Document:

exv10w4

 

Exhibit 10.4

PAC-WEST TELECOMM, INC.

J776 W. March Lane, Suite 250

Stockton, California 95207

November 14, 2006                                                            

SMH Capital Advisors, Inc.

4800 Qverton Plaza Suite 300

Fort Worth, TX 76109

Attn: Mr. Dwayne Moyers

			
	Re:	 	Indenture, dated as of January 29, 1999 (the “Indenture”), among Pac-West
Telecomm, Inc. (the “Company”), as Issuer, and Wells Fargo
Bank Minnesota, N.A.
(formerly known as Norwest Bank Minnesota, National Association), as indenture trustee
(the “Trustee”), with respect to the Company’s 13.5% Senior Notes due 2009 of the
Company (the “Senior Notes”).

Ladies and Gentlemen:

     As you are aware, the Company is in the process of structuring a comprehensive restructuring
of the Company’s financial position pursuant to which, among other things, (i) an affiliate of
Columbia Ventures Corporation (the “Investor”) is expected to purchase the Company’s senior
secured credit facility from Comerica Bank, which as of the date hereof has an
outstanding balance of approximately $8.8 million, and increase the maximum loan commitment under
such facility to $24.0 million, consisting of a $8.0 million revolving credit facility and a $16.0
million term loan, in each case, upon and subject to the terms of an Amended and Restated Loan and
Security Agreement currently being negotiated between the parties substantially in the form
attached hereto as Exhibit A and (ii) another affiliate of the Investor is expected to
purchase for aggregate consideration of approximately $1,000,000 shares of newly designated Series
B-1 Preferred Stock, par value $0.001 per share, and Series B-2 Preferred Stock, par value $0.001
per share, of the Company, which are collectively convertible into an aggregate of approximately
95% of the outstanding Common Stock, par value $0.001 per share, of
the Company. For purposes
hereof, the transactions referred to in clauses (i) and (ii) above are referred to as the
“Restructuring.”

     As part of the Restructuring, the Company expects to agree to offer to exchange all of the
outstanding Senior Notes for new 13.5% Senior Priority Notes due 2009
(the “Priority Notes”) with
such terms and conditions as are substantially identical to the Senior Notes, except that the
Priority Notes will provide that (i) interest under the Priority Notes will not be payable until
maturity and (ii) the holders of the Priority Notes will have the right to receive payment of all
outstanding principal and accrued interest thereunder before the holders of the Senior Notes will
have the right to receive any outstanding principal thereunder (the
“Exchange Offer”). The Company
expects to conduct the Exchange Offer promptly following consummation of the Restructuring under an
exemption from registration pursuant to Section 3(a)(9) under the Securities Act of 1933, as
amended.

 

 

SMH Capital Advisors, Inc.

November 14, 2006

Page 2

     Capitalized terms used herein and not otherwise defined shall have the meanings ascribed
to such terms in the Indenture.

     By executing this letter agreement below, you hereby:

     (1) represent that, to the best of your knowledge after reasonable investigation, you have
valid investment discretion with respect to $21 million in principal amount of the Senior Notes
(“Controlled Senior Notes”);

     (2) subject to consummation of the Restructuring, agree to exchange, or cause to be
exchanged, all Controlled Senior Notes for the same principal amount of Priority Notes in the
Exchange Offer pursuant to the terms and conditions thereof;

     (3) subject
to consummation of the Restructuring, agree to exercise such rights as you
may possess to cause the custodian(s) and/or DTC participant(s) through which the Controlled
Senior Notes are held and The Depository Trust Company
(“DTC”) and/or its nominee to
execute such documents and take such as actions as may be necessary to effect the exchange of
all Controlled Notes as provided paragraph 2 of this letter agreement;

     (4) subject to consummation of the Restructuring, agree not to direct the sale,
assignment, or other disposal of any of Controlled Senior Notes, or take any other action with
the intent to cause or influence your clients to withdraw or terminate your investment discretion
for the purpose of avoiding your obligations under this letter agreement, in each case, at any
time prior to January 29, 2007;

     (5) acknowledge receipt of, among other due diligence materials, a liquidation
analysis estimating that in the event of the Company’s liquidation on or about November 30,
2006, holders of Senior Notes would receive a distribution of between 1.0% and approximately
10% of the outstanding principal amount of the outstanding Senior Notes;

     (6) acknowledge that you have conducted your own due diligence in making the
decision to exchange the Controlled Senior Notes: and

     (7) acknowledge that the Company may possess material non-public information
regarding the business, assets, liabilities, results of operations, financial condition,
future projections and/or other aspects of the Company and/or its affiliates, the Senior Notes and
the Priority Notes;

provided, however, the Company acknowledges and agrees that your clients have the right to
terminate their advisory relationship with you at any time and that upon any such termination by a
client your right to exercise investment discretion on their behalf with respect to any Senior
Notes held for the benefit of such client will cease and such Senior Notes will no longer be
considered Controlled Senior Notes.

     This letter agreement shall be binding on the undersigned and the successors, heirs, personal
representatives and assigns of the undersigned. The parties agree that Pac-West

 

 

SMH
Capital Advisors, Inc. 
November 14, 2006

Page 3

Acquisition Company LLC and Pac-West Funding Company LLC are third party beneficiaries of this
letter agreement.

     If
any of the terms set forth in this letter, or any part thereof, should, for any reason
whatsoever, be declared invalid or unenforceable by a court of competent jurisdiction, the
validity or enforceability of the remainder of such terms shall not thereby be adversely affected.
This letter agreement sets forth the entire understanding between the parties, there are no
representations or warranties except as expressly set forth in this letter, and this letter cannot
be changed or amended except by written agreement executed by authorized representatives of each
of the parties hereto. This letter shall be governed by the laws of the State of New York, without
regard to its conflict of law principles. This letter may be signed
in one or more counterparts.

* * * *

 

 

SMH
Capital Advisors, Inc. 
November 14, 2006

Page 4

     To confirm our agreement, please sign in the space provided below and return an originally
executed copy to us.

	 	 	 
	 

	 	PAC-WEST TELECOMM, INC.
	 
	 	 
	 

	 	/s/ Henry R. Carabelli
	 

	 	 
	 

	 	Name: Henry R. Carabelli
	 

	 	Title: CEO

Accepted and agreed to as of the date first written above:

	 
	SMH CAPITAL ADVISORS, INC.

	 

	/s/
Dwayne Moyers

 

	Name:
Dwayne Moyers

	Title: Chief Investment Officerexv10w5

 

Exhibit 10.5

November 14, 2006

TEKELEC

5200 Paramount Parkway

Morrisville, N.C. 27560

     Re: Settlement Release and Amendment

Ladies and Gentlemen:

     Reference is hereby made to the Master Procurement Agreement, dated March 26, 2004 (the
“Master Agreement”), between Pac-West Telecomm, Inc.
(the “Company”) and Tekelec, on behalf of
itself and its majority owned subsidiary, Santera Systems Inc. (“Vendor”), and the Custom Extended
Warranty Services Agreement, dated March 26, 2004, between the Company and the Vendor (the
“Warranty Agreement” and together with the Master
Agreement, the “Vendor Agreements”).
Capitalized terms used and not otherwise defined herein shall have the meaning set forth in the
Vendor Agreements.

     The purpose of this letter agreement is to confirm the parties’ understanding that, subject
to and conditioned upon consummation of the proposed financing transaction between Columbia
Ventures Corporation and its affiliates and the Company (the “Financing Transaction”):

     (1) the Company agrees to promptly thereafter pay to the Vendor $535,000 by wire transfer of
immediately available funds as settlement in full of all amounts due and owing, whether or not
invoiced (other than obligations invoiced for Services to be prospectively provided by the Vendor),
by the Company to the Vendor as of the date hereof under the terms of the Vendor Agreements and any
other agreements between the parties (the “Obligations”):

     (2) the Vendor agrees, upon receipt of such payment, to release and forever discharge the
Company from any and all claims arising out of or in connection with the Obligations, and waive any
actual or alleged breach by the Company of, or default or termination event arising under, the
terms of such agreements in connection with the Obligations (collectively, the “Vendor’s
Settlement and Release”); and

     (3) the Company agrees, upon Vendor’s receipt of such payment, to release and forever
discharge the Vendor from any and all claims arising out of or in connection with the Vendor
Agreements arising prior to the date of Company’s settlement payment, and waive any actual or

1776 W.
March Lane, Suite 250 | Stockton, CA 95207 | main 800-399-1234 | fax 209-926-4444 | www.pacwest.com

 

 

alleged breach by the Vendor of, or default or termination event arising under, the terms of
such Vendor Agreements prior to the date of Company’s settlement payment (collectively, the
“Company’s Settlement and Release”).

     In addition, the parties understand that, except as otherwise expressly provided in this
letter agreement, the Vendor’s Settlement and Release and the Company’s Settlement and Release
shall in no way amend or otherwise modify the Vendor Agreements and the Company’s and the Vendor’s
executory obligations thereunder, and the Company and the Vendor shall, subject to the terms of
this letter agreement, continue to be bound by, and entitled to enforce, the terms and conditions
of the Vendor Agreements; provided that, subject to consummation of the Financing Transaction, the
Company shall thereafter pay to the Vendor all amount presently due and owing for Services
previously billed but not yet paid (e.g., invoice 148699 for $46,057.44 dated October 23, 2006; and
invoices 149246, 149247, and 149248 for $61,750,00, $61,824.22. and $182,313.50, respectively, each
dated November 6, 2006) in four equal quarterly installments in advance beginning on the day the
Financing Transaction is consummated (or on such later business day as such invoices are actually
received by the Company). For all other Services, the Company shall thereafter pay to the Vendor
all amounts due in four equal quarterly installments in advance beginning on the expiration date
for each product warranty or Customer Extended Warranty Service commitment. This letter agreement
shall be binding on the undersigned and the successors, heirs, personal representatives and assigns
of the undersigned, and shall supersede all prior understandings and communications regarding the
subject matter hereof.

	 	 	 	 	 
	 	Very truly yours,

PAC-WEST TELECOMM, INC.

 	 
	 	/s/ Henry R. Carabelli
 	 
	 	Name:  	Henry R. Carabelli 	 
	 	Its: President and Chief Executive Officer 	 
	 

Accepted and agreed to as of the date first written above:

TEKELEC

	 	 	 
	/s/ Gregory S. Rush
 

Name: Gregory S. Rush

	 	 
	Its:
V.P. Controller, CAD
	 	 

1776 W.
March Lane, Suite 250 | Stockton, CA 95207 | main 800-399-1234 | fax
209-926-4444 | www.pacwest.com

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