-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KZ4/pvd5QJJaYj9vTdHBu5uqBqhiIktp5DZvWUuUpzFm4t3xZKaxu569hIGyPwma wO/wOrjzZ61C+FlE12IVTg== 0000947871-04-002760.txt : 20041221 0000947871-04-002760.hdr.sgml : 20041221 20041221162444 ACCESSION NUMBER: 0000947871-04-002760 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20041221 DATE AS OF CHANGE: 20041221 GROUP MEMBERS: DB ALTERNATIVE TRADING INC. GROUP MEMBERS: DEUTSCHE BANK AG SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PAC-WEST TELECOMM INC CENTRAL INDEX KEY: 0001071598 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 680383568 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-58023 FILM NUMBER: 041217720 BUSINESS ADDRESS: STREET 1: 1776 W. MARCH LANE, SUITE #250 CITY: STOCKTON STATE: CA ZIP: 95207 BUSINESS PHONE: 2099263300 MAIL ADDRESS: STREET 1: 1776 WEST MARCH LANE, SUITE #250 CITY: STOCKTON STATE: CA ZIP: 95207 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DEUTSCHE BANK AG\ CENTRAL INDEX KEY: 0000948046 IRS NUMBER: 13294498 STATE OF INCORPORATION: I8 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: TAUNUSANLAGE 12 D-60325 CITY: FRANKFURT AM MAIN GE STATE: I8 MAIL ADDRESS: STREET 1: TAUNUSANLAGE 12 D-60325 CITY: FRANKFURT AM MAIN STATE: I8 SC 13D/A 1 sc13da_122004.txt AMENDMENT NO. 1 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Amendment No. 1) Under the Securities Exchange Act of 1934 PAC-WEST TELECOMM, INC. - ------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.001 per share - ------------------------------------------------------------------------------- (Title of Class of Securities) 69371Y 10 1 - ------------------------------------------------------------------------------- (CUSIP Number) Deutsche Bank AG c/o DB Alternative Trading Inc. 280 Park Avenue, New York, New York 10017 (212) 469-7471 Attn: General Counsel - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 17, 2004 - ------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box | |. Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. The information required on this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act (however, see the Notes). (Continued on following pages) (Page 1 of 11 pages) SCHEDULE 13D - -------------------------------------- ------------------------- CUSIP No. 69371Y 10 1 Page 2 of 11 Pages - -------------------------------------- ------------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Deutsche Bank AG - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) | | (b) | | - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC (See Item 3) - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED | | PURSUANT TO ITEMS 2(d) or 2(e) - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Deutsche Bank AG is organized under the laws of the Federal Republic of Germany. - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 (SEE ITEM 5) BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 26,666,667 (SEE ITEM 5) REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 0 (SEE ITEM 5) 10 SHARED DISPOSITIVE POWER 26,666,667 (SEE ITEM 5) - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 26,666,667 (SEE ITEM 5) - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | | - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 42.1% (SEE ITEM 5) - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON BK - ------------------------------------------------------------------------------- - ------------------------------------- --------------------------------- CUSIP No. 69371Y 10 1 Page 3 of 11 Pages - ------------------------------------- --------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON DB Alternative Trading Inc. - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) | | (b) |x| - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | | - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES 0 (SEE ITEM 5) BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH 26,666,667 (SEE ITEM 5) REPORTING PERSON 9 SOLE DISPOSITIVE POWER WITH 0 (SEE ITEM 5) 10 SHARED DISPOSITIVE POWER 26,666,667 (SEE ITEM 5) - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 26,666,667 (SEE ITEM 5) - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | | - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 42.1% (SEE ITEM 5) - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA - ------------------------------------------------------------------------------- Item 1. Security and Issuer. This Amendment No. 1 (this "Amendment") amends the Statement on Schedule 13D (the "Schedule 13D") filed with the Securities and Exchange Commission on December 29, 2003. The class of equity securities to which this Amendment related is warrants to purchase a certain number of shares of common stock, par value $.001 per share (the "Common Stock"), of Pac-West Telecomm, Inc., a California corporation (the "Company"). The principal executive offices of the Company are located at 1776 West March Lane, Suite 250, Stockton, California 95207. The following amendments to Items 2, 4, 5, 6 and 7 are hereby made. Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Schedule 13D. Item 2. Identity and Background. The response set forth in item 2 of the Schedule 13D is hereby amended in its entirety as follows: This Statement is being filed by DB Alternative Trading Inc. ("DB Alternative") and Deutsche Bank AG ("Deutsche Bank", together with DB Alternative, the "Reporting Persons" and each, a "Reporting Person"). A joint filing agreement has been filed as Exhibit 1 to this Statement pursuant to Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DB Alternative is a Delaware corporation, and is a wholly-owned subsidiary of Deutsche Bank. Deutsche Bank is organized under the laws of the Federal Republic of Germany. The securities associated with this Statement were acquired through the London Branch of Deutsche Bank, which is licensed by the United Kingdom banking authority. The address of the principal office of DB Alternative is 280 Park Avenue, New York, New York 10017. The address of the principal place of business of Deutsche Bank is Taunusanlage 12, 60325 Frankfurt, Federal Republic of Germany. The principal business activity of DB Alternative is to act as a proprietary trading group that invests in publicly listed companies undergoing financial or operational restructuring. Subsequent to filing the Schedule 13D on December 29, 2003, Deutsche Bank replaced DB Advisors, L.L.C., a wholly-owned subsidiary of Deutsche Bank ("DB Advisors"), with DB Alternative as its investment advisor. The principal business of Deutsche Bank is the provision of financial and related services. Deutsche Bank is the largest banking institution in the Federal Republic of Germany and is the parent company of a group consisting of banks, capital market and fund management companies, mortgage banks and property finance companies, installment financing and leasing companies, insurance companies, research and consultancy companies and other companies. In addition, in accordance with Securities Exchange Act Release No. 39538 (January 12, 1998), this Statement reflects the securities beneficially owned by the Corporate and Investment Banking business group and the Corporate Investments business group (collectively, "CIB") of Deutsche Bank and its subsidiaries and affiliates. This filing does not reflect securities, if any, beneficially owned by any other business group of Deutsche Bank. Consistent with Rule 13d-4 under the Exchange Act, this filing shall not be construed as an admission that Page 4 of 11 CIB is, for purposes of Section 13(d) under the Exchange Act, the beneficial owner of any securities covered by the filing. Furthermore, CIB disclaims beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which CIB or its employees have voting or investment discretion, or both, and (ii) certain investment entities, of which CIB is the general partner, managing general partner, or other manager, to the extent interests in such entities are held by persons other than CIB. Set forth on Schedules A-1 and A-2 to this Statement, and incorporated herein by reference, are lists of the executive officers and directors of the Reporting Persons that contain the following information with respect to each such person: (i) name; (ii) business address; (iii) present principal occupation or employment; and (iv) citizenship. During the last five years, none of the Reporting Persons and, to the best knowledge of the Reporting Persons, none of the persons named on Schedules A-1 and A-2 hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 4. Purpose of Transaction. The response set forth in Item 4 of the Schedule 13D is hereby amended by adding the following paragraph after the second paragraph: Deutsche Bank intends to dispose of the securities covered by this statement in order to divest its interest in the Company for investment purposes. On December 17, 2004, Deutsche Bank AG-London, acting through DB Alternative Trading Inc., and Deutsche Bank Trust Company Americas ("DB Trust") entered into a Payoff Letter and Release with the Company (the "Letter Agreement") pursuant to which Deutsche Bank has agreed to cancel the Note, cancel the Warrants and release the Company from all obligations under the Guaranty and Security Agreement (as described below) upon the receipt of $40,750,000 from the Company (the "Payoff Amount"). Item 5. Interest in Securities of the Issuer. Item 5 is hereby amended in its entirety as follows: (a) - (b) On December 19, 2003, Deutsche Bank, acting through its London Branch and DB Advisors, acquired the Warrants. Based on the 36,514,802 shares of Common Stock outstanding as of October 22, 2003, and assuming that the Warrants are fully exercised, after such exercise Deutsche Bank would beneficially own approximately 42.1% of the outstanding Common Stock. DB Alternative acts as the discretionary investment manager for Deutsche Bank with respect to the Warrants and, as such, shares the power to exercise and dispose of such Warrants and the shares of Common Stock issuable upon the exercise of the Warrants, and, upon exercise of the Warrants, would share the power to vote or direct the vote of the shares of Common Stock issuable upon such exercise. Page 5 of 11 (c) Except for the transactions described herein, there were no transactions effected in the past sixty days in this class of securities by either Deutsche Bank or DB Alternative. (d) Not applicable. (e) The Reporting Persons will cease to be the beneficial owners of any of the securities covered by this statement upon the receipt by Deutsche Bank of the Payoff Amount from the Company. Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to Securities of the Issuer. The response set forth in Item 6 of the Schedule 13D is hereby amended by adding the following to the end of the Item: Payoff Letter and Release On December 17, 2004, Deutsche Bank, acting through its London Branch and DB Alternative, and DB Trust entered into the Letter Agreement with the Company. Subject to the terms and conditions of the Letter Amendment, Deutsche Bank has agreed to cancel the Note, cancel the Warrants and release the Company from all obligations under the Guaranty and Security Agreement upon the receipt of the Payoff Amount. The proceeds of the transactions contemplated by the Asset Purchase Agreement, dated December 17, 2004, by and between U.S. TelePacific Corp. and the Company relating to the sale of the Company's small and medium-sized enterprises business (the "SME Asset Purchaser Agreement") will be used to provided the Payoff Amount and the payment of the Payoff Amount to Deutsche Bank under the Letter Agreement is expressly conditioned on the closing of the transactions contemplated by the SME Asset Purchase Agreement. Upon Deutsche Bank's receipt of the Payoff Amount, (i) such Payoff Amount will be deemed payment in full of all interest and principal owed under each of the Purchase Agreement, the Note, the Guaranty and Security Agreement, the Warrant and the Registration Rights Agreement (collectively, the "Transaction Documents"), (ii) all outstanding Warrants to purchase Common Stock of the Company issued pursuant to any of the Transaction Documents will be immediately terminated, (iii) all the Transaction Documents will be immediately terminated (other than with respect to certain indemnification and confidentiality obligations) and (iv) all liens, security interests and encumbrances granted by the Company to Deutsche Bank or DB Trust pursuant to the Transaction Documents will be immediately released. The Letter Agreement is to terminate upon the termination of the SME Asset Purchase Agreement. Deutsche Bank may terminate the Letter Agreement if the transactions contemplated by the SME Asset Purchase Agreement are not consummated on or prior to April 15, 2005, subject to certain extensions until no later than June 30, 2005 in the event of delays obtaining regulatory approvals. Page 6 of 11 This description of the Letter Agreement is qualified in its entirety by reference to the Letter Agreement, a copy of which has been filed as Exhibit 5 to this statement and is incorporated herein by reference. Item 7. Material to be filed as Exhibits. Exhibit 1: Joint Filing Agreement Exhibit 2: Note and Warrant Purchase Agreement, dated October 17, 2003, among Pac-West Telecomm, Inc. and Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor* Exhibit 3: Registration Rights Agreement, dated December 19, 2003, by and among Pac-West Telecomm, Inc. and Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor** Exhibit 4: Pac-West Telecomm, Inc. Warrant to Purchase Shares of Common Stock issued to Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor** Exhibit 5: Payoff Letter and Release, dated December 17, 2004, from Deutsche Bank AG-London, acting through DB Alternative Trading Inc., and Deutsche Bank Trust Company Americas to Pac-West Telecomm, Inc. - ---------------------- * Previously filed as an exhibit to Form 8-K filed by the Company on October 21, 2003 and incorporated by reference in this Statement. ** Previously filed as an exhibit to Form 8-K filed by the Company on December 22, 2003 and incorporated by reference in this Statement. Page 7 of 11 SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this Statement is true, complete and corret. Dated: December 21, 2004 Deutsche Bank AG By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President DB ALTERNATIVE TRADING INC. By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President SCHEDULE A-1 EXECUTIVE OFFICERS AND DIRECTORS OF DB ALTERNATIVE TRADING INC. The following sets forth the name, business address, title and citizenship of the directors and principal executive officer of DB Alternative Trading Inc. The business address of DB Alternative Trading Inc. is 280 Park Avenue, New York, New York 10017. NAME BUSINESS ADDRESS TITLE CITIZENSHIP Scott Bowen 60 Wall Street Director United States New York, New York Adrienne Browning 60 Wall Street Director United States New York, New York Joseph J. Rice 60 Wall Street Director United States New York, New York Jonathan Hitchon 280 Park Avenue Chief Operating United Kingdom New York, New York Officer and President Page 9 of 11 SCHEDULE A-2 MANAGING DIRECTORS OF DEUTSCHE BANK AG The following sets forth the name, business address, title and citizenship of the managing directors of Deutsche Bank AG. The business address of Deutsche Bank AG is Taunusanlage 12, 60325 Frankfurt, Federal Republic of Germany.
NAME BUSINESS ADDRESS TITLE CITIZENSHIP Dr. Josef Ackermann Deutsche Bank AG Chairman of the Group Executive Member of Swiss Taunusanlage 12 the Board of Managing Directors, Deutsche 60325 Frankfurt Bank AG The Federal Republic of Germany Dr. Tessen von Heydebreck Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany Dr. Hermann-Josef Lamberti Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany Dr. Clemens Borsig Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany
Page 10 of 11 EXHIBIT INDEX Exhibit 1: Joint Filing Agreement Exhibit 2: Note and Warrant Purchase Agreement, dated as of October 17, 2003, by and between Pac-West Telecomm, Inc. and Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor* Exhibit 3: Registration Rights Agreement, dated December 19, 2003, by and among Pac-West Telecomm, Inc. and Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor** Exhibit 4: Pac-West Telecomm, Inc. Warrant to Purchase Shares of Common Stock issued to Deutsche Bank AG-London acting through DB Advisors, LLC as investment advisor** Exhibit 5: Payoff Letter and Release, dated December 17, 2004, from Deutsche Bank AG-London, acting through DB Alternative Trading Inc., and Deutsche Bank Trust Company Americas to Pac-West Telecomm, Inc. - ------------------ * Previously filed as an exhibit to Form 8-K filed by the Company on October 21, 2003 and incorporated by reference in this Statement. ** Previously filed as an exhibit to Form 8-K filed by the Company on December 22, 2003 and incorporated by reference in this Statement. Page 11 of 11 EX-1 2 ex1_122004.txt JOINT FILING AGREEMENT EXHIBIT 1 JOINT FILING AGREEMENT The undersigned hereby agree that Amendment No. 1 to the statement on Schedule 13D, dated December 21, 2004, with respect to the common stock, par value $.001 per share, of Pac-West Telecomm, Inc. is, and any further amendments thereto executed by each of us shall be, filed on behalf of each of us pursuant to and in accordance with the provisions of Rule 13d-1(k)(1) under the Securities and Exchange Act of 1934, as amended, and that this Agreement shall be included as an Exhibit to the Schedule 13D and each such amendment. Each of the undersigned agrees to be responsible for the timely filing of the Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning itself contained therein. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 21 day of December, 2004. DEUTSCHE BANK AG By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President DB ALTERNATIVE TRADING INC. By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President EX-5 3 ex5_122004.txt PAYOFF LETTER AND RELEASE EXHIBIT 5 PAYOFF LETTER AND RELEASE December 17, 2004 Pac-West Telecomm, Inc. 1776 W. March Lane, Suite 250 Stockton, California 95207 Re: Certain transactions contemplated by the Note and Warrant Purchase Agreement dated October 17, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Note and Warrant Purchase Agreement") between Pac-West Telecomm, Inc., a California corporation (the "Borrower"), and Deutsche Bank AG - London, acting through DB Advisors, LLC (the "Purchaser") Ladies and Gentlemen: This Payoff Letter and Release (this "Letter Agreement") refers to the financing arrangements among the Borrower and the Purchaser contemplated by the Note and Warrant Purchase Agreement, pursuant to which (i) the Purchaser purchased from the Borrower that certain Senior Secured Promissory Note dated as of December 19, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Senior Note") in the original principal amount of $40,000,000 made by the Borrower in favor of the Purchaser, (ii) the Borrower entered into that certain Guaranty and Security Agreement dated as of December 19, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Guaranty and Security Agreement") in favor of Deutsche Bank Trust Company Americas, as "Collateral Agent" for the Purchaser, pursuant to which the Borrower granted the Collateral Agent a security interest in substantially all of its personal property as security for the repayment of the Senior Note, (iii) the Borrower issued the Purchaser that certain Warrant to Purchase Shares of Common Stock dated as of December 19, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Warrant") entitling the Purchaser to purchase up to 26,666,667 shares of the common stock of the Borrower on the terms set forth therein, and (iv) the Borrower and the Purchaser entered into that certain Registration Rights Agreement dated as of December 19, 2003 (as amended, restated, supplemented or otherwise modified from time to time, the "Registration Rights Agreement") and all such other agreements, instruments, certificates and documents executed and/or delivered by or on behalf of the Borrower to or for the benefit of the Purchaser, the Collateral Agent or any affiliate or representative of the either of the foregoing, in each case, pursuant to the Note and Warrant Purchase Agreement, the Senior Note, the Guaranty and Security Agreement, the Warrant and/or the Registration Rights Agreement (collectively with the Note and Warrant Purchase Agreement, the Senior Note, the Guaranty and Security Agreement, the Warrant and the Registration Rights Agreement, the "Transaction Documents"). Pac-West Telecomm, Inc. December 17, 2004 Page 2 This Letter Agreement is being executed in connection with the execution of that certain Asset Purchase Agreement, dated December 17, 2004, by and between U.S. TelePacific Corp. and the Borrower relating to the sale of the Borrower's small and medium-sized enterprises business on the terms set forth therein (the "SME Asset Purchase Agreement"). An executed copy of the SME Asset Purchase Agreement is attached hereto as Exhibit A. The parties hereto understand and acknowledge that the proceeds of the transactions contemplated by the SME Asset Purchase Agreement will be used to provide the Payoff Amount (as defined below) hereunder and that the payment of the Payoff Amount to the Purchaser hereunder is expressly conditioned on the closing of the transactions contemplated by the SME Asset Purchase Agreement. In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the undersigned hereby agrees as follows: 1. Payoff and Termination. Except as provided in Paragraph 8 below, the Borrower, the Purchaser and the Collateral Agent hereby agree, that upon the Purchaser's receipt of payment of $40,750,000 plus all fees and expenses of the Collateral Agent then due and owing as of the date of such payment under the Guaranty and Security Agreement (the "Payoff Amount") in immediately available funds of the United States of America at the Purchaser's bank account at _______ _______________________________________________________________________________ ___________________________________________ (the date such payment is so made, being the "Effective Date"): (a) such Payoff Amount shall be deemed payment in full of all interest and principal then accrued, due or owing under any and all of the Transaction Documents; (b) all outstanding Warrants to purchase the shares of the common stock of the Borrower issued pursuant to Note and Warrant Purchase Agreement, the Warrant or any of the other Transactions Documents shall be deemed immediately terminated, expired and extinguished and of no further force or effect; and (c) all of the Transaction Documents shall be deemed immediately terminated and of no further force or effect (other than with respect to (i) those indemnification obligations set forth in Section 7.02 of the Note and Warrant Purchase Agreement and Section 22 of the Guaranty and Security Agreement (the "Surviving Indemnity Rights") and (ii) the confidentiality obligations set forth in Section 9.02 of the Note and Warrant Purchase Agreement and Section 25 of the Guaranty and Security Agreement); all liens, security interests, bank account control agreements, claims or other encumbrances granted by the Borrower to the Purchaser or the Collateral Agent on any of the assets, rights, title or interests of the Borrower (or any other Grantor or Guarantor under the Guaranty and Security Agreement) pursuant to the Transaction Documents shall be and are hereby immediately released and forever discharged, and shall be of no further force or effect; and the original copy of the Senior Note, the Warrant, the Registration Rights Agreement, each account control agreement and any such other Transaction Documents as the Borrower may request, shall be immediately returned by the Purchaser and/or the Pac-West Telecomm, Inc. December 17, 2004 Page 3 Collateral Agent, as applicable, to the Borrower marked "Terminated" and signed by the Purchaser. The Borrower shall notify the Purchaser and the Collateral Agent in writing of the Borrower's intention to make the payment of the Payoff Amount to the Purchaser no less than two Business Days (as defined in the Note and Warrant Purchase Agreement) prior to such payment. The Purchaser, as sole Lender (as defined in the Guaranty and Security Agreement), hereby notifies the Collateral Agent that Purchaser's receipt of the Payoff Amount (as defined below) constitutes the payment in full of the Secured Obligations (as defined in the Guaranty and Security Agreement) as contemplated under Section 27 of the Guaranty and Security Agreement and directs the Collateral Agent to sign this Letter Agreement. 2. Releases. Upon the Effective Date, (a) the Borrower hereby releases, discharges and acquits the Purchaser and the Collateral Agent, and each of their respective officers, directors, agents and employees and their respective successors and assigns (the "Purchaser Released Parties"), from all obligations to the Borrower (and its respective successors and assigns) and from any and all claims, demands, debts, accounts, contracts, liabilities, actions and causes of actions, whether in law or in equity, whether known or unknown, that the Borrower at any time had or has, or that its successors and assigns hereafter can or may have against the Purchaser Released Parties arising under or in connection with the Transaction Documents or the transactions contemplated thereby on or prior to the Effective Date; provided, that nothing herein shall be deemed to release the Purchaser Released Parties from their obligation to perform, or the Borrower's right to enforce, this Letter Agreement in accordance with its terms or any Surviving Indemnity Right under any Transaction Document with respect to any matter arising after the Effective Date, and (b) the Purchaser and the Collateral Agent each hereby releases, discharges and acquits the Borrower (and each other Grantor and Guarantor under the Guaranty and Security Agreement), and each of their respective officers, directors, agents and employees and their respective successors and assigns (the "Borrower Released Parties"), from all obligations to the Purchaser and the Collateral Agent (and their respective successors and assigns) and from any and all claims, demands, debts, accounts, contracts, liabilities, actions and causes of actions, whether in law or in equity, whether known or unknown, that the Purchaser and/or the Collateral Agent at any time had or has, or that their respective successors and assigns hereafter can or may have against the Borrower Released Parties arising under or in connection with the Transaction Documents or the transactions contemplated thereby on or prior to the Effective Date; provided, that nothing herein shall be deemed to release the Borrower Released Parties from their obligation to perform, or the Purchaser's and/or the Collateral Agent's right to enforce, this Letter Agreement in accordance with its terms or any Surviving Indemnity Right under any Transaction Document with respect to any matter arising after the Effective Date. 3. Release Documents; Authorization to File. Upon and after the Effective Date and at the Borrower's expense, the Purchaser and the Collateral Agent each hereby authorizes the Borrower to prepare, file and record any Uniform Commercial Code termination statements to release, as of record, all financing statements filed by the Purchaser and/or the Collateral Agent Pac-West Telecomm, Inc. December 17, 2004 Page 4 naming the Borrower, as debtor, that are currently filed of record and to terminate all other notices of security interests, mortgages, liens, claims or other encumbrances previously filed, recorded or registered by the Purchaser and/or the Collateral Agent with respect to the financing arrangements under the Transaction Documents (collectively, the "Releases"), and the Purchaser and the Collateral Agent each hereby agree to execute and/or deliver any such Releases reasonably requested by the Borrower to effect the termination thereof. 4. Representations of the Purchaser. The Purchaser hereby acknowledges, represents, warrants, covenants and agrees that on the date hereof and on the Effective Date: (a) The Purchaser has full corporate power and authority to enter into this Letter Agreement and to carry out the transactions contemplated hereby. The execution, delivery and performance by the Purchaser of this Letter Agreement have been or prior to the Effective Date will be duly authorized by all necessary corporate action on the part of the Purchaser. This Letter Agreement has been duly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser enforceable in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws from time to time in effect affecting creditor's rights generally and by legal and equitable limitations on the availability of specific remedies. (b) The Purchaser is the sole beneficial owner of the Warrant and the Senior Note, free and clear of any liens, security interests, claims, encumbrances or restrictions on its ability to, and with full power and authority to, consummate the transactions contemplated by this Letter Agreement. The Purchaser has not transferred or assigned to any other Person any portion of or interest in the Warrant or the Senior Note, and has not exercised, in whole or in part, the Warrant. (c) The Purchaser acknowledges that the Borrower may have material, non-public, confidential information concerning the Borrower (the "Information"), which has not been, and may not be, disclosed to the Purchaser or the Collateral Agent. Notwithstanding the foregoing, the Borrower acknowledges that it has disclosed to the Purchaser all material Information relating to any offers to purchase a controlling interest in the Borrower or all or a substantial portion of the Borrower's assets, in each case, received within the prior twelve (12) months. (d) The Purchaser is engaged in the business of investing in securities such as the Warrant and the Senior Note, and as such, is a sophisticated, experienced and well-informed investor, capable of evaluating the merits and economic risks which may be associated with a sale or purchase of the Warrant and the Senior Note. (e) The Borrower is relying on this Letter Agreement and the payment and effectiveness of the Payoff Amount to extinguish the Warrant, satisfy the Senior Note and release the security interests granted to the Collateral Agent pursuant to the Transaction Documents (the "Payoff"), and would not enter into the transaction contemplated by this Letter Agreement in the absence of this Letter Agreement. Pac-West Telecomm, Inc. December 17, 2004 Page 5 5. Representations of the Borrower. The Borrower hereby acknowledges, represents, warrants, covenants and agrees that on the date hereof and on the Effective Date that it has full corporate power and authority to enter into this Letter Agreement and to carry out the transactions contemplated hereby. The execution, delivery and performance by the Borrower of this Letter Agreement have been or prior to the Effective Date will be duly authorized by all necessary corporate action on the part of the Borrower. This Letter Agreement has been duly executed and delivered by the Borrower and constitutes the legal, valid and binding obligation of the Borrower enforceable in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws from time to time in effect affecting creditor's rights generally and by legal and equitable limitations on the availability of specific remedies. 6. Additional Covenants. (a) The Purchaser covenants and agrees that, notwithstanding anything else to the contrary in the Transaction Documents, it will not transfer or assign all or any portion of the Warrant or the Senior Note, or any of its rights and obligations thereunder or under the other Transaction Documents during the term of this Letter Agreement. (b) The Borrower agrees to use commercially reasonable efforts to inform the Purchaser of any material developments that, in the reasonable judgment of the Borrower, would cause the transactions contemplated by the SME Asset Purchase Agreement not to close. 7. Further Assurances. At the request of the Borrower, at the Borrowers' expense, the Purchaser and the Collateral Agent each agree to execute and deliver such other and further documents and instruments and take such actions as may be reasonably requested in order to effect or evidence more fully the matters covered hereby, including, without limitation, notifying any depositary or securities institutions in respect of which the Borrower maintains any accounts subject to account control agreements in favor of the Collateral Agent of the termination of such agreements and the Collateral Agent's rights in respect thereof. 8. Termination. (a) The rights and obligations of the parties hereto shall terminate upon termination of the SME Asset Purchase Agreement in accordance with its terms; provided, that the Borrower shall provide the Purchaser and the Collateral Agent written notice that the SME Asset Purchase Agreement has been terminated and evidence of such termination reasonably satisfactory to the Purchaser. (b) The Purchaser may terminate this Letter Agreement, and the rights and obligations of the parties hereto shall terminate, by written notice to the Borrower and the Collateral Agent if the transactions contemplated by the SME Asset Purchase Agreement shall not have been consummated on or prior to April 15, 2005 (the "Termination Date"); provided that, in the event that the transactions contemplated by the SME Asset Purchase Agreement do not close as a result of the failure of either or both of the parties thereto to obtain all consents, authorizations, assignments, registrations or waivers required from any governmental authority ("Government Approvals"), the Termination Date shall be extended to the earlier to occur of (i) the date that is five (5) business days following receipt of all Government Approvals and (ii) June 30, 2005. Pac-West Telecomm, Inc. December 17, 2004 Page 6 The Collateral Agent shall have the same rights and protections hereunder as it does under the Guaranty and Security Agreement. 9. Purchaser's Legal Fees. The Borrower hereby agrees to reimburse Purchaser for all of Purchaser's legal expenses (reasonable and documented attorneys fees and out-of-pocket expenses) incurred in connection with the negotiation of this letter agreement up to a maximum of $15,000. 10. Governing Law. The validity, construction and effect of this Letter Agreement shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York. 11. Counterparts. This Letter Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original hereof and admissible into evidence and all of which together shall be deemed to be a single instrument. Delivery of an executed counterpart of this Letter Agreement by telecopier shall have the same force and effect as delivery of an original executed counterpart of this Letter Agreement. 12. Successors and Assigns. This Letter Agreement shall be binding upon, and shall inure to the benefit of each of the parties hereto and their respective successors and assigns. [Signature Pages to Follow] Very truly yours, DEUTSCHE BANK AG - LONDON, acting through DB ALTERNATIVE TRADING INC. By: /s/ Jonathan Hitchon ------------------------------------- Title: Chief Operating Officer By: /s/ Robert Wolfson ------------------------------------- Title: Director DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent By: /s/ Stephen T. Hessler ------------------------------------- Title: Vice President ACKNOWLEDGED AND AGREED: PAC-WEST TELECOMM, INC. By: /s/ Hank Carabelli - --------------------------------------------- Title: President and Chief Executive Officer EXHIBIT A EXECUTED SME ASSET PURCHASE AGREEMENT -----END PRIVACY-ENHANCED MESSAGE-----