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
September
25, 2006
Date
of
Report (Date of earliest event reported)
PAC-WEST
TELECOMM, INC.
(Exact
name of registrant as specified in its charter)
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California
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000-27743
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68-0383568
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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1776
W. March Lane, Suite 250
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Stockton,
California
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95207
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(Address
of principal executive offices)
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(Zip
Code)
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(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:
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01 Entry
into a Material Definitive Agreement
On
September 25, 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 Fifth 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 May 1, 2006 through and including November 30, 2006. The
Amendment further provides that during the period from September 30, 2006
through and including November 30, 2006 the minimum balance of cash required
to
be maintained on deposit at the Bank 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.
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 following the
waiver period, 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 August 31, 2006, the Company had outstanding $9.8 million
in
obligations under the Loan and Security Agreement and approximately $24.2
million in cash and cash equivalents.
As
previously disclosed, the Company believes that it will need to find additional
financing in order to maintain sufficient liquidity and capital resources.
In an
effort to address our financing needs, we have retained the services of a
financial advisory firm, and together with such firm are 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.
If
we are
unable to secure additional financing, it will likely become necessary for
us to
significantly curtail our operations in order to meet our debt service
obligations and even if we did take such actions to permit us to service our
debt, we would not meet any of the financial covenants required under the Loan
and Security Agreement. In the event of our non-compliance with the covenants
of
the Loan and Security Agreement at any future time, Comerica could exercise
its
rights under the agreement, and call the loan. Such action would have a
fundamental adverse impact on our ability to continue to operate and to meet
other obligations.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its 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:
September 28, 2006
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By:
/s/ Michael L. Sarina
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Michael
L. Sarina
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Chief
Financial Officer
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