UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of
1934
July
31, 2006
Date
of
Report (Date of earliest event reported)
Commission
File Number: 000-27743
PAC-WEST
TELECOMM, INC.
(Exact
name of registrant as specified in its charter)
|
California
(State
or other jurisdiction of
incorporation
or organization)
|
68-0383568
(I.R.S.
Employer Identification No.)
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|
1776
W. March Lane, Suite 250
Stockton,
California
(Address
of principal executive offices)
|
95207
(Zip
Code)
|
(209)
926-3300
(Registrant’s
telephone number, including area code)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
oWritten
communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting
material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
oPre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 1.01 Entry
into a Material Definitive Agreement
On
July
31, 2006, Pac-West Telecomm, Inc. (the “Company”),
Pac-West Telecom of Virginia, Inc., PWT Services, Inc., and PWT of New York,
Inc. (collectively, the “Borrowers”)
entered into a Fourth Amendment to Loan and Security Agreement (the
“Amendment”)
with
Comerica Bank (the “Bank”),
which
amends that certain Loan and Security Agreement, dated as of November 9, 2005,
by and between the Borrowers and the Bank (as amended, the “Loan
and Security Agreement”).
The
Amendment provides in part that the Borrowers shall not be required to comply
with the financial covenants set forth in Sections 6.7(a) (Adjusted Quick
Ratio), 6.7(c) (Debt Service Coverage Ratio) and 6.7(d) (Total Liabilities
to
Effective Tangible Net Worth) of the Loan and Security Agreement during the
period commencing on July 1, 2006 through and including September 30, 2006;
provided that Borrowers remain in compliance with Section 6.7(b) (Minimum Cash)
of the Loan and Security Agreement as amended. The Company does not currently
expect to be in compliance with the financial covenants set forth in Sections
6.7(a) (Adjusted Quick Ratio), 6.7(c) (Debt Service Coverage Ratio) and 6.7(d)
(Total Liabilities to Effective Tangible Net Worth) of the Loan and Security
Agreement for periods after September 30, 2006. As such, the Company expects
that it will be necessary to request from the Bank an additional waiver under,
and/or negotiate with the Bank an additional amendment to, the Loan and Security
Agreement to provide the Company additional time to comply, and/or reduce the
burden of complying, with these financial covenants for compliance periods
after
September 30, 2006. There can be no assurances that the Bank will agree to
such
a request.
The
Amendment provides, further, that during the period from July 1, 2006 through
and including September 30, 2006 the minimum balance of cash required to be
maintained by Borrowers pursuant to Section 6.7 (b) shall be Two Million Five
Hundred Thousand ($2,500,000) Dollars in excess of the outstanding obligations
of Borrowers to Bank. In addition, the Amendment requires Borrowers to pay
an
amendment fee to Bank in the amount of Ten Thousand Dollars ($10,000) and
provides that Borrowers may request additional credit extensions under the
Loan
and Security Agreement once the Borrowers are in pro forma compliance with
Sections 6.7(a), 6.7 (b), 6.7(c) and 6.7(d) without regard to the
Amendment.
If
the
Company violates the Minimum Cash financial covenant or is otherwise not in
compliance with the Adjusted Quick Ratio, Debt Service Coverage Ratio and Total
Liabilities to Effective Tangible Net Worth financial covenants for
compliance periods after September 30, 2006, and the Bank is unwilling to grant
a waiver or enter into an amendment that relieves the Borrowers’ obligation to
comply with these financial covenants, the Bank will have available to it all
of
the remedies provided for under the Loan and Security Agreement, including
the
right to accelerate, or declare due and payable, all outstanding amounts under
the Loan and Security Agreement. As of June 30, 2006, the Company had
outstanding $10.5 million in obligations under the Loan and Security Agreement
and approximately $20.2 million in cash and cash equivalents. The June 30 cash
and cash equivalents do not include the subsequently received $7.1 million
referred to in Item 7.01.
The
Company now believes that it will require additional liquidity in order to
fund
the expenditures required to support the projected growth from its national
expansion and new products. The Company has retained the services of a financial
advisory firm, and together with such firm is in the process of exploring
strategic alternatives, including raising additional debt or equity financing,
entry into strategic relationships or joint ventures and merger and
acquisitions.
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Item
7.01 Regulation
FD Disclosure
As
noted
in prior public disclosures, on October 20, 2004, the Company filed a formal
complaint with the California Public Utilities Commission (“CPUC”) against
AT&T. In the complaint proceeding, the Company alleged that AT&T
owed the Company over $7.1 million for traffic terminated by the Company on
behalf of AT&T, plus late payment fees. On September 19, 2005, the
presiding hearing officer released a decision granting the Company's complaint
in all regards, except for the Company's claim for late payment fees. On
October 19, 2005, AT&T filed an appeal with the CPUC, claiming the decision
was in error. The Company filed a simultaneous appeal with the CPUC,
asking for award of the late payment fees. On June 29, 2006, subsequent to
the last public disclosure with respect to this matter, the CPUC rejected both
appeals, and reaffirmed the award of over $7.1 million to Pac-West. Thereafter,
on July 31, 2006, the Company received payment of the $7.1 million dollars
from
AT&T pursuant to the order of the California Public Utilities Commission
resolving the dispute in favor of the Company.
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Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on is behalf by the
undersigned, hereunto duly authorized.
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PAC-WEST
TELECOMM, INC.
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(Registrant)
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Dated:
August 4, 2006
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By:
/s/ Michael Sarina
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Michael
Sarina
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Chief
Financial Officer
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