businesses (the "Escrow Account"). The certificates for the Shares
shall be delivered with appropriate stock powers duly executed in
blank.

1.2 INSTRUCTIONS:

The Escrow Agent shall hold and disburse the Shares pursuant to the
instructions set forth in Schedule A, attached hereto and incorporated
herein by reference.

<PAGE> 2

1.3 ASSIGNMENT OF INTEREST:

The assignment, transfer, conveyance, or hypothecation of any right,
title, or interest in and to the subject matter of this Agreement by
any party is prohibited, and no such assignment, transfer, conveyance,
or hypothecation will be given effect.

ARTICLE 2: RIGHTS OF SCHILLINGER IN THE SHARES

During the term of this Agreement, (i) the Shares shall be reflected as
issued and outstanding on PentaStar's financial statements and other books and
records; (ii) Schillinger shall have all ownership rights with respect to the
Shares, including rights to vote such Shares and rights to any dividends paid by
PentaStar with respect to the Shares, and the books and records of PentaStar
will reflect such ownership. Upon the death or termination of employment of
Schillinger, the Shares will remain in the Escrow Account subject to
disbursement to Schillinger or his legal heirs in accordance with Schedule A.

ARTICLE 3: PROVISIONS CONCERNING ESCROW AGENT

3.1 ESCHEAT:

The parties are aware that under Colorado law, escrowed property which
is presumed abandoned may escheat to the State. The Escrow Agent shall
have no liability to Schillinger, his respective heirs, legal
representatives, and successors, should any or all of the Shares become
escheatable or escheat by operation of law.

3.2 NON-LIABILITY:

The Escrow Agent shall not be liable for any act or omission while
acting in good faith and in the exercise of its own best judgment. Any
act or omission by the Escrow Agent pursuant to the advice of its
attorneys shall be conclusive evidence of such good faith. The Escrow
Agent shall have the right to consult with counsel at its expense
whenever any question arises concerning the Agreement and shall incur
no liability for any delay reasonably required to obtain such advice of
counsel. The Escrow Agent shall not be liable for the alteration,
modification or elimination of any right permitted or given under the
instructions set forth in Schedule A and/or in any document deposited
under this Agreement pursuant to any statute of limitations or by
reason of laches. The Escrow Agent shall have no further responsibility
or liability whatsoever to Schillinger following a partial or complete
distribution of the Shares pursuant to this Agreement. The Escrow Agent
shall not incur any liability with respect to any act or omission in
reliance upon any document, including any written notice or
instructions provided for in this Agreement. In performing its
obligations hereunder, the Escrow Agent shall be entitled to presume,
without inquiry, the due execution, validity and effectiveness of all
documents it receives, and also the truth and accuracy of any
information contained therein. The Escrow Agent shall not be
responsible or liable for any diminution in value of the Shares,
whatsoever, for any reason.

<PAGE> 3

3.3 DISAGREEMENTS:

If any disagreement or dispute arises between the parties to this
Agreement concerning the meaning or validity of any provision hereunder
or concerning any other matter relating to this Agreement, the Escrow
Agent:

b. May, in its sole and absolute discretion, interplead the
Shares or that portion of Shares it then holds with the
District Court of the City and County of Denver, State of
Colorado, and name the parties in such interpleader action.
Upon filing the interpleader action, the Escrow Agent shall be
relieved of all liability as to the Shares. The parties by
signing this Agreement submit themselves to the jurisdiction
of such Court and do appoint the Clerk of such Court as their
agent for the service of all process in connection with such
proceedings. In no event shall the institution of such
interpleader action impair the rights of the Escrow Agent
described in Section 3.2 of this Article.

ARTICLE 4: GENERAL TERMS AND CONDITIONS

4.1 EXTENSION OF BENEFITS:

4.2 GOVERNING LAW:

4.3 NOTICES:

All notices, requests, demands, and other communications required under
this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or by certified mail, return receipt
requested, and postage prepaid. If any notice is mailed, it shall be
deemed given on the date such notice is deposited in the United States
mail. If any notice is personally delivered, it shall be deemed given
upon the date of such delivery. If notice is given to a party, it shall
be mailed or delivered to the addresses set forth below the signature
blocks. It shall be the responsibility of the parties to notify the
Escrow Agent in writing of any name or address changes.

<PAGE> 4

4.4 ENTIRE AGREEMENT:

With respect to the subject matter hereof, this Agreement sets forth
the entire agreement and understanding of the parties.

4.5 AMENDMENT:

This Agreement may be amended, modified, superseded, rescinded, or
canceled only by a written instrument executed by the parties.

4.6 WAIVERS:

4.7 HEADINGS:

Section headings of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or otherwise modify any
of the terms of provisions of this Agreement.

4.8 COUNTERPARTS:

4.9 ARBITRATION.

<PAGE> 5

SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE.
The prevailing party or parties in any such arbitration in any action
to enforce this Agreement will be entitled to recover, in addition to
any other relief awarded by the arbitrator, all reasonable costs and
expenses, including fees and expenses of arbitrators and attorneys,
incurred in connection therewith. If each party prevails on specific
issues in the arbitration, the arbitrator may allocate the costs
incurred by all parties on a basis the arbitrator deems appropriate.

IN WITNESS WHEREOF, the Parties to this Agreement have each caused
this Agreement to be duly executed on this 12 day of January, 2000, but
effective as of October 26, 1999.

PENTASTAR COMMUNICATIONS, INC.

/s/ Craig J. Zoellner /s/ Dennis Schillinger
- ----------------------------------- ------------------------------------
By: Craig J. Zoellner DENNIS SCHILLINGER
Its: Vice President

OC MERGERCO 2, INC.

/s/ Craig J. Zoellner
- -----------------------------------
By: Craig J. Zoellner
Its: Vice President

<PAGE> 6

SCHEDULE A TO THE ESCROW AGREEMENT

DISBURSEMENT OF THE SHARES AND
POTENTIAL ISSUANCE OF ADDITIONAL PENTASTAR SHARES

1. Upon the occurrence of the earlier of (i) a sale of substantially all of the
assets or of all of the outstanding stock of PentaStar, or (ii) October 26, 2004
(the "Valuation Event"), the number of Adjusted Shares (as defined below) shall
be determined pursuant to the formula set forth below.

2. If the number of Adjusted Shares exceeds the number of Shares, (a) the Escrow
Agent shall distribute all of the Shares to Schillinger within 60 days of the
date of the Valuation Event; and (b) within such 60 day period, PentaStar shall
issue to Schillinger additional shares of PentaStar common stock equal to such
excess (the "Additional Shares"). The parties agree that a portion of the
Additional Shares shall be treated as imputed interest under Section 483 of the
Internal Revenue Code and reported as interest for all applicable tax purposes.
Notwithstanding the foregoing, in no event shall the number of Additional Shares
exceed the number of shares of PentaStar common stock issued to Schillinger at
the closing in the Merger Transaction but not deposited in the Escrow Account.

4. The number of Adjusted Shares shall be calculated under the following
formula:

Adjusted Shares = (Total Escrowed Shares) x (Schillinger Percentage)

Schillinger Percentage = Schillinger's Adjusted EBITA
------------------------------
Total Operating Partner EBITA

Schillinger Adjusted EBITA = (11.19%) x (ICM Measurement Period EBITA)

ICM Measurement Period EBITA = The lesser of (i) ICM's earnings before interest,
income taxes, and amortization (determined in accordance with generally accepted
accounting principles) for the twelve-month period ending on the date of
termination of Schillinger's employment with PentaStar or (ii) ICM's earnings
before interest, income taxes, and amortization (determined in accordance with
generally accepted accounting principles) for the twelve-month period ending on
the date of the Valuation Event. In any case, if the Valuation Event occurs
before termination of Schillinger's employment, the ICM Measurement Period EBITA
shall be the twelve-month period ending on the Valuation Date. For these
purposes, ICM's earnings will include earnings of ICM (and its subsidiaries, if
any) before and after the acquisition of ICM by PentaStar, and, if ICM is merged
into PentaStar, ICM's earnings shall include those earnings of PentaStar
attributable to the metropolitan area in which ICM operated prior to such
merger.

Total Escrowed Shares = the total number of shares of PentaStar common stock
received by Principal Shareholders prior to the date of the Valuation Event,
which shares are placed in the Escrow Account under escrow agreements similar to
this Agreement.

Principal Shareholders = those owners of a business (including ICM) acquired by
PentaStar (whether through a stock or other equity interest acquisition, a
merger, an asset acquisition or otherwise) prior to the date of the Valuation
Event who are active in the operation of such business both before and after
such acquisition, and who enter into an agreement, the terms and conditions of
which are substantially similar to this Agreement.

<PAGE> 7

Total Operating Partner EBITA = the total Adjusted EBITA of all Principal
Shareholders (including Schillinger), where the Adjusted EBITA for each such
Principal Shareholder is calculated in the same manner as the Schillinger
Adjusted EBITA is calculated, as described above.

EXAMPLES

EXAMPLE 1: Assume that all of the outstanding stock of PentaStar is sold on
December 31, 2003. Assume further that ICM EBITA for 2003 = $3 million, and that
total Operating Partner EBITA (as defined above) for 2003 is $10 million. Also,
assume that 2 million total shares of PentaStar common stock (including the
Shares) are placed in the Escrow Account by all Principal Shareholders. The
Schillinger Adjusted EBITA = 11.19% X $3 million, which equals $335,700. The
Schillinger Percentage = $335,700 over $10 million, which = 3.36%. The number of
Adjusted Shares for Schillinger = 2 million (the total number of Shares placed
in escrow) X 0.0336 (the Schillinger Percentage), which =67,200. Consequently,
Schillinger will receive the Shares back from the Escrow Account, plus 27,200
additional shares of PentaStar common stock directly from PentaStar.

EXAMPLE 2: Assume that all of the outstanding stock of PentaStar is sold on
December 31, 2003. Assume further that ICM EBITA for 2003 = $1 million, and that
total Operating Partner EBITA (as defined above) for 2003 is $10 million. Also,
assume that 2 million total shares of PentaStar common stock (including the
Shares) are placed in the Escrow Account by all Principal Shareholders. The
Schillinger Adjusted EBITA = 11.19% X $1 million, which equals $111,900. The
Schillinger Percentage = $111,900 over $10 million, which = 1.12%. The number of
Adjusted Shares for Schillinger = 2 million (the total number of Shares placed
in escrow) X 0.0112 (the Schillinger Percentage), which = 22,400. Consequently,
Schillinger will receive 22,400 of the Shares back, and the remaining 17,600
Shares will be retained by PentaStar.

<PAGE> 1
EXHIBIT 10.14

ESCROW AGREEMENT

ESCROW AGREEMENT, effective as of the 20th day of October, 1999, by and
among certain of the shareholders listed on Exhibit A to this Escrow Agreement
(the "Shareholders" or "Shareholder") of PENTASTAR COMMUNICATIONS, INC., a
Delaware corporation, (the "Company"), SCHNEIDER SECURITIES, INC. (the
"Representative") and AMERICAN SECURITIES TRANSFER & TRUST, INC. (the "Escrow
Agent").

WHEREAS, the Shareholders are the record and beneficial owners of
certain of the Company's $0.0001 par value common stock ("Common Stock") all as
more fully reflected on Exhibit A to this Escrow Agreement;

WHEREAS, the Company and the Representative of the several underwriters
(the "Underwriters") intend to enter into an underwriting agreement (the
"Underwriting Agreement") pursuant to which the Company will sell Common Stock
in a public offering pursuant to the registration provisions of the Securities
Act of 1933, as amended (the "1933 Act");

WHEREAS, as a condition to closing the proposed public offering of the
Company (the "Offering"), the Representative has required the Shareholders to
deposit an aggregate of 200,000 shares of Common Stock owned by such
Shareholders in Escrow with the Escrow Agent as reflected on Exhibit A (the
"Escrow Shares"); and

WHEREAS, the Shareholders wish to deposit the Escrow Shares in
Escrow in order to fulfill the requirements of the Underwriting Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, terms and conditions hereinafter set forth, the parties to this
Escrow Agreement agree as follows:

SECTION 1. DESIGNATION AND DEPOSIT OF ESCROW SHARES.

a. The Escrow Shares to be deposited in Escrow pursuant to
this Escrow Agreement consist of 200,000 shares of Common Stock of the
Company and are owned of record as of the date of this Escrow Agreement
by the Shareholders identified on Exhibit A.

b. On the date on which the Securities and Exchange Commission
declares the Company's Registration Statement on Form SB-2 (Reg. No.
333-85281) effective under the 1933 Act (the "Effective Date"), the
Shareholders shall deliver to the Escrow Agent any and all certificates
representing the Escrow Shares and a stock power endorsed in blank with
a medallion guarantee. Promptly after the Effective Date, the Escrow
Agent shall deliver a receipt therefor and, if requested by a
Shareholder, a new certificate representing each Shareholder's shares
of Common Stock represented by the certificates delivered but which are
not subject to this Escrow Agreement.

<PAGE> 2

SECTION 2. TITLE OF ACCOUNT. All certificates representing the
Escrow Shares delivered to the Escrow Agent pursuant to this Agreement shall be
deposited on the Effective Date by the Escrow Agent in an account designated
substantially as follows: "PentaStar Communications, Inc. Escrow Share
Account" (the "Escrow Account").

SECTION 3. TRANSFER OF ESCROW SHARES DURING ESCROW PERIOD.

a. During the Escrow Period (as defined below) none of the
Escrow Shares deposited in the Escrow Account shall be sold, pledged,
hypothecated or otherwise transferred or delivered out of the Escrow
Account except:

i. transfers by operation of law; and

ii. transfers of ownership of certificates
representing the Escrow Shares, certificates for which have
been deposited to the Escrow Account, shall remain subject to
the restrictions imposed hereby, including those persons, if
any, who become holders, by any means provided herein, of the
Escrow Shares during the Escrow Period.

SECTION 4. DURATION OF ESCROW PERIOD.

a. The Escrow Period shall commence on the Effective Date and
shall terminate on the earlier of the date on which all Escrow Shares
have been returned to the Shareholders pursuant to Sections 6(a), 6(b),
6(c) or 6(d) below.

b. This Agreement shall be of no force or effect in the event
the Underwriting Agreement is not executed on the Effective Date in
accordance with its terms.

SECTION 5. RECEIPT OF DISTRIBUTIONS AND DIVIDENDS. During the term of
the Escrow Period, if the Company issues any distributions, dividends, rights or
other property with respect to the Common Stock, then, in such event, the
Company shall be authorized to send evidence of such distributions, dividends,
rights or other property directly to the Escrow Agent, which is hereby
authorized to hold and retain possession of all such evidences of distributions,
dividends, rights or other property until termination of the Escrow Period in
accordance with Section 6 below. In the event the Escrow Shares are distributed
to the Shareholders pursuant to Sections 6(a), 6(b), 6(c), 6(d), 6(e) or 6(f)
below, then the Escrow Agent will distribute evidences of such distributions,
dividends, rights, or other property in the form the Escrow Agent received such
distributions, dividends, rights or other property from the Company. If the
Company recapitalizes, splits or combines its shares, such shares shall be
substituted, on a pro rata basis for the Escrow Shares. The Company will notify
the Escrow Agent of the occurrence of the events listed in this section.

2
<PAGE> 3

SECTION 6. RELEASE AND DELIVERY OF ESCROW SHARES.

a. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming that the Company had pro
forma (based on a full 12-month period for all acquired operations,
giving effect to such acquisitions as if they had occurred on the first
day of fiscal year 2000 and giving retroactive effect for the period
from the first day of fiscal year 2000 to the date of acquisition to
prospective changes to salaries, bonuses, benefits, lease payments and
other expenses in a manner consistent with that used in the preparation
of the Unaudited Pro Forma Condensed Combined Financial Information of
the Company set forth in the prospectus used in connection with the
Offering) diluted earnings per share of $0.50 in fiscal year 2000, the
Escrow Agent shall return to each Shareholder a certificate for its
share of the Escrow Shares as are listed on Exhibit A. The Escrow Agent
shall return the Escrow Shares only to the entity named as the holder
of record in Exhibit A to this Escrow Agreement, as modified by any
transfers made pursuant to Section 3 above.

b. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming the Company had pro forma
(based on a full 12-month period for all acquired operations, giving
effect to such acquisitions as if they had occurred on the first day of
fiscal year 2001 and giving retroactive effect for the period from the
first day of fiscal year 2001 to the date of acquisition to prospective
changes to salaries, bonuses, benefits, lease payments and other
expenses in a manner consistent with that used in the preparation of
the Unaudited Pro Forma Condensed Combined Financial Information of the
Company set forth in the prospectus used in connection with the
Offering) diluted earnings per share of $1.25 in fiscal year 2001, the
Escrow Agent shall return to each Shareholder a certificate for its
share of the Escrow Shares as are listed on Exhibit A. The Escrow Agent
shall return each certificate only to the entity named as the holder of
record in Exhibit A hereto, as modified by any transfers made pursuant
to Section 3 above.

3
<PAGE> 4

c. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming that the Company has been
merged or consolidated, or has executed a share exchange, with another
company which is the survivor to the transaction or in which the
stockholders of the Company own less than 50% of the outstanding
capital stock of the surviving entity, or that the Company has sold all
or substantially all of its assets and the relevant transaction was
approved by the holders of a majority of the Company's outstanding
voting securities exclusive of the Escrow Shares held hereunder, the
Escrow Agent shall contemporaneously with the closing of any such
transaction return to each Shareholder a certificate for its share of
the Escrow Shares as are listed on Exhibit A. The Escrow Agent shall
return each certificate only to the person named as the holder of
record in Exhibit A hereto, as modified by any transfers made pursuant
to Section 3 above.

d. In the event none of the criteria for release specified in
subparagraphs (a), (b) or (c) above is reached by the Company, the
Escrow Shares shall remain in the Escrow Account until a date that is
seven years from the Effective Date. Upon termination of the Escrow
Period pursuant to the provisions of this Section 6(d), the Escrow
Agent shall, as promptly as possible, return to each Shareholder a
certificate for its share of the Escrow Shares as are listed on Exhibit
A. The Escrow Agent shall return each certificate only to the person
named as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.

e. At such time as the Escrow Agent shall have returned all
Escrow Shares as provided in this Section, the Escrow Agent shall be
discharged completely and released from any and all further liabilities
and responsibilities under this Escrow Agreement.

f. The determination of the criteria described above shall be
solely the responsibility of the Company and the Representative, and
the Escrow Agent shall have no liability or responsibility therefor.

SECTION 7. VOTING RIGHTS. During the Escrow Period, each Shareholder,
or any transferee receiving all or a portion of the Escrow Shares of such
Shareholder pursuant to Section 3 of this Escrow Agreement, shall have the right
to vote such Escrow Shares (to the extent the Escrow Shares have voting rights)
in the Escrow Account at any and all shareholder meetings without restriction.

SECTION 8. LIMITATION OF LIABILITY OF ESCROW AGENT. In acting pursuant
to this Escrow Agreement, the Escrow Agent shall be protected fully in every
reasonable exercise of its discretion and shall have no obligation hereunder to
either the Shareholders or to any other party except as expressly set forth
herein. In performing any of its duties hereunder, the Escrow Agent shall not
incur any liability to any person for any damages, losses or expenses, except
for willful default or negligence and it shall, accordingly, not incur any such
liability with respect to (1) any action taken or omitted in good faith upon
advice of its counsel, counsel for the Company or counsel for the Representative
given with respect to any question relating to the duties and responsibilities
of the Escrow Agent under this Agreement, and (2) any action taken or omitted in
reliance upon any instrument, including written notices provided for herein, not
only to its due execution and validity and effectiveness of its provisions, but
also to the truth and accuracy of any information

4
<PAGE> 5

contained therein, which the Escrow Agent shall in good faith believe to be
genuine, to have been signed and presented by a proper person or persons and to
be in compliance with the provisions of this Agreement.

SECTION 9. INDEMNIFICATION. The Company, the Representative and the
Shareholders shall indemnify and hold harmless the Escrow Agent against any and
all losses, claims, damages, liabilities and expenses, including reasonable
costs of investigation and counsel fees and disbursements, which may be imposed
upon the Escrow Agent or incurred by the Escrow Agent in connection with its
acceptance of appointment as Escrow Agent or the performance of its duties
hereunder, including any litigation arising from this Escrow Agreement or
involving the subject matter of this Escrow Agreement.

SECTION 10. PAYMENT OF FEES. The Company shall be responsible for all
reasonable fees and expenses of the Escrow Agent incurred by it in the course of
performing under this Escrow Agreement.

SECTION 11. CHANGE OF ESCROW AGENT. In the event the Escrow Agent
notifies the Company and the Representative that its acceptance of the duties of
Escrow Agent has been terminated by the Escrow Agent, or in the event the Escrow
Agent files for protection under the United States Bankruptcy Code or is
liquidated or ceases operations for any reason, the Company and the
Representative shall have the right to jointly designate a replacement Escrow
Agent who shall succeed to the rights and duties of the Escrow Agent hereunder.
Any such replacement Escrow Agent shall be a trust or stock transfer company
experienced in stock transfer, escrow and related matters and shall have a
minimum net worth of $5 million. Upon appointment of such successor Escrow
Agent, the Escrow Agent shall be discharged from all duties and responsibilities
hereunder.

SECTION 12. NOTICES. All notices, demands or requests required or
authorized hereunder shall be deemed given sufficiently if in writing and sent
by registered mail or certified mail, return receipt requested and postage
prepaid and by facsimile or cable:

In the case of the Representative to:

Schneider Securities, Inc.
The Chancery
1120 Lincoln Street, Suite 900
Denver, Colorado 80203
Attention: Thomas J. O'Rourke, President

With a copy to (which shall not constitute notice):

Robert W. Walter, Esq.
Berliner Zisser Walter & Gallegos, P.C.
One Norwest Center, Suite 4700
1700 Lincoln Street
Denver, Colorado 80203-4547

5
<PAGE> 6

In the case of the Escrow Agent to:

American Securities Transfer & Trust, Inc.
12039 West Alameda Parkway, Suite Z-2
Lakewood, Colorado 80228
Attn: Corporate Trust Department

In the case of the Company to:

PentaStar Communications, Inc.
1522 Blake Street
Denver, Colorado 80202

With a copy to (which shall not constitute notice):

B. Scott Pullara, Esq.
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202

In the case of the Shareholders to:

BACE Investments, LLC
1522 Blake Street
Denver, Colorado 80202

Black Diamond Capital, LLC
7101 LaVista Place, Suite 100
Niwot, Colorado 80503

6
<PAGE> 7
SECTION 13. DISPUTES. In the event of any disputes between the parties
hereto as to the facts of default, the validity of the instructions contained
herein or any other fact or matter relating to this Agreement, the Escrow Agent
is instructed as follows:

a. No Obligation to Act. That it shall be under no obligation to
act, except under process or order of court, or until it has been
adequately indemnified to its full and complete satisfaction, and shall
sustain no liability for its failure to act pending such process or
court order or indemnification.

b. Interpleader. That it may, in its sole and absolute
discretion, deposit the property described herein or so much thereof as
remains in its hands with then Clerk, or acting Clerk, of the District
Court of the City and County of Denver, State of Colorado, and
interplead the parties thereto, and upon so depositing such property
and filing its complaint in interpleader it shall be relieved of all
liability under the terms hereof as to the property so deposited and
shall be entitled to recover in such interpleader action, from the
other parties thereto, its reasonable attorney fees and related costs
and expenses incurred in commencing such action and furthermore, the
parties hereto for themselves, their successors and assigns do hereby
submit themselves to the jurisdiction of said court and do hereby
appoint the then Clerk, or acting Clerk, of said court as their Agent
for the Service of all process in connection with such proceedings. The
institution of any such interpleader action shall not impair the rights
of the Escrow Agent as provided under the terms of this Agreement.

SECTION 14. OTHER AGREEMENTS. The termination of this Escrow
Agreement pursuant to Section 6 shall not affect any other agreement,
contract, lock-up arrangement, etc., that the Company has executed with
Representative. Such other agreements shall continue in full force and effect
pursuant to such agreement's terms.

SECTION 15. COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Escrow Agreement. Facsimile signatures shall
be accepted as original signatures for all purposes.

SECTION 16. GOVERNING LAW. The validity, interpretation and
construction of this Escrow Agreement and of each part hereof shall be governed
by the laws of the State of Colorado.

IN WITNESS WHEREOF, the Shareholders, the Company, the Representative
and the Escrow Agent have executed this Escrow Agreement to be effective as of
the day and year first above written.

AMERICAN SECURITIES TRANSFER & TRUST, INC.

By: [ILLEGIBLE]
--------------------------------------

Title: Corporate Trust Officer
-----------------------------------

By: [ILLEGIBLE]
--------------------------------------

Title: Marketing Officer
-----------------------------------

PENTASTAR COMMUNICATIONS, INC.

By: /s/ CRAIG J. ZOELLNER
--------------------------------------

Title:
-----------------------------------

SCHNEIDER SECURITIES, INC.

By: [ILLEGIBLE]
--------------------------------------

Title: President
-----------------------------------

7
<PAGE> 8

THE SHAREHOLDERS:

BACE INVESTMENTS, LLC

By: /s/ CRAIG J. ZOELLNER
----------------------------------
Craig J. Zoellner

BLACK DIAMOND CAPITAL, LLC

By: /s/ BLAIR W. MCNEA
----------------------------------
Blair W. McNea

8
<PAGE> 9
EXHIBIT A

TO ESCROW AGREEMENT

NAME TOTAL SHARES
---- ------------
BACE INVESTMENTS, LLC 140,000
BLACK DIAMOND CAPITAL, LLC 60,000

<PAGE> 1
EXHIBIT 21.1

SUBSIDIARIES OF PENTASTAR COMMUNICATIONS, INC.

PentaStar Internet, Inc.

PentaStar Holding Corp.

OC Mergerco 1, Inc.

OC Mergerco 2, Inc.

OC Mergerco 3, Inc.

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAR-15-1999
<PERIOD-END> DEC-31-1999
<CASH> 8,137
<SECURITIES> 0
<RECEIVABLES> 1,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,033
<PP&E> 587
<DEPRECIATION> (32)
<TOTAL-ASSETS> 15,415
<CURRENT-LIABILITIES> 1,592
<BONDS> 0
0
86
<COMMON> 1
<OTHER-SE> 13,736
<TOTAL-LIABILITY-AND-EQUITY> 15,415
<SALES> 0
<TOTAL-REVENUES> 694
<CGS> 0
<TOTAL-COSTS> 1,428
<OTHER-EXPENSES> (57)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (677)
<INCOME-TAX> (244)
<INCOME-CONTINUING> (433)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (433)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)

</TABLE>