Exhibit 10.3
AGREEMENT TO RESTRUCTURE
     This agreement to restructure (this “Agreement”) is dated as of
November 15, 2006 and is entered into between Pac-West Telecomm, Inc. (the
“Borrower”) and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc. (the “Lender” and, together with the Borrower, the
“Parties”).
RECITALS
     On May 21, 2004, Borrower delivered to Lender that certain Collateral
Installment Note of even date in the original principal amount of Two Million
Four Hundred Thousand Eight Hundred Eighty Seven and 18/100 Dollars
($2,400,887.18) which is secured as provided by that certain Term Loan and
Security Agreement of even date between Borrower and the Lender (collectively,
the “May 2004 Loan Agreement”). Under the May 2004 Loan Agreement, the Borrower
is obligated to make monthly payments to Lender in the amount of approximately
$76,046.54 per month, with the final monthly payment due to Lender on June 1,
2007.
     On July 2, 2005, Borrower delivered to Lender that certain Collateral
Installment Note of even date in the original principal amount of Two Million
Nine Hundred Ninety Six Thousand Four Hundred Forty Five Thousand and 82/100
Dollars ($2,996,445.82) which is secured as provided by that certain Term Loan
and Security Agreement of even date between Borrower and the Lender
(collectively, the “June 2004 Loan Agreement”). Under the June 2004 Loan
Agreement, the Borrower is obligated to make monthly payments to Lender in the
amount of approximately $94,889.92 per month, with the final monthly payment due
to Lender on August 1, 2007.
     On May 27, 2005, Borrower delivered to Lender that certain Collateral
Installment Note of even date in the original principal amount of One Million
Nine Hundred Forty Nine Thousand Ninety dollars and 94/100 ($1,949,090.94) which
is secured as provided by that certain Term Loan and Security Agreement of even
date between Borrower and the Lender (collectively, the “May 2005 Loan
Agreement”). Under the May 2005 Loan Agreement, Borrower is obligated to make
monthly payments to Lender in the amount of approximately $61,671.35 per month,
with the final monthly payment due to Lender on June 1, 2008.
     On November 30, 2005, Borrower delivered to Lender that certain Collateral
Installment Note of even date in the original principal amount of four hundred
seventy four thousand, five hundred eighty eight dollars and 64 /100
($4,474,588.64) which is secured as provided by that certain Term Loan and
Security Agreement of even date between Borrower and the Lender (collectively,
the “November 2005 Loan Agreement”). Under the November 2005 Loan Agreement,
Borrower is obligated to make monthly payments to Lender in the amount of
approximately $142,866.14 per month, with the final monthly payment due to
Lender on December 1, 2008.

 

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     Pursuant to the Existing Loan Agreements (defined below), the Lender
agreed, at the request of the Borrower and from time to time, to lend money,
advance funds or otherwise extend credit to Borrower so that Borrower could
purchase telecommunication and related equipment, in accordance with the terms
and provisions of the Existing Loan Documents (defined below).
     Pac-West Funding Company LLC and Borrower have requested that the Lender
agree to restructure the Obligations of the Borrower under the Existing Loan
Documents.
     Subject to the satisfaction of certain conditions precedent as and when set
forth in Section 4(b) of this Agreement, Lender has agreed to restructure the
Obligations under the Existing Loan Documents but only on the terms and
conditions set forth herein.
     NOW THEREFORE, in consideration of the recitals and the mutual agreements
set forth herein, the Parties agree as follows:
     1. Definitions.
     Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement shall have the meanings set forth in the Existing Loan Agreements. As
used herein, the following terms shall have the meanings set forth below.
     “Existing Loan Agreements” means, collectively, the May 2004 Loan
Agreement, the June 2004 Loan Agreement, the May 2005 Loan Agreement and the
November 2005 Loan Agreement.
     “Existing Loan Documents” means, collectively, the Existing Loan Agreements
and all documents executed in connection with the Existing Loan Agreements and
all other agreements and documents relating to the Obligations under the
Existing Loan Documents executed and delivered pursuant to the Existing Loan
Documents prior to the date hereof (in each case, as amended, restated,
supplemented or otherwise modified from time to time).
     “Obligations” means all liabilities, indebtedness of the Borrower to
Lender, howsoever created, arising or evidenced, whether now existing or
hereafter arising, whether direct or indirect, absolute or contingent, due or to
become due, primary or secondary or joint or several, and without limiting the
generality of the foregoing, shall include principal, accrued interest
(including, without limitation, interest accruing after the filing of any
petition in bankruptcy), all advances made by or on behalf of Lender under the
Existing Loan Documents and the New Loan Documents (defined below), collection
and other costs and expenses incurred by or on behalf of Lender, whether
incurred before or after judgment, and all present or future liabilities,
indebtedness and obligations of Borrower under any other note or evidence of
indebtedness to Lender.
     “Senior Loan Facility” means the Amended and Restated Loan and Security
Agreement, dated as of November 15, 2006, by and between Pac-West Funding
Company LLC, as Lender (“PWFC”), the Borrower, Pac-West Telecom of Virginia,
Inc., PWT Services, Inc., and PWT of New York, Inc. (prior to giving effect to
any amendments or modifications thereto).

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     “Senior Notes” means the 13.5% senior notes of Borrower due 2009.
     “Stock Purchase Agreement” means that certain Preferred Stock Purchase
Agreement, dated as November 15, 2006, by and between the Borrower and Pac-West
Acquisition Company, LLC, as amended, restated or otherwise modified.
     2. Reaffirmation of Obligations.
     (a) The Borrower acknowledges, agrees and reaffirms that (i) the Existing
Loan Documents constitute legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with the terms of the Existing
Loan Documents, and (ii) as of the close of business on November 13, 2006, it is
indebted to Lender, in each case exclusive of accrued or accruing but unpaid
interest, costs, fees and expenses as follows:
     $517,166.69 in connection with the May 2004 Loan Agreement;
     $823,804.50 in connection with the June 2004 Loan Agreement;
     $1,092,026.33 in connection with the May 2005 Loan Agreement; and
     $3,237,004.85 in connection with the June 2005 Loan Agreement.
     3. Waiver and Forbearance.
     (a) Lender hereby waives any and all breaches, Defaults or Events of
Default under the Existing Loan Documents and, after the Restructuring Effective
Date, the New Loan Documents arising solely as a result of the consummation of,
and the events leading up to, the transactions contemplated by the Senior Loan
Facility, the Stock Purchase Agreement and the Exchange Offer (defined below).
Each of Lender and Borrower hereby agrees that the requirement set forth under
each of the Existing Loan Documents that the aggregate unrestricted cash and
unrestricted marketable securities owned and controlled by Borrower exceed of
the lesser of (1) $5,000,000.00 or (2) the amount of indebtedness evidenced by
the Obligations is hereby suspended in its entirety through and including
April 1, 2007 (the “Liquidity Covenant”).
     (b) Lender agrees to forbear from exercising its rights and remedies
against the Borrower solely with respect to an Event of Default that arises
solely from the failure of Borrower to make the regular monthly payments due to
Lender on each of January 1, 2007 and February 1, 2007 as required by the
Existing Loan Agreements. Nothing herein shall be deemed to waive or forgive the
regular monthly payments due to Lender on each of January 1, 2007 and
February 1, 2007 as required by the Existing Loan Agreements and such payments
shall be made as set forth below.
     (c) The Borrower further agrees and acknowledges that if the Restructuring
Effective Date (as defined below) does not occur, then the regular monthly
payments due to Lender on each of January 1, 2007 and February 1, 2007 as set
forth in the Existing Loan Agreements shall be due on the maturity date under
the Existing Loan Agreements whether pursuant to acceleration or otherwise.

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     (d) The Borrower further agrees and acknowledges that except as set forth
in Section 3(a) and (b) hereof, no action taken by Lender shall (i) constitute a
waiver or modification of any term or condition of the Existing Loan Documents
or (ii) constitute a waiver of any Event of Default, any unsatisfied condition
precedent or otherwise prejudice any rights or remedies which Lender now has or
may have in the future under the Existing Loan Documents, the New Loan Documents
(defined below), applicable law or otherwise. Other than as set forth in Section
3(a) and 3(b) hereof, nothing contained herein shall in any way be deemed to
limit or prevent Lender from upon the occurrence of an Event of Default,
accelerating the Obligations, commencing any action or actions to collect the
Obligations, foreclosing or otherwise realizing on the Collateral, or taking any
other enforcement action against the Borrower to the extent permitted herein
under the Existing Loan Documents, or the New Loan Documents. Without limiting
the generality of the foregoing, Lender expressly reserves all rights and
remedies which it now has or may have in the future under the Existing Loan
Documents, the New Loan Documents, applicable law or otherwise, including,
without limitation, all rights and remedies in connection with any existing
Event of Default.
     4. Restructured Obligations.
     (a) Subject to the satisfaction of the conditions precedent set forth in
Section 4(b) below and Lender’s receipt of written notice that Borrower has
elected to restructure the Obligations under the Existing Loan Documents, which
notice shall have been received by Lender at least five Business Days before the
Restructuring Effective Date (defined below), on March 1, 2007, and, if not
exercised on or before March 1, 2007, on or prior to the first Business Day of
any calendar month after March 1, 2007 (the “Restructuring Effective Date”), the
Obligations under the Existing Loan Documents shall be restructured as follows:
     (i) The Obligations shall be paid over a term of 30 months commencing on
the Restructuring Effective Date with $75,000 due by Borrower to Lender on the
Restructuring Effective Date and, $75,000 due by Borrower to Lender on the first
calendar day of each of the next 14 calendar months thereafter, and $125,000 due
by Borrower to Lender on the first calendar day of each of the following months
thereafter through and including July 1, 2009, with all remaining principal,
interest and other Obligations due and payable on August 1, 2009. All
Obligations shall bear interest at 9.11% per annum.
     (ii) Borrower acknowledges and agrees that (1) until the Restructuring
Effective Date, the Existing Loan Documents shall remain in full force and
effect, the Borrower shall make all regular and timely payments due under the
Existing Loan Documents (other than as specifically set forth in Section 3(b)
hereof), including, without limitation, the $375,473.95 payment due to Lender on
or before December 1, 2006 (the “December Payment”), and the Obligations shall
remain due and owing in accordance with the terms of the Existing Loan
Documents, and (2) this Agreement shall not serve to effect a novation of the
Obligations under the Existing Loan Documents.
     (iii) Upon Lender’s receipt of Borrower’s timely notice that Borrower
intends to restructure the Obligations under the Existing Loan Documents, Lender
shall provide Borrower with a new note reflecting the payment terms set forth in
Section 4(a)(i) above (the “New Note”) and a credit agreement which amends and
restates the Existing Loan Agreements and which shall

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be on substantially similar terms and conditions as the Existing Loan Agreements
and which shall not include the Liquidity Covenant (the “Amended and Restated
Loan Agreement”) and all other ancillary documents which are deemed reasonably
necessary by Lender to effectuate the restructuring of the Obligations of the
Borrower under the Existing Loan Documents as permitted hereby (together with
the New Note and the Amended and Restated Loan Agreement, the “New Loan
Documents”). Lender agrees that upon the receipt of the New Note in accordance
with Section 4(b)(iv), Lender will return to Borrower all notes executed in
connection with the Existing Loan Agreements. The Liens granted to Lender
pursuant to the Existing Loan Agreements shall at all times remain perfected and
in full force and effect.
     (b) The Borrower shall not be entitled to exercise the option to
restructure the Obligations under the Existing Loan Documents unless all of the
following conditions precedent have been met to the satisfaction of Lender in
its sole discretion:
          (i) Except as set forth in Section 3(b) herein, Lender shall have
received all scheduled payments due under the Existing Loan Agreements prior to
the Restructuring Effective Date, including, without limitation, the December
Payment;
          (ii) Lender shall have received each Semi-Annual Interest Payment, if
any, then due to Lender in accordance with Section 5 hereof;
          (iii) Borrower shall have provided satisfactory evidence to the Lender
that (a) Borrower has fully drawn the full amount of the Tranche A Term Loan (as
defined in the Senior Loan Facility), (b) the Tranche B Availability Date (as
defined in the Senior Loan Facility) has occurred, and (c) Borrower has the
right to request Advances (as defined in the Senior Loan Facility);
          (iv) Lender and Borrower shall have exchanged fully executed New Loan
Documents and other documents which Lender deems reasonably necessary to
effectuate the restructuring of the Obligations under the Existing Loan
Documents as permitted hereby;
          (v) Borrower shall have provided to Lender the same financial
information as is provided or is available to PWFC; and
          (vi) Lender shall have been reimbursed by Borrower for the reasonable
documented fees and expenses of Lender’s counsel incurred in connection with
this Agreement.
     5. Semi-Annual Interest Payment.
     (a) Borrower has entered into a letter agreement pursuant to which the
other party thereto has, subject to the terms and conditions thereof, committed
to cause the tender into an exchange offer made to holders of Senior Notes of
approximately $21.0 million of Senior Notes for which it holds investment
discretion for the same principal amount of new 13.5% Senior Priority Notes due
2009 (the “Exchange Offer”). To the extent Borrower receives and accepts as part
of the Exchange Offer tenders of Senior Notes in excess of $21.0 million in
principal amount, the amount of interest associated with Senior Note principal
amount tendered in excess of $21.0 million is referred to herein as the “Senior
Note Interest Savings.”

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     (b) If Borrower receives and accepts as part of the Exchange Offer tenders
of Senior Notes in excess of $21.0 million in principal amount, until the
Obligations are paid in full in cash, within five (5) business days of the
payment of interest by Borrower in connection with each Interest Payment Date
(as defined in the Senior Notes) following consummation of the Exchange Offer,
Borrower shall make a payment to Lender equal to 20% of any Senior Note Interest
Savings in respect of such Interest Payment Date, which amount, if any, shall be
added to the payments otherwise due under the Existing Loan Documents prior to
the Restructuring Effective Date and after the Restructuring Effective Date, to
the principal balance otherwise due under the New Loan Documents.
     6. Additional Affirmative Covenants.
     Except as otherwise set forth herein, Borrower agrees that from and after
the Closing Date and until the date on which the Obligations have been
indefeasibly repaid in full in cash it will:
     (a) comply with all of the terms of this Agreement, the Existing Loan
Documents, and after the Restructuring Effective Date, the New Loan Documents;
     (b) comply in all material respects with all applicable laws, rules,
regulations and orders any governmental or quasi-governmental authority
(including, without limitation, laws, rules, regulations and orders relating to
taxes of any kind or nature);
     (c) provide to Lender, as soon as available, but in any event within thirty
(30) days after the end of each calendar month, a consolidated and consolidating
balance sheet, statement of cash flows and income statement prepared by Borrower
covering Borrower’s operations during such period, in a form reasonably
acceptable to Lender and certified to be true and correct to the best knowledge
of a responsible officer of the Borrower.
     7. Representations and Warranties.
     To induce Lender to enter into this Agreement, the Borrower, represents,
warrants and covenants to Lender that the following statements are, and will
remain, true, correct and complete until the date on which the Obligations have
been indefeasibly repaid in full in cash:
     (a) No representation or warranty of Borrower contained in this Agreement
or any other document, certificate or written statement furnished to Lender by
or on behalf of Borrower for use in connection with this Agreement, the Existing
Loan Documents or, after the Restructuring Effective Date, the New Loan
Documents contains any untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made;
     (b) The consummation of this Agreement does not and will not (i) violate or
conflict with any laws, rules, regulations or orders of any nation or
government, any state or other political subdivision thereof, or any agency or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, or (ii) violate,
conflict with, result in a breach of, or constitute a default (with due notice
or lapse of time or both) under any contractual obligation or organizational
documents of the Borrower;

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     (c) Borrower is duly organized and validly existing under the laws of its
jurisdiction of organization and qualified to do business in all states where
the nature of its business or the property owned by it make such qualification
necessary and where the failure to be so qualified would have a Material Adverse
Effect. Borrower and each of its subsidiaries has all requisite organizational
power and authority to own and operate its properties, to carry on its business
as now conducted and proposed to be conducted, to enter into this Agreement and
carry out the related transactions. This Agreement is the legally valid and
binding obligation of the Borrower, and is enforceable against Borrower in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally or by general
principles of equity;
     (d) All financial statements concerning the Borrower and its subsidiaries
which have been or will hereafter be furnished to Lender pursuant to this
Agreement have been or will be prepared in accordance with GAAP consistently
applied (except as disclosed therein) and do or will present fairly the
financial condition of the entities covered thereby as at the dates thereof and
the results of their operations for the periods then ended, subject to, in the
case of unaudited financial statements, the absence of footnotes and normal
year-end adjustments; and
     (e) Except as set forth on Schedule 7(e), neither Borrower nor any of its
subsidiaries is the subject of any review or audit by the Internal Revenue
Service or any governmental investigation concerning the violation or possible
violation of any law.
     8. Covenants and Representations and Warranties Cumulative.
     Except as provided in Sections 3(a) and 3(b) hereof, the covenants,
representations and warranties in Sections 6-7 of this Agreement shall be in
addition to, and not in lieu of, the covenants, representations and warranties
in the Existing Loan Documents, all of which are reaffirmed as of the date
hereof.
     9. Defaults and Remedies.
     (a) Except as set forth in Sections 3(a) and 3(b) hereof, with respect to
Borrower, it shall be an Event of Default under this Agreement, all Existing
Loan Documents, and after the Restructuring Effective Date, all New Loan
Documents if Borrower fails, in any way, to perform or comply with any term
contained in this Agreement, in any of the Existing Loan Documents or the New
Loan Documents (in each case, after giving effect to any cure period
thereunder).
     (b) Except as set forth in Sections 3(a) and 3(b) hereof, upon the
occurrence of any Event of Default described herein, Lender may exercise any
remedies which may be available under this Agreement, the Existing Loan
Documents, and after the Restructuring Effective Date, the New Loan Documents or
applicable law, including, without limitation, accelerating the Obligations,
commencing any action or actions to collect the Obligations, foreclosing or
otherwise realizing on the Collateral, or taking any other enforcement action
against the Borrower to the extent permitted under the Existing Loan Documents,
or, after the Restructuring Effective Date, the New Loan Documents.

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     10. Release of Lender.
     FOR THE CONSIDERATION SET FORTH HEREIN, BORROWER HEREBY RELEASES AND
FOREVER DISCHARGES THE LENDER, ITS AFFILIATES, SUBSIDIARIES AND CONTROLLING
PERSONS, ALL OF THEIR PRESENT AND FORMER OFFICERS, DIRECTORS, STOCKHOLDERS,
PARTNERS, EMPLOYEES, ATTORNEYS, AGENTS AND OTHER REPRESENTATIVES AND THEIR
RESPECTIVE PREDECESSORS, SUCCESSORS, SUCCESSORS-IN-INTEREST, ASSIGNS, HEIRS,
EXECUTORS, ADMINISTRATORS AND REPRESENTATIVES FROM ANY AND ALL ACTIONS, CAUSES
OF ACTION, COUNTERCLAIMS, SUITS, DEBTS, DUES, SUMS OF MONEY, ACCOUNTS,
RECKONINGS, BONDS, BILLS, SPECIALTIES, COVENANTS, CONTRACTS, CONTROVERSIES,
AGREEMENTS, PROMISES, VARIANCES, TRESPASSES, DAMAGES, JUDGMENTS, EXTENTS,
EXECUTIONS, RIGHTS, CLAIMS, DEMANDS, LIABILITIES, LOSSES, RIGHTS TO
REIMBURSEMENT, SUBROGATION, INDEMNIFICATION OR OTHER PAYMENT, COSTS OR EXPENSES,
AND REASONABLE ATTORNEYS’ FEES, WHETHER IN LAW OR IN EQUITY, OF ANY NATURE
WHATSOEVER, KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, FIXED OR CONTINGENT, AND
WHETHER REPRESENTING PAST, PRESENT OR FUTURE OBLIGATIONS, THAT ARE CONNECTED
WITH, ARISE OUT OF, RELATE TO OR ARE OTHERWISE BASED IN WHOLE OR IN PART ON ANY
ACTS, OMISSIONS, FACTS, MATTERS, TRANSACTIONS OR OCCURRENCES PRIOR TO THE
CLOSING DATE THAT IN ANY WAY RELATE TO THE EXISTING LOAN DOCUMENTS, AFTER THE
RESTRUCTURING EFFECTIVE DATE, THE NEW LOAN DOCUMENTS, THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED THEREBY OR ANY OTHER FINANCING ARRANGEMENT.
     11. Conditions to Closing.
     This Agreement shall become effective only upon the satisfaction of all of
the following conditions precedent: (i) Lender shall have received executed
signature pages for this Agreement signed by Lender, Borrower and PWFC and
(ii) the representations and warranties contained herein shall be true and
correct in all respects. The date that upon which the conditions precedent set
forth in the preceding sentence are satisfied is referred to herein as the
“Closing Date.” The Parties agree that, notwithstanding their execution of this
Agreement as of the date listed above, if the Closing Date shall not have
occurred by November 28, 2006 (or such later date as may be agreed to by the
Parties in writing), this Agreement shall be void ab initio.
     12. Miscellaneous.
     (a) To the extent there is any conflict between this Agreement, any of the
Existing Loan Documents and any of the New Loan Documents, the terms of this
Agreement shall govern.
     (b) The Borrower agrees to indemnify, pay, and hold Lender and its
respective officers, directors, employees, agents, and attorneys (the
“Indemnitees”) harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs and
expenses (including all reasonable fees and expenses of counsel to such

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Indemnitees) of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Indemnitee as a result of such Indemnitee’s being a
party to this Agreement or the transactions consummated pursuant to this
Agreement or otherwise relating to any of the Existing Loan Documents or New
Loan Documents; provided, however, that the Borrower shall have no obligation to
an Indemnitee hereunder with respect to liabilities to the extent resulting from
the gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower agrees to make the
maximum contribution to the payment and satisfaction thereof which is
permissible under applicable law.
          (c) Any notice or other communication required shall be in writing
addressed to the respective party as set forth below and may be personally
served, telecopied, sent by overnight courier service or U.S. mail and shall be
deemed to have been given: (i) if delivered in person, when delivered; (ii) if
delivered by fax, on the date of transmission if transmitted on a Business Day
before 4:00 p.m. Central time; (iii) if delivered by overnight courier, one
(1) Business Day after delivery to the courier properly addressed; or (iv) if
delivered by U.S. mail, four (4) Business Days after deposit with postage
prepaid and properly addressed.
          Notices shall be addressed as follows:

         
 
  If to the Borrower:   Pac-West Telecomm, Inc.
 
      1776 W. March Lane, Ste. 250
 
      Stockton, California 95207
 
      Attention: Chief Financial Officer
 
      Fax (209) 926-4444
 
       
 
       With a copy to:   Michelle Speller-Thurman
 
      Jenner & Block LLP
 
      330 N. Wabash Avenue
 
      Chicago, IL 60611-7603
 
      Tel (312) 840-8694
 
      Fax (312) 840-8794
 
       
 
       If to Lender:   John Lansing
 
      Porfolio Manager
 
      Merrill Lynch Capital,
 
      a division of Merrill Lynch Business
 
      Financial Services Inc.
 
      222 N. LaSalle Street, 16th Floor
 
      Chicago, IL 60601
 
      Facsimile: (312) 499-3126

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       With a copy to:   Frank Schuble
 
      Senior Transaction Attorney
 
      Merrill Lynch Capital,
 
      a division of Merrill Lynch Business
 
      Financial Services Inc.
 
      222 N. LaSalle Street, 16th Floor
 
      Chicago, IL 60601
 
      Facsimile: (312) 499-3126
 
       
 
      and
 
       
 
      David S. Heller
 
      Latham & Watkins LLP
 
      233 S. Wacker Drive, Suite 5800
 
      Chicago, Illinois 60606
 
      Facsimile: (312) 993-9767

          (d) No failure or delay on the part of Lender to exercise, nor any
partial exercise of, any power, right or privilege hereunder or under any
Existing Loan Document or New Loan Documents shall impair such power, right, or
privilege or be construed to be a waiver of any Default or Event of Default. All
rights and remedies existing hereunder or under any Existing Loan Document or
New Loan Documents are cumulative to and not exclusive of any rights or remedies
otherwise available.
          (e) Section headings are included herein for convenience of reference
only and shall not constitute a part of this Agreement for any other purposes or
be given substantive effect.
          (f) THIS AGREEMENT AND EACH OF THE EXISTING LOAN DOCUMENTS AND NEW
LOAN DOCUMENTS WHICH DOES NOT EXPRESSLY SET FORTH APPLICABLE LAW SHALL BE
GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
          (g) THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN COOK COUNTY, STATE OF ILLINOIS AND IRREVOCABLY
AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE EXISTING LOAN DOCUMENTS OR THE NEW
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. THE BORROWER EXPRESSLY SUBMITS
AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE
OF FORUM NON CONVENIENS. THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS AND AGREE THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON THE
BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO
THE BORROWER’S REPRESENTATIVE, AT THE ADDRESS SET FORTH IN THIS

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AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) BUSINESS DAYS AFTER THE
SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE
RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT, EXISTING LOAN DOCUMENTS OR ANY
OF THE NEW LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF THE
BORROWER OR ANY OF THEIR AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING
AGENTS OF THE BORROWER FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES
REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A
DEPOSITION, AT TRIAL OR OTHERWISE). THE BORROWER AGREES THAT LENDER’S COUNSEL IN
ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS
IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY
BE USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. THE BORROWER IN
ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY
LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM)
OR OTHER THINGS UNDER THEIR CONTROL AND RELATING TO THE DISPUTE.
     (h) THE BORROWER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE EXISTING LOAN
DOCUMENTS AND THE NEW LOAN DOCUMENTS. THE BORROWER ACKNOWLEDGES THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT LENDER HAS
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE EXISTING LOAN
DOCUMENTS AND THE NEW LOAN DOCUMENTS AND THAT LENDER WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE BORROWER WARRANTS AND
REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.
     (i) This Agreement, Existing Loan Documents and the New Loan Documents
shall be binding upon and inure to the benefit of the Parties and their
respective successors and assigns except that Borrower may not assign its rights
or obligations hereunder without the written consent of Lender.
     (j) No provision in this Agreement, the Existing Loan Documents or New Loan
Documents and no course of dealing between the Parties shall be deemed to create
any fiduciary duty owing to the Borrower by Lender. The Borrower agrees that
Lender shall not have any liability to the Borrower (whether sounding in tort,
contract or otherwise) for losses suffered by the Borrower in connection with,
arising out of, or in any way related to the transactions contemplated and the
relationship established by this Agreement, the Existing Loan Documents or the
New Loan Documents, or any act, omission or event occurring in connection
therewith, unless and to the extent that it is determined that such losses
resulted from the gross negligence or willful misconduct of Lender, as
determined by a final non-appealable order by a court of competent jurisdiction.
Lender shall not have any liability with respect to, and the Borrower

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hereby waives, releases and agrees not to sue for, any special, indirect or
consequential damages suffered by the Borrower in connection with, arising out
of, or in any way related to this Agreement, the Existing Loan Documents or the
New Loan Documents or the transactions contemplated hereby or thereby.
     (k) The Parties acknowledge that each of them has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Agreement, the Existing Loan Documents and the New Loan Documents with its legal
counsel and that this Agreement, the Existing Loan Documents and the New Loan
Documents shall be construed as if jointly drafted by the Lender and the
Borrower.
     (l) All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement.
     (m) This Agreement, the Existing Loan Documents and the New Loan Documents
embody the entire agreement among the parties hereto and supersede all prior
commitments, agreements, representations, and understandings, whether oral or
written, relating to the subject matter hereof, and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the Parties hereto. All Exhibits referred to herein are
incorporated in this Agreement by reference and constitute a part of this
Agreement. The terms of this Agreement shall control and supersede any
provisions of the Existing Loan Documents and New Loan Documents to the extent
that any provision of the Existing Loan Documents or New Loan Documents
contradicts or otherwise is in variance with the terms of this Agreement.
     (n) This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one in the same instrument.

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     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.

                  MERRILL LYNCH CAPITAL, a division of MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC.
 
           
 
  By:   /s/ Ferris W. Mapes    
 
           
 
  Name:   Ferris W. Mapes    
 
           
 
  Title:   Director    
 
           
 
                PAC-WEST TELECOMM, INC.
 
           
 
  By:   /s/ Henry R. Carabelli    
 
           
 
  Name:   Henry R. Carabelli    
 
           
 
  Title:   President and Chief Executive Officer    
 
           

ACKNOWLEDGED RECEIPT OF:
PAC-WEST FUNDING COMPANY LLC

         
By:
  /s/ Kenneth D. Peterson, Jr.    
 
       
Name:
  Kenneth D. Peterson, Jr.    
 
       
Title:
  Manager